DREYFUS DISCIPLINED EQUITY INCOME FUND, 485APOS, 1998-12-31

DREYFUS DISCIPLINED EQUITY INCOME FUND
485APOS, 1998-12-31

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File No. 811-5270
33-16338
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]

Pre-Effective Amendment No. [ ]

Post-Effective Amendment No. 68 [ X ]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]

Amendment No. 68 [ X ]

(Check appropriate box or boxes.)

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)

Registrant's Telephone Number, including Area Code: (212) 922-6000

Mark N. Jacobs, Esq.
The Dreyfus/Laurel Funds, Inc.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)

It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
----

on (date) pursuant to paragraph (b)
----

X 60 days after filing pursuant to paragraph (a)(i)
----
on (date) pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
----
on (date) pursuant to paragraph (a)(ii) of Rule 485
----
If appropriate, check the following box:

this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
----

<PAGE>
THE DREYFUS LAUREL FUNDS, INC.

CONTENTS OF REGISTRATION STATEMENT

This registration document is comprised of the following:

Cover Sheet

Contents of Registration Statement:

The following post-effective amendment to the Registrant's Registration
Statement on Form N-1A relates to the following series of the Registrant:

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 U.S. TREASURY RESERVES
DREYFUS BASIC S&P 500 STOCK INDEX FUND
DREYFUS BOND MARKET INDEX FUND
DREYFUS DISCIPLINED INTERMEDIATE BOND FUND
DREYFUS PREMIER BALANCED FUND
DREYFUS PREMIER LIMITED TERM INCOME FUND
DREYFUS PREMIER SMALL COMPANY STOCK FUND
DREYFUS PREMIER MIDCAP STOCK FUND
DREYFUS PREMIER LARGE COMPANY STOCK FUND
DREYFUS PREMIER SMALL CAP VALUE FUND
DREYFUS PREMIER TAX MANAGED GROWTH FUND

Part C of Form N-1A

Signature Page

Exhibits

<PAGE>
DREYFUS INSTITUTIONAL PRIME MONEY MARKET FUND

DREYFUS INSTITUTIONAL GOVERNMENT MONEY MARKET FUND

DREYFUS INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND

Seeking a high level of current income
and a stable $1.00 share price

PROSPECTUS March 1, 1999

DREYFUS [LOGO]

As with all mutual funds, the Securities and Exchange has not approved or
disapproved these securities or passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.

<PAGE>

<TABLE>
<CAPTION>
CONTENTS

THE FUNDS
- ---------------------------------------------------------------------------------------------------

<S> <C> <C>
Each fund's 1 Introduction
investment approach, 2 Dreyfus Institutional Prime Money Market Fund
risks, performance, 6 Dreyfus Institutional Government Money Market Fund
expenses and related 10 Dreyfus Institutional U.S. Treasury Money Market Fund
information 14 Management
16 Financial Highlights

INVESTOR ACCOUNT INFORMATION
- ---------------------------------------------------------------------------------------------------

Information 19 Account Policies
for managing a 22 Distributions and Taxes
fund account 23 Services for Fund Investors
24 Instructions for Accounts

FOR MORE INFORMATION
- ---------------------------------------------------------------------------------------------------

Where to learn more about Back Cover
these and other Dreyfus
funds
</TABLE>

<PAGE>

THE FUNDS

Dreyfus Institutional Prime Money Market Fund
Dreyfus Institutional Government Money Market Fund
Dreyfus Institutional U.S. Treasury Money Market Fund
Series of The Dreyfus/Laurel Funds, Inc.

The three funds described in this prospectus are money market funds. They seek
to maintain a stable share price (although they cannot guarantee that they will
always do so) and are designed to offer a high level of current investment
income and high liquidity.

The main differences among these funds are the securities in which they invest.
Dreyfus Institutional Prime Money Market Fund invests in a range of high-quality
money market instruments. Dreyfus Institutional Government Money Market Fund
invests primarily in money market instruments issued or guaranteed by the U.S.
Government and its agencies and instrumentalities. Dreyfus Institutional U.S.
Treasury Money Market Fund maintains an even higher quality standard by
investing exclusively in U.S. Treasury obligations and repurchase agreements
secured by such obligations.

INFORMATION ON EACH FUND'S RECENT PERFORMANCE CAN BE FOUND IN ITS CURRENT
ANNUAL/SEMIANNUAL REPORT (SEE BACK COVER).

Introduction 1
<PAGE>

DREYFUS INSTITUTIONAL PRIME MONEY MARKET FUND
Ticker Symbol: _______________

[ICON] GOAL/APPROACH

The fund seeks a high level of current income consistent with stability of
principal. This objective may be changed without shareholder approval. As a
money market fund, the fund is subject to maturity, quality and diversification
requirements designed to help it maintain a stable share price.

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, including mortgage-related securities
.. 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
.. domestic and dollar-denominated foreign commercial paper, and other
short-term corporate obligations, including those with floating or variable
rates of interest

[LEFT SIDE BAR]

CONCEPTS TO UNDERSTAND

MONEY MARKET FUND: a specific type of mutual fund that seeks to maintain a $1.00
price per share. Money market funds are subject to strict federal requirements
and must:

.. maintain an average dollar-weighted portfolio maturity of 90 days or less
.. buy individual securities that have remaining maturities of 13 months or less
.. invest only in high-quality, dollar-denominated obligations

REPURCHASE AGREEMENT: an agreement between a seller and the fund as buyer
whereby the seller agrees to repurchase a security at an agreed-upon time and
price.

2
<PAGE>

[ICON] MAIN RISKS

The fund's yield will vary as the short-term securities in its portfolio mature
and the proceeds are reinvested in securities with different interest rates.
Over time, the real value of the fund's yield may be substantially eroded by
inflation.

An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of an investment at $1.00 per share, it is possible to lose
money by investing in the fund.

While the fund has maintained a constant share price since inception, and will
continue to try to do so, the following factors could reduce the fund's income
level and/or share price:

.. interest rates could rise sharply, causing the
fund's share price to drop

.. any of the fund's holdings could have its credit rating downgraded or could
default
.. adverse developments in the banking industry, which issues or guarantees many
of the securities the fund typically owns
.. adverse economic, political or other developments could affect foreign
issuers of money market securities
.. a counterparty in a repurchase agreement or other portfolio transaction could
fail to honor the terms of its agreement

[LEFT SIDE BAR]

CONCEPTS TO UNDERSTAND

CREDIT RATING: a measure of the issuer's expected ability to make all required
interest and principal payments in a timely manner.

An issuer with the highest credit rating has a very strong degree of certainty
(or safety) with respect to making all payments. An issuer with the
second-highest credit rating has a strong capacity to make all payments, but the
degree of safety is somewhat less.

Generally, the fund is required to invest at least 95% of its assets in the
securities of issuers with the highest credit rating with the remainder invested
in securities with the second-highest credit rating, or the unrated equivalent
as determined by Dreyfus.

Dreyfus Institutional Prime Money Market Fund 3

<PAGE>

Dreyfus Institutional Prime Money Market Fund (continued)

[ICON] PAST PERFORMANCE

The two tables below show the fund's annual returns and long-term performance.
The first table shows you how the fund's performance has varied from year to
year. The second shows you the fund's average annual return for 1, 5 and 10
calendar-year periods. Both tables assume reinvestment of dividends and
distributions. As with all mutual funds, the past is not a prediction of the
future.

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

[insert bar chart for years 1989 to 1998]

Best Quarter 00.00 +0.00%
Worst Quarter 00.00 -0.00%

The funds 7-day yield on xx/xx/9x was xx.xx%. For the fund's current yield call
toll-free 1-800-554-4611.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98

Inception Date 1 Year 5 Years 10 Years
<S> <C> <C> <C> <C>

Fund 4/15/88 % % %
--- ---- ----
</TABLE>

[LEFT SIDE BAR]

WHAT THIS FUND IS - AND ISN'T

An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. An investor could lose money in this fund, but also has the
potential to make money.

4
<PAGE>

[ICON] EXPENSES

Fund investors pay certain fees and expenses in connection with the fund, which
are described in the table below. Shareholder transaction fees are paid from an
investor's account. Annual fund operating expenses are paid out of fund assets,
so their effect is included in the share price. The fund has no sales charge
(load).

FEE TABLE

Shareholder transaction fees
% OF TRANSACTION AMOUNT none

Annual fund operating expenses
% OF AVERAGE DAILY NET ASSETS
Management fees 0.15%
Shareholder servicing fee 0.15%
Other expenses 0.00%
- -----------------------------------------------
Total 0.30%

EXPENSE EXAMPLE

1 year 3 years 5 years 10 years

$3 $10 $17 $38

This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether the investors sold their shares at the
end of a period or kept them. Because actual return and expenses will be
different, the example is for comparison only.

[LEFT SIDE BAR]

CONCEPTS TO UNDERSTAND

MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most funds and their investment advisers,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors, Rule 12b-1 fees (shareholder
servicing fee in the case of this fund) and extraordinary expenses.

SHAREHOLDER SERVICING FEE: the fee paid to certain banks, brokers or dealers and
other financial institutions for shareholder services. This fee is paid out of
the fund's assets on an ongoing basis and over time it will increase the cost of
a shareholder's investment in the fund.

Dreyfus Institutional Prime Money Market Fund 5

<PAGE>

DREYFUS INSTITUTIONAL GOVERNMENT MONEY MARKET FUND
Ticker Symbol: _______________

[ICON] GOAL/APPROACH

The fund seeks a high level of current income consistent with stability of
principal and conservative investment risk. This objective may be changed
without shareholder approval. As a money market fund, the fund is subject to
maturity, quality and diversification requirements designed to help it maintain
a stable share price.

Under normal market conditions, the fund will invest at least 65% of its total
assets in money market instruments issued or guaranteed by the U.S. government
and its agencies and instrumentalities, including those with floating or
variable rates of interest.

The fund may also invest in repurchase agreements

[LEFT SIDE BAR]

CONCEPTS TO UNDERSTAND

MONEY MARKET FUND: a specific type of mutual fund that seeks to maintain a $1.00
price per share. Money market funds are subject to strict federal requirements
and must:

REPURCHASE AGREEMENT: an agreement between a seller and the fund as buyer
whereby the seller agrees to repurchase a security at an agreed-upon time and
price.

<PAGE>

[ICON] MAIN RISKS

The fund's yield will vary as the short-term securities in its portfolio mature
and the proceeds are reinvested in securities with different interest rates.
Over time the real value of the fund's yield may be substantially eroded by
inflation.

While the fund has maintained a constant share price since inception, and will
continue to try to do so, the following factors could reduce the fund's income
level and/or share price:

.. interest rates could rise sharply, causing the fund's share price to drop
.. any of the fund's holdings could have its credit rating downgraded or could
default (in the case of U.S. government securities, this risk is considered
remote)

[LEFT SIDE BAR]

CONCEPTS TO UNDERSTAND

CREDIT RATING: a measure of the issuer's expected ability to make all required
interest and principal payments in a timely manner.

Dreyfus Institutional Government Money Market Fund 7

<PAGE>

Dreyfus Institutional Government Money Market Fund (continued)

[ICON] PAST PERFORMANCE

The two tables below show the fund's annual returns and its long-term
performance. The first table shows you how the fund's performance has varied
from year to year. The second shows you the fund's average annual return for 1,
5 and 10 calendar-year periods. Both tables assume reinvestment of dividends and
distributions. As with all mutual funds, the past is not a prediction of the
future.

YEAR-BY-YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

[insert bar chart for years 1989 to 1998]

Best Quarter 00.00 +0.00%
Worst Quarter 00.00 -0.00%

The fund's 7-day yield on xx/xx/9x was xx.xx%. For the fund's current yield call
toll free 1-800-554-4611.

AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98
<TABLE>
<CAPTION>

Inception Date 1 Year 5 Years 10 Years

[LEFT SIDE BAR]

WHAT THIS FUND IS - AND ISN'T

8
<PAGE>

[ICON] EXPENSES

FEE TABLE

Shareholder transaction fees
% OF TRANSACTION AMOUNT none
- --------------------

Annual fund operating expenses
% OF AVERAGE DAILY NET ASSETS
Management fees 0.15%
Shareholder servicing fee 0.15%
Other expenses 0.00%
- -----------------------------------------------
Total 0.30%

EXPENSE EXAMPLE

1 year 3 years 5 years 10 years

$3 $10 $17 $38

This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether you sold your shares at the end of a
period or kept them. Because actual return and expenses will be different, the
example is for comparison only.

[LEFT SIDE BAR]

CONCEPTS TO UNDERSTAND

Dreyfus Institutional Government Money Market Fund 9
<PAGE>

DREYFUS INSTITUTIONAL U.S. TREASURY MONEY MARKET FUND
Ticker Symbol: _______________

[ICON] GOAL/APPROACH

To pursue its goal, the fund invests exclusively in direct obligations of the
U.S. Treasury and in repurchase agreements secured by these obligations.

[LEFT SIDE BAR]

CONCEPTS TO UNDERSTAND

MONEY MARKET FUND: a specific type of mutual fund that seeks to maintain a $1.00
price per share. Money market funds are subject to strict federal requirements
and must:

REPURCHASE AGREEMENT: an agreement between a seller and the fund as buyer
whereby the seller agrees to repurchase a security at an agreed-upon time and
price.

<PAGE>

[ICON] MAIN RISKS

An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation 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.

While the fund has maintained a constant share price since inception, and will
continue to try to do so, the following factors could reduce the fund's income
level and/or share price:

.. interest rates could rise sharply, causing the fund's share price to drop
.. a counterparty in a repurchase agreement could have its credit rating
downgraded or could default

[LEFT SIDE BAR]

CONCEPTS TO UNDERSTAND

U.S. TREASURY OBLIGATIONS: bills, notes and bonds issued by the U.S. Treasury
and backed by the full faith and credit of the U.S. government.

Treasury obligations are generally considered to be among the highest-quality
investments available. By investing in these obligations, the fund seeks to add
an incremental degree of safety to its portfolio. The fund's yields may be
somewhat lower than those of money market funds that do not limit their
investments to the extent that this fund does, in exchange for the higher level
of credit quality that Treasury obligations offer.

Dreyfus Institutional U.S. Treasury Money Market Fund 11

<PAGE>

[ICON] PAST PERFORMANCE

YEAR-BY -YEAR TOTAL RETURN AS OF 12/31 EACH YEAR (%)

[insert bar chart for years 1989 to 1998]

Best Quarter 00.00 +0.00%
Worst Quarter 00.00 -0.00%

The fund's 7-day yield on xx/xx/9x was xx.xx%. For the fund's current yield call
toll free 1-800-554-4611.

AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/98
<TABLE>
<CAPTION>

Inception Date 1 Year 5 Years 10 Years

[LEFT SIDE BAR]

WHAT THIS FUND IS - AND ISN'T

THIS FUND IS A MUTUAL FUND: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.

<PAGE>

[ICON] EXPENSES

FEE TABLE

Shareholder transaction fees
% OF TRANSACTION AMOUNT none

Annual fund operating expenses
% OF AVERAGE DAILY NET ASSETS
Management fees 0.15%
Shareholder servicing fee 0.15%
Other expenses 0.00%
- -----------------------------------------------
Total 0.30%

EXPENSE EXAMPLE

1 year 3 years 5 years 10 years

$3 $10 $17 $38

This example shows what an investor could pay in expenses over time. It uses the
same hypothetical conditions other funds use in their prospectuses: $10,000
initial investment, 5% total return each year and no changes in expenses. The
figures shown would be the same whether you sold your shares at the end of a
period or kept them. Because actual return and expenses will be different, the
example is for comparison only.

[LEFT SIDE BAR]

CONCEPTS TO UNDERSTAND

Dreyfus Institutional U.S. Treasury Money Market Fund 13

<PAGE>

[ICON] MANAGEMENT

The investment adviser of each fund is The Dreyfus Corporation, 200 Park Avenue,
New York, NY 10166. Founded in 1947, Dreyfus manages one of the nation's leading
mutual fund complexes with more than $112 billion in over 160 mutual fund
portfolios. Dreyfus is the mutual fund business of Mellon Bank Corporation, a
broad-based financial services company with a bank at its core. With more than
$350 billion of assets under management and $1.7 trillion of assets under
administration and custody, Mellon provides a full range of banking, investment
and trust products and services to individuals, businesses and institutions. Its
mutual fund companies place Mellon as the leading bank manager of mutual funds.
Mellon is headquartered in Pittsburgh, Pennsylvania.

[LEFT SIDE BAR]

CONCEPTS TO UNDERSTAND

YEAR 2000 ISSUES: the funds could be adversely affected if the computer systems
used by Dreyfus and the funds' other service providers do not properly process
and calculate date-related information from and after January 1, 2000.

Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the funds invest may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the funds' investments and their share price and yield.

<PAGE>

MANAGEMENT PHILOSOPHY

The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, the firm
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity.

Dreyfus manages each fund by making investment decisions based on the fund's
investment objective, policies and restrictions.

Management 15

<PAGE>

[ICON] FINANCIAL HIGHLIGHTS

Dreyfus Institutional Prime Money Market Fund

The following table describes the fund's performance for the fiscal periods
indicated. "Total return" shows how much an investment in the fund would have
increased (or decreased) during each period, assuming reinvestment of all
dividends and distributions. These figures have been independently audited by ,
whose report, along with the fund's financial statements, is included in the
annual report.

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1998 1997 1996 1995 1994
- ----------------------------------------------------- ------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>

PER-SHARE DATA ($)

Net asset value, beginning of period

Investment operations: Investment income (loss) - net

Net realized and unrealized
gain (loss) on investments

Total from investment operations

Distributions Dividends from investment
income - net

Dividends from net realized
gain or investments

Total distributions

Net asset value, end of period

Total return (%)

RATES/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%)

Ratio of net investment income (loss) to average
net assets (%)

Net assets end of period ($ x 1,000)
</TABLE>

<PAGE>

[ICON] FINANCIAL HIGHLIGHTS

Dreyfus Institutional Government Money Market Fund

The following table describes the fund's performance for the fiscal periods
indicated. "Total Return" shows how much an investment in the fund would have
increased (or decreased) during each period, assuming reinvestment of all
dividends and distributions. These figures have been independently audited by ,
whose report, along with the fund's financial statements, is included in the
annual report.

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1998 1997 1996 1995 1994
- ----------------------------------------------------- ------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>

PER-SHARE DATA ($)

Net asset value, beginning of period

Investment operations: Investment income (loss) - net

Net realized and unrealized
gain (loss) on investments

Total from investment operations

Distributions Dividends from investment
income - net

Dividends from net realized
gain or investments

Total distributions

Net asset value, end of period

Total return (%)

RATES/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%)

Ratio of net investment income (loss) to average
net assets (%)

Net assets end of period ($ x 1,000)
</TABLE>

17
<PAGE>

[ICON] FINANCIAL HIGHLIGHTS

Dreyfus Institutional U.S. Treasury Money Market Fund

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1998 1997 1996 1995 1994
- ----------------------------------------------------- ------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>

PER-SHARE DATA ($)

Net asset value, beginning of period

Investment operations: Investment income (loss) - net

Net realized and unrealized
gain (loss) on investments

Total from investment operations

Distributions Dividends from investment
income - net

Dividends from net realized
gain or investments

total distributions

Net asset value, end of period

Total return (%)

RATES/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%)

Ratio of net investment income (loss) to average
net assets (%)

Net assets end of period ($ x 1,000)
</TABLE>

18
<PAGE>

INVESTOR ACCOUNT INFORMATION

[ICON] ACCOUNT POLICIES

BUYING SHARES

Investors pay no sales charges to invest in these funds. The price for fund
shares is the net asset value per share (NAV) for the shares purchased. For each
of Dreyfus Institutional Government Money Market Fund and Dreyfus Institutional
U.S. Treasury Money Market Fund, the NAV generally is calculated at 3 p.m.,
Eastern time, every day the New York Stock Exchange ("NYSE") is open. The NAV of
Dreyfus Institutional Prime Money Market Fund generally is calculated at 5 p.m.
Eastern time, every day the NYSE is open. Orders will be priced at the NAV next
calculated after they are accepted by a fund's transfer agent or other entity
authorized to accept orders on behalf of the fund. Each fund's investments are
valued based on amortized cost.
<TABLE>
<CAPTION>

Minimum investments
Initial Additional
- ------------------------------------ --------------------------------- ---------------------------------
<S> <C> <C>
none; $500 FOR TELETRANSFER
Regular accounts $1,000,000 investments and $100 for
Dreyfus automatic investment
plans
</TABLE>

All investments must be in U.S. dollars. Third-party checks cannot be accepted.
Investors may be charged a fee for any check that does not clear. Maximum
TeleTransfer purchase is $150,000 per day.

[LEFT SIDE BAR]

NET ASSET VALUE (NAV): a mutual fund's share price on a given day. A fund's NAV
is calculated by dividing the value of its net assets by the number of existing
shares.

AMORTIZED COST: the value of a fund's portfolio securities, which does not take
into account unrealized gains and losses. As a result, portfolio securities are
valued at their acquisition cost, adjusted over time based on the discounts or
premiums reflected in their portfolio purchase price. This method of valuation
is designed for each fund to be able to price its shares at $1.00 per share.

19
<PAGE>

ACCOUNT POLICIES (CONTINUED)

SELLING SHARES

Investors may sell shares at any time. Shares will be sold at the next NAV
calculated after a sale order is accepted by a fund's transfer agent or other
entity authorized to accept orders on behalf of the funds. Any certificates
representing fund shares being sold must be returned with the redemption
request. Orders will be processed promptly and investors will generally receive
the proceeds within a week.

Before selling recently purchased shares, investors should note that if a fund
has not yet collected payment for the shares being sold, it may delay sending
the proceeds until it has collected payment, which may take up to eight business
days.
<TABLE>
<CAPTION>

Limitations on selling shares by phone:
Proceeds
sent by Minimum Maximum
---------------------------- ---------------------------
<S> <C> <C>

Check No minimum $150,000 per day
Wire accounts $1,000 $250,000 for joint
every 30 days
TeleTransfer $500 $250,000 for joint
accounts every 30 days
</TABLE>

[LEFT SIDE BAR]

Written sell orders

Some circumstances require written sell orders along with signature guarantees.
These include:

.. amounts of $1,000 or more on accounts whose address has been changed within
the last 30 days
.. requests to send the proceeds to a different payee or address Written sell
orders of $100,000 or more must also be signature guaranteed.

A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.

20
<PAGE>

GENERAL POLICIES

For the Dreyfus Institutional Prime Money Market Fund, shares for which the
purchase order is received in proper form by 5 p.m., Eastern time, will receive
the dividend declared that day if federal funds are received by 6 p.m., Eastern
time. For the Dreyfus Institutional Government Money Market Fund and the Dreyfus
Institutional U.S. Treasury Money Market Fund, shares begin accruing dividends
on the day the purchase order is effected if the instructions to purchase shares
and payment are received by the transfer agent or other authorized entity before
3 p.m., Eastern time. The proceeds of a redemption requested to be made by wire
ordinarily will be sent on the day the request is effective and the shares will
not receive the dividend declared that day.

If an investor's account falls below $10,000*, the fund may ask that the balance
be increased. If it is still below $10,000* after 45 days, the fund may close
the account and send the investor the proceeds.

Unless an investor declines telephone privileges on the application, the
investor may be responsible for any fraudulent telephone order as long as
Dreyfus takes reasonable measures to verify the order.

Each fund reserves the right to:

.. refuse any purchase or exchange request

.. change or discontinue its exchange privilege

.. change its minimum investment amounts

.. delay sending out redemption proceeds for up to seven days (generally applies
only in cases of very large redemptions, excessive trading or during unusual
market conditions)

Each fund also reserves the right to make a "redemption in kind" - payment in
portfolio securities rather than cash - if the amount the investor is redeeming
is large enough to affect fund operations (for example, if it represents more
than 1% of the fund's assets).

* $500 or less if an investor has been a fund shareholder since September 14,
1995.

[LEFT SIDE BAR]

Third-party investments

Investments made through a third party (rather than directly with Dreyfus), may
be subject to policies and fees different than those described here. Banks,
brokers, 401(k) plans, financial advisers and financial supermarkets may charge
transaction fees and may set different minimum investments or limitations on
buying or selling shares. Investors should consult a representative of the plan
or financial institution if in doubt.

Account Policies 21
<PAGE>

[ICON] DISTRIBUTIONS AND TAXES

Each fund usually distributes to its shareholders dividends from its net
investment income once a month, and distributes any net capital gains that it
has realized once a year. Distributions will be reinvested in the fund unless
the investor instructs the fund otherwise. There are no fees or sales charges on
reinvestments.

Distributions are taxable to U.S. shareholders as ordinary income (unless an
investment is in an IRA or other tax-advantaged account). The tax status of any
distribution is the same regardless of how long an investor has been in the fund
and whether distributions are reinvested or taken in cash. The tax status of
dividends and distributions will be detailed in annual tax statements from the
fund.

Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.

[LEFT SIDE BAR]

Concepts to understand

DIVIDENDS: income or interest paid by the investments in the fund's portfolio.

DISTRIBUTIONS: dividend income and capital gains, net of expenses, passed on to
fund shareholders. These are calculated on a per share basis; the more fund
shares you own, the more you will receive.

22
<PAGE>

[ICON] SERVICES FOR FUND INVESTORS

EXCHANGE PRIVILEGE

Investors can exchange $500 or more from one Dreyfus fund into certain others
(no minimum for retirement accounts). Investors can request an exchange in
writing or by phone. Be sure to read the current prospectus for any fund into
which you are exchanging. Any new account established through an exchange will
have the same privileges as an original account (as long as they are available).
There is currently no fee for exchanges, although an investor may be charged a
sales load when exchanging into any fund that has one.

DREYFUS AUTO-EXCHANGE PRIVILEGE

Dreyfus Auto-Exchange privilege enables an investor to invest regularly (on a
semi-monthly, quarterly or annual basis), in exchange for shares of a fund, in
shares of certain other Dreyfus funds. There is currently no fee for this
privilege.

DREYFUS TELETRANSFER PRIVILEGE

To move money between a bank account and a Dreyfus fund account with a phone
call, an investor can use the Dreyfus TeleTransfer privilege. Investors can set
up TeleTransfer on an account by providing bank account information and
following the instructions on the application.

THE DREYFUS TOUCH

For 24-hour automated account access, use Dreyfus Touch. With a touch-tone
phone, you can easily manage your Dreyfus accounts, obtain information on other
Dreyfus mutual funds and get current stock market quotes.

OTHER AUTOMATIC SERVICES

Certain other services for buying and selling shares automatically are offered
by the funds. See the SAI for further information.

LEFT SIDE BAR

Retirement plans

Dreyfus offers a variety of retirement plans, including traditional and Roth
IRAs. Here's where you call for information:

.. for traditional, rollover and Roth IRAs, call 1-800-645-6561

.. for SEP-IRAs, Keogh accounts, 401(k) and 403(b) accounts, call
1-800-358-0910

23
<PAGE>

INSTRUCTIONS FOR ACCOUNTS
Different instructions apply for IRAs. See the SAI.

TO OPEN AN ACCOUNT

In Writing

Complete the application.

Mail your application and a check to:
The Dreyfus Family of Funds
P.O. Box 9387, Providence, RI 02940-9387

TO ADD TO AN ACCOUNT

In Writing

Fill out an investment slip, and write your account number on your check.

Mail the slip and the check to: The Dreyfus Family of Funds, P.O. Box 105,
Newark, NJ 07101-0105

TO OPEN AN ACCOUNT

By Telephone

WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co. with
these instructions:

.. Dreyfus Institutional Prime Money Market Fund
DDA#044288
.. Dreyfus Institutional Government Money Market Fund
DDA#044288
.. Dreyfus institutional U.S. Treasury Money Market Fund
DDA#044288
.. your Social Security or tax ID number
.. name(s) of investor(s)

Call us to obtain an account number. Return your application.

TO ADD TO AN ACCOUNT

By Telephone

WIRE Have your bank send your Investment to Boston Safe Deposit & Trust Co. with
these instructions:

24
<PAGE>

ELECTRONIC CHECK Same as wire but before your account number insert the
appropriate number as shown at right.

TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.

TO OPEN AN ACCOUNT

Automatically

WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.

TO ADD TO AN ACCOUNT

Automatically

ALL SERVICES Call us to request a form to add any automatic investing service
(see "Services for Fund Investors"). Complete and return the forms along with
any other required materials.

TO OPEN AN ACCOUNT

Via the Internet

COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.

TO SELL SHARES

In Writing

Write a letter of instruction that includes:
.. your name(s) and signatures(s)
.. your account number
.. the fund name
.. the dollar amount you want to sell
.. how and where to send the proceeds

Instructions for Accounts 25

<PAGE>

INSTRUCTIONS FOR ACCOUNTS (CONTINUED)

Obtain a signature guarantee or other documentation if required (see "Account
Policies Selling Shares).

Mail your request to : The Dreyfus Family of Funds, P.O. Box 9671, Providence,
RI 02940-9671

By Telephone

WIRE Be sure the fund has your bank account information on file. Call us to
request your transaction. Proceeds will be wired to your bank.

TELETRANSFER Be sure the fund has your bank account information on file. Call us
to request your transaction. Proceeds will be sent to your bank by electronic
check.

CHECK Call us to request your transaction. A check will be sent to the address
of record.

Automatically

DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request a form to add the plan.
Complete the form, specifying the amount and frequency of withdrawals you would
like.

Be sure to maintain an account balance of $10,000 or more.

[RIGHT SIDE BAR]

To reach Dreyfus, Call toll free in the U.S. 1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to: The Dreyfus Family of Funds

Electronic check Numbers

"4640" for Dreyfus Institutional Prime Money Market Fund
"4610" for Dreyfus Institutional Government Money Market Fund
"4670" for Dreyfus Institutional U.S. Treasury Money market Fund

Add ABA #011-001234

26
<PAGE>

FOR MORE INFORMATION

Dreyfus Institutional Prime Money Market Fund
Dreyfus Institutional Government Money Market Fund
Dreyfus Institutional U.S. Treasury Money Market Fund
Series of The Dreyfus/Laurel Funds, Inc.
SEC file number: 811-5270

More information on these funds is available free upon request, including the
following:

Annual/Semiannual Report

Describes a fund's performance, lists portfolio holdings and contains a letter
from the fund's manager discussing recent market conditions, economic trends and
fund strategies that significantly affected the fund's performance during the
last fiscal year.

Statement of Additional Information (SAI)

Provides more details about a fund and its policies. A current SAI is on file
with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).

[LEFT SIDE BAR]

To obtain information:

BY TELEPHONE
Call 1-800-554-4611

BY MAIL write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144

BY E-MAIL Send your request to [email protected]

ON THE INTERNET Text only versions of fund documents can be viewed online or
downloaded from SEC http//wwwsec.gov. DREYFUS http://www/dreyfus.com

You can also obtain copies by visiting the SEC's Public Reference room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington DC 20549-6009.
<PAGE>

Dreyfus Money Market Reserves

Dreyfus U.S. Treasury Reserves

Dreyfus Municipal Reserves

Seeking taxable or federally tax-exempt current income and a stable $1.00 share
price

PROSPECTUS March 1, 1999

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.

<PAGE>

Contents

THE FUNDS
- --------------------------------------------------------------------------------

Each fund's 1 Introduction
investment approach,
risks, performance, 2 Dreyfus Money Market Reserves
expenses and related
information 6 Dreyfus U.S. Treasury Reserves

10 Dreyfus Municipal Reserves

14 Management

16 Financial Highlights

YOUR INVESTMENT
- --------------------------------------------------------------------------------

Information 22 Account Policies
for managing your
fund account 25 Distributions and Taxes

26 Services for Fund Investors

28 Instructions for Regular Accounts

30 Instructions for IRAs

FOR MORE INFORMATION
- -------------------------------------------------------------------------------

Where to learn more Back Cover
about these and other
Dreyfus funds

<PAGE>

The Funds

Dreyfus Money Market Reserves
Dreyfus U.S. Treasury Reserves
Dreyfus Municipal Reserves
Series of The Dreyfus/Laurel Funds, Inc.

The main differences among these funds are the securities in which they invest.
Dreyfus Money Market Reserves invests in a range of high-quality money market
instruments. Dreyfus U.S. Treasury Reserves maintains an even higher quality
standard by investing exclusively in U.S. Treasury obligations and repurchase
agreements secured by such obligations. Dreyfus Municipal Reserves invests in
municipal obligations from around the country, allowing the fund's dividends to
be free from federal income tax in most cases.

INFORMATION ON EACH FUND'S RECENT PERFORMANCE CAN BE FOUND IN ITS CURRENT
ANNUAL/SEMIANNUAL REPORT (SEE BACK COVER).

Introduction 1

<PAGE>

Dreyfus Money Market Reserves
---------------------------------
Ticker Symbols: Class R shares DPOXX
Investor shares DPIXX

GOAL/APPROACH
- --------------------

The fund invests in a diversified portfolio of high-quality, short-term debt
securities, including:

o securities issued or guaranteed by the U.S. government or its agencies,
including mortgage-related securities

o certificates of deposit, time deposits, bankers' acceptances and other
short-term securities issued by domestic or foreign banks or their
subsidiaries or branches

o repurchase agreements

o domestic and dollar-denominated foreign commercial paper, and other
short-term corporate obligations, including those with floating or
variable rates of interest

Concepts to understand

MONEY MARKET FUND: a specific type of fund that seeks to maintain a $1.00 price
per share. Money market funds are subject to strict federal requirements and
must:

o maintain an average dollar-weighted portfolio maturity of 90 days or
less

o buy individual securities that have remaining maturities of 13 months
or less

o invest only in high-quality, dollar-denominated obligations

REPURCHASE AGREEMENT: an agreement between a seller and the fund as buyer
whereby the seller agrees to repurchase a security at an agreed-upon time and
price.

<PAGE>

MAIN RISKS
- --------------------

An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation 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.

While the fund has maintained a constant share price since inception, and will
continue to try to do so, the following factors could reduce the fund's income
level and/or share price:

o interest rates could rise sharply, causing the fund's share price to drop

o adverse developments could occur in the banking industry, which issues or
guarantees many of the securities the fund typically owns

o any of the fund's holdings could have its credit rating downgraded or could
default

o adverse economic, political or other developments could affect foreign
issuers of money market securities

Concepts to understand

CREDIT RATING: a measure of the issuer's expected ability to make all required
interest and principal payments in a timely manner.

Dreyfus Money Market Reserves 3

<PAGE>

DREYFUS MONEY MARKET RESERVES (CONTINUED)

PAST PERFORMANCE
- --------------------

The two tables below show the fund's annual returns and long-term performance.
The first table shows you how the performance of the fund's Class R shares has
varied from year to year. The second averages the performance of each share
class over time. Both tables assume reinvestment of dividends and distributions.
As with all mutual funds, the past is not a prediction of the future.

- --------------------------------------------------------------------------------

Year-by-year total return AS OF 12/31 EACH YEAR (%)

CLASS R SHARES [BAR GRAPH]

BEST QUARTER: Q0 '00 +0.00%

WORST QUARTER: Q0 '00 -0.00%

The fund's 7-day yield on x/xx/9x was xx.xx% for Class R shares and xx.xx% for
Investor shares. For the fund's current yield, call toll-free 1-800-645-6561.

- --------------------------------------------------------------------------------

Average annual total return AS OF 12/31/98

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Inception Since
Date 1 Year 5 Years 10 Years Inception

--------------------------------------------------------------------
CLASS R
SHARES 11/18/87 00.00% 00.00% 00.00% --

INVESTOR
SHARES 4/6/94 00.00% -- -- 00.00%

</TABLE>

What this fund is --
and isn't

An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.

<PAGE>

EXPENSES

As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the table below. Shareholder transaction fees are paid
from your account. Annual fund operating expenses are paid out of fund assets,
so their effect is included in the share price. The fund has no sales charge
(load).

-------------------------------------------------------

Fee table

Class R Investor
shares shares
-------------------------------------------------------

SHAREHOLDER TRANSACTION FEES

% OF TRANSACTION AMOUNT NONE NONE
-------------------------------------------------------

ANNUAL FUND OPERATING EXPENSES

% OF AVERAGE DAILY NET ASSETS

Management fees x.xx% x.xx%

12b-1 fee x.xx% x.xx%

Other expenses x.xx% x.xx%
-------------------------------------------------------

TOTAL X.XX% X.XX%
-------------------------------------------------------

Expense example

1 Year 3 Years 5 Years 10 Years
-------------------------------------------------------

CLASS R SHARES $000 $000 $000 $000

INVESTOR SHARES $000 $000 $000 $000

This example shows what you could pay in expenses over
time. It uses the same hypothetical conditions other
funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in
expenses. The figures shown would be the same whether
you sold your shares at the end of a period or kept
them. Because actual return and expenses will be
different, the example is for comparison only.

Concepts to understand

MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers and their funds,
Dreyfus pays all fund expenses except for brokerage fees, taxes, interest, fees
and expenses of the independent directors, Rule 12b-1 fees and extraordinary
expenses.

12B-1 FEE: the fee paid to Dreyfus Service Corporation for shareholder service
and to the fund's distributor for shareholder service and promotional expenses.
Because this fee is paid out of the fund's assets on an ongoing basis, over time
it will increase the cost of your investment and may cost you more than paying
other types of sales charges.

Dreyfus Money Market Reserves 5

<PAGE>

Dreyfus U.S. Treasury Reserves
--------------------------------------
Ticker Symbols: Class R shares DUTXX?
Investor shares DUTXX?

GOAL/APPROACH
- --------------------

To pursue its goal, the fund invests exclusively in direct obligations of the
U.S. Treasury and in repurchase agreements secured by these obligations.

Concepts to understand

MONEY MARKET FUND: a specific type of fund that seeks to maintain a $1.00 price
per share. Money market funds are subject to strict federal requirements and
must:

o maintain an average dollar-weighted portfolio maturity of 90 days or
less

o buy individual securities that have remaining maturities of 13 months
or less

o invest only in high-quality, dollar-denominated obligations

REPURCHASE AGREEMENT: an agreement between a seller and the fund as buyer
whereby the seller agrees to repurchase a security at an agreed-upon time and
price.

6
<PAGE>

MAIN RISKS
- --------------------

An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation 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.

While the fund has maintained a constant share price since inception, and will
continue to try to do so, the following factors could reduce the fund's income
level and/or share price:

o interest rates could rise sharply, causing the fund's share price to drop

o a counterparty in a repurchase agreement could have its credit rating
downgraded or could default

Concepts to understand

U.S. TREASURY OBLIGATIONS: bills, notes and bonds issued by the U.S. Treasury
and backed by the full faith and credit of the U.S. government.

Dreyfus U.S. Treasury Reserves 7

<PAGE>

DREYFUS U.S. TREASURY RESERVES (CONTINUED)

PAST PERFORMANCE
- --------------------

- --------------------------------------------------------

Year-by-year total return AS OF 12/31 EACH YEAR (%)

CLASS R SHARES [BAR GRAPH]

BEST QUARTER: Q0 '00 +0.00%

WORST QUARTER: Q0 '00 -0.00%

The fund's 7-day yield on x/xx/9x was xx.xx% for Class R shares and xx.xx% for
Investor shares. For the fund's current yield, call toll-free 1-800-645-6561.

- --------------------------------------------------------

Average annual total return AS OF 12/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Inception Since
Date 1 Year 5 Years Inception
-----------------------------------------------------------

CLASS R SHARES 2/4/91 00.00% 00.00% 00.00%

INVESTOR SHARES 4/18/94 00.00% -- 00.00%

</TABLE>

What this fund is --
and isn't

<PAGE>

EXPENSES
- --------------------

--------------------------------------------------------

Fee table

Class R Investor
shares shares
--------------------------------------------------------

SHAREHOLDER TRANSACTION FEES

% OF TRANSACTION AMOUNT NONE NONE
--------------------------------------------------------

ANNUAL FUND OPERATING EXPENSES

% OF AVERAGE DAILY NET ASSETS

Management fees x.xx% x.xx%

12b-1 fee x.xx% x.xx%

Other expenses x.xx% x.xx%
--------------------------------------------------------

TOTAL X.XX% X.XX%
--------------------------------------------------------

Expense example

1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------

CLASS R SHARES $000 $000 $000 $000

INVESTOR SHARES $000 $000 $000 $000

Concepts to understand

Dreyfus U.S. Treasury Reserves 9

<PAGE>

Dreyfus Municipal Reserves
----------------------------------
Ticker Symbols: Class R shares DLTXX
Investor shares DTMXX

GOAL/APPROACH
- --------------------

The fund seeks income, consistent with stability of principal, that is exempt
from federal income tax. This objective may be changed without shareholder
approval. As a money market fund, the fund is subject to maturity, quality and
diversification requirements designed to help it maintain a stable share price.

To pursue its goal, the fund invests at least 80% of total 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.

Concepts to understand

MONEY MARKET FUND: a specific type of fund that seeks to maintain a $1.00 price
per share. Money market funds are subject to strict federal requirements and
must:

o maintain an average dollar-weighted portfolio maturity of 90 days or
less

o buy individual securities that have remaining maturities of 13 months
or less

o invest only in high-quality, dollar-denominated obligations

10
<PAGE>

MAIN RISKS
- --------------------

An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation 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.

While the fund has maintained a constant share price since inception, and will
continue to try to do so, the following factors could reduce the fund's income
level and/or share price:

o interest rates could rise sharply, causing the fund's share price to drop

o any of the fund's holdings could have its credit rating downgraded or could
default

To the extent that the fund invests in municipal leases, it takes on additional
risks. Because municipal leases generally are backed by revenues from a
particular source or that depend on future appropriations by municipalities and
are not obligations of their issuers, they are less secure than most municipal
obligations.

Concepts to understand

CREDIT RATING: a measure of the issuer's expected ability to make all required
interest and principal payments in a timely manner.

Dreyfus Municipal Reserves 11

<PAGE>

DREYFUS MUNICIPAL RESERVES (CONTINUED)

PAST PERFORMANCE
- --------------------
The two tables below show the fund's annual returns and long-term performance.
The first table shows you how the performance of the fund's Class R shares has
varied from year to year. The second averages the performance of each share
class over time. Both tables assume reinvestment of dividends and distributions.
As with all mutual funds, the past is not a prediction of the future.
--------------------------------------------------------

Year-by-year total return AS OF 12/31 EACH YEAR (%)

CLASS R SHARES [BAR GRAPH]

BEST QUARTER: Q0 '00 +0.00%

WORST QUARTER: Q0 '00 -0.00%

The fund's 7-day yield on x/xx/9x was xx.xx% for Class R shares and xx.xx% for
Investor shares. For the fund's current yield, call toll-free 1-800-645-6561.
--------------------------------------------------------

Average annual total return AS OF 12/31/98
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Inception Since
Date 1 Year 5 Years 10 Years Inception
-------------------------------------------------------------------------

CLASS R
SHARES 12/10/87 00.00% 00.00% 00.00% --

INVESTOR
SHARES 4/20/94 00.00% -- -- 00.00%
</TABLE>

What this fund is --
and isn't

12
<PAGE>

EXPENSES
- --------------------

--------------------------------------------------------
Fee table

Class R Investor
shares shares
--------------------------------------------------------

SHAREHOLDER TRANSACTION FEES

% OF TRANSACTION AMOUNT NONE NONE
--------------------------------------------------------

ANNUAL FUND OPERATING EXPENSES

% OF AVERAGE DAILY NET ASSETS

Management fees x.xx% x.xx%

12b-1 fee x.xx% x.xx%

Other expenses x.xx% x.xx%

--------------------------------------------------------

TOTAL X.XX% X.XX%

--------------------------------------------------------

Expense example

1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------

CLASS R SHARES $000 $000 $000 $000

INVESTOR SHARES $000 $000 $000 $000

Concepts to understand

Dreyfus Municipal Reserves 13

<PAGE>

MANAGEMENT
- -------------------

The investment adviser for each fund is The Dreyfus Corporation, 200 Park
Avenue, New York, New York 10166. Founded in 1947, Dreyfus manages one of the
nation's leading mutual fund complexes, with more than $112 billion in more than
160 mutual fund portfolios. Dreyfus is the mutual fund business of Mellon Bank
Corporation, a broad-based financial services company with a bank at its core.
With more than $350 billion of assets under management and $1.7 trillion of
assets under administration and custody, Mellon provides a full range of
banking, investment and trust products and services to individuals, businesses
and institutions. Its mutual fund companies place Mellon as the leading bank
manager of mutual funds. Mellon is headquartered in Pittsburgh, Pennsylvania.

Concepts to understand

YEAR 2000 ISSUES: each fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000.

Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of a fund's investments and its yield and share price.

14
<PAGE>

Management philosophy

Dreyfus manages each fund by making investment decisions based on the fund's
investment objective, policies and restrictions.

Management 15

<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------

Dreyfus Money Market Reserves

The following two tables describe the fund's 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 financial highlights have been independently
audited by _____________ LLP, whose report, along with the fund's financial
statements, is included in the annual report.

YEAR ENDED OCTOBER 31,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CLASS R SHARES 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period 1.00 1.00 1.00 1.00

Investment operations:

Investment income -- net .051 .050 .053 .034(1)

Distributions:

Dividends from
investment income -- net (.051) (.050) (.053) (.034)

Net asset value, end of period 1.00 1.00 1.00 1.00

Total return (%) 5.25 5.16 5.44 3.52
- ---------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to
average net assets (%) .50 .50 .50 .51(2)

Ratio of net investment income to
average net assets (%) 5.13 5.01 5.40 3.51
- ---------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 232,032 170,409 139,787 124,754

(1) NET INVESTMENT INCOME BEFORE EXPENSES REIMBURSED BY THE INVESTMENT ADVISER
FOR THE YEAR ENDED OCTOBER 31, 1994 WAS $.0331.

(2) ANNUALIZED EXPENSE RATIO BEFORE EXPENSES REIMBURSED BY THE INVESTMENT
ADVISER FOR THE YEAR ENDED OCTOBER 31, 1994 WAS 0.64%.

16
<PAGE>

YEAR ENDED OCTOBER 31,

INVESTOR SHARES 1998 1997 1996 1995 1994(1)
- ------------------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period 1.00 1.00 1.00 1.00

Investment operations:

Investment income -- net .049 .048 .052 .021

Distributions:

Dividends from
investment income -- net (.049) (.048) (.052) (.021)

Net asset value, end of period 1.00 1.00 1.00 1.00

Total return (%) 5.04 4.94 5.28 2.14(2)
- ---------------------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses
to average net assets (%) .70 .70 .70 .71(3)

Ratio of net investment income
to average net assets (%) 4.95 4.84 5.25 3.31(3)
- ---------------------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 204,851 144,168 161,819 3,611
</TABLE>

(1) THE FUND COMMENCED SELLING INVESTOR SHARES ON APRIL 6, 1994.

(2) NOT ANNUALIZED.

(3) ANNUALIZED.

Financial Highlights 17

<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Dreyfus U.S. Treasury Reserves

The following two tables describe the fund's 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 financial highlights have been independently
audited by ____________ LLP, whose report, along with the fund's financial
statements, is included in the annual report.

PER-SHARE DATA ($)

Net asset value, beginning of period 1.00 1.00 1.00 1.00

Investment operations:

Investment income -- net .050 .048 .051 .033(1)

Distributions:

Dividends from investment
income -- net (.050) (.048) (.051) (.033)

Net asset value, end of period 1.00 1.00 1.00 1.00

Total return (%) 5.10 4.94 5.23 3.37
- ------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average
net assets (%) .50 .50 .50 .50(2)

Ratio of net investment income
to average net assets (%) 4.98 4.79 5.14 3.62
- ------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 522,178 464,303 399,873 228,797

(1) NET INVESTMENT INCOME BEFORE EXPENSES REIMBURSED BY THE INVESTMENT ADVISER
FOR THE YEAR ENDED OCTOBER 31, 1994 WAS $0.0323.

(2) ANNUALIZED EXPENSE RATIO BEFORE EXPENSES REIMBURSED BY THE INVESTMENT
ADVISER FOR THE YEAR ENDED OCTOBER 31, 1994 WAS 0.59%.

</TABLE>

18
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C>

INVESTOR SHARES 1998 1997 1996 1995 1994(1)
- --------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period 1.00 1.00 1.00 1.00

Investment operations:

Investment income -- net .048 .046 .049 .020

Distributions:

Dividends from investment
income -- net (.048) (.046) (.049) (.020)

Net asset value, end of period 1.00 1.00 1.00 1.00

Total return (%) 4.89 4.74 5.02 1.96(2)
- ------------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses
to average net assets (%) .70 .70 .70 .70(3)

Ratio of net investment income
to average net assets (%) 4.81 4.64 4.92 3.42(3)
- ------------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 112,900 21,826 21,386 1,324

</TABLE>

(1) THE FUND COMMENCED SELLING INVESTOR SHARES ON APRIL 18, 1994.

(2) NOT ANNUALIZED.

(3) ANNUALIZED.

Financial Highlights 19

<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Dreyfus Municipal Reserves

The following two tables describe the fund's 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 financial highlights have been independently
audited by ____________, whose report, along with the fund's financial
statements, is included in the annual report.

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C>

CLASS R SHARES 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period ...... 1.00 1.00 1.00 1.00

Investment operations:

Investment income -- net ............ .032 .031 .034 .023(1)

Distributions:

Dividends from investment
income -- net ....................... (.031) (.031) (.034 (.023)

Dividends from net realized
gain on investments ................. (.001) -- -- --

Total distributions ....................... (.032) (.031) (.034) (.023)

Net asset value, end of period ............ 1.00 1.00 1.00 1.00

Total return (%) .......................... 3.21 3.17 3.48 2.29
-----------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) .52 .50 .50 .51(2)

Ratio of net investment income
to average net assets (%) ................. 3.10 3.11 3.41 2.30
-----------

Net assets, end of period ($ x 1,000) ..... 194,158 221,178 205,373 205,105

(1) NET INVESTMENT INCOME BEFORE EXPENSES REIMBURSED BY THE INVESTMENT ADVISER
FOR THE YEAR ENDED OCTOBER 31, 1994 WAS $.0218.

(2) ANNUALIZED OPERATING EXPENSE RATIO BEFORE EXPENSES REIMBURSED BY THE
INVESTMENT ADVISER FOR THE YEAR ENDED OCTOBER 31, 1994 WAS .61%

</TABLE>

20
<PAGE>

YEAR ENDED OCTOBER 31,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>

INVESTOR SHARES 1998 1997 1996 1995 1994(1)
- ------------------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period 1.00 1.00 1.00 1.00

Investment operations:

Investment income -- net .030 .029 .032 .012

Distributions:

Dividends from investment
income -- net (.029) (.029) (.032) (.012)

Dividends from net realized
gain on investments (.001) -- -- --

Total distributions (.030) (.029) (.032) (.012)

Net asset value, end of period 1.00 1.00 1.00 1.00

Total return (%) 3.00 2.96 3.28 1.23(2)
- ------------------------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to
average net assets (%) .72 .70 .70 .70(3)

Ratio of net investment income
to average net assets (%) 2.92 2.92 3.33 2.11(3)
- ------------------------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 19,486 14,074 17,764 1,161

</TABLE>

(1) THE FUND COMMENCED SELLING INVESTOR SHARES ON APRIL 20, 1994.

(2) NOT ANNUALIZED.

(3) ANNUALIZED.

Financial Highlights 21

<PAGE>

Your Investment

ACCOUNT POLICIES
- --------------------

Buying shares

EACH FUND OFFERS TWO SHARE CLASSES--Class R shares and Investor shares. Class R
shares are sold primarily to financial service providers acting on behalf of
customers having a qualified trust or investment account or relationship at such
institution, or to customers who hold shares of the fund distributed to them by
such account or relationship. Investor shares are offered primarily to investors
who have certain accounts with financial institutions that have entered selling
agreements with the fund's distributor. YOU PAY NO SALES CHARGES to invest in
these funds. Your price for fund shares is the net asset value per share (NAV)
for the class of shares you purchase, which is generally calculated twice a day,
at 12 noon and 4 p.m. Eastern time, every day the New York Stock Exchange is
open. Your order will be priced at the next NAV calculated after your order is
accepted by the fund's transfer agent or other entity authorized to accept
orders on behalf of the fund. Each fund's investments are valued based on
amortized cost.

- --------------------------------------------------------

Minimum investments

Initial Additional
--------------------------------------------------------

REGULAR ACCOUNTS $100,000 NO MINIMUM;
$500 FOR
TELETRANSFER
INVESTMENTS

DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS

All investments must be in U.S. dollars. Third-party
checks cannot be accepted. You may be charged a fee for
any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day. Dreyfus Municipal Reserves
is not recommended for IRAs or other retirement plans.

Concepts to understand

NET ASSET VALUE (NAV): a mutual fund's share price on a given day. A fund's NAV
is calculated by dividing the value of its net assets by the number of existing
shares.

AMORTIZED COST: the value of a fund's portfolio securities, which does not take
into account unrealized gains or losses. As a result, portfolio securities are
valued at their acquisition cost, adjusted over time based on the discounts or
premiums reflected in their purchase price. This method of valuation is designed
for a fund to be able to price its shares at $1.00 per share.

22
<PAGE>

Selling shares

YOU MAY SELL SHARES AT ANY TIME. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. Any certificates
representing fund shares being sold must be returned with your redemption
request. Your order will be processed promptly and you will generally receive
the proceeds within a week.

BEFORE SELLING OR WRITING A CHECK FOR RECENTLY PURCHASED SHARES, please note
that if the fund has not yet collected payment for the shares you are selling,
it may delay sending the proceeds for up to eight business days or until it has
collected payment.

- --------------------------------------------------------

Limitations on selling shares by phone

Proceeds
sent by Minimum Maximum
--------------------------------------------------------

CHECK NO MINIMUM $150,000 PER DAY

WIRE $1,000 $250,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS

TELETRANSFER $500 $250,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS

Written sell orders

Some circumstances require written sell orders along with signature guarantees.
These include:

o amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days

o requests to send the proceeds to a different payee or address

Written sell orders of $100,000 or more must also be signature guaranteed.

Your Investment 23

<PAGE>

ACCOUNT POLICIES (CONTINUED)

General policies

IF YOUR ACCOUNT FALLS BELOW $10,000*, the fund may ask you to increase your
balance. If it is still below $10,000* after 45 days, the fund may close your
account and send you the proceeds.

UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.

EACH FUND RESERVES THE RIGHT TO:

o refuse any purchase or exchange request

o change or discontinue its exchange privilege

o change its minimum investment amounts

o delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions)

Each fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).

* BELOW $500 IF YOU WERE A FUND SHAREHOLDER SINCE AUGUST 31, 1995.

Third-party investments

If you invest through a third party (rather than directly with Dreyfus), the
policies and fees may be different than those described here. Banks, brokers,
401(k) plans, financial advisers and financial supermarkets may charge
transaction fees and may set different minimum investments or limitations on
buying or selling shares. Consult a representative of your plan or financial
institution if in doubt.

24
<PAGE>

DISTRIBUTIONS AND TAXES
- -----------------------

Each fund usually pays its shareholders dividends from its net investment income
once a month, and distributes any net capital gains that it has realized once a
year. Your dividends and distributions will be reinvested in the fund unless you
instruct the fund otherwise. There are no fees or sales charges on
reinvestments.

Each share class will generate a different dividend because each has different
expenses.

Dividends and distributions paid by Dreyfus U.S. Treasury Reserves and Dreyfus
Money Market Reserves are taxable to U.S. shareholders as ordinary income
(unless your investment is in an IRA or other tax-advantaged account).

By investing in municipal obligations, Dreyfus Municipal Reserves generally pays
dividends and distributions that are exempt from federal income tax. The fund
may invest some of its assets in securities that generate income that is not
exempt from federal income tax. Income exempt from federal income tax may be
subject to state and local taxes. The fund's income also may be subject to the
alternative minimum tax.

The tax status of any distribution is the same regardless of how long you have
been in the fund and whether you reinvest your distributions or take them in
cash. The tax status of your dividends and distributions will be detailed in
your annual tax statement from the fund.

Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.

Concepts to understand

DIVIDENDS: income or interest paid by the investments in a fund's portfolio, net
of expenses, passed on to fund shareholders.

Your Investment 25

<PAGE>

SERVICES FOR FUND INVESTORS
- ---------------------------

Automatic services

Buying or selling shares automatically is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application or by
calling 1-800-645-6561.

- --------------------------------------------------------

For investing

DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.

DREYFUS PAYROLL For making automatic investments
SAVINGS PLAN through a payroll deduction.

DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.

DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).

--------------------------------------------------------

For exchanging shares

DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.

--------------------------------------------------------

For selling shares

DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds.

Dreyfus Financial Centers

Through a nationwide network of Dreyfus Financial Centers, Dreyfus offers a full
array of investment services and products. This includes information on mutual
funds, brokerage services, tax-advantaged products and retirement planning.

Our experienced financial consultants can help you make informed choices and
provide you with personalized attention in handling account transactions. The
Financial Centers also offer informative seminars and events. To find the
Financial Center nearest you, call 1-800-499-3327.

26
<PAGE>

Checkwriting privilege

You may write redemption checks against your account in amounts of $500 or more.
These checks are free; however, a fee will be charged if you request a stop
payment or if the transfer agent cannot honor a redemption check due to
insufficient funds or another valid reason. Please do not postdate your checks
or use them to close your account.

Exchange privilege

You can exchange $500 or more from one Dreyfus fund into another (no minimum for
retirement accounts). You can request your exchange in writing or by phone. Be
sure to read the current prospectus for any fund into which you are exchanging.
Any new account established through an exchange will have the same privileges as
your original account (as long as they are available). There is currently no fee
for exchanges, although you may be charged a sales load when exchanging into any
fund that has one.

Dreyfus TeleTransfer privilege

To move money between your bank account and your Dreyfus fund account with a
phone call, use the Dreyfus TeleTransfer privilege. You can set up TeleTransfer
on your account by providing bank account information and following the
instructions on your application.

The Dreyfus Touch((reg.tm))

Retirement plans

Dreyfus offers a variety of retirement plans, including traditional, Roth and
Education IRAs. Here's where you call for information:

o for traditional, rollover, Roth and Education IRAs, call 1-800-645-6561

o for SEP-IRAs, Keogh accounts, 401(k) and 403(b) accounts, call
1-800-358-0910

27
<PAGE>

INSTRUCTIONS FOR REGULAR ACCOUNTS

TO OPEN AN ACCOUNT

In Writing

Complete the application.

Mail your application and a check to:
The Dreyfus Family of Funds
P.O. Box 9387, Providence, RI 02940-9387

TO ADD TO AN ACCOUNT

Fill out an investment slip, and write your account number on your check.

Mail the slip and the check to: The Dreyfus Family of Funds P.O. Box 105,
Newark, NJ 07101-0105

TO SELL SHARES

Write a redemption check OR letter of instruction that includes:

* your name(s) and signature(s)
* your account number
* the fund name and share class
* the dollar amount you want to sell
* how and where to send the proceeds

Obtain a signature guarantee or other documentation, if required (see "Account
Policies -- Selling Shares").

Mail your request to: The Dreyfus Family of Funds P.O. Box 9671, Providence, RI
02940-9671

TO OPEN AN ACCOUNT

By Telephone

WIRE Have your bank send your investment to Boston Safe Deposit and Trust
Company, with these instructions:

* Dreyfus Money Market Reserves DDA# 043435
* Dreyfus U.S. Treasury Reserves DDA# 043435
* Dreyfus Municipal Reserves DDA# 043508
* share class
* your Social Security or tax ID number
* name(s) of investor(s)

Call us to obtain an account number. Return your application.

TO ADD TO AN ACCOUNT

WIRE Have your bank send your investment to Boston Safe Deposit and Trust
Company, with these instructions:

* Dreyfus Money Market Reserves DDA# 043435
* Dreyfus U.S. Treasury Reserves DDA# 043435
* Dreyfus Municipal Reserves DDA# 043508
* your account number
* name(s) of investor(s)

ELECTRONIC CHECK Same as wire, but before your account number insert the
appropriate number as shown at right.

TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.

TO SELL SHARES

WIRE Be sure the fund has your bank account information on file. Call us to
request your transaction. Proceeds will be wired to your bank.

TELETRANSFER Be sure the fund has your bank account information on file. Call
us to request your transaction. Proceeds will be sent to your bank by electronic
check.

CHECK Call us to request your transaction. A check will be sent to the address
of record.

TO OPEN AN ACCOUNT

Automatically

WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.

TO ADD TO AN ACCOUNT

ALL SERVICES Call us to request a form to add any automatic investing service
(see "Services for Fund Investors"). Complete and return the forms along with
any other required materials.

TO SELL SHARES

DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request a form to add the plan.
Complete the form, specifying the amount and frequency of withdrawals you would
like.

Be sure to maintain an account balance of $5,000 or more.

TO OPEN AN ACCOUNT

Via the Internet

COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.

TO ADD AN ACCOUNT

- ---------------

TO SELL SHARES

- ---------------

28
<PAGE>

To reach Dreyfus, call toll free in the U.S.

1-800-645-6561

Outside the U.S. 516-794-5452

Make checks payable to:

THE DREYFUS FAMILY OF FUNDS

Electronic check numbers

DREYFUS MONEY MARKET RESERVES
"4800" -- Class R shares
"4790" -- Investor shares

DREYFUS U.S. TREASURY RESERVES
"4890" -- Class R shares
"4900" -- Investor shares

DREYFUS MUNICIPAL RESERVES
"4850" -- Class R shares
"4860" -- Investor shares

Add ABA #011-001234

Your Investment 29

<PAGE>

INSTRUCTIONS FOR IRAS

TO OPEN AN ACCOUNT

In Writing

Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.

Mail your application and a check to:
The Dreyfus Trust Company, Custodian
P.O. Box 6427, Providence, RI 02940-6427

TO ADD TO AN ACCOUNT

Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.

Mail in the slip and the check (see "To Open an Account" at left).

TO SELL SHARES

Write a redemption check* OR write a letter of instruction that includes:
* your name and signature
* your account number and fund name
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld

Obtain a signature guarantee or other documentation, if required. Mail in your
request (see "To Open an Account" at left).

*A redemption check written for a qualified distribution is not subject to
TEFRA.

TO OPEN AN ACCOUNT

By Telephone

- -------------

TO ADD AN ACCOUNT

WIRE Have your bank send your investment to Boston Safe Deposit and Trust
Company, with these instructions:

* Dreyfus Money Market Reserves DDA# 043435
* Dreyfus U.S. Treasury Reserves DDA# 043435
* Dreyfus Municipal Reserves DDA# 043508
* your account number
* name of investor
* the contribution year

ELECTRONIC CHECK Same as wire, but before your account number insert the
appropriate number as shown at right.

TELEPHONE CONTRIBUTION Call to request us to move money from a regular Dreyfus
account to an IRA (both accounts must be held in the same shareholder name).

TO SELL SHARES

- ----------------

TO OPEN AN ACCOUNT

Automatically

- ----------------

TO ADD TO AN ACCOUNT

ALL SERVICES Call us to request a form to add an automatic investing service
(see "Services for Fund Investors"). Complete and return the form along with any
other required materials. All contributions will count as current year.

TO SELL SHARES

DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request instructions to establish
the plan.

TO OPEN AN ACCOUNT

Via the Internet

COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.

TO ADD TO AN ACCOUNT

- ----------------

TO SELL SHARES

- ----------------

<PAGE>

To reach Dreyfus, call toll free in the U.S.

1-800-645-6561

Outside the U.S. 516-794-5452

Make checks payable to:

THE DREYFUS FAMILY OF FUNDS

Electronic check numbers

DREYFUS MONEY MARKET RESERVES
"4800" -- Class R shares
"4790" -- Investor shares

DREYFUS U.S. TREASURY RESERVES
"4890" -- Class R shares
"4900" -- Investor shares

DREYFUS MUNICIPAL RESERVES
"4850" -- Class R shares
"4860" -- Investor shares

Add ABA #011-001234

Your Investment 31

<PAGE>

NOTES

32 33
<PAGE>

For More Information

Dreyfus Money Market Reserves
Dreyfus U.S. Treasury Reserves
Dreyfus Municipal Reserves
Series of The Dreyfus/Laurel Funds, Inc.
-----------------------------
SEC file number: 811-5270

More information on these funds is available free upon
request, including the following:

Annual/Semiannual Report

Describes a fund's performance, lists portfolio holdings
and contains a letter from the fund's manager discussing
recent market conditions, economic trends and fund
strategies that significantly affected the fund's
performance during the last fiscal year.

Statement of Additional Information (SAI)

Provides more details about a fund and its policies. A
current SAI is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference (is
legally considered part of this prospectus).

To obtain information:

BY TELEPHONE Call 1-800-645-6561

BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144

BY E-MAIL Send your request to [email protected]

ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from:

SEC
http://www.sec.gov

DREYFUS
http://www.dreyfus.com

You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1999

THE DREYFUS/LAUREL FUNDS, INC.

This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus dated
March 1, 1999, of each fund listed below (each a "Fund", collectively, the
"Funds"), as such Prospectus may be revised from time to time. The Funds are
separate, diversified portfolios of The Dreyfus/Laurel Funds, Inc., an open-end
management investment company (the "Company"), known as a mutual fund.

Dreyfus Money Market Reserves ("Money Market Reserves")
Dreyfus U.S. Treasury Reserves ("U.S. Treasury Reserves")
Dreyfus Municipal Reserves ("Municipal Reserves")
Dreyfus Institutional Prime Money Market Fund ("Institutional Prime Fund")
Dreyfus Institutional Government Money Market Fund ("Institutional
Government Fund")
Dreyfus Institutional U.S. Treasury Money Market Fund ("Institutional
U.S. Treasury Fund")

To obtain a copy of a Fund's Prospectus, please write to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or call one of the following
numbers:

Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452

<PAGE>

TABLE OF CONTENTS
Page

Description of the Funds.......................................... B-3
Management of the Funds........................................... B-17
Management Arrangements........................................... B-24
Purchase of Shares................................................ B-26
Distribution Plan and Shareholder Servicing Plan.................. B-29
Redemption of Shares.............................................. B-31
Shareholder Services.............................................. B-35
Determination of Net Asset Value.................................. B-40
Dividends, Other Distributions and Taxes.......................... B-41
Portfolio Transactions............................................ B-45
Performance Information........................................... B-47
Information About the Funds....................................... B-49
Transfer and Dividend Disbursing
Agent, Custodian, Counsel and Independent Auditors.............. B-50
Financial Statements.............................................. B-50
Appendix.......................................................... B-51

B-2
<PAGE>

DESCRIPTION OF THE FUNDS

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS OF EACH FUND'S PROSPECTUS ENTITLED "GOAL/APPROACH" AND "MAIN
RISKS."

The Company is a Maryland corporation formed on August 6, 1987. Before
October 17, 1994, the Company's name was The Laurel Funds, Inc. The Company is
an open-end management investment company comprised of separate portfolios,
including the Funds, each of which is treated as a separate fund. Prior to
_________, the name of Money Market Reserves was Dreyfus/Laurel Prime Money
Market Fund; the name of U.S. Treasury Reserves was Dreyfus/Laurel U.S. Treasury
Money Market Fund; the name of Municipal Reserves was Dreyfus/Laurel Tax-Exempt
Money Market Fund; the name of Institutional Prime Fund was Dreyfus/Laurel
Institutional Prime Money Market Fund; the name of Institutional Government Fund
was Dreyfus/Laurel Institutional Government Money Market Fund; and the name of
Institutional U.S. Treasury Fund was Dreyfus/Laurel Institutional U.S. Treasury
Money Market Fund. Prior to _________, the name of Money Market Reserves was
Laurel Prime Money Market Fund; the name of U.S. Treasury Reserves was Laurel
U.S. Treasury Money Market Fund; the name of Municipal Reserves was Laurel
Tax-Exempt Money Market Fund; the name of Institutional Prime Fund was Laurel
Institutional Prime Money Market Fund; the name of Institutional Government Fund
was Laurel Institutional Government Money Market Fund; and the name of
Institutional U.S. Treasury Fund was Laurel Institutional U.S. Treasury Money
Market Fund.

Each Fund expects to maintain, but does not guarantee, a net asset value
("NAV") of $1.00 per share. To do so, each Fund uses the amortized cost method
of valuing its securities pursuant to Rule 2a-7 under the Investment Company Act
of 1940, as amended (the "1940 Act") which Rule includes various maturity,
quality and diversification requirements, certain of which are summarized as
follows. In accordance with Rule 2a-7, each Fund must maintain a dollar-weighted
average portfolio maturity of 90 days or less and invest only in U.S.
dollar-denominated securities with remaining maturities of 397 days or less and
which are determined to be of high quality with minimal credit risk in
accordance with procedures adopted by the Board of Directors. In determining
whether a security is of high quality with minimal credit risk, Dreyfus must
consider whether the security is rated in one of the two highest short-term
rating categories by nationally recognized statistical rating organizations or
determined to be of comparable quality by Dreyfus in accordance with
requirements of these procedures. These procedures are reasonably designed to
assure that the prices determined by the amortized cost valuation will
approximate the current market value of each Fund's securities. Each Fund is
diversified, which means that, with respect to 75% of its total assets, a Fund
will not invest more than 5% of its assets in the securities of any single
issuer. In addition, in accordance with Rule 2a-7, each Fund generally will not
invest more than 5% of its assets in the securities of any one issuer.

The Dreyfus Corporation ("Dreyfus") serves as each Fund's investment
manager.

B-3
<PAGE>

CERTAIN PORTFOLIO SECURITIES

The following information regarding the securities that the Funds may
purchase supplements that found in each Fund's Prospectus.

MUNICIPAL SECURITIES (MUNICIPAL RESERVES). Municipal securities are
obligations issued by or on behalf of states, territories and possessions of the
United States and their political subdivisions, agencies, and instrumentalities,
the interest from which is, in the opinion of bond counsel, exempt from regular
Federal income tax. The municipal securities in which the Municipal Reserves
will invest are limited to those obligations which at the time of purchase:

1. are backed by the full faith and credit of the United States; or

2. are municipal notes rated MIG-1/VMIG-1 or MIG-2/VMIG-2 by Moody's
Investors Service, Inc. ("Moody's") or SP-1 or SP-2 by Standard &
Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), or,
if not rated, are of equivalent investment quality as determined by
Dreyfus under guidelines approved by the Board of Directors or are
obligations of an issuer which has outstanding municipal bonds rated
Aa or higher by Moody's or Aa or higher by S&P; or

3. are municipal bonds rated Aa or higher by Moody's or AA or higher by
S&P or, if not rated, are of equivalent investment quality as
determined by Dreyfus under guidelines approved by the Board of
Directors or are obligations of an issuer which has outstanding
municipal notes rated MIG-1/VMIG-1 or MIG-2/VMIG-2 by Moody's or
SP-1 or SP-2 by S&P; or

4. are other types of municipal securities, provided that such
obligations are rated Prime-2 or higher by Moody's or A-2 or higher
by S&P or determined by Dreyfus to be of comparable quality pursuant
to guidelines approved by the Board of Directors (see the Appendix
for a description of these ratings).

The municipal securities in which Municipal Reserves may invest include
municipal notes, short-term municipal bonds and municipal leases. Municipal
notes are generally used to provide for the issuer's short-term capital needs
and generally have maturities of one year or less. Examples include tax
anticipation and revenue anticipation notes which generally are issued in
anticipation of various seasonal revenues, bond anticipation notes, construction
loan notes and tax exempt commercial paper. Short-term municipal bonds may
include "general obligation bonds," which are secured by the issuer's pledge of
its faith, credit and taxing power for payment of principal and interest,
"revenue bonds," which are generally paid from the revenues of a particular
facility or a specific excise or other source, "industrial revenue bonds," which
are issued by or on behalf of public authorities to provide funding for various
privately operated industrial and commercial facilities, and "private activity
bonds." Municipal Reserves may purchase certain municipal securities, including
certain industrial development bonds and bonds issued after August 7, 1986 to
finance "private activities," the interest on which may constitute a "tax

B-4
<PAGE>

preference item" for purposes of the Federal alternative minimum tax, even
though the interest will continue to be fully tax-exempt for Federal income tax
purposes. Municipal Reserves may invest without limitation in such municipal
securities as long as such investment is consistent with the Fund's investment
objective.

"Municipal leases," which may take the form of a lease or an installment
purchase or conditional sale contract, are issued by state and local governments
and authorities to acquire a wide variety of equipment and facilities such as
fire and sanitation vehicles, telecommunications equipment and other capital
assets. Municipal leases frequently have special risks not normally associated
with general obligation or revenue bonds. Leases and installment purchase or
conditional sale contracts (which normally provide for title to the leased asset
to pass eventually to the government issuer) have evolved as a means for
governmental issuers to acquire property and equipment without meeting the
constitutional and statutory requirements for the issuance of debt. The
debt-issuance limitations of many state constitutions and statutes are deemed to
be inapplicable because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for such purpose by the appropriate legislative body on a yearly or
other periodic basis. To reduce these risks, Municipal Reserves will only
purchase municipal leases subject to a non-appropriation clause when the payment
of principal and accrued interest is backed by an unconditional irrevocable
letter of credit or guarantee of a bank.

Municipal Reserves proposes to purchase municipal lease obligations
principally from banks, equipment vendors or other parties that have entered
into an agreement with Municipal Reserves providing that such party will
remarket the municipal lease obligations on certain conditions (described below)
within seven days after demand by Municipal Reserves. (Such agreements are
referred to as "remarketing agreements" and the party that agrees to remarket or
repurchase a municipal lease obligation is referred to as a "remarketing
party.") The agreement will provide for a remarketing price equal to the
principal balance on the obligation as determined pursuant to the terms of the
remarketing agreement as of the repurchase date (plus accrued interest). The
Funds' investment manager, Dreyfus, anticipates that, in most cases, the
remarketing agreement will also provide for the seller of the municipal lease
obligation or the remarketing party to service it for a servicing fee. The
conditions to Municipal Reserves right to require the remarketing party to
purchase or remarket the obligation are that Municipal Reserves must certify at
the time of remarketing that (1) payments of principal and interest under the
municipal lease obligation are current and Municipal Reserves has no knowledge
of any default thereunder by the governmental issuer, (2) such remarketing is
necessary in the sole opinion of a designated officer of Municipal Reserves to
meet the Fund's liquidity needs, and (3) the governmental issuer has not
notified Dreyfus Municipal Reserves of termination of the underlying lease.

The remarketing agreement described above requires the remarketing party
to purchase (or market to a third party) municipal lease obligations of
Municipal Reserves under certain conditions to provide liquidity if share
redemptions of Municipal Reserves exceed purchases of Municipal Reserves shares.
Municipal Reserves will only enter into remarketing agreements with banks,

B-5
<PAGE>

equipment vendors or other responsible parties (such as insurance companies,
broker-dealers and other financial institutions) that in Dreyfus' opinion are
capable of meeting their obligations to the Fund. Dreyfus will regularly monitor
the ability of remarketing parties to meet their obligations to Municipal
Reserves. Municipal Reserves will enter into remarketing agreements covering at
least 75% of the principal amount of the municipal lease obligations in its
portfolio. Municipal Reserves will not enter into remarketing agreements with
any one remarketing party in excess of 5% of its total assets. Remarketing
agreements with broker-dealers may require an exemptive order under the 1940
Act. Municipal Reserves will not enter into such agreements with broker dealers
prior to the issuance of such an order or interpretation of the Securities and
Exchange Commission ("SEC") that such an order is not required. There can be no
assurance that such an order or interpretation will be granted.

The "remarketing" feature of the agreement entitles the remarketing party
to attempt to resell the municipal lease obligation within seven days after
demand from the Fund; however, the remarketing party will be obligated to
repurchase the obligation for its own account at the end of the seven-day period
if such obligation has not been resold. The remarketing agreement will often be
entered into with the party who has sold a municipal lease obligation to
Municipal Reserves, but remarketing agreements may also be entered into with a
separate remarketing party of the same type that meets the credit and other
criteria listed above. Up to 25% of Municipal Reserves municipal lease
obligations may not be covered by remarketing agreements. Municipal Reserves,
however, will not invest in municipal lease obligations that are not subject to
remarketing agreements if, as a result of such investment, more than 10% of its
total assets would be invested in illiquid securities such as (1) municipal
lease obligations not subject to remarketing agreements and not deemed by
Dreyfus at the time of purchase to be at least of comparable quality to rated
municipal debt obligations, or (2) other illiquid assets such as securities
restricted as to resale under federal or state securities laws. For purposes of
the preceding sentence, a municipal lease obligation that is backed by an
irrevocable bank letter of credit or an insurance policy, issued by a bank or
issuer deemed by Dreyfus to be of high quality and minimal credit risk, will not
be deemed to be "illiquid" solely because the underlying municipal lease
obligation is unrated, if Dreyfus determines that such municipal lease
obligation is readily marketable because it is backed by such letter of credit
or insurance policy.

As used within this section, high quality means that the municipal lease
obligation meets all of the following criteria: (1) the underlying equipment is
for an essential governmental function; (2) the municipality has a documented
history of stable financial operations and timely payments of principal and
interest on its municipal debt or lease obligation; (3) the lease/purchase
agreement contains proper terms and conditions to protect against
non-appropriation, substitution of equipment and other more general risks
associated with the purchase of securities; (4) the equipment underlying the
lease was leased in a proper and legal manner; and (5) the equipment underlying
the lease was leased from a reputable equipment vendor. A letter of credit or
insurance policy would generally provide that the issuer of the letter of credit
or insurance policy would pay the outstanding principal balance of the municipal
lease obligations plus any accrued but unpaid interest upon non-appropriation or
default by the governmental lessee. However, the terms of each letter of credit

B-6
<PAGE>

or insurance policy may vary significantly and would affect the degree to which
such protections increase the liquidity of a particular municipal lease
obligation.

Municipal Reserves may invest more than 25% of its assets in industrial
development bonds, in participation interests therein issued by banks, and in
municipal securities and other obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. A participation interest gives
Municipal Reserves an undivided interest in a municipal bond owned by a bank and
generally is backed by the bank's irrevocable letter of credit or guarantee.

When the assets and revenues of an agency, authority, instrumentality or
other political subdivision are separate from those of the government creating
the issuing entity and a security is backed only by the assets or revenues of
the entity, the entity will be deemed to be the sole issuer of the security.
Similarly, in the case of an industrial development bond backed only by the
assets or revenues of the non-governmental user, the non-governmental user will
be deemed to be the sole issuer of the bond.

Municipal Reserves will invest in securities, including the foregoing
types of securities, only if the investments are of a type which would satisfy
the requirements of Rule 2a-7 promulgated under the 1940 Act and only to the
extent permitted by Municipal Reserves' investment limitations. Accordingly, if
the creating agency, authority, instrumentality or other political subdivision
or some other entity, such as an insurance company or other corporate obligor,
guarantees a security purchased by Municipal Reserves or a bank issues a letter
of credit in support of a security purchased by Municipal Reserves, it will not
purchase any security which, as to 75% of the value of all securities held, it
would result in the value of all securities issued or guaranteed by a single
guarantor or issuer of letters of credit exceeding 10% of the total value of the
Fund's assets.

Yields on municipal securities are dependent on a variety of factors,
including the general conditions of the money market and of the municipal bond
and municipal note markets, the size of a particular offering, the maturity of
the obligation and the rating of the issue. The achievement of the investment
objective of Municipal Reserves is dependent in part on the continuing ability
of the issuers of municipal securities in which the Fund invests to meet their
obligations for the payment of principal and interest when due. Municipal
securities historically have not been subject to registration with the SEC,
although there have been proposals which would require registration in the
future.

Obligations of issuers of municipal securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress or state legislatures, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of municipalities to levy taxes. There is also the possibility that, as
a result of litigation or other conditions, the ability of any issuer to pay,
when due, the principal of and interest on its municipal securities may be
materially affected.

B-7
<PAGE>

VARIABLE RATE OBLIGATIONS (MONEY MARKET RESERVES AND MUNICIPAL RESERVES).
The interest rates payable on certain securities, including municipal leases, in
which the Funds may invest, called "variable rate" obligations, are not fixed
and may fluctuate based upon changes in market rates. The interest rate payable
on a variable rate security is adjusted either at predesignated periodic
intervals. Other features may include the right whereby the Funds may demand
prepayment of the principal amount of the obligation prior to its stated
maturity and the right of the issuer to prepay the principal amount prior to
maturity. The main benefit of variable rate securities is that the interest rate
adjustment minimizes changes in the market value of the obligation. As a result,
the purchase of variable rate securities enhances the ability of the Funds to
maintain a stable NAV per share and to sell an obligation prior to maturity at a
price approximating the full principal amount of the obligation. The payment of
principal and interest by issuers of certain securities purchased may be
guaranteed by letters of credit or other credit facilities offered by banks or
other financial institutions. Such guarantees will be considered in determining
whether a security meets a Fund's investment quality requirements.

Variable rate obligations purchased by the Funds may include participation
interests, including those in industrial development bonds, purchased from
banks, insurance companies or other financial institutions, and variable rate
obligations that are backed by irrevocable letters of credit or guarantees of
banks. The Funds can exercise the right, on not more than thirty days' notice,
to sell such an instrument back to the bank from which it purchased the
instrument and draw on the letter of credit for all or any part of the principal
amount of a Fund's participation interest in the instrument, plus accrued
interest, but will do so only (i) as required to provide liquidity to the Funds,
(ii) to maintain a high quality investment portfolio, or (iii) upon a default
under the terms of the demand instrument. Banks and other financial institutions
retain portions of the interest paid on such variable rate obligations as their
fees for servicing such instruments and the issuance of related letters of
credit, guarantees and repurchase commitments. Dreyfus will monitor the pricing,
quality and liquidity of variable rate demand obligations and participation
interests therein held by the Funds on the basis of published financial
information, rating agency reports and other research services.

STAND-BY COMMITMENTS (MUNICIPAL RESERVES). Municipal Reserves may purchase
municipal securities together with the right to resell them to the seller or to
some third party at an agreed-upon price or yield within specified periods prior
to their maturity dates. The right to resell is commonly known as a "stand-by
commitment," and the aggregate price which Municipal Reserves pays for
securities with a stand-by commitment may be higher than the price which
otherwise would be paid. The primary purpose of this practice is to permit
Municipal Reserves to be as fully invested as practicable in municipal
securities while preserving the necessary flexibility and liquidity to meet
unanticipated redemptions. In this regard, Municipal Reserves acquires stand-by
commitments solely to facilitate portfolio liquidity and does not exercise its
rights thereunder for trading purposes. In connection with stand-by commitments,
Municipal Reserves will segregate on its records cash or liquid high-grade debt
obligations of the Fund in an amount at least equal to the commitments. On
delivery dates under the commitments, Municipal Reserves will meet its
obligations from maturing securities, sales of securities held in a separate
account or other available sources of cash. Since the value of a stand-by
commitment is dependent on the ability of the stand-by commitment writer to meet

B-8
<PAGE>

its obligation to repurchase, the policy of Municipal Reserves is to enter into
stand-by commitment transactions only with municipal securities dealers which
are determined to present minimal credit risks as determined by Dreyfus.

The acquisition of a stand-by commitment does not affect the valuation or
maturity of the underlying municipal securities which continue to be valued in
accordance with the amortized cost method. Stand-by commitments acquired by
Municipal Reserves are valued at zero in determining NAV. When Municipal
Reserves pays directly or indirectly for a stand-by commitment its cost is
reflected as unrealized depreciation for the period during which the commitment
is held. Stand-by commitments do not affect the average weighted maturity of the
Fund's portfolio of securities.

Stand-by commitments may involve certain expenses and risks, including the
inability of the issuer of the commitment to pay for the securities at the time
the commitment is exercised, non-marketability of the commitment, and
differences between the maturity of the commitment.

VARIABLE AMOUNT MASTER DEMAND NOTES (MONEY MARKET RESERVES, INSTITUTIONAL
PRIME FUND AND INSTITUTIONAL GOVERNMENT FUND). These Funds may invest in
variable amount master demand notes. Variable amount master demand notes are
unsecured obligations that are redeemable upon demand and are typically unrated.
These instruments are issued pursuant to written agreements between their
issuers and holders. The agreements permit the holders to increase (subject to
an agreed maximum) and the holders and issuers to decrease the principal amount
of the notes, and specify that the rate of interest payable on the principal
fluctuates according to an agreed-upon formula. If an issuer of a variable
amount master demand note were to default on its payment obligation, a Fund
might be unable to dispose of the note because of the absence of a secondary
market and might, for this or other reasons, suffer a loss to the extent of the
default. A Fund will invest in variable amount master demand notes issued only
by entities that Dreyfus considers creditworthy.

FLOATING RATE SECURITIES (MONEY MARKET RESERVES, MUNICIPAL RESERVES,
INSTITUTIONAL PRIME FUND AND INSTITUTIONAL GOVERNMENT FUND). These Funds may
invest in floating rate securities. A floating rate security provides for the
automatic adjustment of its interest rate whenever a specified interest rate
changes. Interest rates on these securities are ordinarily tied to, and are a
percentage of, a widely recognized interest rate, such as the yield on 90-day
U.S. Treasury bills or the prime rate of a specified bank. These rates may
change as often as twice daily. Generally, changes in interest rates will have a
smaller effect on the market value of floating rate securities than on the
market value of comparable fixed income obligations. Thus, investing in variable
and floating rate securities generally allows less opportunity for capital
appreciation and depreciation than investing in comparable fixed income
securities.

BANK INSTRUMENTS (MONEY MARKET RESERVES, MUNICIPAL RESERVES, INSTITUTIONAL
PRIME FUND AND INSTITUTIONAL GOVERNMENT FUND). These Funds may purchase bank
instruments. Bank instruments consist mainly of certificates of deposit, time
deposits and bankers' acceptances.

B-9
<PAGE>

ECDS, ETDS AND YANKEE CDS (MONEY MARKET RESERVES, MUNICIPAL RESERVES,
INSTITUTIONAL PRIME FUND AND INSTITUTIONAL GOVERNMENT FUND). These Funds may
purchase Eurodollar certificates of deposit ("ECDs"), which are U.S.
dollar-denominated certificates of deposit issued by foreign branches of
domestic banks, Eurodollar time deposits ("ETDs"), which are U.S. dollar
denominated deposits in a foreign branch of a domestic bank or a foreign bank,
and Yankee-Dollar certificates of deposit ("Yankee CDs") which are certificates
of deposit issued by a domestic branch of a foreign bank denominated in U.S.
dollars and held in the United States. ECDs, ETDs, and Yankee CDs are subject to
somewhat different risks than domestic obligations of domestic banks. See
"Foreign Securities."

EURODOLLAR BONDS AND NOTES (MONEY MARKET RESERVES). This Fund may invest
in Eurodollar bonds and notes. Eurodollar bonds and notes are obligations which
pay principal and interest in U.S. dollars held in banks outside the United
States, primarily in Europe. Investments in Eurodollar bonds and notes involve
risks that differ from investments in securities of domestic issuers. See
"Foreign Securities."

CORPORATE OBLIGATIONS (INSTITUTIONAL PRIME FUND, MONEY MARKET RESERVES AND
MUNICIPAL RESERVES). Each Fund may invest in corporate obligations rated at
least Aa by Moody's or AA by Standard & Poor's, or if unrated, of comparable
quality as determined by Dreyfus. The Fund will dispose in a prudent and orderly
fashion of bonds whose ratings drop below these minimum ratings.

GOVERNMENT OBLIGATIONS (ALL FUNDS). Each Fund may invest in a variety of
U.S. Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year or
less, (b) U.S. Treasury notes have maturities of one to ten years, and (c) U.S.
Treasury bonds generally have maturities of greater than ten years.

In addition to U.S. Treasury obligations, the Money Market Reserves and
Municipal Reserves, Institutional Prime and Institutional Government Funds may
invest in obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are supported by any of the following: (a) the full faith
and credit of the U.S. Treasury, (b) the right of the issuer to borrow an amount
limited to a specific line of credit from the U.S. Treasury, (c) the
discretionary authority of the U.S. Treasury to lend to such Government agency
or instrumentality, or (d) the credit of the instrumentality. (Examples of
agencies and instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Central Bank for Cooperatives, Federal Intermediate Credit Banks,
Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory Board,
Inter-American Development Bank, Asian-American Development Bank, Student Loan
Marketing Association, International Bank for Reconstruction and Development,
Small Business Administration and Fannie Mae). No assurance can be given that
the U.S. Government will provide financial support to the agencies or
instrumentalities described in (b), (c) and (d) in the future, other than as set
forth above, since it is not obligated to do so by law.

B-10
<PAGE>

REPURCHASE AGREEMENTS (ALL FUNDS). Each Fund may enter into repurchase
agreements with U.S. Government securities dealers recognized by the Federal
Reserve Board, with member banks of the Federal Reserve System, or with such
other brokers or dealers that meet the respective Fund's credit guidelines. This
technique offers a method of earning income on idle cash. In a repurchase
agreement, a Fund buys a security from a seller that has agreed to repurchase
the same security at a mutually agreed upon date and price. A Fund's resale
price will be in excess of the purchase price, reflecting an agreed upon
interest rate. This interest rate is effective for the period of time the Fund
is invested in the agreement and is not related to the coupon rate on the
underlying security. Repurchase agreements may also be viewed as a fully
collateralized loan of money by a Fund to the seller. The period of these
repurchase agreements will usually be short, from overnight to one week, and at
no time will a Fund invest in repurchase agreements for more than one year. A
Fund will always receive as collateral securities whose market value including
accrued interest is, and during the entire term of the agreement remains, at
least equal to 100% of the dollar amount invested by the Fund in each agreement,
and the Fund will make payment for such securities only upon physical delivery
or upon evidence of book entry transfer to the account of the Custodian. If the
seller defaults, a Fund might incur a loss if the value of the collateral
securing the repurchase agreement declines and might incur disposition costs in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of a security which is the
subject of a repurchase agreement, realization upon the collateral by the Fund
may be delayed or limited. Each Fund seeks to minimize the risk of loss through
repurchase agreements by analyzing the creditworthiness of the obligors under
repurchase agreements, in accordance with the Fund's credit guidelines.

COMMERCIAL PAPER (MONEY MARKET RESERVES, MUNICIPAL RESERVES, INSTITUTIONAL
PRIME FUND AND INSTITUTIONAL GOVERNMENT FUND). The Funds may invest in
commercial paper. These instruments are short-term obligations issued by banks
and corporations that have maturities ranging from two to 270 days. Each
instrument may be backed only by the credit of the issuer or may be backed by
some form of credit enhancement, typically in the form of a guarantee by a
commercial bank. Commercial paper backed by guarantees of foreign banks may
involve additional risk due to the difficulty of obtaining and enforcing
judgments against such banks and the generally less restrictive regulations to
which such banks are subject. Money Market Reserves and Municipal Reserves will
only invest in commercial paper of U.S. and foreign companies rated at the time
of purchase at least A-1 by Standard & Poor's, Prime-1 by Moody's, F-1 by Fitch
Investors Service, LLP, Duff 1 by Phoenix Duff & Phelps, Corp., or A1 by IBCA,
Inc. or determined by Dreyfus to be of comparable quality.

FOREIGN SECURITIES (MONEY MARKET RESERVES, MUNICIPAL RESERVES,
INSTITUTIONAL PRIME FUND AND INSTITUTIONAL GOVERNMENT FUNDS). These Funds may
purchase securities of foreign issuers and may invest in obligations of foreign
branches of domestic banks and domestic branches of foreign banks. Investment in
foreign securities presents certain risks, including those resulting from
fluctuations in currency exchange rates, revaluation of currencies, adverse
political and economic developments and the possible imposition of currency
exchange blockages or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers, and the fact that foreign
issuers are not generally subject to uniform accounting, auditing and financial

B-11
<PAGE>

reporting standards or to other regulatory practices and requirements comparable
to those applicable to domestic issuers. Moreover, securities of many foreign
issuers may be less liquid and their prices more volatile than those of
comparable domestic issuers. In addition, with respect to certain foreign
countries, there is the possibility of expropriation, confiscatory taxation and
limitations on the use or removal of funds or other assets of a Fund, including
withholding of dividends. Foreign securities may be subject to foreign
government taxes that would reduce the yield on such securities.

ILLIQUID SECURITIES. No Fund will knowingly invest more than 10% of the
value of its net assets in illiquid securities, including time deposits and
repurchase agreements having maturities longer than seven days. Securities that
have readily available market quotations are not deemed illiquid for purposes of
this limitation (irrespective of any legal or contractual restrictions on
resale). A Fund may invest in commercial obligations issued in reliance on the
so-called "private placement" exemption from registration afforded by Section
4(2) of the Securities Act of 1933, as amended ("Section 4(2) paper"). A Fund
may also purchase securities that are not registered under the Securities Act of
1933, as amended, but that can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities"). Liquidity
determinations with respect to Section 4(2) paper and Rule 144A securities will
be made by the Board of Directors or by Dreyfus pursuant to guidelines
established by the Board of Directors. The Board or Dreyfus will consider
availability of reliable price information and other relevant information in
making such determinations. Section 4(2) paper is restricted as to disposition
under the federal securities laws, and generally is sold to institutional
investors, such as the Funds, that agree that they are purchasing the paper for
investment and not with a view to public distribution. Any resale by the
purchaser must be pursuant to registration or an exemption therefrom. Section
4(2) paper normally is resold to other institutional investors like the Funds
through or with the assistance of the issuer or investment dealers who make a
market in the Section 4(2) paper, thus providing liquidity. Rule 144A securities
generally must be sold to other qualified institutional buyers. If a particular
investment in Section 4(2) paper or Rule 144A securities is not determined to be
liquid, that investment will be included within the percentage limitation on
investment in illiquid securities. The ability to sell Rule 144A securities to
qualified institutional buyers is a recent development and it is not possible to
predict how this market will mature. Investing in Rule 144A securities could
have the effect of increasing the level of Fund illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in purchasing
these securities.

CREDIT ENHANCEMENTS. Certain instruments in which Institutional Prime
Fund, Institutional Government Fund, Money Market Reserves and Municipal
Reserves may invest, including floating rate securities, variable amount master
demand notes and variable rate obligations, may be backed by letters of credit
or insured or guaranteed by financial institutions, such as banks, or insurance
companies, whose credit quality ratings are judged by Dreyfus to be comparable
in quality to the two highest quality ratings of Moody's or Standard & Poor's.
Changes in the credit quality of banks and other financial institutions that
provide such credit or liquidity enhancements to a Fund's portfolio securities
could cause losses to the Fund and affect its share price.

B-12
<PAGE>

OTHER INVESTMENT COMPANIES. Each Fund may invest in securities issued by
other investment companies to the extent that such investments are consistent
with the respective Fund's investment objective and policies and permissible
under the 1940 Act, as amended (the "1940 Act"). As a shareholder of another
investment company, a Fund would bear, along with other shareholders, its pro
rata portion of the other investment company's expenses, including advisory
fees. These expenses would be in addition to the advisory and other expenses
that a Fund bears directly in connection with its own operations.

INVESTMENT TECHNIQUES

In addition to the principal investment strategies discussed in each
Fund's Prospectus, the Fund also may engage in the investment techniques
described below. The Fund might not use, or may not have the ability to use, any
of these strategies and there can be no assurance that any strategy that is used
will succeed.

BORROWING. Each Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.

WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS (ALL FUNDS). New
issues of U.S. Treasury and Government securities are often offered on a
"when-issued" basis. This means that delivery and payment for the securities
normally will take place approximately 7 to 45 days after the date the buyer
commits to purchase them. The payment obligation and the interest rate that will
be received on securities purchased on a "when-issued" basis are each fixed at
the time the buyer enters into the commitment. Each Fund will make commitments
to purchase such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities or dispose of the commitment
before the settlement date if it is deemed advisable as a matter of investment
strategy. Cash or marketable high-grade debt securities equal to the amount of
the above commitments will be segregated on each Fund's records. For the purpose
of determining the adequacy of these securities the segregated securities will
be valued at market. If the market value of such securities declines, additional
cash or securities will be segregated on the Fund's records on a daily basis so
that the market value of the account will equal the amount of such commitments
by the Fund.

Securities purchased on a "when-issued" basis and the securities held by
each Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value of
such securities will fluctuate inversely to changes in interest rates i.e., they
will appreciate in value when interest rates decline and decrease in value when
interest rates rise. Therefore, if in order to achieve higher interest income
each Fund remains substantially fully invested at the same time that it has
purchased securities on a "when-issued" basis, there will be a greater
possibility of fluctuation in the Fund's NAV.

When payment for "when-issued" securities is due, each Fund will meet its
obligations from then-available cash flow, the sale of segregated securities,
the sale of other securities and/or, although it would not normally expect to do
so, from the sale of the "when-issued" securities themselves (which may have a
market value greater or less than the Fund's payment obligation). The sale of

B-13
<PAGE>

securities to meet such obligations carries with it a greater potential for the
realization of capital gains, which are subject to federal income taxes.

To secure advantageous prices or yields, a Fund may purchase or sell
securities for delayed delivery. In such transactions, delivery of the
securities occurs beyond the normal settlement periods, but no payment or
delivery is made by a Fund prior to the actual delivery or payment by the other
party to the transaction. The purchase of securities on a delayed delivery basis
involves the risk that the value of the securities purchased will decline prior
to the settlement date. The sale of securities for delayed delivery involves the
risk that the prices available in the market on the delivery date may be greater
than those obtained in the sale transaction. The Funds will establish a
segregated account consisting of cash, U.S. Government Securities or other
high-grade debt obligations in an amount at least equal at all times to the
amounts of its delayed delivery commitments.

LOANS OF FUND SECURITIES (ALL FUNDS EXCEPT U.S. TREASURY RESERVES). Each
Fund may lend securities from its portfolio to brokers, dealers and other
financial institutions needing to borrow securities to complete certain
transactions. A Fund continues to be entitled to payments in amounts equal to
the interest, dividends or other distributions payable on the loaned securities,
which affords the Fund an opportunity to earn interest on the amount of the loan
and on the loaned securities' collateral. Loans of portfolio securities may not
exceed 33-1/3% of the value of a Fund's total assets and the Fund will receive
collateral consisting of cash, U.S. Government securities or irrevocable letters
of credit which will be maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities. These loans are
terminable by a Fund at any time upon specified notice. A Fund might experience
loss if the institution to which it has lent its securities fails financially or
breaches its agreement with the Fund. In addition, it is anticipated that a Fund
may share with the borrower some of the income received on the collateral for
the loan or that it will be paid a premium for the loan. In determining whether
to lend securities, a Fund considers all relevant factors and circumstances
including the creditworthiness of the borrower.

REVERSE REPURCHASE AGREEMENTS (MONEY MARKET RESERVES, MUNICIPAL RESERVES
AND INSTITUTIONAL PRIME FUND). A Fund may enter into reverse repurchase
agreements to meet redemption requests where the liquidation of Fund securities
is deemed by Dreyfus to be disadvantageous. Under a reverse repurchase
agreement, a Fund: (1) transfers possession of Fund securities to a bank or
broker-dealer in return for cash in an amount equal to a percentage of the
securities' market value; and (2) agrees to repurchase the securities at a
future date by repaying the cash with interest. A Fund retains record ownership
of the security involved including the right to receive interest and principal
payments. Cash or liquid high-grade debt securities held by a Fund equal in
value to the repurchase price including any accrued interest will be maintained
in a segregated account while a reverse repurchase agreement is in effect.

CERTAIN INVESTMENTS. From time to time, to the extent consistent with its
investment objective, policies and restrictions, each Fund may invest in
securities of companies with which Mellon Bank, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.

B-14
<PAGE>

MASTER/FEEDER OPTION. The Company may in the future seek to achieve any
Fund's investment objective by investing all of the Fund's net investable assets
in another investment company having the same investment objective and
substantially the same investment policies and restrictions as those applicable
to the Fund. Shareholders of a Fund will be given at least 30 days' prior notice
of any such investment. Such investment would be made only if the Company's
Board of Directors determines it to be in the best interest of a Fund and its
shareholders. In making that determination, the Company's Board of Directors
will consider, among other things, the benefits to shareholders and/or the
opportunity to reduce costs and achieve operational efficiency. Although the
Funds believe that the Company's Board of Directors will not approve an
arrangement that is likely to result in higher costs, no assurance is given that
costs will be materially reduced if this option is implemented.

INVESTMENT RESTRICTIONS

FUNDAMENTAL. The following limitations have been adopted by each Fund. A
Fund may not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of shareholders
duly called if the holders of more than 50% of the outstanding shares of the
Fund are present or represented by proxy; or (b) more than 50% of the
outstanding shares of the Fund, whichever is less. Each Fund may not:

1. Purchase any securities which would cause more than 25% of the value of
a Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities, and
state or municipal governments and their political subdivisions are not
considered members of any industry. In addition, this limitation does not apply
to investments in domestic banks, including U.S. branches of foreign banks and
foreign branches of U.S. banks.)

2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) a Fund may borrow money in an amount not exceeding one-third of
the Fund's total assets at the time of such borrowings, and (b) a Fund may issue
multiple classes of shares. The purchase or sale of futures contracts and
related options shall not be considered to involve the borrowing of money or
issuance of senior securities.

3. Purchase with respect to 75% of a Fund's total assets securities of any
one issuer (other than securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities) if, as a result, (a) more than 5% of a Fund's
total assets would be invested in the securities of that issuer, or (b) a Fund
would hold more than 10% of the outstanding voting securities of that issuer.

4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments and repurchase agreements shall not
be treated as loans.

B-15
<PAGE>

5. Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent a Fund from
investing in securities or other instruments backed by real estate, including
mortgage loans, or securities of companies that engage in real estate business
or invest or deal in real estate or interests therein).

6. Underwrite securities issued by any other person, except to the extent
that the purchase of securities and later disposition of such securities in
accordance with the Fund's investment program may be deemed an underwriting.

7. Purchase or sell commodities except that each Fund may enter into
futures contracts and related options, forward currency contacts and other
similar instruments.

Each Fund may, notwithstanding any other fundamental investment policy or
limitation, invest all of its investable assets in securities of a single
open-end management investment company with substantially the same investment
objective, policies and limitations as the Fund.

None of the Funds intends to engage in futures contracts, related options
or forward currency contracts.

NONFUNDAMENTAL. The Funds have adopted the following additional
non-fundamental restrictions. These non-fundamental restrictions may be changed
without shareholder approval, in compliance with applicable law and regulatory
policy.

1. No Fund shall sell securities short, unless it owns or has the right to
obtain securities equivalent in kind and amounts to the securities sold short.

2. No Fund shall purchase securities on margin, except that a Fund may
obtain such short-term credits as are necessary for the clearance of
transactions.

3. No Fund shall purchase oil, gas or mineral leases.

4. Each Fund will not purchase or retain the securities of any issuer if
the officers, Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of one percent of the securities of such issuer,
together own beneficially more than five percent of such securities.

5. No Fund will purchase securities of issuers (other than securities
issued or guaranteed by domestic or foreign governments or political
subdivisions thereof), including their predecessors, that have been in operation
for less than three years, if by reason thereof, the value of such Fund's
investment in securities would exceed 5% of such Fund's total assets. For
purposes of this limitation, sponsors, general partners, guarantors and
originators of underlying assets may be treated as the issuer of a security.

6. None of the Funds will invest more than 10% of the value of its net
assets in illiquid securities, including repurchase agreements with remaining

B-16
<PAGE>

maturities in excess of seven days, time deposits with maturities in excess of
seven days and other securities which are not readily marketable. For purposes
of this limitation, illiquid securities shall not include Section 4(2) Paper and
securities which may be resold under Rule 144A under the Securities Act of 1933,
provided that the Board of Directors, or its delegate, determines that such
securities are liquid based upon the trading markets for the specific security.

7. No Fund may invest in securities of other investment companies, except
as they may be acquired as part of a merger, consolidation or acquisition of
assets and except to the extent otherwise permitted by the 1940 Act.

8. No Fund shall purchase any security while borrowings representing more
than 5% of the Fund's total assets are outstanding.

9. No Fund will purchase warrants if at the time of such purchase: (a)
more than 5% of the value of such Fund's assets would be invested in warrants,
or (b) more than 2% of the value of the Fund's assets would be invested in
warrants that are not listed on the New York or American Stock Exchange (for
purposes of this limitation, warrants acquired by a Fund in units or attached to
securities will be deemed to have no value).

10. No Fund will purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate investment
in such classes of securities will exceed 5% of its total assets except that:
(a) this limitation shall not apply to standby commitment, and (b) this
limitation shall not apply to a Fund's transactions in futures contracts and
related options.

If a percentage restriction is adhered to at the time of an investment, a
later increase or decrease in such percentage resulting from a change in the
values of assets will not constitute a violation of such restriction, except as
otherwise required by the 1940 Act.

If a Fund's investment objective, policies, restrictions, practices or
procedures change, shareholders should consider whether the Fund remains an
appropriate investment in light of the shareholder's then-current position and
needs.

MANAGEMENT OF THE FUNDS

FEDERAL LAW AFFECTING MELLON BANK

The Glass-Steagall Act of 1933 prohibits national banks from engaging in
the business of underwriting, selling or distributing securities and prohibits a
member bank of the Federal Reserve System from having certain affiliations with
an entity engaged principally in that business. The activities of Mellon Bank in
informing its customers of, and performing, investment and redemption services
in connection with a Fund, and in providing services to a Fund as custodian, as
well as Dreyfus' investment advisory activities, may raise issues under these
provisions. Mellon Bank has been advised by counsel that the activities
contemplated under these arrangements are consistent with its statutory and
regulatory obligations.

B-17
<PAGE>

Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of such
future statutes and regulations, could prevent Mellon Bank or Dreyfus from
continuing to perform all or a part of the above services for its customers
and/or a Fund. If Mellon Bank or Dreyfus were prohibited from serving a Fund in
any of its present capacities, the Board of Directors would seek an alternative
provider(s) of such services.

DIRECTORS AND OFFICERS

The Company's Board is responsible for the management and supervision of
the Funds. The Board approves all significant agreements between the Company, on
behalf of the Funds, and those companies that furnish services to the Funds.
These companies are as follows:

The Dreyfus Corporation...............................Investment Adviser
Premier Mutual Fund Services, Inc............................Distributor
Dreyfus Transfer, Inc.....................................Transfer Agent
Mellon Bank.......................................Custodian for the Fund

The Company has a Board composed of nine Directors. The following lists
the Directors and officers and their positions with the Company and their
present and principal occupations during the past five years. Each Director who
is an "interested person" of the Company (as defined in the 1940 Act) is
indicated by an asterisk(*). Each of the Directors also serves as a Trustee of
The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free Municipal Funds
(collectively, with the Company, the "Dreyfus/Laurel Funds") and the Dreyfus
High Yield Strategies Fund.

DIRECTORS OF THE COMPANY

o+JOSEPH S. DIMARTINO, Chairman of the Board of the Company. Since January 1995,
Mr. DiMartino has served as Chairman of the Board for various funds in the
Dreyfus Family of Funds. He is also a Director of The Noel Group, Inc., a
venture capital company (for which from February 1995 until November 1997,
he was Chairman of the Board), The Muscular Dystrophy Association,
HealthPlan Services Corporation, a provider of marketing, administrative
and risk management services to health and other benefit programs, Carlyle
Industries, Inc. (formerly Belding Heminway Company, ) a button packager
and distributor; Century Business Services, Inc. (formerly, International
Alliance Services, Inc.), a provider of various outservicing functions for
small and medium sized companies, and Career Blazers, Inc (formerly
Staffing Resources) a temporary placement agency, Mr. DiMartino is also a
Board member of 152 other funds in the Dreyfus Family of Funds. For more
than five years prior to January 1995, he was President, a director and,
until August 24, 1994, Chief Operating Officer of Dreyfus and Executive
Vice President and a director of Dreyfus Service Corporation, a
wholly-owned subsidiary of Dreyfus. From August 1994 to December 31, 1994,

B-18
<PAGE>

he was a director of Mellon Bank Corporation. Age: 55 years old. Address:
200 Park Avenue, New York, New York 10166.

o+JAMES M. FITZGIBBONS. Director of the Company; Director, Lumber Mutual
Insurance Company; Director, Barrett Resources, Inc. Age: 64 years old.
Address: 40 Norfolk Road, Brookline, Massachusetts 02167.

o*J. TOMLINSON FORT. Director of the Company; Partner, Reed, Smith, Shaw &
McClay (law firm). Age: 70 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.

o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; former Chairman of the Board and
Director, Rexene Corporation. Age: 77 years old. Address: Way Hallow Road
and Woodland Road, Sewickley, Pennsylvania 15143.

o+KENNETH A. HIMMEL. Director of the Company; former Director, The Boston
Company, Inc. ("TBC") and Boston Safe Deposit and Trust Company; President
and Chief Executive Officer, Himmel & Co., Inc.; Vice Chairman, Sutton
Place Gourmet, Inc.; Managing Partner, Franklin Federal Partners. Age: 52
years old. Address: 625 Madison Avenue, New York, New York 10022.

o+STEPHEN J. LOCKWOOD. Director of the Company; President and CEO, LDG
Management Company Inc.; CEO, LDG Reinsurance Underwriters, SRRF
Management Inc. and Medical Reinsurance Underwriters Inc. Age: 51 years
old. Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.

o+JOHN J. SCIULLO. Director of the Company; Dean Emeritus and Professor of Law,
Duquesne University Law School; Director, Urban Redevelopment Authority of
Pittsburgh; Member of Advisory Committee, Decedents Estates Laws of
Pennsylvania. Age: 67 years old. Address: 321 Gross Street, Pittsburgh,
Pennsylvania 15224.

o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures, Inc.;
Director, American Express Centurion Bank; Director, Harvard/Pilgrim
Community Health Plan, Inc.; Director, Massachusetts Electric Company;
Director, the Hyams Foundation, Inc. Age: 49 years old. Address: 25
Braddock Park, Boston, Massachusetts 02116-5816.

B-19
<PAGE>

Dreyfus. Age: 52 years old. Address: 334 Boylston Street, Suite 400,
Boston, Massachusetts.

- --------------------------------
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.

OFFICERS OF THE COMPANY

# MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior Vice
President and General Counsel of Funds Distributor, Inc. From August 1996
to March 1998, she was Vice President and Assistant General Counsel for
Loomis, Sayles & Company, L.P. From January 1986 to July 1996, she was an
associate with the law firm of Ropes & Gray. Age: 39 years old.

#MARIE E. CONNOLLY. President and Treasurer of the Company. President, Chief
Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which is
Boston Institutional Group, Inc. Age: 41 years old.

#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. From April 1993 to
January 1995, he was a Senior Fund Accountant for Investors Bank & Trust
Company. Age: 29 years old.

#CHRISTOPHER J. KELLEY. Vice President and Assistant Secretary of the Company.
Vice President and Senior Associate General Counsel of Funds Distributor,
Inc. From April 1994 to July 1996, Mr. Kelley was Assistant Counsel at
Forum Financial Group. From October 1992 to March 1994, Mr. Kelley was
employed by Putnam Investments in legal and compliance capacities. Age: 34
years old.

#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the Company.
Manager of Treasury Services Administration of Funds Distributor, Inc.
From July 1994 to November 1995, she was a Fund Accountant for Investors
Bank & Trust Company. Age: 26 years old.

#MARY A. NELSON. Vice President and Assistant Treasurer of the Company. Vice
President of the Distributor and Funds Distributor, Inc. From September
1989 to July 1994, she was an Assistant Vice President and Client Manager
for TBC. Age: 34 years old.

#MICHAEL S. PETRUCELLI. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Senior Vice President and director of Strategic
Client Initiatives of Funds Distributor, Inc. From December 1989 through
November, 1996, he was employed by GE Investment Services where he held
various financial, business development and compliance positions. He also
served as Treasurer of the GE Funds and as Director of GE Investment
Services. Age: 37 years old.

B-20
<PAGE>

#STEPHANIE PIERCE. Vice President, Assistant Treasurer and Assistant Secretary
of the Company. Vice President and Client Development Manager of Funds
Distributor, Inc. From April 1997 to March 1998, she was employed as a
Relationship Manager with Citibank, N.A. From August 1995 to April 1997,
she was an Assistant Vice President with Hudson Valley Bank, and from
September 1990 to August 1995, she was a Second Vice President with Chase
Manhattan Bank. Age: 30 years old.

#GEORGE A. RIO. Vice President and Assistant Treasurer of the Company. Executive
Vice President and Client Service Director of Funds Distributor, Inc. From
June 1995 to March 1998, he was Senior Vice President and Senior Key
Account Manager for Putnam Mutual Funds. From May 1994 to June 1995, he
was Director of Business Development for First Data Corporation. From
September 1983 to May 1994, he was Senior Vice President and Manager of
Client Services and Director of Internal Audit at TBC. Age: 44 years old.

#JOSEPH F. TOWER, III. Vice President and Assistant Treasurer of the Company.
Senior Vice President, Treasurer, Chief Financial Officer and a Director
of the Distributor and Funds Distributor, Inc. From 1988 to August 1994,
he was employed by TBC where he held various management positions in the
Corporate Finance and Treasury areas. Age: 37 years old.

- --------------------------------
# Officer also serves as an officer for other investment companies advised by
Dreyfus, including The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel
Tax-Free Municipal Funds.

The address of each officer of the Company is 200 Park Avenue, New York,
New York 10166.

No officer or employee of the Distributor (or of any parent, subsidiary or
affiliate thereof) receives any compensation from the Company for serving as an
officer or Director of the Company. In addition, no officer or employee of
Dreyfus (or of any parent, subsidiary or affiliate thereof) serves as an officer
or Director of the Company. Effective July 1, 1998, the Dreyfus/Laurel Funds pay
each Director/Trustee who is not an "interested person" of the Company (as
defined in the 1940 Act) $40,000 per annum, plus $5,000 per joint Dreyfus/Laurel
Funds Board meeting attended, $2,000 for separate committee meetings attended
which are not held in conjunction with a regularly scheduled Board meeting and
$500 for Board meetings and separate committee meetings attended that are
conducted by telephone. The Dreyfus/Laurel Funds also reimburse each
Director/Trustee who is not an "interested person" of the Company (as defined in
the 1940 Act) for travel and out-of-pocket expenses. The Chairman of the Board
receives an additional 25% of such compensation (with the exception of
reimbursable amounts). In the event that there is a joint committee meeting of
the Dreyfus/Laurel Funds and the Dreyfus High Yield Strategies Fund, the $2,000

B-21
<PAGE>

fee will be allocated between the Dreyfus/Laurel Funds and the Dreyfus High
Yield Strategies Fund. The compensation structure described in this paragraph is
referred to hereinafter as the "Current Compensation Structure."

In addition, the Company currently has three Emeritus Board members who
are entitled to receive an annual retainer and a per meeting fee of one-half the
amount paid to them as Board members pursuant to the Current Compensation
Structure.

Prior to July 1, 1998, the Dreyfus/Laurel Funds paid each Director/Trustee
who was not an "interested person" of the Company (as defined in the 1940 Act)
$27,000 per annum (and an additional $25,000 for the Chairman of the Board of
Directors/Trustees of the Dreyfus/Laurel Funds) and $1,000 per joint
Dreyfus/Laurel Funds Board meeting attended, plus $750 per joint Dreyfus/Laurel
Funds Audit Committee meeting attended, and reimbursed each such
Director/Trustee for travel and out-of-pocket expenses (the "Former Compensation
Structure").

The aggregate amount of fees and expenses received by each current
Director from the Company for the fiscal year ended October 31, 1998, and from
all other funds in the Dreyfus Family of Funds for which such person is a Board
member for the year ended December 31, 1998, pursuant to the Former Compensation
Structure for the period from November 1, 1997 through June 30, 1998 and the
Current Compensation Structure for the period from July 1, 1998 through October
31, 1998, were as follows:

Total Compensation
Aggregate From the Company
Name of Board Compensation and Fund Complex
Member From the Company# Paid to Board Member****
- ------------- ----------------- ------------------------

Joseph S. DiMartino*

James M. Fitzgibbons

J. Tomlinson Fort** none none

Arthur L. Goeschel

Kenneth A. Himmel

Stephen J. Lockwood

John J. Sciullo

Roslyn M. Watson

B-22
<PAGE>

Benaree Pratt Wiley***

- ----------------------------
# 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. Amount does not include reimbursed expenses for
attending Board meetings, which amounted to $[ ] for the Company.
* Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board member
of the Company and the funds in the Dreyfus/Laurel Funds and separately by
the Dreyfus High Yield Strategies Fund. For the fiscal year ended October
31, 1998, the aggregate amount of fees and expenses received by J. Tomlinson
Fort from Dreyfus for serving as a Board member of the Company was
______________________. For the year ended December 31, 1998, the aggregate
amount of fees and expenses received by Mr. Fort for serving as a Board
member of all funds in the Dreyfus/Laurel Funds (including the Company) and
Dreyfus High Yield Strategies Fund (for which payment is made directly by
the fund) was ______________________. In addition, Dreyfus reimbursed Mr.
Fort a total of $__________________ for expenses attributable to the
Company's Board meetings which is not included in the $__________________
amount in note # above.
*** Payments to Ms. Wiley were for the period from April 23, 1998 (the date she
was elected as a Board member) through October 31, 1998.
****The Dreyfus Family of Funds consists of ___ mutual funds.

The officers and Directors of the Company as a group owned beneficially
less than 1% of the total shares of each Fund outstanding as of ___________.

The following shareholder(s) owned 5% or more of the outstanding Investor
shares of the following Funds at _______________:

MONEY MARKET RESERVES:

MUNICIPAL RESERVES:

U.S. TREASURY RESERVES:

The following shareholder(s) owned 5% or more of the outstanding Class R
shares of the following Funds at _______________, 1999:

MONEY MARKET RESERVES:

MUNICIPAL RESERVES:

U.S. TREASURY RESERVES:

The following shareholder(s) owned 5% or more of the outstanding voting
shares of the following Funds at _______________, 1999:

INSTITUTIONAL PRIME FUND:

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<PAGE>

INSTITUTIONAL GOVERNMENT FUND:

INSTITUTIONAL U.S. TREASURY FUND:

MANAGEMENT ARRANGEMENTS

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN EACH FUND'S PROSPECTUS ENTITLED "EXPENSES" AND
"MANAGEMENT."

Dreyfus is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international markets.
Mellon is among the 25 largest bank holding companies in the United States based
on total assets.

MANAGEMENT AGREEMENT. Dreyfus serves as the investment manager for the
Funds pursuant to an Investment Management Agreement with the Company on behalf
of each Fund, dated April 4, 1994 (the "Management Agreement"), transferred to
Dreyfus as of October 17, 1994, subject to the overall authority of the
Company's Board of Directors in accordance with Maryland law. Pursuant to the
Management Agreement, Dreyfus provides, or arranges for one or more third
parties to provide, investment advisory, administrative, custody, fund
accounting and transfer agency services to the Funds. As investment manager,
Dreyfus manages the Funds by making investment decisions based on each Fund's
investment objective, policies and restrictions. The Management Agreement is
subject to review and approval at least annually by the Board of Directors.

The Management Agreement will continue from year to year with respect to
each Fund provided that a majority of the Directors who are not "interested
persons" of the Company and either a majority of all Directors or a majority (as
defined in the 1940 Act) of the shareholders of the Fund approve its
continuance. The Management Agreement was last approved by the Board of
Directors on _________, 1999 to continue until _______, 2000. The Company may
terminate the Management Agreement with respect to each Fund upon the vote of a
majority of the Board of Directors or upon the vote of a majority of the
respective Fund's outstanding voting securities on 60 days' written notice to
Dreyfus. Dreyfus may terminate the Management Agreement upon 60 days' written
notice to the Company. The Management Agreement will terminate immediately and
automatically upon its assignment.

B-24
<PAGE>

Patrice M. Kozlowski, Vice President-Corporate Communications; Mary Beth Leibig,
Vice President-Human Resources; Andrew S. Wasser, Vice-President-Information
Systems; Theodore A. Schachar, Vice President; Wendy Strutt, Vice President;
Richard Terres, Vice President; William H. Maresca, Controller; James Bitetto,
Assistant Secretary; Steven F. Newman, Assistant Secretary; and Mandell L.
Berman, Burton C. Borgelt, Frank V. Cahouet and Richard F. Syron, directors.

EXPENSES. Under the Management Agreement, Money Market Reserves, U.S.
Treasury Reserves and Municipal Reserves have each agreed to pay Dreyfus a
monthly fee at the annual rate of 0.50% of the value of each such Fund's average
daily net assets and Institutional Prime Fund, Institutional Government Fund and
Institutional U.S. Treasury have each agreed to pay Dreyfus a monthly fee at the
annual rate of 0.15% of the value of each such Fund's average daily net assets.
Dreyfus pays all of the Funds' expenses, except brokerage fees, taxes, interest,
fees and expenses of the non-interested directors (including counsel fees), Rule
12b-1 fees (if applicable) and extraordinary expenses. Although Dreyfus does not
pay for the fees and expenses of the non-interested Directors (including counsel
fees), Dreyfus is contractually required to reduce its investment management fee
by an amount equal to each Fund's allocable share of such fees and expenses.
From time to time, Dreyfus may voluntarily waive a portion of the investment
management fees payable by a Fund, which would have the effect of lowering the
expense ratio of the Fund and increasing return to investors. Expenses
attributable to a Fund are charged against the Fund's assets; other expenses of
the Company are allocated among its funds on the basis determined by the Board,
including, but not limited to, proportionately in relation to the net assets of
each fund.

For the last three fiscal years, each Fund had the following management
fees:

FOR THE FISCAL YEARS ENDED OCTOBER 31,

1998 1997 1996
---- ---- ----

Money Market Reserves $____ $1,931,340 $1,651,339

U.S. Treasury Reserves $____ $2,571,553 $2,138,371

Municipal Reserves $____ $1,080,023 $1,182,931

Institutional Prime Fund $____ $848,936 $808,812

Institutional Government Fund $____ $382,114 $458,878

Institutional U.S. Treasury Fund $____ $1,097,044 $967,698

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<PAGE>

THE DISTRIBUTOR. Premier Mutual Fund Services, Inc. (the "Distributor"),
located at 60 State Street, Boston, Massachusetts 02109, serves as the Fund's
distributor on a best efforts basis pursuant to an agreement which is renewable
annually. Dreyfus may pay the Distributor for shareholder services from Dreyfus'
own assets, including past profits but not including the management fee paid by
a Fund. The Distributor may use part or all of such payments to pay certain
banks, securities brokers or dealers and other financial institutions ("Agents")
for these services. The Distributor also provides various administrative and
corporate secretarial services to the Funds as sub-administrator for each Fund
pursuant to a Sub-Administration Agreement effective October 17, 1994. The
Distributor also acts as distributor for the other funds in the Dreyfus Family
of Funds.

PURCHASE OF SHARES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN EACH FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES,"
"SERVICES FOR FUND INVESTORS," "INSTRUCTIONS FOR REGULAR ACCOUNTS," AND
"INSTRUCTIONS FOR IRAS."

GENERAL. Each of Money Market Reserves, U. S. Treasury Reserves and
Municipal Reserves offers two share classes - Class R shares and Investor
shares. Investor shares and Class R shares are identical, except as to the
services offered to and the expenses borne by each class. Investor shares are
sold primarily to investors maintaining related securities, brokerage,
commodities trading or similar accounts with Agents that have entered into
Agreements with the Distributor. Additionally, holders of Investor shares who
have held their shares since August 31, 1995, may continue to purchase Investor
shares whether or not they otherwise would be eligible to do so.

A "Retirement Plan" is a qualified or non-qualified employee benefit plan
or other program, including pension, profit-sharing and other deferred
compensation plans, whether established by corporations, partnerships,
non-profit entities or state and local governments. Class R shares may be
purchased for a Retirement Plan only by a custodian, trustee, investment manager
or other entity authorized to act on behalf of such Plan. It is not recommended
that Dreyfus Municipal Reserves be used as a vehicle for Retirement Plans, Keogh
plans or Individual Retirement Accounts.

If shares of Money Market Reserves, U.S. Treasury Reserves or Municipal
Reserves are held in an account at a bank or with an Agent, such bank or Agent
may require you to place all purchase, exchange and redemption orders through
them. All banks and Agents have agreed to transmit transaction requests to each
Fund's transfer agent or to the Distributor. Agents effecting transactions in
Fund shares for the accounts of their clients may charge their clients direct
fees in connection with such transactions. Distribution and shareholder
servicing fees paid by Investor shares will cause Investor shares to have a
higher expense ratio and to pay lower dividends than Class R shares.

The minimum initial investment to establish a new account in Institutional
Prime Fund, Institutional Government Fund or Institutional U.S. Treasury Fund is
$1 million. There is no minimum requirement for subsequent investments.

B-26
<PAGE>

The minimum initial investment to establish a new account in Money Market
Reserves, U.S. Treasury Reserves or Municipal Reserves is $100,000. Each such
Fund may waive its minimum initial investment requirement for new Fund accounts
opened through an Agent whenever Dreyfus Institutional Services Division
("DISD") has determined for the initial account opened through such Agent which
is below the Fund's minimum initial investment requirement that the existing
accounts in the Fund opened through that Agent have an average account size, or
the Agent has adequate intent and access to funds to result in maintenance of
accounts in the Fund opened through that Agent with an average account size, in
an amount equal to or in excess of $100,000. DISD is required to periodically
review the average size of the accounts opened through each Agent and, if
necessary, reevaluate the Agent's intent and access to funds. DISD will
discontinue the waiver as to new accounts to be opened through an Agent if DISD
determines that the average size of accounts opened through that Agent is less
than $100,000 and the Agent does not have the requisite intent and access to
funds. Money Market Reserves, U.S. Treasury Reserves and Municipal Reserves each
reserve the right to offer their shares without regard to minimum purchase
rquirements to employees participating in certain qualified and non-qualified
employee benefit plans or other programs where contributions or account
information can be transmitted in a manner and form acceptable to such Funds.
There is no minimum for subsequent purchases. The initial investment must be
accompanied by the appropriate Account Application.

The Internal Revenue Code of 1986, as amended (the "Code") imposes various
limitations on the amount that may be contributed annually to certain Retirement
Plans. These limitations apply with respect to participants at the plan level
and, therefore, do not directly affect the amount that may be invested in a Fund
by a Retirement Plan. Participants and plan sponsors should consult their tax
advisers for details.

Fund shares are sold on a continuous basis. NAV per share is determined on
each day that the New York Stock Exchange ("NYSE") is open (a "business day").

INSTITUTIONAL GOVERNMENT MONEY MARKET FUND AND INSTITUTIONAL U.S. TREASURY
FUND. The NAV per share of each of these Funds is calculated at 3 p.m., Eastern
time. Purchase orders (except for purchase orders through Dreyfus TELETRANSFER
Privilege) received in proper form by the Transfer Agent by 3 p.m., Eastern
time, on a business day will become effective on, and will receive the share
price next determined on, that day; purchase orders received after 3 p.m.,
Eastern time, will become effective on, and will receive the share price
determined on, the next business day. Shares begin accruing dividends on the day
the purchase order for the shares is effected if the instructions to purchase
shares and immediately available funds are received by the Transfer Agent prior
to 3 p.m., Eastern time for a Fund. Dividends begin accruing on shares on the
next business day with regard to purchase orders effected after 3 p.m., Eastern
Time.

B-27
<PAGE>

INSTITUTIONAL PRIME FUND. The NAV per share of this Fund is calculated at
5 p.m., Eastern time. Purchase orders (except for purchase orders through
Dreyfus TELETRANSFER Privilege) received in proper form by the Transfer Agent or
the Distributor or its designee by 5 p.m., Eastern time, will become effective
at the price determined at 5 p.m., Eastern time, on that day and the shares
purchased will receive the dividend on Fund shares declared that day, provided
Federal Funds are received by 6 p.m., Eastern time, on that day. A purchase
order received in proper form after 5 p.m., Eastern time, will become effective
on, and dividends will begin accruing on shares on, the next business day.

MONEY MARKET RESERVES, U.S. TREASURY RESERVES, AND MUNICIPAL RESERVES. The
NAV per share of Money Market Reserves, U.S. Treasury Reserves and Municipal
Reserves is calculated two times each business day, at 12 noon and 4 p.m.,
Eastern time. Orders received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund before 4 p.m., Eastern
time, are effective on, and will receive the price next determined on, that
business day. Orders received after 4 p.m., Eastern time, are effective at 12
noon on, and receive the first share price determined on, the next business day.

The Distributor may pay dealers a fee of up to 0.5% of the amount invested
through such dealers in Fund shares by employees participating in qualified or
non-qualified employee benefit plans or other programs where (i) the employers
or affiliated employers maintaining such plans or programs have a minimum of 250
employees eligible for participation in such plans or programs or (ii) such
plan's or program's aggregate investment in the Dreyfus Family of Funds or
certain other products made available by the Distributor to such plans or
programs exceeds $1,000,000 ("Eligible Benefit Plans"). Shares of funds in the
Dreyfus Family of Funds then held by Eligible Benefit Plans will be aggregated
to determine the fee payable. The Distributor reserves the right to cease paying
these fees at any time. The Distributor will pay such fees from its own funds,
other than amounts received from a Fund, including past profits or any other
source available to it.

Federal regulations require that you provide a certified tax payer
identification number ("TIN") upon opening or reopening an account. See the
Fund's Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to a Fund could subject you to a $50 penalty
imposed by the Internal Revenue Service.

DREYFUS TELETRANSFER PRIVILEGE. You may purchase Fund shares by telephone
through the DREYFUS TELETRANSFER Privilege if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these documents and
your Fund account. Only a bank account maintained in a domestic financial
institution that is an Automated Clearing House ("ACH") member may be so
designated. DREYFUS TELETRANSFER purchase orders may be made at any time.
Purchase orders received by 4:00 p.m., New York time, on any business day that
the Transfer Agent and the NYSE are open for business will be credited to the
shareholder's Fund account on the next bank business day following such purchase
order. Purchase orders made after 4:00 p.m., New York time, on any business day
the Transfer Agent and the NYSE are open for business, or orders made on
Saturday, Sunday or any Fund holiday (e.g., when the NYSE is not open for

B-28
<PAGE>

business), will be credited to the shareholder's Fund account on the second bank
business day following such purchase order. To qualify to use the DREYFUS
TELETRANSFER Privilege, the initial payment for purchase of Fund shares must be
drawn on, and redemption proceeds paid to, the same bank and account as are
designated on the Account Application or Shareholder Services Form on file. If
the proceeds of a particular redemption are to be wired to an account at any
other bank, the request must be in writing and signature-guaranteed. See
"Redemption of Shares - DREYFUS TELETRANSFER Privilege." A Fund may modify or
terminate this Privilege at any time or charge a service fee upon notice to
shareholders. No such fee currently is contemplated.

PROCEDURES FOR MULTIPLE ACCOUNTS (INSTITUTIONAL PRIME FUND, INSTITUTIONAL
GOVERNMENT FUND AND INSTITUTIONAL U.S. TREASURY FUND). Special procedures have
been designed for banks and other institutions that wish to open multiple
accounts. The institution may open a single master account by filing one
application with the Transfer Agent and may open individual sub-accounts at the
same time or at some later date.

SHARE CERTIFICATES. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.

DISTRIBUTION PLAN AND SHAREHOLDER SERVICING PLAN

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN EACH FUND'S PROSPECTUS ENTITLED "YOUR INVESTMENT."

The SEC has adopted Rule 12b-1 under the 1940 Act (the "Rule") regulating
the circumstances under which investment companies such as the Company may,
directly or indirectly, bear the expenses of distributing their shares. The Rule
defines distribution expenses to include expenditures for "any activity which is
primarily intended to result in the sale of fund shares." The Rule, among other
things, provides that an investment company may bear such expenses only pursuant
to a plan adopted in accordance with the Rule.

DISTRIBUTION PLAN. With respect to the Investor shares of Money Market
Reserves, U.S. Treasury Reserves and Municipal Reserves, the Company has adopted
a Distribution Plan (the "Distribution Plan") pursuant to the Rule, under which
the Investor shares of such Funds bear some of the cost of selling those shares
under the Plan. The Distribution Plan allows each of Money Market Reserves, U.S.
Treasury Reserves and Municipal Reserves to spend annually up to 0.25%
(currently limited by the Company's Board of Directors to 0.20%) of the average
daily net assets attributable to its Investor shares to compensate Dreyfus
Service Corporation, an affiliate of Dreyfus, for shareholder servicing
activities and the Distributor for shareholder servicing activities and for
activities or expenses primarily intended to result in the sale of Investor
shares of the respective Fund. The Distribution Plan allows the Distributor to
make payments from the Rule 12b-1 fees it collects from a Fund to compensate
Agents that have entered into Selling Agreements ("Agreements") with the
Distributor. Under the Agreements, the Agents are obligated to provide
distribution related services with regard to the Funds and/or shareholder
services to the Agent's clients that own Investor shares of a Fund.

The Funds and the Distributor may suspend or reduce payments under the
Distribution Plan at any time, and payments are subject to the continuation of a
Fund's Distribution Plan and the Agreements described above. From time to time,
the Agents, the Distributor and the Funds may agree to voluntarily reduce the
maximum fees payable under the Distribution Plan.

B-29
<PAGE>

Potential investors should read this Statement of Additional Information
in light of the terms governing Agreements with their Agents. An Agent entitled
to receive compensation for selling and servicing a Fund's shares may receive
different compensation with respect to different classes of shares.

SHAREHOLDER SERVICING PLAN. With respect to the Institutional Prime Fund,
Institutional Government Fund and Institutional U.S. Treasury Fund, the Company
has adopted a Shareholder Servicing Plan (the "Institutional Plan") which is not
subject to the Rule, and may enter into Shareholder Servicing Agreements with
Agents.

The Institutional Plan permits each of Institutional Prime Fund,
Institutional Government Fund and Institutional U.S. Treasury Fund to compensate
Agents that have entered into Shareholder Servicing Agreements with the Company.
Payments under the Institutional Plan are calculated daily and paid monthly at a
rate or rates set from time to time by the Board of such Fund, provided that the
annual rate may not exceed 0.15% of the average daily NAV of the Fund shares.
Payments under the Institutional Plan may be increased without shareholder
approval.

The fees payable under the Institutional Plan are used primarily to
compensate Agents for shareholder services provided, and related expenses
incurred by such Agents. The shareholder services provided by Agents may
include: (i) aggregating and processing purchase and redemption requests for
Fund shares from their customers and transmitting net purchase and redemption
orders to the Distributor or Transfer Agent; (ii) providing customers with a
service that invests the assets of their accounts in Fund shares pursuant to
specific or pre-authorized instructions; (iii) processing dividend and
distribution payments from a Fund on behalf of customers; (iv) providing
information periodically to customers showing their positions in Fund shares;
(v) arranging for bank wires; and (vi) providing general shareholder liaison
services.

The Company may suspend or reduce payments under the Institutional Plan at
any time, and payments are subject to the continuation of the Institutional Plan
and the Agreements described above. From time to time, the Agents and the
Company may agree to voluntarily reduce the maximum fees payable under the
Institutional Plan.

The Company understands that Agents may charge fees to their clients who
are owners of shares of Institutional Prime Fund, Institutional Government Fund
or Institutional U.S. Treasury Fund for various services provided in connection
with a client's account. These fees would be in addition to any amounts received
by an Agent under its Agreement with the Company. The Shareholder Servicing
Agreement requires each Agent to disclose to their clients any compensation
payable to such Agent by the Company and any other compensation payable by the
clients for various services provided in connection with their accounts.
Potential investors should read this Statement of Additional Information in
light of the terms governing their accounts with their Agents.

B-30
<PAGE>

The Distribution Plan and the Institutional Plan each provides that a
report of the amounts expended thereunder, and the purposes for which such
expenditures were incurred, must be made to the Directors for their review at
least quarterly. In addition, the Distribution Plan provides that it may not be
amended to increase materially the costs which a Fund may bear for distribution
pursuant to the plan without approval of a Fund's shareholders, and that other
material amendments of the Distribution Plan must be approved by the vote of a
majority of the Directors and of the Directors who are not "interested persons"
of the Company and who do not have any direct or indirect financial interest in
the operation of the Distribution Plan or in the related Agreements, cast in
person at a meeting called for the purpose of considering such amendments. Both
plans are subject to annual approval by all of the Directors and by the
Directors who are neither "interested persons" nor have any direct or indirect
financial interest in the operation of either plan or in the related Agreements
or Shareholder Servicing Agreements, by vote cast in person at a meeting called
for the purpose of voting on such approval. Each plan was so approved by the
Directors at a meeting held on _____________, 1999. The plans are terminable, as
to a Fund or a Fund's class of shares, at any time by vote of a majority of the
Directors who are not "interested persons" and have no direct or indirect
financial interest in the operation of the plan or in the related Agreements or
Shareholder Servicing Agreements or by vote of the holders of a majority of the
outstanding shares of such Fund or a class of a Fund.

The fees payable under the plans are payable without regard to actual
expenses incurred.

For the fiscal year ended October 31, 1998, the distribution and service
fees paid by the Funds subject to the Distribution Plan to Dreyfus Service
Corporation and the Distributor were:

Dreyfus Service
Corporation Distributor

Money Market Reserves $ $
----------- ------------
Municipal Reserves $ $
----------- ------------
U.S. Treasury Reserves $ $
----------- ------------

For the fiscal year ended October 31, 1998, the service fees paid by the
Funds subject to the Institutional Plan were:

Institutional Prime Fund $
------------
Institutional Government Fund $
------------
Institutional U.S. Treasury Fund $
------------

REDEMPTION OF SHARES

The following information supplements and should be read in conjunction
with the section in each Fund's Prospectus entitled "Account Policies,"
"Services For Fund Investors," "Instructions for Regular Accounts" and
"Instructions for IRAs."

GENERAL. If, in the case of Money Market Reserves, U.S. Treasury Reserves
and Municipal Reserves, you hold Fund shares of more than one Class, any request
for redemption must specify the Class of shares being redeemed. If you fail to
specify the Class of shares to be redeemed or if you own fewer shares of the
Class than specified to be redeemed, the redemption request may be delayed until
the Transfer Agent receives further instructions from you or your Agent.

B-31
<PAGE>

The Funds impose no charges when shares are redeemed. Agents or other
institutions may charge their clients a nominal fee for effecting redemptions of
Fund shares. Any certificates representing Fund shares being redeemed must be
submitted with the redemption request. The value of the shares redeemed may be
more or less than their original cost, depending upon the Fund's then-current
NAV.

PROCEDURES. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or through the Telephone Redemption
Privilege or, in the case of Money Market Reserves, U.S. Treasury Reserves and
Municipal Reserves, the Check Redemption Privilege, which are granted
automatically unless you specifically refuse them by checking the applicable
"No" box on the Account Application. The Telephone Redemption Privilege and, in
the case of Money Market Reserves, U.S. Treasury Reserves and Municipal
Reserves, the Check Redemption Privilege, may be established for an existing
account by a separate signed Shareholder Services Form or, with respect to the
Telephone Redemption Privilege, by oral request from any of the authorized
signatories on the account by calling 1-800-645-6561. You also may redeem shares
through the Wire Redemption Privilege or the Dreyfus TELETRANSFER Privilege if
you have checked the appropriate box and supplied the necessary information on
the Account Application or have filed a Shareholders Services Form with the
Transfer Agent. Other redemption procedures may be in effect for clients of
other Agents and institutions. The Funds make available to certain large
institutions the ability to issue redemption instructions through compatible
computer facilities. Each Fund reserves the right to refuse any request made by
telephone, including requests made shortly after a change of address, and may
limit the amount involved or the number of such requests. Each Fund may modify
or terminate any redemption privilege at any time or charge a service fee upon
notice to shareholders. No such fee currently is contemplated. Shares held under
Keogh Plans, IRAs, or other retirement plans, and shares for which certificates
have been issued, are not eligible for the Check Redemption, Wire Redemption,
Telephone Redemption or Dreyfus TELETRANSFER Privilege.

The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including over
The Dreyfus Touch(REGISTERED TRADEMARK) automated telephone system) from any
person representing himself or herself to be you, or a representative of your
Agent, and reasonably believed by the Transfer Agent to be genuine. The Funds
will require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions are
genuine and, if it does not follow such procedures, a Fund or the Transfer Agent
may be liable for any losses due to unauthorized or fraudulent instructions.
Neither the Funds nor the Transfer Agent will be liable for following telephone
instructions reasonably believed to be genuine.

During times of drastic economic or market conditions, you may experience
difficulty in contacting the Transfer Agent by telephone to request a redemption
or an exchange of Fund shares. In such cases, you should consider using the
other redemption procedures described herein. Use of these other redemption
procedures may result in your redemption request being processed at a later time
than it would have been if telephone redemption had been used.

B-32
<PAGE>

CHECK REDEMPTION PRIVILEGE (MONEY MARKET RESERVES, U.S. TREASURY RESERVES
AND MUNICIPAL RESERVES). Investors may write Redemption Checks ("Checks") drawn
on a Fund account. Each Fund provides Checks automatically upon opening an
account, unless the investor specifically refuses the Check Redemption Privilege
by checking the applicable "No" box on the Account Application. The Check
Redemption Privilege may be established for an existing account by a separate
signed Shareholder Services Form. Checks will be sent only to the registered
owner(s) of the account and only to the address of record. The Account
Application or Shareholder Services Form must be manually signed by the
registered owner(s). Checks may be made payable to the order of any person in an
amount of $500 or more. When a Check is presented to the Transfer Agent for
payment, the Transfer Agent, as the investor's agent, will cause the Fund to
redeem a sufficient number of full or fractional shares in the investor's
account to cover the amount of the Check. Dividends are earned until the Check
clears. After clearance, a copy of the Check will be returned to the investor.
Investors generally will be subject to the same rules and regulations that apply
to checking accounts, although the election of this Privilege creates only a
shareholder-transfer agent relationship with the Transfer Agent.

If the amount of the Check is greater than the value of the shares in an
investor's account, the Check will be returned marked insufficient funds. Checks
should not be used to close an account. Checks are free but the Transfer Agent
will impose a fee for stopping payment of a Check upon request or if the
Transfer Agent cannot honor a Check because of insufficient funds or other valid
reason. Investors should date Checks with the current date when writing them.
Please do not postdate Checks. If Checks are postdated, the Transfer Agent will
honor, upon presentment, even if presented before the date of the Check, all
postdated Checks which are dated within six months of presentment for payment,
if they are otherwise in good order.

WIRE REDEMPTION PRIVILEGE. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone or letter redemption
instructions from any person representing himself or herself to be the investor,
or a representative of the investor's Agent, and reasonably believed by the
Transfer Agent to be genuine. With respect to the Institutional Prime Fund only,
ordinarily, the Fund will initiate payment for shares redeemed pursuant to this
Privilege on the same business day after receipt by the Transfer Agent of the
redemption request in proper form prior to 5:00 p.m., New York time, on such
day; otherwise the Fund will initiate payment on the next business day. With
respect to the Institutional Government Fund and the Institutional U.S. Treasury
Fund only, ordinarily, the Funds will initiate payment for shares redeemed
pursuant to this Privilege on the same business day if the Transfer Agent
receives the redemption request in proper form prior to 3:00 p.m., New York
time, on such day; otherwise the Funds will initiate payment on the next
business day. With respect to each Fund other than the Institutional Prime Fund,
the Institutional Government Fund and the Institutional U.S. Treasury Fund,
ordinarily, the Funds will initiate payment for shares redeemed pursuant to this
Privilege on the next business day after receipt if the Transfer Agent receives
the redemption request in proper form. Redemption proceeds ($1,000 minimum),
will be transferred by Federal Reserve wire only to the commercial bank account
specified by the investor on the Account Application or Shareholder Services
Form, or a correspondent bank if the investor's bank is not a member of the
Federal Reserve System. Holders of jointly registered Fund or bank accounts may

B-33
<PAGE>

have redemption proceeds of only up to $250,000 wired within any 30-day period.
Fees ordinarily are imposed by such bank and borne by the investor. Immediate
notification by the correspondent bank to the investor's bank is necessary to
avoid a delay in crediting the funds to the investor's bank account.

Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code which
may be used for domestic or overseas transmissions:

Transfer Agent's
Transmittal Code Answer Back Sign
---------------- ----------------

144295 144295 TSSG PREP

Investors who do not have direct access to telegraphic equipment may have
the wire transmitted by contacting a TRT Cables operator at 1-800-654-7171, toll
free. Investors should advise the operator that the above transmittal code must
be used and should also inform the operator of the Transfer Agent's answer back
sign.

To change the commercial bank or account designated to receive redemption
proceeds, a written request must be sent to the Transfer Agent. This request
must be signed by each shareholder, with each signature guaranteed as described
below under "Stock Certificates; Signatures."

DREYFUS TELETRANSFER PRIVILEGE. You may request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an ACH member may be designated. Redemption
proceeds will be on deposit in your account at an ACH member bank ordinarily two
business days after receipt of the redemption request. Investors should be aware
that if they have selected the Dreyfus TELETRANSFER Privilege, any request for a
wire redemption will be effected as a Dreyfus TELETRANSFER transaction through
the ACH system unless more prompt transmittal specifically is requested. Holders
of jointly registered Fund or bank accounts may redeem through the Dreyfus
TELETRANSFER Privilege for transfer to their bank account only up to $250,000
within any 30-day period. See "Purchase of Shares--Dreyfus TELETRANSFEr
Privilege."

B-34
<PAGE>

guarantor and "Signature-Guaranteed" must appear with the signature. The
Transfer Agent may request additional documentation from corporations,
executors, administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular verification.
For more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.

REDEMPTION COMMITMENT. The Company has committed itself to pay in cash all
redemption requests by any shareholder of record of a Fund, limited in amount
during any 90 day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the SEC. In the case of requests for
redemptions in excess of such amount, the Company's Board reserves the right to
make payments in whole or in part in securities or other assets in case of an
emergency or any time a cash distribution would impair the liquidity of the Fund
to the detriment of the existing shareholders. In such event, the securities
would be valued in the same manner as the Fund's portfolio is valued. If the
recipient sold such securities, brokerage charges might be incurred.

SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or the
date of payment postponed (a) during any period when the NYSE is closed (other
than customary weekend and holiday closings), (b) when trading in the markets a
Fund ordinarily utilizes is restricted, or when an emergency exists as
determined by the SEC so that disposal of a Fund's investments or determination
of its NAV is not reasonably practicable, or (c) for such other periods as the
SEC by order may permit to protect a Fund's shareholders.

SHAREHOLDER SERVICES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN EACH FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES" AND
"SERVICES FOR FUND INVESTORS."

FUND EXCHANGES. Shares of a Fund may be exchanged for shares certain other
funds managed or administered by Dreyfus. Shares of such other funds purchased
by exchange will be purchased on the basis of relative NAV per share as follows:

A. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.

B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the applicable
sales load will be deducted.

C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a sales
load.

B-35
<PAGE>

D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein as
"Offered Shares"), provided that, if the sales load applicable to
the Offered Shares exceeds the maximum sales load that could have
been imposed in connection with the Purchased Shares (at the time
the Purchased Shares were acquired), without giving effect to any
reduced loads, the difference will be deducted.

To accomplish an exchange under item D above, shareholders must notify the
Transfer Agent of their prior ownership of fund shares and their account number.
Any such exchange is subject to confirmation of a shareholder's holdings through
a check of appropriate records.

To request an exchange, an investor or an investor's Agent acting on the
investor's behalf must give exchange instructions to the Transfer Agent in
writing or by telephone. The ability to issue exchange instructions by telephone
is given to all Fund shareholders automatically unless the investor checks the
applicable "No" box on the Account Application, indicating that the investor
specifically refuses this privilege. The Telephone Exchange Privilege may be
established for an existing account by written request signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-645-6561, or by oral request from any of the
authorized signatories on the account, also by calling 1-800-645-6561. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent to
act on telephonic instructions (including over The Dreyfus Touch(REGISTERED
TRADEMARK) automated telephone system) from any person representing himself or
herself to be the investor or a representative of the investor's Agent, and
reasonably believed by the Transfer Agent to be genuine. Telephone exchanges may
be subject to limitations as to the amount involved or the number of telephone
exchanges permitted. Shares issued in certificate form are not eligible for
telephone exchange. No fees currently are charged shareholders directly in
connection with exchanges, although each Fund reserves the right, upon not less
than 60 days' written notice, to charge shareholders a nominal fee in accordance
with rules promulgated by the SEC.

Exchanges of Class R shares of Money Market Reserves, U.S. Treasury
Reserves or Municipal Reserves, as the case may be, held by a Retirement Plan
may be made only between the investor's Retirement Plan account in one fund and
such investor's Retirement Plan account in another fund.

To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made.

DREYFUS AUTO-EXCHANGE PRIVILEGE. The Dreyfus Auto-Exchange Privilege
permits an investor to regularly purchase (on a semi-monthly, monthly, quarterly
or annual basis), in exchange for shares of a Fund, shares of certain other
funds in the Dreyfus Family of Funds of which the investor is a shareholder. The
amount the investor designates, which can be expressed either in terms of a

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specific dollar or share amount ($100 minimum), will be exchanged automatically
on the first and/or fifteenth day of the month according to the schedule the
investor has selected. This Privilege is available only for existing accounts.
With respect to Class R shares of Money Market Reserves, U.S. Treasury Reserves
or Municipal Reserves, as the case may be, held by a Retirement Plan, exchanges
may be made only between the investor's Retirement Plan account in one fund and
such investor's Retirement Plan account in another fund. Shares will be
exchanged on the basis of relative NAV per share as described above under "Fund
Exchanges." Enrollment in or modification or cancellation of this Privilege is
effective three business days following notification by the investor. An
investor will be notified if the investor's account falls below the amount
designated to be exchanged under this Privilege. In this case, an investor's
account will fall to zero unless additional investments are made in excess of
the designated amount prior to the next Dreyfus Auto-Exchange transaction.
Shares held under IRAs and other retirement plans are eligible for this
Privilege. Exchanges of IRA shares may be made between IRA accounts and from
regular accounts to IRA accounts, but not from IRA accounts to regular accounts.
With respect to all other retirement accounts, exchanges may be made only among
those accounts.

The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to P.O. Box 9671,
Providence, Rhode Island 02940-9671. The Fund may charge a service fee for the
use of this Privilege. No such fee currently is contemplated. For more
information concerning this Privilege and the funds in the Dreyfus Family of
Funds eligible to participate in this Privilege, or to obtain a Dreyfus
Auto-Exchange Authorization Form, please call toll free 1-800-645-6561.

Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being acquired
may legally be sold. Shares may be exchanged only between accounts having
identical names and other identifying designations. The exchange of shares of
one fund for shares of another is treated for Federal income tax purposes as a
sale of the shares given in exchange and, therefore, an exchanging shareholder
(other than a tax-exempt Retirement Plan) may realize a taxable gain or loss.

Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. Each Fund reserves the right to reject any
exchange request in whole or in part. The Fund Exchange service or the Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.

DREYFUS-AUTOMATIC ASSET BUILDER(REGISTERED TRADEMARK). Dreyfus Automatic
Asset Builder permits you to purchase Fund shares (minimum of $100 and maximum
of $150,000 per transaction) at regular intervals selected by you. Fund shares
are purchased by transferring funds from the bank account designated by you.
Only an account maintained at a domestic financial institution which is an ACH
member may be so designated. To establish a Dreyfus-Automatic Asset Builder
account, you must file an authorization form with the Transfer Agent. You may
obtain the necessary authorization form by calling 1-800-645-6561. You may
cancel your participation in this Privilege or change the amount of purchase at
any time by mailing written notification to the Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671 and the notification will be
effective three business days following receipt. The Fund may modify or
terminate this Privilege at any time or charge a service fee. No such fee
currently is contemplated.

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depleted. An Automatic Withdrawal Plan may be established by filing an Automatic
Withdrawal Plan application with the Transfer Agent or by oral request from any
of the authorized signatories on the account by calling 1-800-645-6561.
Automatic Withdrawal may be terminated at any time by the investor, a Fund or
the Transfer Agent. Shares for which certificates have been issued may not be
redeemed through the Automatic Withdrawal Plan.

The right to exercise this privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
privilege at any time by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. The Fund may charge a
service fee for the use of this privilege. No such fee currently is
contemplated. For more information concerning this privilege and the funds in
the Dreyfus Family of Funds eligible to participate in this privilege, or to
obtain a Dreyfus Auto-Exchange Authorization Form, please call toll free
1-800-645-6561.

Fund exchanges and the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being acquired
may legally be sold. Shares may be exchanged only between accounts having
identical names and other identifying designations. The exchange of shares of
one fund for shares of another is treated for Federal income tax purposes as a
sale of the shares given in exchange and, therefore, an exchanging shareholder
(other than a tax-exempt Retirement Plan) may realize a taxable gain or loss.

Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund exchange service or the Dreyfus
Auto-Exhcnage privilege may be modified or terminated at any time upon notice to
shareholders.

DREYFUS DIVIDEND OPTIONS. Dreyfus Dividend Sweep allows investors to
invest automatically their dividends or dividends and other distributions, if
any, from a Fund in shares of certain other funds in the Dreyfus Family of Funds
of which the investor is a shareholder. Shares of the other funds purchased
pursuant to this Privilege will be purchased on the basis of relative NAV per
share as follows:

A. Dividends and other distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that are
offered without a sales load.

B. Dividends and other distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds sold
with a sales load, and the applicable sales load will be deducted.

C. Dividends and other distributions paid by a fund which charges a
sales load may be invested in shares of other funds sold with a
sales load (referred to herein as "Offered Shares"), provided that,
if the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or other
distributions are being swept, without giving effect to any reduced
loads, the difference will be deducted.

D. Dividends and other distributions paid by a fund may be invested
in shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.

Dreyfus Dividend ACH permits you to transfer electronically dividends and
other distributions, if any, from a Fund to a designated bank account. Only an
account maintained at a domestic financial institution which is an ACH member
may be so designated. Banks may charge a fee for this service.

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<PAGE>

For more information concerning these Privileges, or to request a Dividend
Options Form, please call toll free 1-800-645-6561. You may cancel these
Privileges by mailing written notification to the Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671. To select a new fund after
cancellation, you must submit a new Dividend Options Form. Enrollment in or
cancellation of these privileges is effective three business days following
receipt. These privileges are available only for existing accounts and may not
be used to open new accounts. Minimum subsequent investments do not apply for
Dreyfus Dividend Sweep. A Fund may modify or terminate these privileges at any
time or charge a service fee. No such fee currently is contemplated. Shares held
under Keogh Plans, IRAs or other retirement plans are not eligible for Dreyfus
Dividend Sweep.

DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social Security or
certain veterans', military or other payments from the Federal government
automatically deposited into your Fund account. You may deposit as much of such
payments as you elect. To enroll in Dreyfus Government Direct Deposit, you must
file with the Transfer Agent a completed Direct Deposit Sign-Up Form for each
type of payment that you desire to include in this Privilege. The appropriate
form may be obtained from your Agent or by calling 1-800-645-6561. Death or
legal incapacity will terminate your participation in this Privilege. You may
elect at any time to terminate your participation by notifying in writing the
appropriate Federal agency. Further, a Fund may terminate your participation
upon 30 days' notice to you.

DREYFUS PAYROLL SAVINGS PLAN. Dreyfus Payroll Savings Plan permits you to
purchase Fund shares (minimum $100 per transaction) automatically on a regular
basis. Depending upon your employer's direct deposit program, you may have part
or all of your paycheck transferred to your existing Dreyfus account
electronically through the ACH system at each pay period. To establish a Dreyfus
Payroll Savings Plan account, you must file an authorization form with your
employer's payroll department. Your employer must complete the reverse side of
the form and return it to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. You may obtain the necessary authorization
form by calling 1-800-645-6561. You may change the amount of purchase or cancel
the authorization only by written notification to your employer. It is the sole
responsibility of your employer, not the Distributor, Dreyfus, the Funds, the
Transfer Agent or any other person, to arrange for transactions under the
Dreyfus Payroll Savings Plan. A Fund may modify or terminate this Privilege at
any time or charge a service fee. No such fee currently is contemplated.

RETIREMENT PLANS. The Funds make available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs and rollover IRAs),
401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support services also
are available. You can obtain details on the various plans by calling the
following numbers toll free: for Keogh Plans, please call 1-800-358-5566; for
IRAs and IRA "Rollover Accounts," please call 1-800-645-6561; for SEP-IRAs,
401(k) Salary Reduction Plans and 403(b)(7) Plans, please call 1-800-322-7880.

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<PAGE>

DETERMINATION OF NET ASSET VALUE

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN EACH FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES."

The NAV for Fund shares is calculated on the basis of amortized cost,
which involves initially valuing a portfolio instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. Each Fund intends to maintain a constant NAV of $1.00
per share, although there is no assurance that this can be done on a continuing
basis.

The use of amortized cost is permitted by Rule 2a-7 under the 1940 Act.
Pursuant to the provisions of Rule 2a-7, the Directors have established
procedures reasonably designed to stabilize each Fund's price per share, as
computed for the purpose of sale and redemption, at $1.00. These procedures
include the determination by the Directors, at such times as they deem
appropriate, of the extent of deviation, if any, of each Fund's current NAV per
share, using market values, from $1.00; periodic review by the Directors of the
amount of and the methods used to calculate the deviation; maintenance of
records of the determination; and review of such deviations. The procedures
employed to stabilize each Fund's price per share require the Directors to
promptly consider what action, if any, should be taken by the Directors if such
deviation exceeds 1/2 of one percent. Such procedures also require the Directors
to take appropriate action to eliminate or reduce, to the extent reasonably
practicable, material dilution or other unfair effects resulting from any
deviation. In addition to such procedures, Rule 2a-7 requires each Fund to
purchase instruments having remaining maturities of 397 days or less, to
maintain a dollar-weighted average portfolio maturity of 90 days or less and to
invest only in securities determined by the Directors to be of high quality, as
defined in Rule 2a-7, with minimal credit risks.

In periods of declining interest rates, the indicated daily yield on
shares of a Fund computed by dividing the annualized daily income on the Fund by
the NAV per share computed as above may tend to be higher than a similar
computation made by using a method of valuation based upon market prices and
estimates. In periods of rising interest rates, the indicated daily yield on
shares of a Fund computed the same way may tend to be lower than a similar
computation made by using a method of calculation based upon market prices and
estimates.

NYSE CLOSINGS. The holidays (as observed) on which the NYSE is currently
scheduled to be closed are: New Year's Day, Dr. Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.

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<PAGE>

DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN EACH FUND'S PROSPECTUS ENTITLED "DISTRIBUTIONS AND TAXES."

GENERAL. Each Fund ordinarily declares dividends from net investment
income on each day that the NYSE is open for business. A Fund's earnings for
Saturdays, Sundays and holidays are declared as dividends on the preceding
business day. Dividends usually are paid on the last calendar day of each month,
and are automatically reinvested in additional Fund shares at NAV or, at your
option, paid in cash. If you redeem all shares in your account at any time
during the month, all dividends to which you are entitled will be paid to you
along with the proceeds of the redemption. If you are an omnibus accountholder
and indicate in a partial redemption request that a portion of any accrued
dividends to which such account is entitled belongs to an underlying
accountholder who has redeemed all shares in his or her account, such portion of
the accrued dividends will be paid to you along with the proceeds of the
redemption. Dividends from net realized short-term securities gains, if any,
generally are declared and paid once a year, but a Fund may make distributions
on a more frequent basis to comply with the distribution requirements of the
Code, in all events in a manner consistent with the provisions of the 1940 Act.
A Fund will not make distributions from net realized securities gains unless
capital loss carryovers, if any, have been utilized or have expired. Each Fund
does not expect to realize any long-term capital gains or losses. You may choose
whether to receive distributions in cash or to reinvest in additional Fund
shares at NAV. All expenses are accrued daily and deducted before declaration of
dividends to investors.

Distributions paid by Money Market Reserves, U.S. Treasury Reserves and
Municipal Reserves with respect to one class of shares may be greater or less
per share than those paid with respect to another class of shares due to the
different expenses of the different classes. Except as provided below, shares of
these Funds purchased on a day on which any such Fund calculates its NAV will
not begin to accrue dividends until the following business day and redemption
orders effected on any particular day will receive all dividends declared
through the day of redemption. However, if immediately available funds are
received by the Transfer Agent prior to 12:00 noon, Eastern time, you may
receive the dividend declared on the day of purchase. You will not receive the
dividends declared on the day of redemption if a wire redemption order is placed
prior to 12:00 noon, Eastern time.

With respect to Institutional Government Fund and Institutional U.S.
Treasury Fund, shares begin accruing dividends on the day the purchase order is
effected if the instructions to purchase shares (except for purchase orders
through Dreyfus TELETRANSFER Privilege) and immediately available funds are
received by the Transfer Agent prior to 3 p.m., Eastern time, on a business day.
Dividends begin accruing on shares on the next business day with regard to
purchase orders effected after 3 p.m., Eastern Time. With respect to
Institutional Prime Fund, purchase orders (except for purchase orders through
Dreyfus TELETRANSFER Privilege) received in proper form by the Transfer Agent or
the Distributor or its designee by 5 p.m., Eastern time, will receive the
dividend on Fund shares declared that day,

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<PAGE>

provided Federal Funds are received by 6 p.m., Eastern time, on that day. A
purchase order received in proper form after 5 p.m., Eastern time, will begin
accruing dividends on shares on, the next business day.

With respect to Institutional Government Fund and Institutional U.S.
Treasury Fund, requests to redeem or exchange fund shares received in proper
form by the transfer agent by 3 p.m., eastern time, on a business day are
effective on, and will receive the share price next determined on, that day.
Redemption and exchange requests received after 3 p.m., Eastern time, are
effective on, and will receive the share price determined on, the next business
day. If the redemption is requested to be made by wire, the proceeds of the
redemption ordinarily will be sent on the same day the request is effective and
the shares will not receive the dividend declared on that day.

With respect to Institutional Prime Fund, redemption or exchange
requests received in proper form by the Transfer Agent or its designee by 5
p.m., Eastern time, on a business day are effective on that day; such requests
received after 5 p.m., Eastern time, will be effective on the next business day.
If the redemption is requested to be made by wire, the proceeds of the
redemption ordinarily will be sent on the day the request is effective and the
shares will not receive the dividend declared on that day.

Each Fund intends to continue to qualify for treatment as a regulated
investment company ("RIC") under the Code so that it will be relieved of federal
income tax on that part of its investment company taxable income (consisting
generally of taxable net investment income and net short-term capital gain) that
is distributed to its shareholders. In addition, Dreyfus Municipal Reserves
intends to continue to qualify to pay "exempt-interest" dividends, which
requires, among other things, that at the close of each quarter of its taxable
year at least 50% of the value of its total assets must consist of municipal
securities.

If you elect to receive dividends and distributions in cash, and your
dividend or distribution check is returned to a Fund as undeliverable or remains
uncashed for six months, the Fund reserves the right to reinvest such dividends
or distributions and all future dividends and distributions payable to you in
additional Fund shares at NAV. No interest will accrue on amounts represented by
uncashed distributions or redemptions checks.

Dividends from a Fund's investment company taxable income are taxable to
you as ordinary income, to the extent of the Fund's earnings and profits.
Distributions by Municipal Reserves that are designated by it as
"exempt-interest dividends" generally may be excluded by you from your gross
income. Distributions by a Fund (including Municipal Reserves) of net capital
gain, when designated as such, are taxable to you as long-term capital gains,
regardless of the length of time you have owned your shares. The Funds are not
expected to realize long-term capital gains.

Interest on indebtedness incurred or continued to purchase or carry shares
of Municipal Reserves will not be deductible for federal income tax purposes to
the extent that Fund's distributions consist of exempt-interest dividends.
Municipal Reserves may invest in "private activity bonds," the interest on which
is treated as a tax preference item for shareholders in determining their
liability for the alternative minimum tax. Proposals have been and may be
introduced before Congress that would restrict or eliminate the federal income
tax exemption for interest on municipal securities. If such a proposal were
enacted, the availability of such securities for investment by Municipal
Reserves and the value of its portfolio would be affected. In such event, that
Fund would reevaluate its investment objective and policies.

Dividends and other distributions are taxable to you regardless of whether
they are received in cash or reinvested in additional Fund shares, even if the
value of your shares is below your cost. None of the dividends paid by any of
the Funds will be eligible for the dividends-received deductions allowed to
corporations.

Dividends and other distributions paid by a Fund to qualified Retirement
Plans ordinarily will not be subject to taxation until the proceeds are
distributed from the Retirement Plans. A Fund will not report to the IRS
distributions paid to such plans. Generally, distributions from Qualified
Retirement Plans, except those representing returns of non-deductible

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contributions thereto, will be taxable as ordinary income and, if made prior to
the time the participant reaches age 59 1/2, generally will be subject to an
additional tax equal to 10% of the taxable portion of the distribution. If the
distribution from such a retirement plan (other than certain governmental or
church plans) for any taxable year following the year in which the participant
reaches age 70 1/2 is less than the "minimum required distribution" for that
taxable year, an excise tax equal to 50% of the deficiency may be imposed by the
Internal Revenue Service ("IRS"). The administrator, trustee or custodian of
such a retirement plan will be responsible for reporting distributions from such
plans to the IRS. Moreover, certain contributions to a qualified retirement plan
in excess of the amounts permitted by law may be subject to an excise tax. If a
distributee of an "eligible rollover distribution" from a qualified Retirement
Plan does not elect to have the eligible rollover distribution paid directly
from the plan to an eligible retirement plan in a "direct rollover," the
eligible rollover distribution is subject to a 20% income tax withholding.

In January of each year, your Fund will send you a Form 1099-DIV notifying
you of the status for federal income tax purposes of your distributions for the
preceding year. Municipal Reserves also will advise shareholders of the
percentage, if any, of the dividends paid that are exempt from federal income
tax and the portion, if any, of those dividends that is a tax preference item
for purposes of the alternative minimum tax.

You must furnish the Funds with your TIN and state whether you are subject
to backup withholding for prior under-reporting, certified under penalties of
perjury as prescribed by the Code and the regulations thereunder. Unless
previously furnished, investments received without such a certification will be
returned. Each Fund is required to withhold 31% of all dividends payable to any
individuals and certain other non-corporate shareholders who do not provide the
Fund with a correct TIN or who otherwise are subject to backup withholding.

A TIN is either the Social Security number, IRS individual taxpayer
identification number, or employer identification number of the record owner of
the account. Any tax withheld as a result of backup withholding does not
constitute an additional tax imposed on the record owner of the account and may
be claimed as a credit on the record owner's Federal income tax return.

Each Fund may be subject to a 4% nondeductible excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
taxable ordinary income for that year and capital gain net income for the
one-year period ending October 31 of that year, plus certain other amounts. Each
Fund expects to make such distributions as are necessary to avoid the imposition
of this tax.

FEDERAL TAX--GENERAL. To qualify for treatment as a RIC under the Internal
Revenue Code of 1986, as amended (the "Code"), each Fund -- each of which is
treated as a separate corporation for federal tax purposes -- (1) must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (generally consisting of taxable net
investment income and net short-term capital gain, if any), or, in the case of
Municipal Reserves, its net interest income excludable from gross

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<PAGE>

income under section 103(a) of the Code; (2) must derive at least 90% of its
annual gross income from specified sources; and (3) must meet certain asset
diversification and other requirements.

MUNICIPAL RESERVES. Dividends paid by Municipal Reserves will qualify as
"exempt-interest dividends," and thus will be excludable from gross income by
its shareholders, if that Fund satisfies the additional requirement that, at the
close of each quarter of its taxable year, at least 50% of the value of its
total assets consists of securities the interest on which is excludable from
gross income under section 103(a) of the Code ("tax-exempt interest"); that Fund
intends to continue to satisfy this requirement. The aggregate amount designated
by Municipal Reserves as exempt-interest dividends for any taxable year may not
exceed its tax-exempt interest for the year over certain amounts disallowed as
deductions. The treatment of dividends from that Fund under local and state
income tax laws may differ from the treatment thereof under the Code.

If shares of the Municipal Reserves are sold at a loss after being held
for six months or less, the loss will be disallowed to the extent of any
exempt-interest dividends received on those shares.

Tax-exempt interest attributable to certain private activity bonds
("PABs") (including, in the case of a RIC receiving interest on such bonds, a
proportionate part of the exempt-interest dividends paid by that RIC) is an item
of tax preference for purposes of the federal alternative minimum tax.
Exempt-interest dividends received by a corporate shareholder also may be
indirectly subject to that tax without regard to whether the Municipal Reserves'
tax-exempt interest was attributable to those bonds.

Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by PABs or industrial development
bonds ("IDBs") should consult their tax advisers before purchasing shares of the
Municipal Reserves because, for users of certain of these facilities, the
interest on those bonds is not exempt from federal income tax. For these
purposes, the term "substantial user" is defined generally to include a
"non-exempt person" who regularly uses in trade or business a part of a facility
financed from the proceeds of PABs or IDBs.

Up to 85% of social security and railroad retirement benefits may be
included in taxable income for recipients whose adjusted gross income (including
income from tax-exempt sources such as the Municipal Reserves) plus 50% of their
benefits exceeds certain base amounts. Exempt-interest dividends paid by that
Fund still are tax-exempt to the extent described in the Fund's Prospectus; they
are only included in the calculation of whether a recipient's income exceeds the
established amounts.

If Municipal Reserves invests in any instrument that generate taxable
income, under the circumstances described in its prospectus, distributions of
the interest earned thereon will be taxable to its shareholders as ordinary
income to the extent of its earnings and profits. Moreover, if Municipal
Reserves realizes capital gain as a result of market transactions, any
distribution of that gain will be taxable to its shareholders. There also may be

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collateral federal income tax consequences regarding the receipt of
exempt-interest dividends by shareholders such as S corporations, financial
institutions and property and casualty insurance companies. A shareholder
falling into any such category should consult its tax adviser concerning its
investment in shares of Municipal Reserves.

STATE AND LOCAL TAXES. Depending upon the extent of a Fund's activities in
states and localities in which its offices are maintained, in which its agents
or independent contractors are located, or in which it is otherwise deemed to be
conducting business, the Fund may be subject to the tax laws of such states or
localities. Shareholders are advised to consult their tax advisers concerning
the application of state and local taxes.

FOREIGN SHAREHOLDERS - U.S. FEDERAL INCOME TAXATION. U.S. federal income
taxation of a shareholder who, as to the United States, is a non-resident alien
individual, a foreign trust or estate, a foreign corporation or a foreign
partnership (a "foreign shareholder") depends on whether the income from a Fund
is "effectively connected" with a U.S. trade or business carried on by the
shareholder, as discussed generally below. Special U.S. federal income tax rules
that differ from those described below may apply to certain foreign persons who
invest in a Fund such as a foreign shareholder entitled to claim the benefits of
an applicable tax treaty. Foreign shareholders are advised to consult their own
tax advisers with respect to the particular tax consequences to them of an
investment in a Fund.

FOREIGN SHAREHOLDERS - DIVIDENDS. Dividends (other than exempt-interest
dividends) distributed to a foreign shareholder whose ownership of Fund shares
is not effectively connected with a U.S. trade or business carried on by the
foreign shareholder ("effectively connected") generally will be subject to a
U.S. federal withholding tax of 30% (or lower treaty rate). If a foreign
shareholder's ownership of Fund shares is effectively connected, however, then
all distributions to that shareholder will not be subject to such withholding
and instead will be subject to U.S. federal income tax at the graduated rates
applicable to U.S. citizens and domestic corporations, as the case may be.
Foreign shareholders also may be subject to the branch profits tax.

FOREIGN SHAREHOLDERS - ESTATE TAX. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as shares
of a Fund, that they own at the time of their death. Certain credits against
that tax and relief under applicable tax treaties may be available.

PORTFOLIO TRANSACTIONS

All portfolio transactions of each Fund are placed on behalf of the Fund
by Dreyfus. Debt securities purchased and sold by a Fund are generally traded on
a net basis (i.e., without commission) through dealers acting for their own
account and not as brokers, or otherwise involve transactions directly with the
issuer of the instrument. This means that a dealer (the securities firm or bank
dealing with a Fund) makes a market for securities by offering to buy at one
price and sell at a slightly higher price. The difference between the prices is

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known as a spread. Other portfolio transactions may be executed through brokers
acting as agent. A Fund will pay a spread or commissions in connection with such
transactions. Dreyfus uses its best efforts to obtain execution of portfolio
transactions at prices which are advantageous to a Fund and at spreads and
commission rates, if any, which are reasonable in relation to the benefits
received. Dreyfus also places transactions for other accounts that it provides
with investment advice.

Brokers and dealers involved in the execution of portfolio transactions on
behalf of a Fund are selected on the basis of their professional capability and
the value and quality of their services. In selecting brokers or dealers,
Dreyfus will consider various relevant factors, including, but not limited to,
the size and type of the transaction; the nature and character of the markets
for the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer; the broker-dealer's
execution services rendered on a continuing basis; and the reasonableness of any
spreads (or commissions, if any). Any spread, commission, fee or other
remuneration paid to an affiliated broker-dealer is paid pursuant to the
Company's procedures adopted in accordance with Rule 17e-1 under the 1940 Act.

Brokers or dealers may be selected who provide brokerage and/or research
services to the Fund and/or other accounts over which Dreyfus or its affiliates
exercise investment discretion. Such services may include advice concerning the
value of securities; the advisability of investing in, purchasing or selling
securities; the availability of securities or the purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement).

The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to the Fund and/or its other
clients; and, conversely, such information provided by brokers or dealers who
have executed transaction orders on behalf of other clients of Dreyfus may be
useful to these organizations in carrying out their obligations to the Fund. The
receipt of such research services does not reduce these organizations' normal
independent research activities; however, it enables these organizations to
avoid the additional expenses which might otherwise be incurred if these
organizations were to attempt to develop comparable information through their
own staffs.

Although Dreyfus manages other accounts in addition to the Fund,
investment decisions for the Fund are made independently from decisions made for
these other accounts. It sometimes happens that the same security is held by
more than one of the accounts managed by Dreyfus. Simultaneous transactions may
occur when several accounts are managed by the same investment manager,
particularly when the same investment instrument is suitable for the investment
objective of more than one account.

B-46
<PAGE>

however, the ability of the Fund to participate in volume transactions will
produce better executions for the Fund. While the Directors will continue to
review simultaneous transactions, it is their present opinion that the
desirability of retaining Dreyfus as investment manager to the Fund outweighs
any disadvantages that may be said to exist from exposure to simultaneous
transactions.

None of the Funds paid a stated brokerage commission during the fiscal
years ended October 31, 1996, 1997 and 1998.

PERFORMANCE INFORMATION

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN EACH FUND'S PROSPECTUS ENTITLED "PAST PERFORMANCE."

Each Fund computes its current annualized and compound effective yields
using standardized methods required by the SEC. The annualized yield for each
Fund is computed by (a) determining the net change in the value of a
hypothetical account having a balance of one share at the beginning of a seven
calendar day period; (b) dividing the net change by the value of the account at
the beginning of the period to obtain the base period return; and (c)
annualizing the results (i.e., multiplying the base period return by 365/7). The
net change in the value of the account reflects the value of additional shares
purchased with dividends declared on both the original share and such additional
shares, but does not include realized gains and losses or unrealized
appreciation and depreciation. Compound effective yields are computed by adding
1 to the base period return (calculated as described above), raising that sum to
a power equal to 365/7 and subtracting 1.

Yield may fluctuate daily and does not provide a basis for determining
future yields. Because each Fund's yield fluctuates, its yield cannot be
compared with yields on savings accounts or other investment alternatives that
provide an agreed-to or guaranteed fixed yield for a stated period of time.
However, yield information may be useful to an investor considering temporary
investments in money market instruments. In comparing the yield of one money
market fund to another, consideration should be given to each Fund's investment
policies, including the types of investments made, length of maturities of
portfolio securities, the methods used by each fund to compute the yield
(methods may differ) and whether there are any special account charges which may
reduce effective yield.

B-47
<PAGE>

The following are the current and effective yields for the Funds for the
seven-day period ended October 31, 1998:

Current Yield Effective Yield
------------- ---------------
Investor Class R Investor Class R
-------- ------- -------- -------

Money Market Reserves ____% ____% ____% ____%
U.S. Treasury Reserves ____% ____% ____% ____%
Municipal Reserves ____% ____% ____% ____%

Current Yield Effective Yield
------------- ---------------
Institutional Prime Fund ____% ____%
Institutional Government Fund ____% ____%
Institutional U.S. Treasury Fund ____% ____%

Municipal Reserves may also, from time to time, utilize tax-equivalent
yields. The tax-equivalent yield is calculated by dividing that portion of the
Fund's yield (as calculated above) which is tax-exempt by one minus a stated tax
rate and adding the quotient to that portion of the Fund's yield, if any (as
calculated above), that is not tax-exempt. The following are the tax-equivalent
yields based on a tax rate of 39.6% for Municipal Reserves for the seven-day
period ended October 31, 1998:

Investor Class R
-------- -------
Tax-Equivalent Yield ____% ____%

Municipal Reserves may from time to time for illustrative purposes only
use tax-equivalency tables which compare tax-exempt yields to their equivalent
taxable yields for relevant federal income tax brackets. The following is an
example of such a table:

Tax Bracket 28% 31% 36% 39.6%

Tax-Exempt Yields Equivalent Taxable Yields
4.5% 6.25% 6.52% 7.03% 7.45%
5.0% 6.94% 7.25% 7.81% 8.28%
5.5% 7.64% 7.97% 8.59% 9.11%
6.0% 8.33% 8.70% 9.38% 9.93%
6.5% 9.03% 9.42% 10.16% 10.76%

From time to time, advertising materials for the Fund may refer to
Morningstar ratings and related analyses supporting the rating.

B-48
<PAGE>

From time to time, advertising material for a Fund may include
biographical information relating to its portfolio manager and may refer to, or
include commentary by the portfolio manager relating to, investment strategy,
asset growth, current or past business, political, economic or financial
conditions and other matters of general interest to investors.

INFORMATION ABOUT THE FUNDS

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN EACH FUND'S PROSPECTUS ENTITLED "THE FUND."

The Company has an authorized capitalization of 25 billion shares of
$0.001 per value stock.

Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. Each Fund is
one of nineteen portfolios of the Company. Fund shares have no preemptive,
subscription or conversion rights and are freely transferable.

Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Company to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Board members or
the appointment of auditors. However, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Company to hold a special
meeting of shareholders for purposes of removing a Board member from office.
Shareholders may remove a Board member by the affirmative vote of a majority of
the Company's outstanding voting shares. In addition, the Board will call a
meeting of shareholders for the purpose of electing Board members if, at any
time, less than a majority of the Board members then holding office have been
elected by shareholders.

The Company is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for certain
matters under the 1940 Act and for other purposes. A shareholder of one
portfolio is not deemed to be a shareholder of any other portfolio. For certain
matters shareholders vote together as a group; as to others they vote separately
by portfolio.

Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an investment
company, such as the Company, will not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by such matter. Rule 18f-2 further provides that a series
shall be deemed to be affected by a matter unless it is clear that the interests
of each series in the matter are identical or that the matter does not affect
any interest of such series. The Rule exempts the selection of independent
accountants and the election of Board members from the separate voting
requirements of the Rule.

B-49
<PAGE>

The Fund will send annual and semi-annual financial statements to all of
its shareholders.

TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS

Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Company,
Dreyfus Transfer, Inc. arranges for the maintenance of shareholder account
records for the Funds, the handling of certain communications between
shareholders and the Funds, and the payment of dividends and distributions
payable by the Funds. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses.

Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as custodian of the Funds' investments.
Under a custody agreement with the Company, Mellon Bank holds the Funds'
portfolio securities and keeps all necessary accounts and records. Dreyfus
Transfer, Inc. and Mellon Bank, as custodian, have no part in determining the
investment policies of the Funds or which securities are to be purchased or sold
by the Funds.

___________________, 1800 Massachusetts Avenue, N.W., Second Floor,
Washington, D.C. 20036-1800, has passed upon the legality of the shares offered
by the Prospectuses and this Statement of Additional Information.

___________________, was appointed by the Directors to serve as the Funds'
independent auditors for the year ending October 31, 1999, providing audit
services including (1) examination of the annual financial statements, (2)
assistance, review and consultation in connection with SEC filings and (3)
review of the annual federal income tax returns filed on behalf of the Funds.

FINANCIAL STATEMENTS

The financial statements for the fiscal year ended October 31, 1998,
including notes to the financial statements and supplementary information, and
the Independent Auditors' Report are included in each Fund's Annual Report to
shareholders. A copy of each Fund's Annual Report accompanies this Statement of
Additional Information. The financial statements included in the Annual Reports,
and the Independent Auditors' Reports thereon contained therein, and related
notes, are incorporated herein by reference.

B-50
<PAGE>

APPENDIX

DESCRIPTION OF STANDARD AND POOR'S, MOODY'S, FITCH IBCA
AND DUFF RATINGS

STANDARD & POOR'S ("S&P")

BOND RATINGS

AAA An obligation rated `AAA' has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.

AA An obligation rated `AA' differs from the highest rated issues only
in small degree. The obligors capacity to meet its financial
commitment on the obligation is very strong.

NOTE RATINGS

SP-1 Strong capacity to pay principal and interest. An issue determined
to possess a very strong capacity to pay debt service is given a
plus (+) designation.

SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the term
of the notes.

COMMERCIAL PAPER RATINGS

An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than 365 days.

A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign
(+) designation.

A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high
as for issuers designated `A-1.'

MOODY'S

BOND RATINGS

Aaa Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and generally are
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

B-51
<PAGE>

Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally
are known as high-grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.

NOTES AND OTHER SHORT-TERM OBLIGATIONS

There are four rating categories for short-term obligations that define an
investment grade situation. These are designated Moody's Investment Grade as MIG
1 (best quality) through MIG 4 (adequate quality). Short-term obligations of
speculative quality are designated SG.

In the case of variable rate demand obligations (VRDOs), a two component
rating is assigned. The first element represents an evaluation of the degree of
risk associated with scheduled principal and interest payments, and the other
represents an evaluation of the degree of risk associated with the demand
feature. The short-term rating assigned to the demand feature of VRDOs is
designated as VMIG. When either the long- or short-term aspect of a VRDO is not
rated, that piece is designated NR, e.g., Aaa/NR or NR/VMIG 1.

MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.

MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.

COMMERCIAL PAPER RATING

Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated issuers:

Prime-1 Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics:

o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.

B-52
<PAGE>

o Well-established access to a range of financial markets and
assured sources of alternate liquidity.

Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited
above but to a lesser agree. Earnings trends and coverage ratios,
while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.

FITCH IBCA

BOND RATINGS

AAA Highest credit quality. `AAA' ratings denote the lowest expectation
of credit risk. They are assigned only in case of exceptionally
strong capacity for timely payment of financial commitments. This
capacity is highly unlikely to be adversely affected by foreseeable
events.

AA Very high credit quality. `AA' ratings denote a very low expectation
of credit risk. They indicate very strong capacity for timely
payment of financial commitments. This capacity is not significantly
vulnerable to foreseeable events.

SHORT-TERM AND COMMERCIAL PAPER RATINGS

A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and thus
places greater emphasis on the liquidity necessary to meet financial commitments
in a timely manner.

F-1+ Highest credit quality. Indicates the strongest capacity for timely
payment of financial commitments; may have an added "+" to denote
any exceptionally strong credit feature.

F-2 Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as
in the case of the higher ratings.

DUFF & PHELPS INC. ("DUFF & PHELPS")

LONG-TERM RATINGS

AAA Highest credit quality. The risks factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.

B-53
<PAGE>

AA+ High credit quality. Protection factors are strong. Risk is modest
AA but may vary slightly from time to time because of economic
AA- conditions.

SHORT-TERM AND COMMERCIAL PAPER RATINGS

D-1+ Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of
funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.

D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk
factors are minor.

D-1- High certainly of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are
very small.

D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge
total financial requirements, access to capital markets is good.
Risk factors are small.

B-54
<PAGE>
BSP313/713SP0399

12/4/98

DREYFUS

BASIC S&P 500

STOCK INDEX FUND

Investing in equity securities to match the total return of the S&P
500(REGISTERED) index

PROSPECTUS March 1, 1999

<PAGE>

Contents

THE FUND
- ----------------------------------------------------

2 Goal/Approach
What every investor
should know about 3 Main Risks
the fund
4 Past Performance

5 Expenses

6 Management

7 Financial Highlights

YOUR INVESTMENT
- --------------------------------------------------------------------

8 Account Policies
Information for
managing your fund 11 Distributions and Taxes
account
12 Services for Fund Investors

14 Instructions for Regular Accounts

16 Instructions for IRAs

FOR MORE INFORMATION
- -------------------------------------------------------------------------------

Where to learn more Back Cover
about this and other
Dreyfus funds

<PAGE>

THE FUND

DREYFUS BASIC S&P 500 STOCK INDEX FUND
-----------------------------

Ticker Symbol: DSPIX

GOAL/APPROACH

The fund seeks to match the total return of the Standard & Poor's 500 Composite
Stock Price Index. This objective can be changed without shareholder approval.
To pursue this goal, the fund normally invests at least 95% of total assets in
common stocks included in the index.

The fund attempts to have a correlation between its performance and that of the
index of at least .95, before expenses. A correlation of 1.00 would mean that
the fund and the index were perfectly correlated.

The fund generally invests in all 500 stocks in the S&P 500(REGISTERED) in
proportion to their weighting in the index. The S& P 500(REGISTERED) is an
unmanaged index of 500 common stocks chosen to reflect the industries of the
U.S. economy and is often considered a proxy for the stock market in general.
Each stock is weighted by its market capitalization, which means larger
companies have greater representation in the index than smaller ones. The fund
may also use options and futures as a substitute for the sale or purchase of
securities.

INFORMATION ON THE FUND' S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT (SEE BACK COVER).

Concepts to understand

INDEX FUNDS: mutual funds that are designed to meet the performance of an
underlying benchmark index.

To replicate index performance, the manager uses a passive management approach
and purchases all or a representative sample of the stocks comprising the
benchmark index. Because the fund has expenses, performance will tend to be
slightly lower than that of the target benchmark.

2
<PAGE>

MAIN RISKS

While stocks have historically been a leading choice of long-term investors,
they do fluctuate in price. The value of your investment in the fund will go up
and down, which means that you could lose money.

The fund uses an indexing strategy, it does not attempt to manage market
volatility, use defensive strategies or reduce the effects of any long-term
periods of poor stock performance.

The correlation between fund and index performance may be affected by the fund's
expenses, changes in securities markets, changes in the composition of the index
and the timing of purchases and redemptions of fund shares.

The fund may invest in futures and options, which could carry additional risks
such as losses due to unanticipated market price movements, and could also
reduce the opportunity for gain.

CONCEPTS TO UNDERSTAND

"Standard & Poor's(REGISTERED)," "S&P(REGISTERED)," "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

3
<PAGE>

PAST PERFORMANCE

The two tables below show the fund' s annual returns and its long-term
performance. The first table shows you how the fund's performance has varied
from year to year. The second compares the fund's performance over time to that
of the S& P 500(REGISTERED), a widely recognized unmanaged index of stock
performance. Both tables assume reinvestment of dividends and distributions. As
with all mutual funds, the past is not a prediction of the future.

--------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)

[BAR GRAPH]

BEST QUARTER: Q ' %

WORST QUARTER: Q ' %
--------------------------------------------------------

Average annual total return AS OF 12/31/98

Inception

1 Year 5 Years (9/30/93)
----------------------------------------

FUND % % %

S&P 500(REGISTERED) INDEX % % %

WHAT THIS FUND IS -- AND ISN'T

4
<PAGE>

EXPENSES

--------------------------------------------------------
Fee table

SHAREHOLDER TRANSACTION FEES

% OF TRANSACTION AMOUNT NONE
--------------------------------------------------------

ANNUAL FUND OPERATING EXPENSES

% OF AVERAGE DAILY NET ASSETS

Management fees 0.20%

Other expenses 0.00%
-------------------------------------------------------

TOTAL 0.20%
--------------------------------------------------------

Expense example
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$20 $64 $113 $255

CONCEPTS TO UNDERSTAND

The Fund

5
<PAGE>

MANAGEMENT

The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages one of the nation's
leading mutual fund complexes, with more than $110 billion in more than 160
mutual fund portfolios. Dreyfus is the mutual fund business of Mellon Bank
Corporation, a broad-based financial services company with a bank at its core.
With more than $350 billion of assets under management and $1.7 trillion of
assets under administration and custody, Mellon provides a full range of
banking, investment and trust products and services to individuals, businesses
and institutions. Its mutual fund companies place Mellon as the leading bank
manager of mutual funds. Mellon is headquartered in Pittsburgh, Pennsylvania.

Dreyfus manages the fund by making investment decisions based on the fund's
investment objective, policies and restrictions in order to match the
performance of the S&P 500(REGISTERED) index.

CONCEPTS TO UNDERSTAND

YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000.

Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.

6
<PAGE>

FINANCIAL HIGHLIGHTS

This table describes the fund's 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 financial highlights have been independently audited by
_____________, whose report, along with the fund's financial statements, is
included in the annual report.
<TABLE>
<CAPTION>

YEAR ENDED OCTOBER 31,

1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>

PER-SHARE DATA ($)

Net asset value, beginning of period 15.38 12.75 10.42 10.23

Investment operations:

Investment income -- net .30 .29 .26 .21(1)

Net realized and unrealized gain (loss)
on investments 4.52 2.69 2.37 .14

Total from investment operations 4.82 2.98 2.63 .35

Distributions:

Dividends from investment
income -- net (.28) (.30) (.26) (.16)

Dividends from net realized gains
on investments (.19) (.05) (.04) (.00)(2)

Total distributions (.47) (.35) (.30) (.16)

Net asset value, end of period 19.73 15.38 12.75 10.42

Total return (%) 31.87 23.78 25.75 3.50
- ------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) .20 .20 .37 .40(3)

Ratio of net investment income
to average net assets (%) 1.72 2.16 2.36 2.38

Portfolio turnover rate (%) 3.75 4.75 1.03 13.00
- ------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 803,142 449,123 204,278 123,994
</TABLE>

(1)NET INVESTMENT INCOME BEFORE REIMBURSEMENT OF EXPENSES BY THE INVESTMENT
ADVISER FOR THE YEAR ENDED OCTOBER 31, 1994 WAS $0.21.

(2) AMOUNT REPRESENTS LESS THAN $0.01.

(3)ANNUALIZED EXPENSE RATIO BEFORE VOLUNTARY REIMBURSEMENT OF EXPENSES BY THE
INVESTMENT ADVISER FOR THE YEAR ENDED OCTOBER 31, 1994 WAS 0.45%.

The Fund

7
<PAGE>

YOUR INVESTMENT

ACCOUNT POLICIES

BUYING SHARES

You pay no sales charges to invest in this fund. Your price for fund shares is
the fund's net asset value per share (NAV), which is generally calculated as of
the close of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. The fund's investments
are generally valued based on market value, or where market quotations are not
readily available, based on fair value as determined in good faith by the fund's
board.

--------------------------------------------------------
Minimum investments

Initial Additional
--------------------------------------------------------

REGULAR ACCOUNTS $10,000 $1,000*
$500 FOR
TELETRANSFER
INVESTMENTS

TRADITIONAL IRAS $5,000 $1,000**

SPOUSAL IRAS $5,000 $1,000**

ROTH IRAS $5,000 $1,000**

DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS

All investments must be in U.S. dollars. Third-party
checks cannot be accepted. You may be charged a fee for
any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.

*$100 FOR INVESTORS WHO HAVE HELD SHARES SINCE
SEPTEMBER 14, 1995.

**NO MINIMUM FOR INVESTORS WHO HAVE HELD SHARES SINCE
SEPTEMBER 14, 1995.

CONCEPTS TO UNDERSTAND

TRADITIONAL IRA: an individual retirement account. Your contributions may or may
not be deductible depending on your circumstances. Assets grow tax-deferred;
withdrawals and distributions are taxable in the year made.

SPOUSAL IRA: an IRA funded by a working spouse in the name of a nonworking
spouse.

ROTH IRA: an IRA with non-deductible contributions, and tax-free growth of
assets and distributions to pay retirement expenses, provided certain conditions
are met.

EDUCATION IRA: an IRA with nondeductible contributions, and tax-free growth of
assets and distributions, if used to pay certain educational expenses.

FOR MORE COMPLETE IRA INFORMATION, CONSULT DREYFUS OR YOUR TAX PROFESSIONAL.

8
<PAGE>

SELLING SHARES

You may sell shares at any time. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. Any certificates
representing fund shares being sold must be returned with your redemption
request. Your order will be processed promptly and you will generally receive
the proceeds within a week.

Before selling recently purchased shares, please note that if the fund has not
yet collected payment for the shares you are selling, it may delay sending the
proceeds until it has collected payment, which may take up to eight business
days.

--------------------------------------------------------
Limitations on selling shares by phone

Proceeds
sent by Minimum Maximum
--------------------------------------------------------
CHECK NO MINIMUM $150,000 PER DAY

WIRE $1,000 $250,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS

TELETRANSFER $500 $250,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS

Written sell orders

Some circumstances require written sell orders along with signature guarantees.
These include:

.. amounts of $1,000 or more on accounts whose address has been changed within
the last 30 days

.. requests to send the proceeds to a different payee or address

Written sell orders of $100,000 or more must also be signature guaranteed.

Your Investment

9
<PAGE>

ACCOUNT POLICIES (CONTINUED)

GENERAL POLICIES

If your account falls below $5,000 ($500 in the case of holders of fund shares
since September 14, 1995), the fund may ask you to increase your balance. If it
is still below $5,000 after 45 days, the fund may close your account and send
you the proceeds.

Unless you decline telephone privileges on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.

The fund reserves the right to:

.. refuse any purchase or exchange request that could adversely affect the fund
or its operations, including those from any individual or group who, in the
fund' s view, is likely to engage in excessive trading (usually defined as
more than four exchanges out of the fund within a calendar year)

.. refuse any purchase or exchange request in excess of 1% of the fund's total
assets

.. change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions

.. change its minimum investment amounts

.. delay sending out redemption proceeds for up to seven days (generally applies
only in cases of very large redemptions, excessive trading or during unusual
market conditions)

The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).

THIRD-PARTY INVESTMENTS

10
<PAGE>

DISTRIBUTIONS AND TAXES

The fund usually pays its shareholders dividends from its net investment income
quarterly, and distributes any net capital gains that it has realized annually.
Your distributions will be reinvested in the fund unless you instruct the fund
otherwise. There are no fees or sales charges on reinvestments.

Fund dividends and distributions are taxable to most investors (unless your
investment is in an IRA or other tax-advantaged account). The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash. In general,
distributions are taxable as follows:

--------------------------------------------------------
Taxability of distributions

Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
--------------------------------------------------------

INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE

SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE

LONG-TERM
CAPITAL GAINS 10% 20%

The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund.

Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.

TAXES ON TRANSACTIONS

Except in tax-advantaged accounts, any sale or exchange of fund shares may
generate a tax liability.

The table at right can provide a guide for your potential tax liability when
selling or exchanging fund shares. "Short-term capital gains" applies to fund
shares sold or exchanged up to 12 months after buying them. "Long-term capital
gains" applies to shares sold or exchanged after 12 months.

Your Investment

11
<PAGE>

SERVICES FOR FUND INVESTORS

Automatic services

--------------------------------------------------------
For investing

DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER(REGISTERED) from a designated bank account.

DREYFUS PAYROLL For making automatic investments
SAVINGS PLAN through a payroll deduction.

DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.

DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
--------------------------------------------------------

For exchanging shares

DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
--------------------------------------------------------

For selling shares

DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds.

DREYFUS FINANCIAL CENTERS

12
<PAGE>

EXCHANGE PRIVILEGE

You can exchange $500 or more from one Dreyfus fund into another (no minimum for
retirement accounts) . You can request your exchange in writing or by phone. Be
sure to read the current prospectus for any fund into which you are exchanging.
Any new account established through an exchange will have the same privileges as
your original account (as long as they are available). There is currently no fee
for exchanges, although you may be charged a sales load when exchanging into any
fund that has one.

DREYFUS TELETRANSFER PRIVILEGE

THE DREYFUS TOUCH(REGISTERED)

RETIREMENT PLANS

Dreyfus offers a variety of retirement plans, including traditional, Roth and
Education IRAs. Here's where you call for information:

.. for traditional, rollover, Roth and Education IRAs, call 1-800-645-656

.. for SEP-IRAs, Keogh accounts, 401(k) and 403(b) accounts, call 1-800-358-0910

Your Investment
13
<PAGE>

INSTRUCTIONS FOR REGULAR ACCOUNTS

TO OPEN AN ACCOUNT

In Writing

Complete the application.

Mail your application and a check to:
The Dreyfus Family of Funds
P.O. Box 9387, Providence, RI 02940-9387

TO ADD TO AN ACCOUNT

Fill out an investment slip, and write your account number on your check.

Mail the slip and the check to: The Dreyfus Family of Funds P.O. Box 105,
Newark, NJ 07101-0105

By Telephone

WIRE Have your bank send your
investment to Boston Safe Deposit and Trust Company with these instructions:

* DDA# 044288

* the fund name

* your Social Security or tax ID number

* name(s) of investor(s)

Call us to obtain an account number. Return your application.

WIRE Have your bank send your investment to Boston Safe Deposit and Trust
Company with these instructions:

* DDA# 044288

* the fund name

* your account number

* name(s) of investor(s)

ELECTRONIC CHECK Same as wire, but insert "4110" before your account number and
add ABA# 011-001234

TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.

Automatically

WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.

ALL SERVICES Call us to request a form to add any automatic investing service
(see "Services for Fund Investors"). Complete and return the forms along with
any other required materials.

Via the Internet

COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.

<PAGE>14

TO SELL SHARES

Write a letter of instruction that includes:

* your name(s) and signature(s)

* your account number

* the fund name

* the dollar amount you want to sell

* how and where to send the proceeds

Obtain a signature guarantee or other documentation, if required (see "Account
Policies -- Selling Shares").

Mail your request to: The Dreyfus Family of Funds P.O. Box 9671, Providence, RI
02940-9671

WIRE Be sure the fund has your bank account information on file. Call us to
request your transaction. Proceeds will be wired to your bank.

TELETRANSFER Be sure the fund has your bank account information on file. Call
us to request your transaction. Proceeds will be sent to your bank by electronic
check.

CHECK Call us to request your transaction. A check will be sent to the address
of record.

DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request a form to add the plan.
Complete the form, specifying the amount and frequency of withdrawals you would
like.

Be sure to maintain an account balance of $5,000 or more.

To reach Dreyfus, call toll free in the U.S.

1-800-645-6561

Outside the U.S. 516-794-5452

Make checks payable to:

THE DREYFUS FAMILY OF FUNDS

You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.

Concepts to understand

WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.

ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.

Your Investment

<PAGE>15

INSTRUCTIONS FOR IRAS

TO OPEN AN ACCOUNT

In Writing

Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.

Mail your application and a check to:
The Dreyfus Trust Company, Custodian P.O. Box 6427, Providence, RI 02940-6427

TO ADD TO AN ACCOUNT

Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.

Mail in the slip and the check (see "To Open an Account" at left).

By Telephone

WIRE Have your bank send your investment to Boston Safe Deposit and Trust
Company with these instructions:

* DDA# 044288

* the fund name

* your account number

* name of investor

* the contribution year

ELECTRONIC CHECK Same as wire, but insert "4110" before your account number and
add ABA# 011-001234

TELEPHONE CONTRIBUTION Call to request us to move money from a regular Dreyfus
account to an IRA (both accounts must be held in the same shareholder name).

Automatically

ALL SERVICES Call us to request a form to add an automatic investing service
(see "Services for Fund Investors"). Complete and return the form along with any
other required materials.

All contributions will count as current year.

Via the Internet

COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.

<PAGE>16

TO SELL SHARES

Write a letter of instruction that includes:

* your name and signature

* your account number

* the fund name

* the dollar amount you want to sell

* how and where to send the proceeds

* whether the distribution is qualified or premature

* whether the 10% TEFRA should be withheld

Obtain a signature guarantee or other documentation, if required.

Mail in your request (see "To Open an Account" at left).

DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request instructions to establish
the plan.

To reach Dreyfus, call toll free in the U.S.

1-800-645-6561

Outside the U.S. 516-794-5452

Make checks payable to:

THE DREYFUS TRUST CO., CUSTODIAN

You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.

Concepts to understand

Your Investment

<PAGE>17

For More Information

Dreyfus BASIC S&P 500 Stock Index Fund

Series of The Dreyfus/Laurel Funds, Inc.
-----------------------------

SEC file number: 811-5270

More information on this fund is available free upon
request, including the following:

Annual/Semiannual Report

Describes the fund' s performance, lists portfolio
holdings and contains a letter from the fund's manager
discussing recent market conditions, economic trends and
fund strategies that significantly affected the fund's
performance during the last fiscal year.

Statement of Additional Information (SAI)

Provides more details about the fund and its policies. A
current SAI is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference (is
legally considered part of this prospectus).

To obtain information:

BY TELEPHONE Call 1-800-645-6561

BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144

BY E-MAIL Send your request to [email protected]

ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from:

SEC
http://www.sec.gov

DREYFUS
http://www.dreyfus.com

<PAGE>
- --------------------------------------------------------------------------------

DREYFUS BASIC S&P 500 STOCK INDEX FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 1999

- --------------------------------------------------------------------------------

This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of the
Dreyfus BASIC S&P 500 Stock Index Fund (the "Fund"), dated March 1, 1999, as it
may be revised from time to time. The Fund is a separate, diversified portfolio
of The Dreyfus/Laurel Funds, Inc., an open-end management investment company
(the "Company"), known as a mutual fund. To obtain a copy of the Fund's
Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale,
New York 11556-0144, or call one of the following numbers:

Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452

TABLE OF CONTENTS
Page

Description of the Fund........................................... B-2
Management of the Fund............................................ B-17
Management Arrangements........................................... B-23
Purchase of Shares................................................ B-25
Redemption of Shares.............................................. B-27
Shareholder Services.............................................. B-31
Additional Information About Purchases, Exchanges and Redemptions. B-36
Determination of Net Asset Value.................................. B-36
Dividends, Other Distributions and Taxes.......................... B-37
Portfolio Transactions............................................ B-43
Performance Information........................................... B-44
Information About the Fund........................................ B-46
Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors..................... B-47
Financial Statements.............................................. B-47

<PAGE>

DESCRIPTION OF THE FUND

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS OF THE FUND'S PROSPECTUS ENTITLED "GOAL/APPROACH" AND "MAIN
RISKS."

The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.

ADDITIONAL INFORMATION ABOUT THE FUND. "Standard & Poor's(R)," "S&P(R),"
"S&P 500(R)," and "Standard & Poor's 500(R)," are trademarks of The McGraw-Hill
Companies, Inc. and have been licensed for use by the Company. The Fund is not
sponsored, endorsed, sold or promoted by Standard & Poor's Rating Services, a
division of the McGraw-Hill Companies, Inc. ("Standard & Poor's), and Standard &
Poor's makes no representation regarding the advisability of investing in the
Fund. Standard & Poor's makes no representation or warranty, express or implied,
to the owners of the Fund or any member of the public regarding the advisability
of investing in securities generally or in the Fund particularly or the ability
of the S&P 500 Index to track general stock market performance. Standard &
Poor's only relationship to the Company is the licensing of certain trademarks
and trade names of Standard & Poor's and of the S&P 500 Index which is
determined, composed and calculated by Standard & Poor's without regard to the
Company or the Fund. Standard & Poor's has no obligation to take the needs of
the Company or the owners of the Fund into consideration in determining,
composing or calculating the S&P 500 Index. Standard & Poor's is not responsible
for and has not participated in the determination of the prices and amount of
the Fund or the timing of the issuance or sale of the Fund or in the
determination or calculation of the equation by which the Fund is to be
converted into cash. Standard & Poor's has no obligation or liability in
connection with the administration, marketing or trading of the Fund.

STANDARD & POOR'S DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS
OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN AND STANDARD & POOR'S SHALL
HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. STANDARD
& POOR'S MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY
THE FUND, OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE
S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. STANDARD & POOR'S MAKES NO EXPRESS
OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY

B-2
<PAGE>

OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO
EVENT SHALL STANDARD & POOR'S HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE,
INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.

CERTAIN PORTFOLIO SECURITIES

The following information regarding the securities that the Fund may
purchase supplements that found in the Fund's prospectus.

GENERAL. To maintain liquidity, the Fund may invest up to 5% of its assets
in U.S. Government securities, commercial paper, bank certificates of deposit,
bank demand and time deposits, repurchase agreements, when-issued transactions
and variable amount master demand notes.

GOVERNMENT OBLIGATIONS. The Fund may invest in a variety of U.S. Treasury
obligations, which differ only in their interest rates, maturities and times of
issuance: (a) U.S. Treasury bills have a maturity of one year or less, (b) U.S.
Treasury notes have maturities of one to ten years, and (c) U.S. Treasury bonds
generally have maturities of greater than ten years.

In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are supported by any of the following: (a) the full faith
and credit of the U.S. Treasury, (b) the right of the issuer to borrow an amount
limited to a specific line of credit from the U.S. Treasury, (c) the
discretionary authority of the U.S. Government agency or instrumentality, or (d)
the credit of the instrumentality. (Examples of agencies and instrumentalities
are: Federal Land Banks, Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Central Bank for
Cooperatives, Federal Intermediate Credit Banks, Federal Home Loan Banks,
General Services Administration, Maritime Administration, Tennessee Valley
Authority, District of Columbia Armory Board, Inter-American Development Bank,
Asian-American Development Bank, Student Loan Marketing Association,
International Bank for Reconstruction and Development and Federal National
Mortgage Association). No assurance can be given that the U.S. Government will
provide financial support to the agencies or instrumentalities described in (b),
(c) and (d) in the future, other than as set forth above, since it is not
obligated to do so by law.

B-3
<PAGE>

REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
U.S. Government securities dealers recognized by the Federal Reserve Board, with
member banks of the Federal Reserve System, or with such other brokers or
dealers that meet the Fund's credit guidelines. In a repurchase agreement, the
Fund buys a security from a seller that has agreed to repurchase the same
security at a mutually agreed upon date and price. The Fund's resale price will
be in excess of the purchase price, reflecting an agreed upon interest rate.
This interest rate is effective for the period of time the Fund is invested in
the agreement and is not related to the coupon rate on the underlying security.
Repurchase agreements may also be viewed as a fully collateralized loan of money
by the Fund to the seller. The period of these repurchase agreements will
usually be short, from overnight to one week, and at no time will the Fund
invest in repurchase agreements for more than one year. The Fund will always
receive as collateral securities whose market value including accrued interest
is, and during the entire term of the agreement remains, at least equal to 100%
of the dollar amount invested by the Fund in each agreement, and the Fund will
make payment for such securities only upon physical delivery or upon evidence of
book entry transfer to the account of the Custodian. If the seller defaults, the
Fund might incur a loss if the value of the collateral securing the repurchase
agreement declines and might incur disposition costs in connection with
liquidating the collateral. In addition, if bankruptcy proceedings are commenced
with respect to the seller of a security which is the subject of a repurchase
agreement, realization upon the collateral by the Fund may be delayed or
limited. The Fund seeks to minimize the risk of loss through repurchase
agreements by analyzing the creditworthiness of the obligors under repurchase
agreements, in accordance with the Fund's credit guidelines.

COMMERCIAL PAPER. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from 2 to 270 days. Each instrument may be backed only
by the credit of the issuer or may be backed by some form of credit enhancement,
typically in the form of a guarantee by a commercial bank. Commercial paper
backed by guarantees of foreign banks may involve additional risk due to the
difficulty of obtaining and enforcing judgments against such banks and the
generally less restrictive regulations to which such banks are subject. The Fund
will only invest in commercial paper of U.S. and foreign companies rated at the
time of purchase at least A-1 by Standard & Poor's, Prime-1 by Moody's Investors
Service, Inc., F-1 by Fitch Investors Service LLP, Duff 1 by Phoenix Duff &
Phelps, Corp., or A1 by IBCA, Inc.

The Fund may invest in commercial paper issued in reliance on the
so-called "private placement" exemption from registration afforded by Section
4(2) of the Securities Act of 1933, as amended ("Section 4(2) paper"). Section
4(2) paper is restricted as to disposition under the federal securities laws and
generally is sold to investors, such as the Fund, who agree that they are
purchasing the paper for an investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper is normally resold to other investors through or with the
assistance of the issuer or investment dealers who make a market in Section 4(2)
paper, thus providing liquidity. Pursuant to guidelines established by the
Company's Board of Directors, Dreyfus may determine that Section 4(2) paper is
liquid for the purposes of complying with the Fund's investment restriction
relating to investments in illiquid securities.

B-4
<PAGE>

pursuant to guidelines established by the Board of Directors. The Board or
Dreyfus will consider availability of reliable price information and other
relevant information in making such determinations. Rule 144A securities
generally must be sold to other qualified institutional buyers. If a particular
investment in Section 4(2) paper or Rule 144A securities is not determined to be
liquid, that investment will be included within the percentage limitation on
investment in illiquid securities. The ability to sell Rule 144A securities to
qualified institutional buyers is a recent development, and it is not possible
to predict how this market will mature. Investing in Rule 144A securities could
have the effect of increasing the level of Fund illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in purchasing
these securities from the Fund or other holders.

OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued by
other investment companies to the extent that such investments are consistent
with the Fund's investment objective and policies and permissible under the
Investment Company Act of 1940, as amended (the "1940 Act"). As a shareholder of
another investment company, the Fund would bear, along with other shareholders,
its pro rata portion of the other investment company's expenses, including
advisory fees. These expenses would be in addition to the advisory and other
expenses that the Fund bears directly in connection with its own operations.

VARIABLE AMOUNT MASTER DEMAND NOTES. The Fund may invest in variable
amount master demand notes. Variable amount master demand notes are unsecured
obligations that are redeemable upon demand and are typically unrated. These
instruments are issued pursuant to written agreements between their issuers and
holders. The agreements permit the holders to increase (subject to an agreed
maximum) and the holders and issuers to decrease the principal amount of the
notes, and specify that the rate of interest payable on the principal fluctuates
according to an agreed-upon formula. If an issuer of a variable amount master
demand note were to default on its payment obligation, the Fund might be unable
to dispose of the note because of the absence of a secondary market and might,
for this or other reasons, suffer a loss to the extent of the default. The Fund
will only invest in variable amount master demand notes issued by entities that
Dreyfus considers creditworthy.

INVESTMENT TECHNIQUES

In addition to the principal investment strategies discussed in the Fund's
Prospectus, the Fund also may engage in the investment techniques described
below. The Fund might not use, or may not have the ability to use, any of these
strategies and there can be no assurance that any strategy that is used will
succeed.

BORROWING. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.

WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. New issues of
U.S. Treasury and Government securities are often offered on a when-issued
basis. This means that delivery and payment for the securities normally will
take place approximately 7 to 45 days after the date the buyer commits to
purchase them. The payment obligation and the interest rate that will be

B-5
<PAGE>

received on securities purchased on a when-issued basis are each fixed at
the time the buyer enters into the commitment. The Fund will make commitments to
purchase such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities or dispose of the commitment
before the settlement date if it is deemed advisable as a matter of investment
strategy. Cash or marketable high-grade debt securities equal to the amount of
the above commitments will be segregated on the Fund's records. For the purpose
of determining the adequacy of these securities the segregated securities will
be valued at market. If the market value of such securities declines, additional
cash or securities will be segregated on the Fund's records on a daily basis so
that the market value of the account will equal the amount of such commitments
by the Fund.

Securities purchased on a when-issued basis and the securities held by the
Fund are subject to changes in market value based upon the public's perception
of changes in the level of interest rates. Generally, the value of such
securities will fluctuate inversely to changes in interest rates -- i.e., they
will appreciate in value when interest rates decline and decrease in value when
interest rates rise. Therefore, if in order to achieve higher interest income
the Fund remains substantially fully invested at the same time that it has
purchased securities on a "when-issued" basis, there will be a greater
possibility of fluctuation in the Fund's net asset value ("NAV").

When payment for when-issued securities is due, the Fund will meet its
obligations from then-available cash flow, the sale of segregated securities,
the sale of other securities and/or, although it would not normally expect to do
so, from the sale of the when-issued securities themselves (which may have a
market value greater or less than the Fund's payment obligation). The sale of
securities to meet such obligations carries with it a greater potential for the
realization of capital gains, which are subject to federal income taxes.

To secure advantageous prices or yields, the Fund may purchase or sell
securities for delayed delivery. In such transactions, delivery of the
securities occurs beyond the normal settlement periods, but no payment or
delivery is made by the Fund prior to the actual delivery or payment by the
other party to the transaction. The purchase of securities on a delayed delivery
basis involves the risk that the value of the securities purchased will decline
prior to the settlement date. The sale of securities for delayed delivery
involves the risk that the prices available in the market on the delivery date
may be greater than those obtained in the sale transaction. The Fund will
establish a segregated account consisting of cash, U.S. Government Securities or
other high-grade debt obligations in an amount at least equal at all times to
the amounts of its delayed delivery commitments.

B-6
<PAGE>

the loaned securities. These loans are terminable by the Fund at any time upon
specified notice. The Fund might experience loss if the institution to which it
has lent its securities fails financially or breaches its agreement with the
Fund. In addition, it is anticipated that the Fund may share with the borrower
some of the income received on the collateral for the loan or that it will be
paid a premium for the loan. In determining whether to lend securities, the Fund
considers all relevant factors and circumstances including the creditworthiness
of the borrower.

REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements to meet redemption requests where the liquidation of Fund securities
is deemed by Dreyfus to be disadvantageous. Under a reverse repurchase
agreement, the Fund: (1) transfers possession of Fund securities to a bank or
broker-dealer in return for cash in an amount equal to a percentage of the
securities' market value; and (2) agrees to repurchase the securities at a
future date by repaying the cash with interest. The Fund retains record
ownership of the security involved including the right to receive interest and
principal payments. Cash or liquid high-grade debt securities held by the Fund
equal in value to the repurchase price including any accrued interest will be
maintained in a segregated account while a reverse repurchase agreement is in
effect.

FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS. The Fund may purchase
and sell various financial instruments ("Derivative Instruments"), including
financial futures contracts (such as index futures contracts) and options (such
as options on U.S. and foreign securities or indices of such securities). The
index Derivative Instruments the Fund may use may be based on indices of U.S. or
foreign equity securities. These Derivative Instruments may be used, for
example, to preserve a return or spread or to facilitate or substitute for the
sale or purchase of securities.

Hedging strategies can be broadly categorized as "short hedges" and "long
hedges." A short hedge is a purchase or sale of a Derivative Instrument intended
partially or fully to offset potential declines in the value of one or more
investments held in the Fund's portfolio. Thus, in a short hedge the Fund takes
a position in a Derivative Instrument whose price is expected to move in the
opposite direction of the price of the investment being hedged.

Conversely, a long hedge is a purchase or sale of a Derivative Instrument
intended partially or fully to offset potential increases in the acquisition
cost of one or more investments that the Fund intends to acquire. Thus, in a
long hedge the Fund takes a position in a Derivative Instrument whose price is
expected to move in the same direction as the price of the prospective
investment being hedged. A long hedge is sometimes referred to as an
anticipatory hedge. In an anticipatory hedge transaction, the Fund does not own
a corresponding security and, therefore, the transaction does not relate to a
security the Fund owns. Rather, it relates to a security that the Fund intends
to acquire. If the Fund does not complete the hedge by purchasing the security
it anticipated purchasing, the effect on the Fund's portfolio is the same as if
the transaction were entered into for speculative purposes.

B-7
<PAGE>

Derivative Instruments on securities generally are used to hedge against
price movements in one or more particular securities positions that the Fund
owns or intends to acquire. Derivative Instruments on indices, in contrast,
generally are used to attempt to hedge against price movements in market sectors
in which the Fund has invested or expects to invest.

The use of Derivative Instruments is subject to applicable regulations of
the Securities and Exchange Commission ("SEC"), the several options and futures
exchanges upon which they are traded, the Commodity Futures Trading Commission
("CFTC") and various state regulatory authorities. In addition, the Fund's
ability to use Derivative Instruments may be limited by tax considerations. See
"Dividends, Other Distributions and Taxes."

In addition to the instruments, strategies and risks described below and
in the Prospectus, Dreyfus expects to discover additional opportunities in
connection with other Derivative Instruments. These new opportunities may become
available as Dreyfus develops new techniques, as regulatory authorities broaden
the range of permitted transactions and as new techniques are developed. Dreyfus
may utilize these opportunities to the extent that they are consistent with the
Fund's investment objective, and permitted by the Fund's investment policies and
applicable regulatory authorities.

SPECIAL RISKS. The use of Derivative Instruments involves special
considerations and risks, certain of which are described below. Risks pertaining
to particular Derivative Instruments are described in the sections that follow.

(1) Successful use of most Derivative Instruments depends upon Dreyfus'
ability not only to forecast the direction of price fluctuations of the
investment involved in the transaction, but also to predict movements of the
overall securities and interest rate markets, which requires different skills
than predicting changes in the prices of individual securities. There can be no
assurance that any particular strategy will succeed.

(2) There might be imperfect correlation, or even no correlation, between
price movements of a Derivative Instrument and price movements of the
investments being hedged. For example, if the value of a Derivative Instrument
used in a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of correlation
might occur due to factors unrelated to the value of the investments being
hedged, such as speculative or other pressures on the markets in which
Derivative Instruments are traded. The effectiveness of hedges using Derivative
Instruments on indices will depend on the degree of correlation between price
movements in the index and price movements in the securities being hedged.

Because there are a limited number of types of exchange-traded options and
futures contracts, it is likely that the standardized contracts available will
not match the Fund's current or anticipated investments exactly. The Fund may
invest in options and futures contracts based on securities with different
issuers, maturities, or other characteristics from the securities in which it
typically invests, which involves a risk that the options or futures position
will not track the performance of the Fund's other investments.

B-8
<PAGE>

Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors as
current and anticipated short-term interest rates, changes in volatility of the
underlying instrument, and the time remaining until expiration of the contract,
which may not affect security prices the same way. Imperfect correlation may
also result from differing levels of demand in the options and futures markets
and the securities markets, from structural differences in how options and
futures and securities are traded, or from imposition of daily price fluctuation
limits or trading halts. The Fund may purchase or sell options and futures
contracts with a greater or lesser value than the securities it wishes to hedge
or intends to purchase in order to attempt to compensate for differences in
volatility between the contract and the securities, although this may not be
successful in all cases. If price changes in the Fund's options or futures
positions are poorly correlated with its other investments, the positions may
fail to produce anticipated gains or result in losses that are not offset by
gains in other investments.

(3) If successful, the above-discussed strategies can reduce risk of loss
by wholly or partially offsetting the negative effect of unfavorable price
movements. However, such strategies can also reduce opportunity for gain by
offsetting the positive effect of favorable price movements. For example, if the
Fund entered into a short hedge because Dreyfus projected a decline in the price
of a security in the Fund's portfolio, and the price of that security increased
instead, the gain from that increase might be wholly or partially offset by a
decline in the price of the Derivative Instrument. Moreover, if the price of the
Derivative Instrument declined by more than the increase in the price of the
security, the Fund could suffer a loss. In either such case, the Fund would have
been in a better position had it not attempted to hedge at all.

(4) As described below, the Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in Derivative Instruments involving obligations to third parties
(i.e., Derivative Instruments other than purchased options). If the Fund were
unable to close out its positions in such Derivative Instruments, it might be
required to continue to maintain such assets or accounts or make such payments
until the position expired or matured. These requirements might impair the
Fund's ability to sell a portfolio security or make an investment at a time when
it would otherwise be favorable to do so, or require that the Fund sell a
portfolio security at a disadvantageous time. The Fund's ability to close out a
position in a Derivative Instrument prior to expiration or maturity depends on
the existence of a liquid secondary market or, in the absence of such a market,
the ability and willingness of the other party to the transaction
("counterparty") to enter into a transaction closing out the position.
Therefore, there is no assurance that any position can be closed out at a time
and price that is favorable to the Fund.

(5) The purchase and sale of Derivative Instruments could result in a loss
if the counterparty to the transaction does not perform as expected and may
increase portfolio turnover rates, which results in correspondingly greater
commission expenses and transaction costs, and may result in certain tax
consequences.

B-9
<PAGE>

COVER FOR DERIVATIVE INSTRUMENTS. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund will
not enter into any such transactions unless it owns either (1) an offsetting
("covered") position in securities, futures or options, or (2) cash and
short-term liquid debt securities with a value sufficient at all times to cover
its potential obligations to the extent not covered as provided in (1) above.
The Fund will comply with SEC guidelines regarding cover for Derivative
Instruments and will, if the guidelines so require, set aside cash, U.S.
Government securities or other liquid, high-grade debt securities in a
segregated account with its custodian in the prescribed amount.

Assets used as cover or held in a segregated account cannot be sold while
the position in the corresponding Derivative Instrument is open, unless they are
replaced with other appropriate assets. As a result, the commitment of a large
portion of the Fund's assets to cover or segregated accounts could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.

OPTIONS. A call option gives the purchaser the right to buy, and obligates
the writer to sell, the underlying investment at the agreed upon exercise price
during the option period. A put option gives the purchaser the right to sell,
and obligates the writer to buy, the underlying investment at the agreed upon
exercise price during the option period. A purchaser of an option pays an
amount, known as the premium, to the option writer in exchange for rights under
the option contract.

Options on indices are similar to options on securities except that all
settlements are in cash and gain or loss depends on changes in the index in
question rather than on price movements in individual securities.

The purchase of call options can serve as a long hedge, and the purchase
of put options can serve as a short hedge. Writing put or call options can
enable the Fund to enhance income or yield by reason of the premiums paid by the
purchasers of such options. However, if the market price of the security or
other instrument underlying a put option declines to less than the exercise
price on the option, minus the premium received, the Fund would expect to suffer
a loss.

Writing call options can also serve as a limited short hedge because
declines in the value of the hedged investment would be offset to the extent of
the premium received for writing the option. However, if the investment
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and the Fund will be obligated to
sell the investment at less than its market value.

B-10
<PAGE>

Writing put options can serve as a limited long hedge because increases in
the value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the investment depreciates to a
price lower than the exercise price of the put option, it can be expected that
the put option will be exercised and the Fund will be obligated to purchase the
investment at more than its market value.

The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of the
underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised have
no value and the Fund could experience losses to the extent of premiums paid for
them.

The Fund may effectively terminate its right or obligation under an option
by entering into a closing transaction. For example, the Fund may terminate its
obligation under a call or put option that it had written by purchasing an
identical call or put option; this is known as a closing purchase transaction.
Conversely, the Fund may terminate a position in a put or call option it had
purchased by writing an identical put or call option; this is known as a closing
sale transaction. Closing transactions permit the Fund to realize profits or
limit losses on an option position prior to its exercise or expiration.

The Fund may purchase and sell both exchange-traded and over-the-counter
("OTC") options. Exchange-traded options in the United States are issued by a
clearing organization that, in effect, guarantees completion of every
exchange-traded option transaction. In contrast, OTC options are contracts
between the Fund and its counterparty (usually a securities dealer or a bank)
with no clearing organization guarantee. Thus, when the Fund purchases an OTC
option, it relies on the counterparty from whom it purchased the option to make
or take delivery of the underlying investment upon exercise of the option.
Failure by the counterparty to do so would result in the loss of any premium
paid by the Fund as well as the loss of any expected benefit of the transaction.
The Fund will enter into only those option contracts that are listed on a
national securities or commodities exchange or traded in the OTC market for
which there appears to be a liquid secondary market. The Fund will not purchase
put or call options that are traded on a national stock exchange in an amount
exceeding 5% of its net assets.

The Fund will not purchase or write OTC options if, as a result of such
transaction, the sum of (i) the market value of outstanding OTC options
purchased by the Fund, (ii) the market value of the underlying securities
covered by outstanding OTC call options written by the Fund, and (iii) the
market value of all other assets of the Fund that are illiquid or are not
otherwise readily marketable, would exceed 15% of the net assets of the Fund,
taken at market value. However, if an OTC option is sold by the Fund to a
primary U.S. Government securities dealer recognized by the Federal Reserve Bank
of New York and the Fund has the unconditional contractual right to repurchase
such OTC option from the dealer at a predetermined price, then the Fund will
treat as illiquid such amount of the underlying securities as is equal to the
repurchase price less the amount by which the option is "in-the-money" (the
difference between the current market value of the underlying securities and the
option's strike price). The repurchase price with primary dealers is typically a
formula price that is generally based on a multiple of the premium received for
the option plus the amount by which the option is "in-the-money."

B-11
<PAGE>

counterparty, or by a transaction in the secondary market if any such
market exists. Although the Fund will enter into OTC options only with major
dealers in unlisted options, there is no assurance that the Fund will in fact be
able to close out an OTC option position at a favorable price prior to
expiration. In the event of insolvency of the counterparty, the Fund might be
unable to close out an OTC option position at any time prior to its expiration.

If the Fund were unable to effect a closing transaction for an option it
had purchased, it would have to exercise the option to realize any profit. The
inability to enter into a closing purchase transaction for a covered call option
written by the Fund could cause material losses because the Fund would be unable
to sell the investment used as cover for the written option until the option
expires or is exercised.

The Fund may write only covered call options on securities. A call option
is covered if the Fund owns the underlying security or a call option on the same
security with a lower strike price.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. When the Fund
purchases a futures contract, it incurs an obligation to take delivery of a
specified amount of the obligation underlying the futures contract at a
specified time in the future for a specified price. When the Fund sells a
futures contract, it incurs an obligation to deliver a specified amount of the
obligation underlying the futures contract at a specified time in the future for
an agreed upon price. With respect to index futures, no physical transfer of the
securities underlying the index is made. Rather, the parties settle by
exchanging in cash an amount based on the difference between the contract price
and the closing value of the index on the settlement date.

When the Fund writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time during the term of the
option. If the Fund writes a call, it assumes a short futures position. If the
Fund writes a put, it assumes a long futures position. When the Fund purchases
an option on a futures contract, it acquires the right, in return for the
premium it pays, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put).

The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures can
serve as a short hedge. Writing call options on futures contracts can serve as a
limited short hedge, using a strategy similar to that used for writing call
options on securities or indices. Similarly, writing put options on futures
contracts can serve as a limited long hedge.

B-12
<PAGE>

contracts does not represent a borrowing, but rather is in the nature of a
performance bond or good-faith deposit that is returned to the Fund at the
termination of the transaction if all contractual obligations have been
satisfied. Under certain circumstances, such as periods of high volatility, the
Fund may be required by an exchange to increase the level of its initial margin
payment.

Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but rather
represents a daily settlement of the Fund's obligations to or from a futures
broker. When the Fund purchases an option on a future, the premium paid plus
transaction costs is all that is at risk. In contrast, when the Fund purchases
or sells a futures contract or writes a call or put option thereon, it is
subject to daily variation margin calls that could be substantial in the event
of adverse price movements. If the Fund has insufficient cash to meet daily
variation margin requirements, it might need to sell securities at a time when
such sales are disadvantageous.

Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions on
options, by selling or purchasing, respectively, an instrument identical to the
instrument purchased or sold. Positions in futures and options on futures may be
closed only on an exchange or board of trade that provides a secondary market.
Although the Fund intends to enter into futures and options on futures only on
exchanges or boards of trade where there appears to be a liquid secondary
market, there can be no assurance that such a market will exist for a particular
contract at a particular time. In such event, it may not be possible to close a
futures contract or options position.

Under certain circumstances, futures exchanges may establish daily limits
on the amount that the price of a futures or an option on a futures contract can
vary from the previous day's settlement price; once that limit is reached, no
trades may be made that day at a price beyond the limit. Daily price limits do
not limit potential losses because prices could move to the daily limit for
several consecutive days with little or no trading, thereby preventing
liquidation of unfavorable positions.

If the Fund were unable to liquidate a futures or options on futures
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses. The Fund would continue to be
subject to market risk with respect to the position. In addition, except in the
case of purchased options, the Fund would continue to be required to make daily
variation margin payments and might be required to maintain the position being
hedged by the future or option or to maintain cash or securities in a segregated
account.

To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for bona fide hedging purposes
(as defined by the CFTC), the aggregate initial margin and premiums required to
establish those positions (excluding the amount by which options are
"in-the-money" at the time of purchase) will not exceed 5% of the liquidation
value of the Fund's portfolio, after taking into account unrealized profits and
unrealized losses on any contracts the Fund has entered into. This policy does

B-13
<PAGE>

not limit to 5% the percentage of the Fund's assets that are at risk in futures
contracts and options on futures contracts.

The Fund will not enter into futures contracts to the extent that its
outstanding obligations under these contracts would exceed 25% of the Fund's
total assets.

CERTAIN INVESTMENTS. From time to time, to the extent consistent with its
investment objective, policies and restrictions, the Fund may invest in
securities of companies with which Mellon Bank, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.

MASTER/FEEDER OPTION. The Company may in the future seek to achieve the
Fund's investment objective by investing all of the Fund's net investable assets
in another investment company having the same investment objective and
substantially the same investment policies and restrictions as those applicable
to the Fund. Shareholders of the Fund will be given at least 30 days' prior
notice of any such investment. Such investment would be made only if the
Company's Board of Directors determines it to be in the best interest of the
Fund and its shareholders. In making that determination, the Company's Board of
Directors will consider, among other things, the benefits to shareholders and/or
the opportunity to reduce costs and achieve operational efficiency. Although the
Fund believes that the Company's Board of Directors will not approve an
arrangement that is likely to result in higher costs, no assurance is given that
costs will be materially reduced if this option is implemented.

INVESTMENT RESTRICTIONS

FUNDAMENTAL. The following limitations have been adopted by the Fund. The
Fund may not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of shareholders
duly called if the holders of more than 50% of the outstanding shares of the
Fund are present or represented by proxy; or (b) more than 50% of the
outstanding shares of the Fund, whichever is less. The Fund may not:

1. Purchase any securities which would cause more than 25% of the value of
the Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities, and
state or municipal governments and their political subdivisions are not
considered members of any industry. In addition, this limitation does not apply
to investments in domestic banks, including U.S. branches of foreign banks and
foreign branches of U.S. banks.)

2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) the Fund may borrow money in an amount not exceeding one-third
of the Fund's total assets at the time of such borrowings, and (b) the Fund may
issue multiple classes of shares. The purchase or sale of futures contracts and
related options shall not be considered to involve the borrowing of money or
issuance of senior securities.

B-14
<PAGE>

3. Purchase with respect to 75% of the Fund's total assets securities of
any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more than 5%
of the Fund's total assets would be invested in the securities of that issuer,
or (b) the Fund would hold more than 10% of the outstanding voting securities of
that issuer.

5. Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund from
investing in securities or other instruments backed by real estate, including
mortgage loans, or securities of companies that engage in real estate business
or invest or deal in real estate or interests therein).

7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.

NONFUNDAMENTAL. The Fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its investable assets in
securities of a single open-end management investment company with substantially
the same investment objective, policies and limitations as the Fund.

The Fund has adopted the following additional non-fundamental
restrictions. These non-fundamental restrictions may be changed without
shareholder approval, in compliance with applicable law and regulatory policy.

1. The Fund shall not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities sold
short, and provided that transactions in futures contracts and options are not
deemed to constitute selling short.

2. The Fund shall not purchase securities on margin, except that the Fund
may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with futures
contracts and options shall not constitute purchasing securities on margin.

3. The Fund shall not purchase oil, gas or mineral leases.

4. The Fund will not purchase or retain the securities of any issuer if
the officers or Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of one percent of the securities of such issuer,

B-15
<PAGE>

together own beneficially more than 5% of such securities.

5. The Fund will not purchase securities of issuers (other than securities
issued or guaranteed by domestic or foreign governments or political
subdivisions thereof), including their predecessors, that have been in operation
for less than three years, if by reason thereof, the value of the Fund's
investment in securities would exceed 5% of the Fund's total assets. For
purposes of this limitation, sponsors, general partners, guarantors and
originators of underlying assets may be treated as the issuer of a security.

6. The Fund will invest no more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements with remaining maturities
in excess of seven days, time deposits with maturities in excess of seven days
and other securities which are not readily marketable. For purposes of this
limitation, illiquid securities shall not include commercial obligations issued
in reliance on the so-called "private placement" exception from registration
afforded by Section 4(2) of the Securities Act of 1933 as amended and securities
which may be resold under Rule 144A under the 1933 Act, provided that the Board
of Directors, or its delegate, determines that such securities are liquid based
upon the trading markets for the specific security.

7. The Fund may not invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation or acquisition
of assets and except to the extent otherwise permitted by the 1940 Act.

8. The Fund shall not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.

9. The Fund will not purchase warrants if at the time of such purchase:
(a) more than 5% of the value of the Fund's assets would be invested in
warrants, or (b) more than 2% of the value of the Fund's assets would be
invested in warrants that are not listed on the New York or American Stock
Exchange (for purposes of this limitation, warrants acquired by the Fund in
units or attached to securities will be deemed to have no value).

10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate investment
in such classes of securities would exceed 5% of its total assets except that:
(a) this limitation shall not apply to standby commitments, and (b) this
limitation shall not apply to the Fund's transactions in futures contracts and
related options.

As an operating policy, the Fund will not invest more than 25% of the
value of its total assets, at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks. The
Company's Board of Directors may change this policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by the
Board.

B-16
<PAGE>

If the Fund's investment objective, policies, restrictions, practices or
procedures change, shareholders should consider whether the Fund remains an
appropriate investment in light of the shareholder's then-current position and
needs.

MANAGEMENT OF THE FUND

FEDERAL LAW AFFECTING MELLON BANK

The Glass-Steagall Act of 1933 prohibits national banks from engaging in
the business of underwriting, selling or distributing securities and prohibits a
member bank of the Federal Reserve System from having certain affiliations with
an entity engaged principally in that business. The activities of Mellon Bank in
informing its customers of, and performing, investment and redemption services
in connection with the Fund, and in providing services to the Fund as custodian,
as well as Dreyfus' investment advisory activities, may raise issues under these
provisions. Mellon Bank has been advised by counsel that the activities
contemplated under these arrangements are consistent with statutory and
regulatory obligations.

Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of such
future statutes and regulations, could prevent Mellon Bank or Dreyfus from
continuing to perform all or a part of the above services for its customers
and/or the Fund. If Mellon Bank or Dreyfus were prohibited from serving the Fund
in any of its present capacities, the Board of Directors would seek an
alternative provider(s) of such services.

DIRECTORS OF THE COMPANY

The Company's Board is responsible for the management and supervision of
the Fund. The Board approves all significant agreements between the Company, on
behalf of the Fund, and those companies that furnish services to the Fund. These
companies are as follows:

The Dreyfus Corporation.................................Investment Adviser
Premier Mutual Fund Services, Inc...............................Distributor
Dreyfus Transfer, Inc........................................Transfer Agent
Mellon Bank..........................................Custodian for the Fund

B-17
<PAGE>

(collectively, with the Company, the "Dreyfus/Laurel Funds") and the Dreyfus
High Yield Strategies Fund.

o+JOSEPH S. DIMARTINO, Chairman of the Board of the Company. Since January 1995,
Mr. DiMartino has served as Chairman of the Board for various funds in the
Dreyfus Family of Funds. He is also a Director of The Noel Group, Inc., a
venture capital company (for which from February 1995 until November 1997,
he was Chairman of the Board), The Muscular Dystrophy Association,
HealthPlan Services Corporation, a provider of marketing, administrative
and risk management services to health and other benefit programs, Carlyle
Industries, Inc. (formerly Belding Heminway Company, Inc.), a button
packager and distributor, Century Business Services, Inc. (formerly,
International Alliance Services, Inc.), a provider of various outservicing
functions for small and medium sized companies, and Career Blazers Inc.
(formerly, Staffing Resources) a temporary placement agency. Mr. DiMartino
is also a Board member of 152 other funds in the Dreyfus Family of Funds.
For more than five years prior to January 1995, he was President, a
director and, until August 24, 1994, Chief Operating Officer of Dreyfus
and Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of Dreyfus. From August 1994 to
December 31, 1994, he was a director of Mellon Bank Corporation. Age: 55
years old. Address: 200 Park Avenue, New York, New York 10166.

o*J. TOMLINSON FORT. Director of the Company; Partner, Reed, Smith, Shaw &
McClay (law firm). Age: 70 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.

B-18
<PAGE>

o+BENAREE PRATT WILEY. Director of the Company; President and CEO of The
Partnership, an organization dedicated to increasing the representation of
African Americans in positions of leadership, influence and
decision-making in Boston, MA; Trustee, Boston College; Trustee, WGBH
Educational Foundation; Trustee, Children's Hospital; Director, The
Greater Boston Chamber of Commerce; Director, The First Albany Companies,
Inc.; from April 1995 to March 1998, Director, TBC, an affiliate of
Dreyfus. Age: 52 years old. Address: 334 Boylston Street, Suite 400,
Boston, Massachusetts.

_________________________
* "Interested person" of the Company, as defined in the 1940 Act.
.. Member of the Audit Committee.
+ Member of the Nominating Committee.

OFFICERS OF THE COMPANY

#MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior Vice
President and General Counsel of Funds Distributor, Inc. From August 1996
to March 1998, she was Vice President and Assistant General Counsel for
Loomis, Sayles & Company, L.P. From January 1986 to July 1996, she was an
associate with the law firm of Ropes & Gray. Age: 39 years old.

B-19
<PAGE>

employed by Putnam Investments in legal and compliance capacities. Age: 34
years old.

B-20
<PAGE>

- ---------------------------
# Officer also serves as an officer for other investment companies advised by
Dreyfus, including The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel
Tax-Free Municipal Funds.

The address of each officer of the Company is 200 Park Avenue, New York,
New York 10166.

B-21
<PAGE>
<TABLE>
<CAPTION>

Total Compensation
From the Company
Aggregate and Fund Complex
Name of Board Compensation Paid to Board
Member From the Company# Member****
- ------------- ----------------- ------------------
<S> <C> <C>

Joseph S. DiMartino*

James M. Fitzgibbons

J. Tomlinson Fort** none none

Arthur L. Goeschel

Kenneth A. Himmel

Stephen J. Lockwood

John J. Sciullo

Roslyn M. Watson

Benaree Pratt Wiley***
</TABLE>

______________________

# 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. Amount does not include reimbursed expenses for
attending Board meetings, which amounted to $[ ] for the Company.

* Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.

** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board member
of the Company and the funds in the Dreyfus/Laurel Funds and separately by
the Dreyfus High Yield Strategies Fund. For the fiscal year ended October
31, 1998, the aggregate amount of fees and expenses received by J. Tomlinson
Fort from Dreyfus for serving as a Board member of the Company was
______________________. For the year ended December 31, 1998, the aggregate
amount of fees and expenses received by Mr. Fort for serving as a Board
member of all funds in the Dreyfus/Laurel Funds (including the Company) and
Dreyfus High Yield Strategies Fund (for which payment is made directly by
the fund) was ______________________. In addition, Dreyfus reimbursed Mr.
Fort a total of $__________________ for expenses attributable to the
Company's Board meetings which is not included in the $__________________
amount in note # above.

*** Payments to Ms. Wiley were for the period from April 23, 1998 (the date she
was elected as a Board member) through October 31, 1998.

****The Dreyfus Family of Funds consists of ___ mutual funds.

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<PAGE>

The officers and Directors of the Company as a group owned beneficially
less than 1% of the total shares of the Fund outstanding as of November __,
1998.

[As of November _, 1998, the following shareholder(s) owned of record 5%
or more of Fund shares: ]

MANAGEMENT ARRANGEMENTS

The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Expenses" and "Management."

Dreyfus is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international markets.
Mellon is among the twenty-five largest bank holding companies in the United
States based on total assets.

MANAGEMENT AGREEMENT. Dreyfus serves as the investment manager for the
Fund pursuant to an Investment Management Agreement with the Company dated April
4, 1994 (the "Management Agreement"), transferred to Dreyfus as of October 17,
1994, subject to the overall authority of the Company's Board of Directors in
accordance with Maryland law. Pursuant to the Management Agreement, Dreyfus
provides, or arranges for one or more third parties to provide, investment
advisory, administrative, custody, fund accounting and transfer agency services
to the Fund. As investment manager, Dreyfus manages the Fund by making
investment decisions based on the Fund's investment objective, policies and
restrictions. The Management Agreement is subject to review and approval at
least annually by the Board of Directors. The Management Agreement will continue
from year to year provided that a majority of the Directors who are not
"interested persons" of the Company and either a majority of all Directors or a
majority of the shareholders of the Fund approve its continuance. The Management
Agreement was last approved by the Board of Directors on ____________, 1999 to
continue until _________, 2000. The Company may terminate the Management
Agreement upon the vote of a majority of the Board of Directors or upon the vote
of a majority of the Fund's outstanding voting securities on sixty days' written
notice to Dreyfus. Dreyfus may terminate the Management Agreement upon sixty
(60) days' written notice to the Company. The Management Agreement will
terminate immediately and automatically upon its assignment.

The following persons are officers and/or directors of Dreyfus: W. Keith
Smith, Chairman of the Board; Christopher M. Condron, President, Chief Executive
Officer, Chief Operating Officer and a director; Stephen E. Canter, Vice
Chairman, Chief Investment Officer and a director; Lawrence S. Kash, Vice
Chairman-Distribution and a director; Ronald P. O'Hanley III, Vice Chairman; J.
David Officer, Vice Chairman and a director; William T. Sandalls, Jr., Executive
Vice President; Mark N. Jacobs, Vice President, General Counsel and Secretary;
Patrice M. Kozlowski, Vice President-Corporate Communications; Mary Beth Leibig,
Vice President-Human Resources; Andrew S. Wasser, Vice-President-Information
Systems; Theodore A. Schachar, Vice President; Wendy Strutt, Vice President;

B-23
<PAGE>

Richard Terres, Vice President; William H. Maresca, Controller; James Bitetto,
Assistant Secretary; Steven F. Newman, Assistant Secretary; and Mandell L.
Berman, Burton C. Borgelt, Frank V. Cahouet and Richard F. Syron, directors.

EXPENSES. Under the Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of .20% of the value of the Fund's
average daily net assets. Dreyfus pays all of the Fund's expenses, except
brokerage fees, taxes, interest, fees and expenses of the non-interested
directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and expenses
of the non-interested Directors (including counsel fees), Dreyfus is
contractually required to reduce its investment management fee by an amount
equal to the Fund's allocable share of such fees and expenses. From time to
time, Dreyfus may voluntarily waive a portion of the investment management fees
payable by the Fund, which would have the effect of lowering the expense ratio
of the Fund and increasing return to investors. Expenses attributable to the
Fund are charged against the Fund's assets; other expenses of the Company are
allocated among its funds on the basis determined by the Board, including, but
not limited to, proportionately in relation to the net assets of each fund.

For the last three fiscal years, the Fund has had the following expenses:

For the Fiscal Year Ended October 31,
-------------------------------------

1998 1997 1996
---- ---- ----

Management fees (gross of waiver) $1,246,259 $631,728
Expense Reimbursement from
investment manager -- -- --

THE DISTRIBUTOR. Premier Mutual Fund Services, Inc. (the "Distributor"),
located at 60 State Street, Boston, Massachusetts 02109, serves as the Fund's
distributor on a best efforts basis pursuant to an agreement which is renewable
annually. Dreyfus may pay the Distributor for shareholder services from Dreyfus'
own assets, including past profits but not including the management fee paid by
the Fund. The Distributor may use part or all of such payments to pay certain
banks, securities brokers or dealers and other financial institutions ("Agents")
for these services. The Distributor also acts as sub-administrator for the
Fund and as distributor for the other funds in the Dreyfus Family of Funds.

B-24
<PAGE>

PURCHASE OF SHARES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES,"
"SERVICES FOR FUND INVESTORS," "INSTRUCTIONS FOR REGULAR ACCOUNTS," AND
"INSTRUCTIONS FOR IRAS."

GENERAL. The Fund reserves the right to reject any purchase order.

The minimum initial investment is $5,000 for Dreyfus-sponsored Keogh
Plans, IRAs (including regular IRAs, spousal IRAs for a non-working spouse, Roth
IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans with only one participant.
For all other accounts, the minimum initial investment is $10,000. Subsequent
investments must be at least $1,000 (or at least $100 in the case of persons who
have held Fund shares since September 14, 1995). There is no minimum on
subsequent purchases for holders of Fund shares in a Dreyfus-sponsored Keogh
Plan, IRA or 403(b)(7) Plan with only one participant account since September
14, 1995. The initial investment must be accompanied by the Account Application.
The Fund reserves the right to offer Fund shares without regard to minimum
purchase requirements to employees participating in certain qualified or
non-qualified employee benefit plans or other programs where contributions or
account information can be transmitted in a manner and form acceptable to the
Fund. The Fund reserves the right to vary further the initial and subsequent
investment minimum requirements at any time.

The Internal Revenue Code of 1986, as amended (the "Code") imposes various
limitations on the amount that may be contributed annually to certain qualified
or non-qualified employee benefit plans or other programs, including pension,
profit-sharing and other deferred compensation plans, whether established by
corporations, partnerships, non-profit entities or state and local governments
("Retirement Plans"). These limitations apply with respect to participants at
the plan level and, therefore, do not directly affect the amount that may be
invested in the Fund by a Retirement Plan. Participants and plan sponsors should
consult their tax advisers for details.

Management understands that some Agents may impose certain conditions on
their clients which are different from those described in the Fund's Prospectus
and this Statement of Additional Information, and, to the extent permitted by
applicable regulatory authority, may charge their clients direct fees. You
should consult your Agent in this regard.

Fund shares are sold on a continuous basis. NAV per share is determined as
of the close of trading on the floor of the New York Stock Exchange ("NYSE")
(currently 4:00 p.m., New York time), on each day the NYSE is open for business.
For purposes of determining NAV, options and futures contracts will be valued 15
minutes after the close of trading on the floor of the NYSE. NAV per share is
computed by dividing the value of the Fund's net assets (i.e., the value of its
assets less liabilities) by the total number of Fund shares outstanding. For
further information regarding the methods employed in valuing the Fund's
investments, see "Determination of Net Asset Value".

B-25
<PAGE>

Orders for the purchase of Fund shares received by dealers by the close of
trading on the floor of the NYSE on any business day and transmitted to the
Distributor or its designee by the close of its business day (normally 5:15
p.m., New York time) will be based on NAV determined as of the close of trading
on the floor of the NYSE on that day. Otherwise, the orders will be based on the
next determined NAV. It is the dealers' responsibility to transmit orders so
that they will be received by the Distributor or its designee before the close
of its business day. For certain institutions that have entered into agreements
with the Distributor, payment for the purchase of Fund shares may be
transmitted, and must be received by the Transfer Agent, within three business
days after the order is placed. If such payment is not received within three
business days after the order is placed, the order may be canceled and the
institution could be held liable for resulting fees and/or losses.

The Distributor may pay dealers a fee of up to .5% of the amount invested
through such dealers in Fund shares by employees participating in qualified
employee benefit plans or other programs where (i) the employers or affiliated
employers maintaining such plans or programs have a minimum of 250 employees
eligible for participation in such plans or programs or (ii) such plan's or
program's aggregate investment in the Dreyfus Family of Funds or certain other
products made available by the Distributor to such plans or programs exceeds
$1,000,000 ("Eligible Benefit Plans"). Shares of funds in the Dreyfus Family of
Funds then held by Eligible Benefit Plans will be aggregated to determine the
fee payable. The Distributor reserves the right to cease paying these fees at
any time. The Distributor will pay such fees from its own funds, other than
amounts received from the Fund, including past profits or any other source
available to it.

Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Fund's Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service.

DREYFUS TELETRANSFER PRIVILEGE. You may purchase shares by telephone
through the Dreyfus TeleTransfer Privilege if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these documents and
your Fund account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House ("ACH") member may be so
designated. Dreyfus TeleTransfer purchase orders may be made at any time.
Purchase orders received by 4:00 p.m. New York time, on any business day that
the Transfer Agent and the NYSE are open for business will be credited to the
shareholder's Fund account on the next bank business day following such purchase
order. Purchase orders made after 4:00 p.m. New York time, on any business day
the Transfer Agent and the NYSE are open for business, or orders made on
Saturday, Sunday or any Fund holiday (e.g., when the NYSE is not open for
business), will be credited to the shareholder's Fund account on the second bank
business day following such purchase order. To qualify to use the Dreyfus
TeleTransfer Privilege, the initial payment for purchase of Fund shares must be
drawn on, and redemption proceeds paid to, the same bank and account as are
designated on the Account Application or Shareholder Services Form on file. If

B-26
<PAGE>

the proceeds of a particular redemption are to be wired to an account at any
other bank, the request must be in writing and signature-guaranteed. See
"Redemption of Shares - Dreyfus TeleTransfer Privilege." The Fund may modify or
terminate this Privilege at any time or charge a service fee upon notice to
shareholders. No such fee currently is contemplated.

REOPENING AN ACCOUNT. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar
year the account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.

IN-KIND PURCHASES. If the following conditions are satisfied, the Fund may
at its discretion, permit the purchase of shares through an "in-kind" exchange
of securities. Any securities exchanged must meet the investment objective,
policies and limitations of the Fund, must have a readily ascertainable market
value, must be liquid and must not be subject to restrictions on resale. The
market value of any securities exchanged, plus any cash, must be at least equal
to $25,000. Shares purchased in exchange for securities generally cannot be
redeemed for fifteen days following the exchange in order to allow time for the
transfer to settle.

The basis of the exchange will depend upon the relative NAV of the shares
purchased and securities exchanged. Securities accepted by the Fund will be
valued in the same manner as the Fund values its assets. Any interest earned on
the securities following their delivery to the Fund and prior to the exchange
will be considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities become the property of
the Fund, along with the securities. For further information about "in-kind"
purchases, call 1-800-645-6561.

SHARE CERTIFICATES. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.

REDEMPTION OF SHARES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES," "SERVICES
FOR FUND INVESTORS," "INSTRUCTIONS FOR REGULAR ACCOUNTS" AND "INSTRUCTIONS FOR
IRAS."

GENERAL. The Fund imposes no charges when shares are redeemed. Agents may
charge their clients a fee for effecting redemptions of Fund shares. Any
certificates representing Fund shares being redeemed must be submitted with the
redemption request. The value of the shares redeemed may be more or less than
their original cost depending upon the Fund's then-current NAV.

B-27
<PAGE>

signed Shareholder Services Form or by oral request from any of the authorized
signatories on the account by calling 1-800-645-6561. You also may redeem shares
through the Wire Redemption Privilege or the Dreyfus TeleTransfer Privilege if
you have checked the appropriate box and supplied the necessary information on
the Account Application or have filed a Shareholder Services From with the
Transfer Agent. If you are a client of certain Agents ("Selected Dealers"), you
can also redeem Fund shares through the Selected Dealer. Other redemption
procedures may be in effect for clients of other Agents and institutions. The
Fund makes available to certain large institutions the ability to issue
redemption instructions through compatible computer facilities. The Fund
reserves the right to refuse any request made by telephone, including requests
made shortly after a change of address, and may limit the amount involved or the
number of such requests. The Fund may modify or terminate any redemption
privilege at any time or change a service fee upon notice to shareholders. No
such fee currently is contemplated. Shares held under Keogh Plans, IRAs, or
other retirement plans, and share for which certificates have been issued, are
not eligible for the Wire Redemption, Telephone Redemption or TeleTransfer
Privilege.

The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including of The
Dreyfus Touch(REGISTRATIONMARK) automated telephone system) from any person
representing himself or herself to be you, or a representative of your Agent,
and reasonably believed by the Transfer Agent to be genuine. The Fund will
require the Transfer Agent to employ reasonable procedures, such as requiring a
form of personal identification, to confirm that instructions are genuine and,
if it does not follow such procedures, the Fund or the Transfer Agent may be
liable for any losses due to unauthorized or fraudulent instructions. Neither
the Fund nor the Transfer Agent will be liable for following telephone
instructions reasonably believed to be genuine.

REDEMPTION THROUGH A SELECTED DEALER. Customers of Selected Dealers may
make redemption requests to their Selected Dealer. If the Selected Dealer
transmits the redemption request so that it is received by the Transfer Agent
prior to the close of trading on the floor of the NYSE (currently 4:00 p.m., New
York time), the redemption request will be effective on that day. If a
redemption request is received by the Transfer Agent after the close of trading
on the floor of the New York Stock Exchange, the redemption request will be
effective on the next business day. It is the responsibility of the Selected
Dealer to transmit a request so that it is received in a timely manner. The
proceeds of the redemption are credited to your account with the Selected
Dealer.

B-28
<PAGE>

In addition, the Distributor will accept orders from Selected Dealers with
which it has sales agreements for the repurchase of Fund shares held by
shareholders. Repurchase orders received by dealers by the close of trading on
the floor of the NYSE on any business day and transmitted to the Distributor or
its designee prior to the close of its business day (normally 5:15 p.m., New
York time) are effected at the price determined as of the close of trading on
the floor of the NYSE on that day. Otherwise, the Fund shares will be redeemed
at the next determined NAV. It is the responsibility of the Selected Dealer to
transmit orders on a timely basis. The Selected Dealer may charge the
shareholder a fee for executing the order. This repurchase arrangement is
discretionary and may be withdrawn at any time.

Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code which
may be used for domestic or overseas transmissions:

Transfer Agent's
Transmittal Code Answer Back Sign
---------------- ----------------

144295 144295 TSSG PREP

Investors who do not have direct access to telegraphic equipment may have
the wire transmitted by contracting a TRT Cables operator at 1-800-654-7171,
toll free. Investors should advise the operator that the above transmittal code
must be used and should also inform the operator of the Transfer Agent's answer
back sign.

B-29
<PAGE>

proceeds will be on deposit in your account at an ACH member bank ordinarily two
days after receipt of the redemption request. Investors should be aware that if
they have selected the Dreyfus TeleTransfer Privilege, any request for a wire
redemption will be effected as a Dreyfus TeleTransfer transaction through the
ACH system unless more prompt transmittal specifically is requested. See
"Purchase of Shares--Dreyfus TeleTransfer Privilege."

STOCK CERTIFICATES; SIGNATURES. Any certificates representing Fund shares
to be redeemed must be submitted with the redemption request. Written redemption
requests must be signed by each shareholder, including each holder of a joint
account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations
as well as from participants in the NYSE Medallion Signature Program, the
Securities Transfer Agents Medallion Program ("STAMP") and the Stock Exchanges
Medallion Program. Guarantees must be signed by an authorized signatory of the
guarantor and "Signature-Guaranteed" must appear with the signature. The
Transfer Agent may request additional documentation from corporations,
executors, administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular verification.
For more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.

REDEMPTION COMMITMENT. The Company has committed itself to pay in cash all
redemption requests by any shareholder of record of the Fund, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the SEC. In the case of requests for
redemptions in excess of such amount, the Company's Board reserves the right to
make payments in whole or in part in securities or other assets in case of an
emergency or any time a cash distribution would impair the liquidity of the Fund
to the detriment of the existing shareholders. In such event, the securities
would be valued in the same manner as the Fund's portfolio is valued. If the
recipient sold such securities, brokerage charges might be incurred.

SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or the
date of payment postponed (a) during any period when the NYSE is closed (other
than customary weekend and holiday closings), (b) when trading in the markets
the Fund ordinarily utilizes is restricted, or when an emergency exists as
determined by the SEC so that disposal of the Fund's investments or
determination of its NAV is not reasonably practicable, or (c) for such other
periods as the SEC by order may permit to protect the Fund's shareholders.

B-30
<PAGE>

SHAREHOLDER SERVICES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES" AND
"SERVICES FOR FUND INVESTORS."

FUND EXCHANGES. Fund shares may be exchanged for shares of certain other
funds advised or administered by Dreyfus. Shares of such other funds purchased
by exchange will be purchased on the basis of relative NAV per share as follows:

A. Exchanges for shares of funds that are offered without a sales load
will be made without a sales load.

B. Shares of funds purchased without a sales load may be exchanged for
shares of other funds sold with a sales load, and the applicable
sales load will be deducted.

C. Shares of funds purchased with a sales load may be exchanged without
a sales load for shares of other funds sold without a sales load.

To accomplish an exchange under item D above, shareholders must notify the
Transfer Agent of their prior ownership of fund shares and their account number.

To request an exchange, an investor, or an investor's Agent acting on the
investor's behalf, must give exchange instructions to the Transfer Agent in
writing or by telephone. The ability to issue exchange instructions by telephone
is given to all Fund shareholders automatically, unless the investor checks the
applicable "No" box on the Account Application, indicating that the investor
specifically refuses this Privilege. The Telephone Exchange Privilege may be
established for an existing account by written request signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-645-6561, or by oral request from any of the
authorized signatories on the account, also by calling 1-800-645-6561. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent to
act on telephonic instructions (including over The Dreyfus Touch(R) automated
telephone system) from any person representing himself or herself to be the
investor, or a representative of the investor's Agent, and reasonably believed
by the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone

B-31
<PAGE>

exchange. No fees currently are charged shareholders directly in connection with
exchanges, although the Fund reserves the right, upon not less than 60 days'
written notice, to charge shareholders a nominal fee in accordance with rules
promulgated by the SEC.

Exchanges of Fund shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such investor's
Retirement Plan account in another fund.

To establish a new account by exchange, shares of the fund being exchanged
must have a value of at least the minimum initial investment required for the
fund into which the exchange is being made.

DREYFUS AUTO-EXCHANGE PRIVILEGE. The Dreyfus Auto-Exchange Privilege
permits an investor to regularly purchase, in exchange for shares of the Fund,
shares of another fund in the Dreyfus Family of Funds. The amount the investor
designates, which can be expressed either in terms of a specific dollar or share
amount ($100 minimum), will be exchanged automatically on the first and/or
fifteenth day of the month according to the schedule the investor has selected.
This Privilege is available only for existing accounts. With respect to Fund
shares held by a Retirement Plan, exchanges may be made only between the
investor's Retirement Plan account in one fund and such investor's Retirement
Plan account in another fund. Shares will be exchanged on the basis of relative
NAV as described above under "Fund Exchanges." Enrollment in or modification or
cancellation of this Privilege is effective three business days following
notification by the investor. An investor will be notified if the investor's
account falls below the amount designated to be exchanged under this Privilege.
In this case, an investor's account will fall to zero unless additional
investments are made in excess of the designated amount prior to the next
Dreyfus Auto-Exchange transaction. Shares held under IRA and other retirement
plans are eligible for this Privilege. Exchanges of IRA shares may be made
between IRA accounts and from regular accounts to IRA accounts, but not from IRA
accounts to regular accounts. With respect to all other retirement accounts,
exchanges may be made only among those accounts.

The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. The Fund may charge a
service fee for the use of this Privilege. No such fee currently is
contemplated. For more information concerning this Privilege and the funds in
the Dreyfus Family of Funds eligible to participate in this Privilege, or to
obtain a Dreyfus Auto-Exchange Authorization Form, please call toll free
1-800-645-6561.

Fund Exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being acquired
may legally be sold. Shares may be exchanged only between accounts having
identical names and other identifying designations. The exchange of shares of
one fund for shares of another is treated for Federal income tax purposes as a
sale of the shares given in exchange and, therefore, an exchanging shareholder
(other than a tax-exempt Retirement Plan) may realize a taxable gain or loss.

B-32
<PAGE>

Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund Exchange service or Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.

DREYFUS-AUTOMATIC ASSET BUILDER(REGISTRATIONMARK). Dreyfus-Automatic Asset
Builder permits you to purchase Fund shares (minimum of $100 and maximum of
$150,000 per transaction) at regular intervals selected by you. Fund shares are
purchased by transferring funds from the bank account designated by you. Only an
account maintained at a domestic financial institution which is an ACH member
may be so designated. To establish a Dreyfus-Automatic Asset Builder account,
you must file an authorization form with the Transfer Agent. You may obtain the
necessary authorization form by calling 1-800-645-6561. You may cancel your
participation in this Privilege or change the amount of purchase at any time by
mailing written notification to the Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671, or if for Dreyfus retirement plan accounts
to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence, Rhode Island
02940-6427, and the notification will be effective three business days following
receipt. The Fund may modify or terminate this Privilege at any time or charge a
service fee. No such fee currently is contemplated.

AUTOMATIC WITHDRAWAL PLAN. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by filing an Automatic
Withdrawal Plan application with the Transfer Agent or by oral request from any
of the authorized signatories on the account by calling 1-800-645-6561.
Automatic Withdrawal may be terminated at any time by the investor, the Fund or
the Transfer Agent. Shares for which certificates have been issued may not be
redeemed through the Automatic Withdrawal Plan.

DIVIDEND OPTIONS. Dreyfus Dividend Sweep allows investors to invest
automatically their dividends or dividends and other distributions, if any, from
the Fund in shares of certain other funds in the Dreyfus Family of Funds of
which the investor is a shareholder. Shares of the other funds purchased
pursuant to this Privilege will be purchased on the basis of relative NAV per
share as follows:

A. Dividends and other distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that are
offered without a sales load.

B. Dividends and other distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds sold
with a sales load, and the applicable sales load will be deducted.

B-33
<PAGE>

C. Dividends and other distributions paid by a fund which charges a
sales load may be invested in shares of other funds sold with a
sales load (referred to herein as "Offered Shares"), provided that,
if the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any reduced
loads, the difference will be deducted.

D. Dividends and other distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales charge
("CDSC") and the applicable CDSC, if any, will be imposed upon
redemption of such shares.

Dreyfus Dividend ACH permits you to transfer electronically dividends or
dividends and capital gain distributions, if any, from the Fund to a designated
bank account. Only an account maintained at a domestic financial institution
which is an ACH member may be so designated. Banks may charge a fee for this
service.

For more information concerning these Privileges, or to request a Dreyfus
Dividend Options Form, please call toll free 1-800-645-6561. You may cancel
these Privileges by mailing written notification to The Dreyfus Family of Funds,
P.O. Box 9671, Providence, Rhode Island 02940-9671. To select a new fund after
cancellation, you must submit a new Dividend Options Form. Enrollment in or
cancellation of these Privileges is effective three business days following
receipt. These Privileges are available only for existing accounts and may not
be used to open new accounts. Minimum subsequent investments do not apply for
Dreyfus Dividend Sweep. The Fund may modify or terminate these Privileges at any
time or charge a service fee. No such fee currently is contemplated. Shares held
under Keogh Plans, IRAs or other retirement plans are not eligible for Dreyfus
Dividend Sweep.

DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social Security,
or certain veterans', military or other payments from the Federal government
automatically deposited into your Fund account. You may deposit as much of such
payments as you elect. You should consider whether Direct Deposit of your entire
payment into a fund with fluctuating NAV, such as the Fund, may be appropriate
for you. To enroll in Dreyfus Government Direct Deposit, you must file with the
Transfer Agent a completed Direct Deposit Sign-Up Form for each type of payment
that you desire to include in this Privilege. The appropriate form may be
obtained by calling 1-800-645-6561. Death or legal incapacity will terminate
your participation in this Privilege. You may elect at any time to terminate
your participation by notifying in writing the appropriate Federal agency.
Further, the Fund may terminate your participation upon 30 days' notice to you.

DREYFUS PAYROLL SAVINGS PLAN. Dreyfus Payroll Savings Plan permits you to
purchase Fund shares (minimum of $100 per transaction) automatically on a
regular basis. Depending upon your employer's direct deposit program, you may
have part or all of your paycheck transferred to your existing Dreyfus account
electronically through the ACH system at each pay period. To establish a Dreyfus

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Payroll Savings Plan account, you must file an authorization form with your
employer's payroll department. Your employer must complete the reverse side of
the form and return it to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. You may obtain the necessary authorization
form by calling 1-800-645-6561. You may change the amount of purchase or cancel
the authorization only by written notification to your employer. It is the sole
responsibility of your employer, not the Distributor, Dreyfus, the Fund, the
Transfer Agent or any other person, to arrange for transactions under the
Dreyfus Payroll Savings Plan. The Fund may modify or terminate this Privilege at
any time or charge a service fee. No such fee currently is contemplated. Shares
held under Keogh Plans, IRAs or other retirement plans are not eligible for this
Privilege.

CORPORATE PENSION/PROFIT-SHARING AND RETIREMENT PLANS. The Fund makes
available to corporations a variety of prototype pension and profit-sharing
plans, including a 401(k) Salary Reduction Plan. In addition, the Fund makes
available Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a
non-working spouse, Roth IRAs, SEP-IRAs and IRA "Rollover Accounts"), and
403(b)(7) Plans. Plan support services also are available.

Investors who wish to purchase Fund shares in conjunction with such a plan
should call 1-800-358-5566 for Keogh plans, 1-800-645-6561 for IRAs, Roth IRAs
and IRA "Rollover Accounts," and 1-800-322-7880 for SEP-IRAs, 401(k) Salary
Reduction Plans and 403(b)(7) Plans.

If you wish to purchase Fund shares in conjunction with a Keogh Plan, a
403(b)(7) Plan or an IRA, including a SEP-IRA, you may request from the
Distributor forms for adoption of such plans.

The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares. All
fees charged are described in the appropriate form.

The minimum initial investment for corporate plans, Salary Reduction
Plans, 403(b)(7) Plans and SEP-IRAs with more than one participant, is $1,000
with no minimum for subsequent purchases. The minimum initial investment is $750
for Dreyfus-sponsored Keogh Plans, IRAs (including regular IRAs, spousal IRAs
for a non-working spouse, Roth IRAs, SEP-IRAs, and rollover IRAs) and 403(b)(7)
Plans with only one participant and $500 for Dreyfus-sponsored Education IRAs,
with no minimum for subsequent purchases.

SHARES MAY BE PURCHASED IN CONNECTION WITH THESE PLANS ONLY BY DIRECT
REMITTANCE TO THE ENTITY ACTING AS CUSTODIAN. PURCHASES FOR THESE PLANS MAY NOT
BE MADE IN ADVANCE OF RECEIPT OF FUNDS.

Each investor should read the prototype retirement plan and the
appropriate form of custodial agreement for further details on eligibility,
service fees and tax implications, and should consult a tax adviser.

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<PAGE>

ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS.

The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculation on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to the
Fund's performance and its shareholders. Accordingly, if the Fund's management
determines that an investor is engaged in excessive trading, the Fund, with or
without prior notice, may temporarily or permanently terminate the availability
of Fund Exchanges, or reject in whole or part any purchase or exchange request,
with respect to such investor's account. Such investors also may be barred from
purchasing other funds in the Dreyfus Family of Funds. Generally, an investor
who makes more than four exchanges out of the Fund during any calendar year or
who makes exchanges that appear to coincide with an active market-timing
strategy may be deemed to be engaged in excessive trading. Accounts under common
ownership or control will be considered as one account for purposes of
determining a pattern of excessive trading. In addition, the Fund may refuse or
restrict purchase or exchange requests by any person or group if, in the
judgment of the Fund's management, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies or could
otherwise be adversely affected or if the Fund receives or anticipated receiving
simultaneous orders that may significantly affect the Fund (e.g., amounts equal
to 1% or more of the Fund's total assets). If an exchange request is refused,
the Fund will take no other action with respect to the shares until it receives
further instructions from the investor. The Fund may delay forwarding redemption
proceeds for up to seven days if the investor redeeming shares is engaged in
excessive trading or if the amount of the redemption request otherwise would be
disruptive to efficient portfolio management or would adversely affect the Fund.
The Fund's policy on excessive trading applies to investors who invest in the
Fund directly or through financial intermediaries, but does not apply to the
Dreyfus Auto-Exchange Privilege, to any automatic investment or withdrawal
privilege described herein, or to participants in employer-sponsored retirement
plans.

During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange requests
based on their separate components - redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Fund's next determined NAV but the purchase
order would be effective only at the NAV next determined after the fund being
purchased receives the proceeds of the redemption, which may result in the
purchase being delayed.

DETERMINATION OF NET ASSET VALUE

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES."

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VALUATION OF PORTFOLIO SECURITIES. The Fund's securities are valued at the
last sale price on the securities exchange or national securities market on
which such securities primarily are traded. Securities not listed on an exchange
or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked prices.
Bid price is used when no asked price is available. Where market quotations are
not readily available, the Fund's investments are valued based on fair value as
determined in good faith by the Company's Board. Debt securities may be valued
by an independent pricing service approved by the Company's Board and are valued
at fair value as determined by the pricing service. Any assets or liabilities
initially expressed in terms of foreign currency will be translated into U.S.
dollars at the midpoint of the New York interbank market spot exchange rate as
quoted on the day of such translation or, if no such rate is quoted on such
date, such other quoted market exchange rate as may be determined to be
appropriate by Dreyfus. If the Fund has to obtain prices as of the close of
trading on various exchanges throughout the world, the calculation of NAV may
not take place contemporaneously with the determination of prices of certain of
the Fund's securities. Short-term investments are carried at amortized cost,
which approximates value. Expenses and fees, including the management fee, are
accrued daily and taken into account for the purpose of determining the NAV of
the Fund's shares.

Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or which are not valued by a
pricing service approved by the Board of Directors, are valued at fair value as
determined in good faith by the Board of Directors. The Board of Directors will
review the method of valuation on a current basis. In making their good faith
valuation of restricted securities, the Board of Directors generally will take
the following factors into consideration: restricted securities which are, or
are convertible into, securities of the same class of securities for which a
public market exists usually will be valued at market value less the same
percentage discount at which purchased. This discount will be revised
periodically by the Board of Directors if it believes that the discount no
longer reflects the value of the restricted securities. Restricted securities
not of the same class as securities for which a public market exists usually
will be valued initially at cost. Any subsequent adjustment from cost will be
based upon considerations deemed relevant by the Board of Directors.

DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES

The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled " Distributions and Taxes."

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<PAGE>

carryovers, if any, have been utilized or have expired. Investors other than
qualified retirement plans may choose whether to receive dividends and other
distributions in cash, to receive dividends in cash and reinvest other
distributions in additional Fund shares at NAV, or to reinvest both dividends
and other distributions in additional Fund shares at NAV; dividends and other
distributions paid to qualified retirement plans are reinvested automatically in
additional Fund shares at NAV. All expenses are accrued daily and deducted
before declaration of dividends to investors.

It is expected that the Fund will qualify for treatment as a regulated
investment company ("RIC") under the Internal Revenue Code of 1986, as amended
("Code") so long as such qualification is in the best interests of its
shareholders. Such qualification will relieve the Fund of any liability for
Federal income tax to the extent its earnings and realized gains are distributed
in accordance with applicable provisions of the Code. To qualify for treatment
as a RIC under the Code, the Fund -- which is treated as a separate corporation
for federal tax purposes -- (1) must distribute to its shareholders each year at
least 90% of its investment company taxable income (generally consisting of net
investment income, net short-term capital gains and net gains from certain
foreign currency transactions) ("Distribution Requirement"), (2) must derive at
least 90% of its annual gross income from specified sources ("Income
Requirement") and (3) must meet certain asset diversification and other
requirements. The term "regulated investment company" does not imply the
supervision of management or investment practices or policies by any government
agency.

If you elect to receive dividends and distributions in cash, and your
dividend or distribution check is returned to the Fund as undeliverable or
remains uncashed for six months, the Fund reserves the right to reinvest such
dividends or distributions and all future dividends and distributions payable to
you in additional Fund shares at NAV. No interest will accrue on amounts
represented by uncashed distributions or redemption checks.

Dividends derived from net investment income, together with distributions
from net realized short-term capital gains and all or a portion of any gains
realized from the sale or other disposition of certain market discount bonds
(collectively, "dividend distributions"), paid by the Fund will be taxable to
U.S. shareholders, including certain non-qualified retirement plans, as ordinary
income to the extent of the Fund's earnings and profits, whether received in
cash or reinvested in additional Fund shares. Distributions from net capital
gain (the excess of net long-term capital gain over net short-term capital loss)
are taxable to such shareholders as long-term capital gains regardless of how
long the shareholders have held their Fund shares and whether such distributions
are received in cash or reinvested in additional Fund shares.

Notice as to the tax status of your dividends and other distributions will
be mailed to you annually. You also will receive periodic summaries of your
account that will include information as to dividends and distributions from net
capital gain, if any, paid during the year. The annual tax notice and periodic
account summaries you receive designate the portions of capital gain
distributions that are subject to (1) the 20% maximum rate of tax (10% for
investors in the 15% marginal tax bracket) enacted by the Taxpayer Relief Act of
1997 ("Tax Act"), which applies to non-corporate taxpayers' net capital gain on
securities and other capital assets held for more than 18 months, and (2) the

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<PAGE>

28% maximum tax rate, applicable to such gain on capital assets held for more
than one year and up to 18 months (which, prior to enactment of the Tax Act,
applied to all such gain on capital assets held for more than one year).

Dividends and other distributions paid by the Fund to qualified retirement
plans ordinarily will not be subject to taxation until the proceeds are
distributed from the retirement plans. The Fund will not report to the IRS
distributions paid to such plans. Generally, distributions from qualified
retirement plans, except those representing returns of non-deductible
contributions thereto, will be taxable as ordinary income and, if made prior to
the time the participant reaches age 59 1/2, generally will be subject to an
additional tax equal to 10% of the taxable portion of the distribution. If the
distribution from such a retirement plan (other than certain governmental or
church plans) for any taxable year following the year in which the participant
reaches age 70 1/2 is less than the "minimum required distribution" for that
taxable year, an excise tax equal to 50% of the deficiency may be imposed by the
IRS. The administrator, trustee or custodian of such a retirement plan will be
responsible for reporting distributions from such plans to the IRS. Moreover,
certain contributions to a qualified retirement plan in excess of the amounts
permitted by law may be subject to an excise tax. If a distributee of an
"eligible rollover distribution" from a qualified retirement plan does not elect
to have the eligible rollover distribution paid directly from the plan to an
eligible retirement plan in a "direct rollover," the eligible rollover
distribution is subject to a 20% income tax withholding.

The Fund must withhold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, distributions and redemption proceeds,
regardless of the extent to which gain or loss may be realized, paid to an
individual or certain other non-corporate shareholders if such shareholder fails
to certify that the TIN furnished to the Fund is correct. Backup withholding at
that rate also is required from dividends and capital gain distributions payable
to such a shareholder if (1) that shareholder fails to certify that he or she
has not received notice from the IRS of being subject to backup withholding as a
result of a failure properly to report taxable dividend or interest income on a
Federal income tax return or (2) the IRS notifies the Fund to institute backup
withholding because the IRS determines that the shareholder's TIN is incorrect
or that the shareholder has failed properly to report such income.

A TIN is either the Social Security number, individual taxpayer
identification number, or employer identification number of the record owner of
the account. Any tax withheld as a result of backup withholding does not
constitute an additional tax and may be claimed as a credit on the record
owner's Federal income tax return.

The Fund is subject to a non-deductible 4% excise tax, measured with
respect to certain undistributed amounts of taxable investment income and
capital gains.

Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares below
the cost of his or her investment. Such a dividend or other distribution would
be a return on investment in an economic sense, although taxable as stated. In
addition, if a shareholder sells shares of the Fund held for six months or less
and received a capital gain distribution with respect to those shares, any loss
incurred on the sale of those shares will be treated as a long-term capital loss

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<PAGE>

to the extent of the capital gain distribution received.

Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a date
in any of those months are deemed to have been paid by the Fund and received by
the shareholders on December 31 of a year if the distributions are paid by the
Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.

A portion of the dividends paid by the Fund, whether received in cash or
reinvested in additional Fund shares, may be eligible for the dividends-received
deduction allowed to corporations. The eligible portion may not exceed the
aggregate dividends received by the Fund from U.S. corporations. However,
dividends received by a corporate shareholder and deducted by it pursuant to the
dividends-received deduction are subject indirectly to the federal alternative
minimum tax.

FOREIGN CURRENCY, FUTURES, FORWARDS AND HEDGING TRANSACTIONS. Gains from
the sale or other disposition of foreign currencies (except certain gains
therefrom that may be excluded by future regulations), and gains from options,
futures and forward contracts derived by the Fund with respect to its business
of investing in securities or foreign currencies, will qualify as permissible
income under the Income Requirement.

Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gains and losses. However, a portion of the gains and losses
from the disposition of foreign currencies and certain
foreign-currency-denominated instruments (including debt instruments and
financial forward and futures contracts and options) may be treated as ordinary
income or loss under Section 988 of the Code. In addition, all or a portion of
any gain realized from the disposition of certain market discount bonds and from
engaging in "conversion transactions" that would otherwise be treated as capital
gain may be treated as ordinary income. "Conversion transactions" are defined to
include certain option and straddle investments.

Under Section 1256 of the Code, any gain or loss realized by the Fund with
respect to certain future and forward contracts ("Section 1256 Contracts") may
be treated as 60% long-term capital gain or loss and 40% short-term capital gain
or loss. In addition, any Section 1256 Contracts remaining unexercised at the
end of the Fund's taxable year will be treated as sold for their then fair
market value (a process known as "marking-to-market"), resulting in additional
gain or loss to the Fund characterized in the manner described above. The 60%
portion treated as long-term capital gain will qualify for the reduced maximum
tax rates on non-corporate taxpayers' net capital gain enacted by the Taxpayer

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<PAGE>

Relief Act of 1997 instead of the 28% rate in effect before that legislation.

Offsetting positions held by the Fund involving certain options, future or
forward contracts may constitute "straddles," which are defined to include
"offsetting positions" in actively traded personal property. All or a portion of
any capital gain from certain straddle transactions may be recharacterized as
ordinary income. If the Fund were treated as entering into a straddle by reason
of its engaging in certain options, future or forward contract transactions, the
straddle would be characterized as a "mixed straddle" if at least one of the
positions comprising a part of the straddle was a Section 1256 Contract. The
Fund may make one or more elections with respect to mixed straddles; depending
on which election is made, if any, the results to the Fund may differ. If no
election is made, then to the extent the straddle and conversion transactions
rules apply to positions established by the Fund, losses realized by the Fund
will be deferred to the extent of unrealized gain in the offsetting position.
Moreover, as a result of the straddle rules, short-term capital loss on straddle
positions may be recharacterized as long-term capital loss, and long-term
capital gains may be treated as short-term capital gains or ordinary income.

If the Fund has an "appreciated financial position" -- generally, an
interest (including an interest through an option, futures or forward contract,
or short sale) with respect to any stock, debt instrument (other than "straight
debt"), or partnership interest the fair market value of which exceeds its
adjusted basis -- and enters into a "constructive sale" of the same or
substantially similar property, the Fund will be treated as having made an
actual sale thereof, with the result that gain will be recognized at that time.
A constructive sale generally consists of a short sale, an offsetting notional
principal contract, or futures or forward contract entered into by the Fund or a
related person with respect to the same or substantially similar property. In
addition, if the appreciated financial position is itself a short sale or such a
contract, acquisition of the underlying property or substantially similar
property will be deemed a constructive sale.

Investment by the Fund in securities issued or acquired at a discount (for
example, zero coupon securities) could, under special tax rules, affect the
amount and timing of distributions to shareholders by causing the Fund to
recognize income prior to the receipt of cash payments. For example, the Fund
could be required to take into gross income annually a portion of the discount
(or deemed discount) at which the securities were issued and could need to
distribute such income to satisfy the Distribution Requirement and to avoid the
Excise Tax. In such case, the Fund may have to dispose of securities it might
otherwise have continued to hold in order to generate cash to satisfy these
requirements.

FOREIGN CURRENCY GAINS AND LOSSES. Gains and losses attributable to
fluctuations in foreign currency exchange rates that occur between the time the
Fund accrues dividends, interest or other receivables, or expenses or other
liabilities, denominated in a foreign currency and the time the Fund actually
collects the receivables or pays the liabilities generally are treated as
ordinary income or ordinary loss. Similarly, on the disposition of a debt
security denominated in a foreign currency, or of an option or forward contract
on a foreign currency, gains or losses attributable to fluctuations in the value
of the foreign currency between the date of acquisition of the security, option

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<PAGE>

or contract and the date of disposition also are treated as ordinary income or
loss. These gains or losses may increase or decrease the amount of the Fund's
investment company taxable income to be distributed to its shareholders.

STATE AND LOCAL TAXES. Depending upon the extent of the Fund's activities
in states and localities in which it is deemed to be conducting business, it may
be subject to the tax laws thereof. Shareholders are also advised to consult
their tax advisers concerning the application of state and local taxes to them.

FOREIGN SHAREHOLDERS - U.S. FEDERAL INCOME TAXATION. U.S. federal income
taxation of a shareholder who, as to the United States, is a non-resident alien
individual, a foreign trust or estate, a foreign corporation or a foreign
partnership (a "foreign shareholder") depends on whether the income from the
Fund is "effectively connected" with a U.S. trade or business carried on by the
shareholder, as discussed generally below. Special U.S. federal income tax rules
that differ from those described below may apply to certain foreign persons who
invest in the Fund, such as a foreign shareholder entitled to claim the benefits
of an applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in the Fund.

FOREIGN SHAREHOLDERS - INCOME NOT EFFECTIVELY CONNECTED. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the foreign
shareholder generally will be subject to U.S. federal withholding tax of 30% (or
lower treaty rate). Capital gains realized by foreign shareholders on the sale
of Fund shares and distributions to them of net capital gain generally will not
be subject to U.S. federal income tax unless the foreign shareholder is a
non-resident alien individual and is physically present in the United States for
more than 182 days during the taxable year. In the case of certain foreign
shareholders, the Fund may be required to withhold U.S. federal income tax at
the rate of 31% of capital gain distributions and of the gross proceeds from a
redemption of Fund shares unless the shareholder certifies his or her foreign
status to the Fund.

FOREIGN SHAREHOLDERS - EFFECTIVELY CONNECTED INCOME. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by the foreign shareholder, then all distributions
to that shareholder and any gains realized by that shareholder on the
disposition of the Fund shares will be subject to U.S. federal income tax at the
graduated rates applicable to U.S. citizens and domestic corporations, as the
case may be. Foreign shareholders also may be subject to the branch profits tax.

FOREIGN SHAREHOLDERS - ESTATE TAX. Foreign individuals generally are
subject to federal estate tax on their U.S. situs property, such as shares of
the Fund, that they own at the time of their death. Certain credits against that
tax and relief under applicable tax treaties may be available.

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<PAGE>

PORTFOLIO TRANSACTIONS

All portfolio transactions of the Fund are placed on behalf of the Fund by
Dreyfus. Debt securities purchased and sold by the Fund are generally traded on
a net basis (i.e., without commission) through dealers acting for their own
account and not as brokers, or otherwise involve transactions directly with the
issuer of the instrument. This means that a dealer (the securities firm or bank
dealing with the Fund) makes a market for securities by offering to buy at one
price and sell at a slightly higher price. The difference between the prices is
known as a spread. Other portfolio transactions may be executed through brokers
acting as agent. The Fund will pay a spread or commissions in connection with
such transactions. Dreyfus uses its best efforts to obtain execution of
portfolio transactions at prices which are advantageous to the Fund and at
spreads and commission rates, if any, which are reasonable in relation to the
benefits received. Dreyfus also places transactions for other accounts that it
provides with investment advice.

Brokers and dealers involved in the execution of portfolio transactions on
behalf of the Fund are selected on the basis of their professional capability
and the value and quality of their services. In selecting brokers or dealers,
Dreyfus will consider various relevant factors, including, but not limited to,
the size and type of the transaction; the nature and character of the markets
for the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer; the broker-dealer's
execution services rendered on a continuing basis; and the reasonableness of any
spreads (or commissions, if any). Any spread, commission, fee or other
remuneration paid to an affiliated broker-dealer is paid pursuant to the
Company's procedures adopted in accordance with Rule 17e-1 under the 1940 Act.

Dreyfus is authorized to allocate purchase and sale orders for portfolio
securities to certain financial institutions, including, in the case of agency
transactions, financial institutions that are affiliated with Dreyfus or Mellon
Bank or that have sold shares of the Fund, if Dreyfus believes that the quality
of the transaction and the commission are comparable to what they would be with
other qualified brokerage firms.

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<PAGE>

organizations were to attempt to develop comparable information through their
own staffs.

When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated in
accordance with a formula considered by Dreyfus to be equitable to each account.
In some cases this system could have a detrimental effect on the price or volume
of the investment instrument as far as the Fund is concerned. In other cases,
however, the ability of the Fund to participate in volume transactions will
produce better executions for the Fund. It is the present opinion of the
Directors that the desirability of retaining Dreyfus as investment manager to
the Fund outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.

For fiscal years ended October 31, 1996, 1997 and 1998, the Fund paid
brokerage commissions of $44,814, $44,307 and $_____________, respectively.

PORTFOLIO TURNOVER. The portfolio turnover rate for the Fund is calculated
by dividing the lesser of the Fund's annual sales or purchases of portfolio
securities (exclusive of purchases and sales of securities whose maturities at
the time of acquisition were one year or less) by the monthly average value of
securities in the Fund during the year. Portfolio turnover may vary from year to
year as well as within a year. The portfolio turnover rates for the fiscal years
ended October 31, 1997 and 1998 were 3.75% and _____%, respectively.

PERFORMANCE INFORMATION

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "PAST PERFORMANCE."

Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000 payment
made at the beginning of the period (assuming the reinvestment of dividends and
other distributions), dividing by the amount of the initial investment, taking
the "n"th root of the quotient (where "n" is the number of years in the period)
and subtracting 1 from the result.

Average annual total return (expressed as a percentage) for Fund shares
for the periods noted were:

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Average Annual Total Return for the
Periods Ended October 31, 1998

1 Year 5 Years 10 Years Inception
------ ------- -------- ---------

BASIC S&P 500 Fund ______%
(9/30/93)

Inception date appears in parentheses following the average annual total return
since inception.

The Fund's total return for the period September 30, 1993 (the Fund's
inception date) to October 31, 1998 was _______%. Total return is calculated by
subtracting the amount of the Fund's NAV per share at the beginning of a stated
period from the NAV per share at the end of the period (after giving effect to
the reinvestment of dividends and other distributions during the period), and
dividing the result by the NAV per share at the beginning of the period.

Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the Morgan
Stanley European Index; (ii) the Standard & Poor's 500 Composite Stock Price
Index, the Dow Jones Industrial Average, or other appropriate unmanaged domestic
or foreign indices of performance of various types of investments so that
investors may compare the Fund's results with those of indices widely regarded
by investors as representative of the securities markets in general; (iii) other
groups of mutual funds tracked by Lipper Analytical Services, a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or other
criteria; (iv) the Consumer Price Index (a measure of inflation) to assess the
real rate of return from an investment in the Fund; and (v) products managed by
a universe of money managers with similar country allocation and performance
objectives. Unmanaged indices may assume the reinvestment of dividends but
generally do not reflect deductions or administrative and management costs and
expenses. From time to time, advertising materials for the Fund may refer to
Morningstar ratings and related analyses supporting the rating.

From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to, or
include commentary by the portfolio manager relating to investment strategy,
asset growth, current or past business, political, economic or financial
conditions and other matters of general interest to investors.

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<PAGE>

INFORMATION ABOUT THE FUND

The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "THE FUND".

The Company has an authorized capitalization of 25 billion shares of
$0.001 par value stock. Each Fund share has one vote and, when issued and paid
for in accordance with the terms of the offering, is fully paid and
non-assessable. The Fund is one of nineteen portfolios of the Company. Fund
shares are of one class and have equal rights as to dividends and in
liquidation. Fund shares have no preemptive or subscription rights and are
freely transferable.

The Fund will send annual and semi-annual financial statements to all of
its shareholders.

B-46
<PAGE>

TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS

Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Company,
Dreyfus Transfer, Inc. arranges for the maintenance of shareholder account
records for the Fund, the handling of certain communications between
shareholders and the Fund and the payment of dividends and distributions payable
by the Fund. For these services, Dreyfus Transfer, Inc. receives a monthly fee
computed on the basis of the number of shareholder accounts it maintains for the
Company during the month, and is reimbursed for certain out-of-pocket expenses.

Mellon Bank, the parent of Dreyfus, located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, acts as custodian of the Fund's investments.
Under a custody agreement with the Company, Mellon Bank holds the Fund's
portfolio securities and keeps all necessary accounts and records. Dreyfus
Transfer, Inc. and Mellon Bank, as custodian, have no part in determining the
investment policies of the Fund or which securities are to be purchased or sold
by the Fund.

_______________, 1800 Massachusetts Avenue, N.W., Second Floor,
Washington, D.C. 20036-1800, has passed upon the legality of the shares offered
by the Prospectus and this Statement of Additional Information.

______________ was appointed by the Directors to serve as the Fund's
independent auditors for the year ending October 31, 1999, providing audit
services including (1) examination of the annual financial statements, (2)
assistance, review and consultation in connection with SEC filings and (3)
review of the annual federal income tax return filed on behalf of the Fund.

FINANCIAL STATEMENTS

The financial statements for the fiscal year ended October 31, 1998,
including notes to the financial statements and financial highlights and the
Independent Auditors' Report, are included in the Annual Report to shareholders.
A copy of the Annual Report accompanies this Statement of Additional
Information. The financial statements included in the Annual Report, and the
Independent Auditors' Report thereon contained therein, and related notes, are
incorporated herein by reference.

B-47
<PAGE>

Dreyfus

Bond Market Index Fund

Investing in bonds to match the total return of the Lehman Brothers Aggregate
Bond Index

PROSPECTUS March 1, 1999

<PAGE>

Contents

THE FUND
- ----------------------------------------------------

What every investor 1 Goal/Approach
should know about
the fund 2 Main Risks

3 Past Performance

4 Expenses

5 Management

6 Financial Highlights

YOUR INVESTMENT
- --------------------------------------------------------------------

Information 8 Account Policies
for managing your
fund account 11 Distributions and Taxes

12 Services for Fund Investors

14 Instructions for Regular Accounts

16 Instructions for IRAs

FOR MORE INFORMATION
- -------------------------------------------------------------------------------

Where to learn more INFORMATION ON THE FUND'S RECENT
about this and other PERFORMANCE AND HOLDINGS CAN BE
Dreyfus funds FOUND IN THE CURRENT ANNUAL/
SEMIANNUAL REPORT (SEE BACK COVER).

The Fund

Dreyfus Bond Market Index Fund
--------------------------------------------------------

Ticker Symbols: BASIC shares DBIRX
Investor shares DBMIX

GOAL/APPROACH
- -------------

The fund seeks to match the total return of the Lehman Brothers Aggregate Bond
Index. Total return includes price movements as well as interest income. This
objective may be changed without shareholder approval. To pursue its goal, the
fund invests at least 80% of total assets in securities 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.

As the fund grows, it expects to have a correlation between its performance and
that of the index of at least .95 before expenses. A correlation of 1.00 would
mean that the fund and the index were perfectly correlated.

The Lehman Brothers Aggregate Bond Index is a broad-based, unmanaged index that
covers the U.S. investment grade fixed-rate bond market and is comprised of U.S.
government, corporate, mortgage-backed and asset-backed securities. Most of the
bonds in the index are issued by the U.S. Treasury and other U.S. government and
agency issuers. Lehman Brothers is not affiliated with this fund, and it does
not sell or endorse the fund, nor does it guarantee the performance of the fund
index.

Concepts to understand

INDEX FUNDS: mutual funds that are designed to meet the performance of an
underlying benchmark index.

To replicate index performance, the manager uses a passive management approach
and purchases a representative sample of the bonds comprising the benchmark
index. Because the fund has expenses, performance will tend to be slightly lower
than that of the target benchmark.

The Fund 1

<PAGE>

MAIN RISKS
- ----------

Because the fund uses an indexing strategy, it does not attempt to manage market
volatility, use defensive strategies or reduce the effects of any long-term
periods of poor performance among bonds.

The correlation between fund and index performance may be affected by the fund's
expenses and use of sampling techniques, changes in securities markets, changes
in the composition of the index and the timing of purchases and redemptions of
fund shares.

Other risk factors that could have an effect on the fund's performance include:

o a decline in the credit quality of a bond, or the perception of a decline,
could cause its value to fall, potentially lowering the fund's share price

o if the loans underlying the fund's mortgage-related securities are paid off
earlier or later than expected, which could occur because of movements in
market interest rates, the fund's share price or yield could be hurt

o general downturns in the economy could cause the value of asset-backed
securities to fall, and the risk that any recovery on repossessed
collateral might be inadequate is greater than for mortgage-backed
securities

Other potential risks

While some of the fund's securities may carry guarantees of the U.S. government
or its agencies, these guarantees do not apply to shares of the fund itself.

To the extent that the fund invests in securities not included in the index to
maintain liquidity, it will not achieve its goal of replicating the total return
of the index.

<PAGE>

PAST PERFORMANCE
- ----------------

The two tables below show the fund's annual returns and its long-term
performance. The first table shows you how the performance of the fund's BASIC
shares has varied from year to year. The second table compares performance over
time to that of the Lehman Brothers Aggregate Bond Index*, a broad-based,
unmanaged, market-weighted index covering the U.S. investment grade fixed-rate
bond market. Both tables assume reinvestment of dividends and distributions. As
with all mutual funds, the past is not a prediction of the future.

* PRIOR TO NOVEMBER 14, 1997, THE FUND USED A DIFFERENT BENCHMARK INDEX WHICH
DID NOT INCLUDE CERTAIN MORTGAGE- AND ASSET-BACKED SECURITIES.
--------------------------------------------------------

Year-by-year total return AS OF 12/31 EACH YEAR (%)

BASIC SHARES
- ------------

[Bar Graph to be inserted]

BEST QUARTER: Q0 '00 +0.00%

WORST QUARTER: Q0 '00 -0.00%
--------------------------------------------------------

Average annual total return AS OF 12/31/98

Inception Since
Date 1 Year 5 Years Inception
--------------------------------------------------------
BASIC SHARES 11/30/93 00.00% 00.00% 00.00%

INVESTOR SHARES 4/28/94 00.00% -- 00.00%

LEHMAN BROTHERS

AGGREGATE BOND INDEX 00.00% 00.00% 00.00%*

* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 11/30/93 IS USED AS THE
BEGINNING VALUE.

What this fund is -- and isn't

2 The Fund 3

<PAGE>

EXPENSES
- --------

Fee table

BASIC Investor
shares shares
--------------------------------------------------------

SHAREHOLDER TRANSACTION FEES

% OF TRANSACTION AMOUNT NONE NONE
--------------------------------------------------------

ANNUAL FUND OPERATING EXPENSES

% OF AVERAGE DAILY NET ASSETS

Management fees x.xx% x.xx%

12b-1 fee x.xx% x.xx%

Other expenses x.xx% x.xx%
--------------------------------------------------------

TOTAL X.XX% X.XX%
--------------------------------------------------------

Expense example

1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------------------

BASIC SHARES $000 $000 $000 $000

INVESTOR SHARES $000 $000 $000 $000

Concepts to understand

12B-1 FEE: the fee paid to Dreyfus Service Corporation, an affiliate of The
Dreyfus Corporation, for shareholder service and to the fund's distributor for
shareholder service and promotional expenses. Because this fee is paid out of
the fund's assets on an ongoing basis, over time it will increase the cost of
your investment and may cost you more than paying other types of sales charges.

MANAGEMENT
- ----------

The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages one of the nation's
leading mutual fund complexes, with more than $112 billion in more than 160
mutual fund portfolios. Dreyfus is the mutual fund business of Mellon Bank
Corporation, a broad-based financial services company with a bank at its core.
With more than $350 billion of assets under management and $1.7 trillion of
assets under administration and custody, Mellon provides a full range of
banking, investment and trust products and services to individuals, businesses
and institutions. Its mutual fund companies place Mellon as the leading bank
manager of mutual funds. Mellon is headquartered in Pittsburgh, Pennsylvania.

Dreyfus manages the fund by making investment decisions based on the fund's
investment objective, policies and restrictions in seeking to match the total
return of the Lehman Brothers Aggregate Bond Index.

Concepts to understand

Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.

4 The Fund 5

<PAGE>

FINANCIAL HIGHLIGHTS

The following tables describe the performance of each share class 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 financial highlights have been
independently audited by _____________________, whose report, along with the
fund's financial statements, is included in the annual report.

YEAR ENDED OCTOBER 31,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
BASIC SHARES 1998 1997 1996 1995 1994(1)
- ----------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period 9.80 9.94 9.15 10.00

Investment operations:

Investment income -- net .60 .59 .58 .49(2)

Net realized and unrealized
gain (loss) on investments .20 (.14) .79 (.85)

Total from investment operations .80 .45 1.37 (.36)

Distributions:

Dividends from investment
income -- net (.60) (.59) (.58) (.49)

Net asset value, end of period 10.00 9.80 9.94 9.15

Total return (%) 8.46 4.69 15.41 (3.68)
- ----------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) .35 .40 .40 .40(3,4)

Ratio of net investment income
to average net assets (%) 6.12 6.02 6.10 5.05(3)

Portfolio turnover rate (%) 48.86 42.65 40.16 188.00
- ----------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 33,234 32,986 6,824 4,464
</TABLE>

(1) FOR THE PERIOD FROM NOVEMBER 30, 1993 THROUGH OCTOBER 31, 1994.

(2) NET INVESTMENT INCOME BEFORE REIMBURSEMENT OF EXPENSES BY THE INVESTMENT
ADVISER FOR THE PERIOD ENDED OCTOBER 31, 1994 WAS $0.39 PER SHARE.

(3) ANNUALIZED.

(4) ANNUALIZED EXPENSE RATIO BEFORE REIMBURSEMENT OF EXPENSES BY INVESTMENT
MANAGER FOR THE PERIOD ENDED OCTOBER 31, 1994 WAS 1.41%.

YEAR ENDED OCTOBER 31,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>

INVESTOR SHARES 1998 1997(1) 1996(2) 1995 1994(1)
- --------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period 9.78 9.93 9.15 9.44

Investment operations:

Investment income -- net .57 .57 .55 .24

Net realized and unrealized
gain (loss) on investments .21 (.15) .78 (.28)

Total from investment operations .78 .42 1.33 (.04)

Distributions:

Dividends from investment
income -- net (.57) (.57) (.55) (.25)

Net asset value, end of period 9.99 9.78 9.93 9.15

Total return (%) 8.29 4.36 15.01 (.46)
- --------------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) .60 .65 .65 .65(2)

Ratio of net investment income
to average net assets (%) 5.82 5.80 5.77 4.81(2)

Portfolio turnover rate (%) 48.86 42.65 40.16 188.00
- --------------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 120 80 207 38

(1) FOR THE PERIOD FROM APRIL 28, 1994 THROUGH OCTOBER 31, 1994.

(2) ANNUALIZED.

The Fund
</TABLE>

<PAGE>

Your Investment

ACCOUNT POLICIES
- ----------------

Buying shares

THE FUND OFFERS TWO SHARE CLASSES -- BASIC shares and Investor shares. Both
shares are offered to any investor. The classes differ in their expenses,
minimum purchase and account balance requirements, and the services they offer
to shareholders. YOU PAY NO SALES CHARGES to invest in this fund. Your price for
fund shares is the net asset value per share (NAV) for the class of shares you
purchase, which is generally calculated as of the close of trading on the New
York Stock Exchange (usually 4:00 p.m. Eastern time) every day the exchange is
open.

- --------------------------------------------------------

Minimum investments

Initial Additional
--------------------------------------------------------

BASIC SHARES

Regular accounts $10,000 $1,000*; $500 FOR
TELETRANSFER
INVESTMENTS

Traditional IRAs, $5,000 $1,000**
Spousal IRAs, Roth IRAs

Education IRAs N/A N/A

Dreyfus automatic $100 $100
investment plans
--------------------------------------------------------

INVESTOR SHARES

Regular accounts $2,500((+)) $100; $500 FOR
TELETRANSFER
INVESTMENTS

Traditional IRAs, $750 NO MINIMUM
Spousal IRAs, Roth IRAs

Education IRAs $500 NO MINIMUM
AFTER THE FIRST YEAR

Dreyfus automatic $100 $100
investment plans

ALL INVESTMENTS MUST BE IN U.S. DOLLARS. THIRD-PARTY CHECKS CANNOT BE ACCEPTED.
YOU MAY BE CHARGED A FEE FOR ANY CHECK THAT DOES NOT CLEAR. MAXIMUM TELETRANSFER
PURCHASE IS $150,000 PER DAY.

* $100 FOR SHAREHOLDERS WHO HAVE HELD BASIC SHARES SINCE AUGUST 14, 1997.

** NO MINIMUM FOR SHAREHOLDERS WHO HAVE HELD BASIC SHARES IN SUCH ACCOUNTS
SINCE AUGUST 14, 1997.

((+)) $1,000 FOR CLIENTS OF CERTAIN AGENTS AND CERTAIN OTHER PURCHASES.

Concepts to understand

NET ASSET VALUE (NAV): a mutual fund's share price on a given day. A fund's NAV
is calculated by dividing the value of its net assets by the number of existing
shares.

When calculating its NAV, the fund's bonds are generally valued by an
independent pricing service approved by the fund's board. Certain securities are
valued at the last sale price or at fair value as determined by procedures
established by the board.

<PAGE>

Your order will be priced at the next NAV calculated after your order is
accepted by the fund's transfer agent or other entity authorized to accept
orders on behalf of the fund.

Selling shares

BEFORE SELLING RECENTLY PURCHASED SHARES, please note that if the fund has not
yet collected payment for the shares you are selling, it may delay sending the
proceeds until it has collected payment, which may take up to eight business
days.

- --------------------------------------------------------

Limitations on selling shares by phone

Proceeds
sent by Minimum Maximum
--------------------------------------------------------

CHECK NO MINIMUM $150,000 PER DAY

WIRE $1,000 $250,000 FOR JOINT
ACCOUNTS EVERY 30 DAYS

TELETRANSFER $500 $250,000 FOR JOINT
ACCOUNTS EVERY 30 DAYS

Written sell orders

Some circumstances require written sell orders along with signature guarantees.
These include:

o amounts of $1,000 or more on accounts whose address has been changed within
the last 30 days

o requests to send the proceeds to a different payee or address

Written sell orders of $100,000 or more must also be signature guaranteed.

8 Your Investment 9

<PAGE>

ACCOUNT POLICIES (CONTINUED)

General policies

If your account falls below $5,000 ($500 for holders of BASIC shares since
August 14, 1997) IN THE BASIC SHARE CLASS, OR BELOW $500 IN THE INVESTOR SHARE
CLASS, the fund may ask you to increase your balance. If it is still below the
minimum balance amount after 45 days, the fund may close your account and send
you the proceeds.

Unless you decline telephone privileges on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.

The fund reserves the right to:

o refuse any purchase or exchange request that could adversely affect the
fund or its operations, including those from any individual or group who,
in the fund's view, is likely to engage in excessive trading (usually
defined as more than four exchanges out of the fund within a calendar year)

o refuse any purchase or exchange request in excess of 1% of the fund's total
assets

o change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions

o change its minimum investment amounts

o delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions)

Third-party investments

DISTRIBUTIONS AND TAXES
- -----------------------

The fund usually pays its shareholders dividends from its net investment income
once a month, and distributes any net capital gains that it has realized once a
year. Your distributions will be reinvested in the fund unless you instruct the
fund otherwise. There are no fees or sales charges on reinvestments.

Each share class will generate a different dividend because each has different
expenses.

- --------------------------------------------------------

Taxability of distributions

Type of Tax rate for Tax rate for

distribution 15% bracket 28% bracket or above
--------------------------------------------------------

INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE

SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE

LONG-TERM
CAPITAL GAINS 10% 20%

The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund.

Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.

Taxes on transactions

Except in tax-advantaged accounts, any sale or exchange of fund shares may
generate a tax liability.

The table at right can provide a guide for your potential tax liability when
selling or exchanging fund shares. "Short-term capital gains" applies to fund
shares sold up to 12 months after buying them. "Long-term capital gains" applies
to shares sold after 12 months.

10 Your Investment 11

<PAGE>

SERVICES FOR FUND INVESTORS
- ---------------------------

Automatic services

--------------------------------------------------------

For investing

DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER(REGISTERED) from a designated bank account.

DREYFUS PAYROLL For making automatic investments
SAVINGS PLAN through a payroll deduction.

DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.

For exchanging shares

DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
--------------------------------------------------------

For selling shares

DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds.

Dreyfus Financial Centers

Exchange privilege

Dreyfus TeleTransfer privilege

The Dreyfus Touch(REGISTERED)

Retirement plans

Dreyfus offers a variety of retirement plans, including traditional, Roth and
Education IRAs. Here's where you call for information:

o for traditional, rollover, Roth and Education IRAs, call 1-800-645-656

o for SEP-IRAs, Keogh accounts, 401(k) and 403(b) accounts, call
1-800-358-0910

12 Your Investment 13

<PAGE>

INSTRUCTIONS FOR REGULAR ACCOUNTS

TO OPEN AN ACCOUNT

In Writing----------------------------------------------------------------------

Complete the application.

Mail your application and a check to:
The Dreyfus Family of Funds
P.O. Box 9387,
Providence, RI 02940-9387

TO ADD TO AN ACCOUNT

Fill out an investment slip, and write your account number on your check.

Mail the slip and the check to: The Dreyfus Family of Funds P.O. Box 105,
Newark, NJ 07101-0105

TO SELL SHARES

Write a letter of instruction that includes:

* your name(s) and signature(s)
* your account number
* the fund name and the share class
* the dollar amount you want to sell
* how and where to send the proceeds

Obtain a signature guarantee or other documentation, if required (see "Account
Policies -- Selling Shares").

Mail your request to: The Dreyfus Family of Funds P.O. Box 9671, Providence, RI
02940-9671

TO OPEN AN ACCOUNT

By Telephone--------------------------------------------------------------------

WIRE Have your bank send your investment to Boston Safe Deposit and Trust
Company, with these instructions:

* DDA# 044210
* the fund name and the share class
* your Social Security or tax ID number
* name(s) of investor(s)

Call us to obtain an account number. Return your application.

TO ADD TO AN ACCOUNT

WIRE Have your bank send your investment to Boston Safe Deposit and Trust
Company, with these instructions:

* DDA# 044210
* the fund name and the share class
* your account number
* name(s) of investor(s)

ELECTRONIC CHECK Same as wire, but before your account number insert "4450" for
BASIC shares OR "4460" for Investor shares, and add ABA# 011-001234

TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.

TO SELL SHARES

WIRE Be sure the fund has your bank account information on file. Call us to
request your transaction. Proceeds will be wired to your bank.

TELETRANSFER Be sure the fund has your bank account information on file. Call
us to request your transaction. Proceeds will be sent to your bank by electronic
check.

CHECK Call us to request your transaction. A check will be sent to the address
of record.

TO OPEN AN ACCOUNT

Automatically-------------------------------------------------------------------

WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.

WITHOUT ANY INITIAL INVESTMENT (Investor shares only) Check the Dreyfus Step
Program option on your application. Return your application, then complete the
additional materials when they are sent to you.

TO ADD TO AN ACCOUNT

ALL SERVICES Call us to request a form to add any automatic investing service
(see "Services for Fund Investors"). Complete and return the forms along with
any other required materials.

TO SELL SHARES

DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request a form to add the plan.
Complete the form, specifying the amount and frequency of withdrawals you would
like.

Be sure to maintain an account balance of $5,000 or more.

TO OPEN AN ACCOUNT

Via the Internet----------------------------------------------------------------

COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.

TO ADD TO AN ACCOUNT

__________

TO SELL SHARES

__________

To reach Dreyfus, call toll free in the U.S. 1-800-645-6561

Outside the U.S. 516-794-5452

Make checks payable to:

THE DREYFUS FAMILY OF FUNDS

You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.

Concepts to understand

14 Your Investment 15

<PAGE>

INSTRUCTIONS FOR IRAS

TO OPEN AN ACCOUNT

In Writing----------------------------------------------------------------------

Complete an IRA application, making sure to specify the fund name and share
class and to indicate the year the contribution is for.

Mail your application and a check to: The Dreyfus Trust Company, Custodian P.O.
Box 6427, Providence, RI 02940-6427

TO ADD TO AN ACCOUNT

Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.

Mail in the slip and the check (see "To Open an Account" at left).

TO SELL SHARES

Write a letter of instruction that includes:

* your name and signature
* your account number
* the fund name and the share class
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld

Obtain a signature guarantee or other documentation, if required.

Mail in your request (see "To Open an Account" at left).

TO OPEN AN ACCOUNT

By Telephone--------------------------------------------------------------------

____________

TO ADD AN ACCOUNT

WIRE Have your bank send your investment to Boston Safe Deposit and Trust
Company, with these instructions:

* DDA# 044210
* the fund name and the share class
* your account number
* name of investor
* the contribution year

ELECTRONIC CHECK Same as wire, but before your account number insert "4450" for
BASIC shares OR "4460" for Investor shares, and add ABA# 011-001234

TELEPHONE CONTRIBUTION Call to request us to move money from a regular Dreyfus
account to an IRA (both accounts must be held in the same shareholder name).

TO SELL SHARES

_________

TO OPEN AN ACCOUNT

Automatically-------------------------------------------------------------------

WITHOUT ANY INITIAL INVESTMENT (Investor shares only) Call us to request a
Dreyfus Step Program form. Complete and return the form along with your
application.

TO ADD AN ACCOUNT

ALL SERVICES Call us to request a form to add an automatic investing service
(see "Services for Fund Investors"). Complete and return the form along with any
other required materials.

All contributions will count as current year.

TO SELL SHARES

DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request instructions to establish
the plan.

TO OPEN AN ACCOUNT

Via the Internet----------------------------------------------------------------

COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.

TO ADD AN ACCOUNT

_____________

TO SELL SHARES

_____________

To reach Dreyfus, call toll free in the U.S.

1-800-645-6561

Outside the U.S. 516-794-5452

Make checks payable to:

THE DREYFUS TRUST CO., CUSTODIAN

You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.

Concepts to understand

16 Your Investment 17

<PAGE>

For More Information

Dreyfus Bond Market Index Fund
Series of The Dreyfus/Laurel Funds, Inc.
-----------------------------
SEC file number: 811-5270

More information on this fund is available free upon
request, including the following:

Annual/Semiannual Report

Describes the fund's performance, lists portfolio
holdings and contains a letter from the fund's manager
discussing recent market conditions, economic trends and
fund strategies that significantly affected the fund's
performance during the last fiscal year.

Statement of Additional Information (SAI)

To obtain information:

BY TELEPHONE Call 1-800-645-6561

BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144

BY E-MAIL Send your request to [email protected]

ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from:

SEC
http://www.sec.gov

DREYFUS
http://www.dreyfus.com

<PAGE>

- --------------------------------------------------------------------------------

DREYFUS BOND MARKET INDEX FUND
INVESTOR SHARES AND BASIC SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 1999

- --------------------------------------------------------------------------------

This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of the
Dreyfus Bond Market Index Fund (the "Fund"), dated March 1, 1999, as it may be
revised from time to time. The Fund is a separate, diversified portfolio of The
Dreyfus/Laurel Funds, Inc., an open-end management investment company (the
"Company"), known as a mutual fund. To obtain a copy of the Fund's Prospectus,
please write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York
11556-0144, or call one of the following numbers:

Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452

TABLE OF CONTENTS
Page

Description of the Fund........................................... B-2
Management of the Fund............................................ B-14
Management Arrangements........................................... B-20
Purchase of Shares................................................ B-22
Distribution Plan................................................. B-25
Redemption of Shares.............................................. B-26
Shareholder Services.............................................. B-30
Additional Information About Purchases, Exchanges and Redemptions. B-35
Determination of Net Asset Value.................................. B-35
Dividends, Other Distributions and Taxes.......................... B-36
Portfolio Transactions............................................ B-41
Performance Information........................................... B-43
Information About the Fund........................................ B-45
Transfer and Dividend Disbursing
Agent, Custodian, Counsel and Independent Auditors.............. B-46
Financial Statements.............................................. B-46
Appendix.......................................................... B-47

<PAGE>

DESCRIPTION OF THE FUND

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS OF THE FUND'S PROSPECTUS ENTITLED "GOAL/APPROACH" AND "MAIN
RISKS."

The Fund seeks to match the total return of the Lehman Brothers Aggregate
Bond Index (the "Aggregate Bond Index"). The Aggregate Bond Index covers the
U.S. investment grade fixed-rate bond market, including government and corporate
securities, agency mortgage pass-through securities, and asset-backed
securities. The Aggregate Bond Index covers those securities in the Lehman
Brothers Government/Corporate Bond Index ("Government/Corporate Bond Index"),
plus those covered by the Lehman Mortgage-Backed Securities Index ("MBS Index")
and the Lehman Asset-Backed Securities Index ("ABS Index"). The
Government/Corporate Bond Index is composed of (i) all public obligations of the
U.S. Government, its agencies and instrumentalities (excluding "flower" bonds
and pass-through issues such as GNMA Certificates) and (ii) all publicly issued,
fixed-rate, non-convertible, investment grade, dollar-denominated, Securities
and Exchange Commission ("SEC")-registered obligations of domestic corporations,
foreign governments and supranational organizations. The MBS Index covers all
fixed-rate securities backed by mortgage pools of the Government National
Mortgage Association ("GNMA"), Federal Home Loan Mortgage Corporation ("FHLMC")
and Federal National Mortgage Association ("FNMA"). The ABS Index covers three
subsectors - credit and charge cards, auto, and home equity loans - and includes
pass-through, bullet, and controlled amortization structures. As of December 31,
1998, over _______ issues were included in the Aggregate Bond Index,
representing $___________ million in market value, distributed as follows:
_____% governments; ____% corporates; and ____% mortgage-backed securities.
Prior to November 14, 1997, the Fund's investment objective was to seek to match
the total return of the Government/Corporate Bond Index.

The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.

CERTAIN PORTFOLIO SECURITIES

The following information regarding the securities that the Fund may
purchase supplements that found in the Fund's prospectus.

B-2
<PAGE>

circumstances are more likely to lead to a weakened capacity to pay interest and
principal for debt in this category than debt in higher rated categories. The
Fund will dispose in a prudent and orderly fashion of bonds whose ratings drop
below these minimum ratings.

In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are supported by any of the following: (a) the full faith
and credit of the U.S. Treasury (such as GNMA participation certificates), (b)
the right of the issuer to borrow an amount limited to a specific line of credit
from the U.S. Treasury, (c) the discretionary authority of the U.S. Treasury to
lend to the Government agency or instrumentality, or (d) the credit of the
instrumentality. (Examples of agencies and instrumentalities are: Federal Land
Banks, Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Central Bank for Cooperatives, Federal
Intermediate Credit Banks, Federal Home Loan Banks, General Services
Administration, Maritime Administration, Tennessee Valley Authority, District of
Columbia Armory Board, Inter-American Development Bank, Asian-American
Development Bank, Student Loan Marketing Association, International Bank for
Reconstruction and Development, Fannie Mae and Small Business Administration).
No assurance can be given that the U.S. Government will provide financial
support to the agencies or instrumentalities described in (b), (c) and (d) in
the future, other than as set forth above, since it is not obligated to do so by
law.

FIXED-INCOME SECURITIES. The Fund may invest in fixed-income securities to
achieve its investment objective. In periods of declining interest rates, the
Fund's yield (its income from portfolio investments over a stated period of
time) may tend to be higher than prevailing market rates, and in periods of
rising interests rates, the Fund's yield may tend to be lower than prevailing
market rates. Also, in periods of falling interest rates, the inflow of net new
money to the Fund from the continuous sales of its shares will likely be
invested in portfolio instruments producing lower yields than the balance of the
Fund's portfolio, thereby reducing the yield of the Fund. In periods of rising
interest rates, the opposite can be true. The net asset value ("NAV") of a fund
investing in fixed-income securities also may change as general levels of
interest rates fluctuate. When interest rates increase, the value of a portfolio
of fixed-income securities can be expected to decline. Conversely, when interest
rates decline, the value of a portfolio of fixed-income securities can be
expected to increase.

FLOATING RATE SECURITIES. The Fund may invest in floating rate securities.
A floating rate security provides for the automatic adjustment of its interest
whenever a specified interest rate changes. Interest rates on these securities
are ordinarily tied to, and are a percentage of, a widely recognized interest
rate, such as the yield on 90-day U.S. Treasury bills or the prime rate of a
specified bank. These rates may change as often as twice daily. Generally,

B-3

<PAGE>

changes in interest rates will have a smaller effect on the market value of
floating rate securities than on the market value of comparable fixed income
obligations. Thus, investing in variable and floating rate securities generally
allows less opportunity for capital appreciation and depreciation than investing
in comparable fixed income securities.

VARIABLE AMOUNT MASTER DEMAND NOTES. The Fund may invest in variable
amount master demand notes. Variable amount master demand notes are unsecured
obligations that are redeemable upon demand and are typically unrated. These
instruments are issued pursuant to written agreements between their issuers and
holders. The agreements permit the holders to increase (subject to an agreed
maximum) and the holders and issuers to decrease the principal amount of the
notes, and specify that the rate of interest payable on the principal fluctuates
according to an agreed-upon formula. If an issuer of a variable amount master
demand note were to default on its payment obligation, the Fund might be unable
to dispose of the note because of the absence of a secondary market and might,
for this or other reasons, suffer a loss to the extent of the default. The Fund
will invest in variable amount master demand notes issued only by entities that
Dreyfus finds creditworthy.

REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
U.S. Government securities dealers recognized by the Federal Reserve Board, with
member banks of the Federal Reserve System, or with such other brokers or
dealers that meet the Fund's credit guidelines. This technique offers a method
of earning income on idle cash. In a repurchase agreement, the Fund buys a
security from a seller that has agreed to repurchase the same security at a
mutually agreed upon date and price. The Fund's resale price will be in excess
of the purchase price, reflecting an agreed upon interest rate. This interest
rate is effective for the period of time the Fund is invested in the agreement
and is not related to the coupon rate on the underlying security. Repurchase
agreements may also be viewed as a fully collateralized loan of money by the
Fund to the seller. The period of these repurchase agreements will usually be
short, from overnight to one week, and at no time will the Fund invest in
repurchase agreements for more than one year. The Fund will always receive as
collateral securities whose market value including accrued interest is, and
during the entire term of the agreement remains, at least equal to 100% of the
dollar amount invested by the Fund in each agreement, and the Fund will make
payment for such securities only upon physical delivery or upon evidence of book
entry transfer to the account of the Custodian. If the seller defaults, the Fund
might incur a loss if the value of the collateral securing the repurchase
agreement declines and might incur disposition costs in connection with
liquidating the collateral. In addition, if bankruptcy proceedings are commenced
with respect to the seller of a security which is the subject of a repurchase
agreement, realization upon the collateral by the Fund may be delayed or
limited. The Fund seeks to minimize the risk of loss through repurchase
agreements by analyzing the creditworthiness of the obligors under repurchase
agreements, in accordance with the Fund's credit guidelines.

B-4

<PAGE>

should note that mortgage-related securities in which the Fund may invest are
developed and marketed from time-to-time and that, consistent with its
investment limitations, the Fund may invest in those mortgage-related securities
that Dreyfus believes may assist the Fund in achieving its investment objective.

The yield characteristics of mortgage-related securities differ from those
of traditional debt securities. Among the major differences are that interest
and principal payments on mortgage-related securities are made more frequently,
generally once a month, and that principal prepayments on mortgage-related
securities may occur at any time because the underlying mortgage loans generally
may be prepaid at any time. As a result, if the Fund purchases mortgage-related
securities at a premium, a prepayment rate that is faster than expected will
reduce yield to maturity, while a prepayment rate that is slower than expected
will have the opposite effect of increasing yield to maturity. Conversely, if
the Fund purchases mortgage-related securities at a discount, faster than
expected prepayments will increase, while slower than expected prepayments will
reduce, yield to maturity. The timing and magnitude of prepayments cannot be
predicted. Generally, however, prepayments on fixed-rate mortgage loans will
increase during a period of falling mortgage interest rates and will decrease
during a period of rising mortgage interest rates. Amounts available for
reinvestment by the Fund are likely to be greater during a period of falling
interest rates and, as a result, are likely to be reinvested at lower interest
rates than during a period of rising interest rates. Accelerated prepayments on
mortgage-related securities purchased by the Fund at a premium also impose a
risk of loss of principal because the premium may not have been fully amortized
at the time the principal is repaid in full. The value of mortgage-related
securities may be significantly affected by changes in interest rates, the
market's perception of the issuers, and the creditworthiness of the parties
involved.

Collateralized mortgage obligations ("CMOs") are debt obligations
collateralized by mortgage-related securities issued by GNMA, FNMA or FHLMC, or
by whole loans or private issuer pass-through securities. CMOs may be issued by
GNMA, FNMA, FHLMC or private issuers. CMOs are structured to direct payments on
underlying collateral to different series or classes of the obligations. CMO
classes may be specially structured in a manner that provides any of a wide
variety of investment characteristics, such as yield, effective maturity and
interest rate sensitivity. CMO structuring is accomplished by in effect
stripping out portions of the cash flows (comprised of principal and interest
payments) on the underlying mortgage assets and prioritizing the payments of
those cash flows. In the most extreme case, one class will be entitled to
receive all of the interest, but none of the principal, from the underlying
mortgage assets (the interest-only or "IO" class) and one class will be entitled
to receive all of the principal, but none of the interest (the principal-only or
"PO" class). CMOs may be structured in other ways that, based on mathematical
modeling or similar techniques, are expected to provide certain results. As
market conditions change, however, and particularly during periods of rapid or
unanticipated changes in market interest rates, the attractiveness of a CMO
class and the ability of a structure to provide the anticipated investment
characteristics may be significantly reduced. Such changes can result in
volatility in the market value, and in some instances reduced liquidity, of the
CMO class.

In determining the Fund's average maturity, the maturity of a
mortgage-related security is deemed to be its effective life (i.e., the average

B-5
<PAGE>

time in which the principal amount of the security is repaid), as estimated by
Dreyfus based on scheduled principal amortization and an anticipated rate of
principal prepayments, which rate, in turn, is based on past prepayment
patterns, prevailing interest rates and other factors. The effective life of a
mortgage-related security generally is substantially shorter than its stated
maturity and can be further shortened by greater than expected prepayments.

MORTGAGE PASS-THROUGH CERTIFICATES. Mortgage pass-through certificates are
issued by governmental, government-related and private entities and are backed
by pools of mortgages (including those on residential properties and commercial
real estate). The mortgage loans are made by savings and loan institutions,
mortgage bankers, commercial banks and other lenders. The securities are
"pass-through" securities because they provide investors with monthly payments
of principal and interest which, in effect, are a "pass-through" of the monthly
payments made by the individual borrowers on the underlying mortgages, net of
any fees paid to the issuer or guarantor of the pass-through certificates. The
principal governmental issuer of such securities is GNMA, which is a
wholly-owned U.S. Government corporation within the Department of Housing and
Urban Development. Government-related issuers include FHLMC and FNMA, both
government sponsored corporations owned entirely by private stockholders.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential and commercial mortgage loans.
Such issuers may be the originators of the underlying mortgage loans as well as
the guarantors of the mortgage-related securities.

(1) GNMA Mortgage Pass-Through Certificates ("Ginnie Maes"). Ginnie Maes
represent an undivided interest in a pool of mortgages that are insured by the
Federal Housing Administration or the Farmers Home Administration or guaranteed
by the Veterans Administration. Ginnie Maes entitle the holder to receive all
payments (including prepayments) of principal and interest owed by the
individual mortgagors, net of fees paid to GNMA and to the issuer which
assembles the mortgage pool and passes through the monthly mortgage payments to
the certificate holders (typically, a mortgage banking firm), regardless of
whether the individual mortgagor actually makes the payment. Because payments
are made to certificate holders regardless of whether payments are actually
received on the underlying mortgages, Ginnie Maes are of the "modified
pass-through" mortgage certificate type. The GNMA is authorized to guarantee the
timely payment of principal and interest on the Ginnie Maes as securities backed
by an eligible pool of mortgages. The GNMA guarantee is backed by the full faith
and credit of the United States, and the GNMA has unlimited authority to borrow
funds from the U.S. Treasury to make payments under the guarantee. The market
for Ginnie Maes is highly liquid because of the size of the market and the
active participation in the secondary market of securities dealers and a variety
of investors.

B-6
<PAGE>

default on an underlying mortgage, but in no event later than one year after it
becomes payable. Freddie Macs are not guaranteed by the United States or by any
of the Federal Home Loan Banks and do not constitute a debt or obligation of the
United States or of any Federal Home Loan Bank. The secondary market for Freddie
Macs is highly liquid because of the size of the market and the active
participation in the secondary market of the FHLMC, securities dealers and a
variety of investors.

(3) FNMA Guaranteed Mortgage Pass-Through Certificates ("Fannie Maes").
Fannie Maes represent an undivided interest in a pool of conventional mortgage
loans secured by first mortgages or deeds of trust, on one family, or two to
four family, residential properties. The FNMA is obligated to distribute
scheduled monthly installments of principal and interest on the mortgages in the
pool, whether or not received, plus full principal of any foreclosed or
otherwise liquidated mortgages. The obligation of the FNMA under its guaranty is
solely the obligation of the FNMA and is not backed by, nor entitled to, the
full faith and credit of the United States.

(4) Private issuer mortgage certificates are pass-through securities
structured in a similar fashion to GNMA, FNMA and FHLMC certificates. Private
issuer mortgage certificates are generally backed by conventional single family,
multi-family and commercial mortgages. Private issuer mortgage certificates
typically are not guaranteed by the U.S. Government, its agencies or
instrumentalities, but generally have some form of credit support in the form of
over-collateralization, pool insurance or other form of credit enhancement.

The market value of mortgage-related securities depends on, among other
things, the level of interest rates, the certificates' coupon rates and the
payment history of the mortgagors of the underlying mortgages.

ASSET-BACKED SECURITIES. Asset-backed securities are securities that
represent direct or indirect participations in, or are secured by and payable
from, assets such as motor vehicle installment sales contracts, installment loan
contracts, leases of various types of real and personal property, and
receivables from revolving credit (credit card) agreements. Such assets are
securitized through the use of trusts and special purpose corporations. The
value of such securities partly depends on loan repayments by individuals, which
may be adversely affected during general downturns in the economy. Payments or
distributions of principal and interest on asset-backed securities may be
supported by credit enhancements, such as various forms of cash collateral
accounts or letters of credit. Like mortgage-related securities, asset-backed
securities are subject to the risk of prepayment. The risk that recovery or
repossessed collateral might be unavailable or inadequate to support payments on
asset-backed securities, however, is greater than is the case for
mortgage-backed securities.

B-7
<PAGE>

will only invest in commercial paper of U.S. and foreign companies rated at the
time of purchase at least A-1 by Standard & Poor's, Prime-1 by Moody's, F-1 by
Fitch Investors Service, LLP, Duff 1 by Phoenix Duff & Phelps, Corp., or A1 by
IBCA, Inc.

BANK INSTRUMENTS. The Fund may purchase bankers' acceptances, certificates
of deposit, time deposits, and other short-term obligations issued by domestic
banks, foreign subsidiaries or foreign branches of domestic banks, domestic and
foreign branches of foreign banks, domestic savings and loan associations and
other banking institutions. Included among such obligations are Eurodollar
certificates of deposit ("ECDs"), Eurodollar time deposits ("ETDs") and Yankee
Dollar certificates of deposit ("Yankee CDs"). ECDs are U.S. dollar-denominated
certificates of deposit issued by foreign branches of domestic banks. ETDs are
U.S. dollar-denominated time deposits in a foreign branch of a U.S. bank or a
foreign bank. Yankee CDs are certificates of deposit issued by a U.S. branch of
a foreign bank denominated in U.S. dollars and held in the United States. The
fund may also invest in Eurodollar bonds and notes, which are obligations that
pay principal and interest in U.S. dollars held in banks outside the United
States, primarily in Europe. All of these obligations are subject to somewhat
different risks than are the obligations of domestic banks or issuers in the
United States. See "Foreign Securities."

FOREIGN SECURITIES. The Fund may purchase securities of foreign governments
and may invest in obligations of foreign branches of domestic banks and domestic
branches of foreign banks. Investment in foreign securities presents certain
risks, including those resulting from fluctuations in currency exchange rates,
revaluation of currencies, adverse political and economic developments, the
possible imposition of currency exchange blockages or other foreign governmental
laws or restrictions, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
Moreover, securities of many foreign issuers may be less liquid and their prices
more volatile than those of comparable domestic issuers. In addition, with
respect to certain foreign countries, there is the possibility of expropriation,
confiscatory taxation and limitations on the use or removal of funds or other
assets of the Fund, including withholding of dividends. Foreign securities may
be subject to foreign government taxes that would reduce the yield on such
securities.

B-8
<PAGE>

investment and not with a view to public distribution. Any resale by the
purchaser must be pursuant to registration or an exemption therefrom. Section
4(2) paper normally is resold to other institutional investors like the Fund
through or with the assistance of the issuer or investment dealers who make a
market in the Section 4(2) paper, thus providing liquidity. Rule 144A securities
generally must be sold to other qualified institutional buyers. If a particular
investment in Section 4(2) paper or Rule 144A securities is not determined to be
liquid, that investment will be included within the percentage limitation on
investment in illiquid securities. The ability to sell Rule 144A securities to
qualified institutional buyers is a recent development and it is not possible to
predict how this market will mature. Investing in Rule 144A securities could
have the effect of increasing the level of Fund illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in purchasing
these securities from the Fund or other holder.

INVESTMENT TECHNIQUES

BORROWING. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.

WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. New issues of
U.S. Treasury and Government securities are often offered on a "when-issued"
basis. This means that delivery and payment for the securities normally will
take place approximately 7 to 45 days after the date the buyer commits to
purchase them. The payment obligation and the interest rate that will be
received on securities purchased on a "when-issued" basis are each fixed at the
time the buyer enters into the commitment. The Fund will make commitments to
purchase such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities or dispose of the commitment
before the settlement date if it is deemed advisable as a matter of investment
strategy. Cash or marketable high-grade debt securities equal to the amount of
the above commitments will be segregated on the Fund's records. For the purpose
of determining the adequacy of these securities the segregated securities will
be valued at market. If the market value of such securities declines, additional
cash or securities will be segregated on the Fund's records on a daily basis so
that the market value of the account will equal the amount of such commitments
by the Fund.

B-9
<PAGE>

Securities purchased on a "when-issued" basis and the securities held by
the Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value of
such securities will fluctuate inversely to changes in interest rates i.e., they
will appreciate in value when interest rates decline and decrease in value when
interest rates rise. Therefore, if in order to achieve higher interest income
the Fund remains substantially fully invested at the same time that it has
purchased securities on a "when-issued" basis, there will be a greater
possibility of fluctuation in the Fund's NAV.

When payment for "when-issued" securities is due, the Fund will meet its
obligations from then-available cash flow, the sale of segregated securities,
the sale of other securities and/or, although it would not normally expect to do
so, from the sale of the "when-issued" securities themselves (which may have a
market value greater or less than the Fund's payment obligation). The sale of
securities to meet such obligations carries with it a greater potential for the
realization of capital gains, which are subject to federal income taxes.

LOANS OF FUND SECURITIES. The Fund may lend securities from its portfolio
to brokers, dealers and other financial institutions needing to borrow
securities to complete certain transactions. The Fund continues to be entitled
to payments in amounts equal to the interest, dividends or other distributions
payable on the loaned securities, which affords the Fund an opportunity to earn
interest on the amount of the loan and on the loaned securities' collateral.
Loans of portfolio securities may not exceed 33-1/3% of the value of the Fund's
total assets and the Fund will receive collateral consisting of cash, U.S.
Government securities or irrevocable letters of credit which will be maintained
at all times in an amount equal to at least 100% of the current market value of
the loaned securities. These loans are terminable by the Fund at any time upon
specified notice. The Fund might experience loss if the institution to which it
has lent its securities fails financially or breaches its agreement with the
Fund. In addition, it is anticipated that the Fund may share with the borrower
some of the income received on the collateral for the loan or that it will be
paid a premium for the loan. In determining whether to lend securities, the Fund
considers all relevant factors and circumstances including the creditworthiness
of the borrower.

REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements to meet redemption requests where the liquidation of Fund securities

B-10
<PAGE>

is deemed by Dreyfus to be disadvantageous. Under a reverse repurchase
agreement, the Fund: (1) transfers possession of Fund securities to a bank or
broker-dealer in return for cash in an amount equal to a percentage of the
securities' market value; and (2) agrees to repurchase the securities at a
future date by repaying the cash with interest. The Fund retains record
ownership of the security involved including the right to receive interest and
principal payments. Cash or liquid high-grade debt securities held by the Fund
equal in value to the repurchase price including any accrued interest will be
maintained in a segregated account while a reverse repurchase agreement is in
effect.

INVESTMENT RESTRICTIONS

B-11
<PAGE>

issue multiple classes of shares. The purchase or sale of futures contracts and
related options shall not be considered to involve the borrowing of money or
issuance of senior securities.

7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.

NONFUNDAMENTAL The Fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its investable assets in
securities of a single open-end management investment company with substantially
the same investment objective, policies and limitations as the Fund.

3. The Fund shall not purchase oil, gas or mineral leases.

B-12
<PAGE>

6. The Fund will invest no more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements with remaining maturities
in excess of seven days, time deposits with maturities in excess of seven days
and other securities which are not readily marketable. For purposes of this
limitation, illiquid securities shall not include Section 4(2) paper and
securities which may be resold under Rule 144A under the Securities Act of 1933,
provided that the Board of Directors, or its delegate, determines that such
securities are liquid based upon the trading markets for the specific security.

8. The Fund shall not purchase any security while borrowings representing more
than 5% of the Fund's total assets are outstanding.

10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate investment
in such classes of securities would exceed 5% of its total assets except that:
this limitation shall not apply to standby commitments, and this limitation
shall not apply to the Fund's transactions in futures contracts and options.

B-13
<PAGE>

MANAGEMENT OF THE FUND

FEDERAL LAW AFFECTING MELLON BANK

The Glass-Steagall Act of 1933 prohibits national banks from engaging in
the business of underwriting, selling or distributing securities and prohibits a
member bank of the Federal Reserve System from having certain affiliations with
an entity engaged principally in that business. The activities of Mellon Bank in
informing its customers of, and performing, investment and redemption services
in connection with the Fund, and in providing services to the Fund as custodian,
as well as Dreyfus' investment advisory activities, may raise issues under these
provisions. Mellon Bank has been advised by counsel that the activities
contemplated under these arrangements are consistent with its statutory and
regulatory obligations.

Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of such
future statutes and regulations, could prevent Mellon Bank or Dreyfus from
continuing to perform all or a part of the above services for its customers
and/or the Fund. If Mellon Bank or Dreyfus were prohibited from serving the Fund
in any of its present capacities, the Board of Directors would seek an
alternative provider(s) of such services.

DIRECTORS AND OFFICERS

The Dreyfus Corporation...............................Investment Adviser
Premier Mutual Fund Services, Inc..... Sub-Administrator and Distributor
Dreyfus Transfer, Inc.....................................Transfer Agent
Mellon Bank.......................................Custodian for the Fund

B-14
<PAGE>

(collectively, with the Company, the "Dreyfus/Laurel Funds") and the Dreyfus
High Yield Strategies Fund.

DIRECTORS OF THE COMPANY

o*J. TOMLINSON FORT. Director of the Company; Partner, Reed, Smith, Shaw &
McClay (law firm). Age: 70 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.

B-15
<PAGE>

- --------------------------------
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.

OFFICERS OF THE COMPANY

#MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior
Vice President and General Counsel of Funds Distributor, Inc. From August
1996 to March 1998, she was Vice President and Assistant General Counsel
for Loomis, Sayles & Company, L.P. From January 1986 to July 1996, she was
an associate with the law firm of Ropes & Gray. Age: 39 years old.

#MARIEE. CONNOLLY. President and Treasurer of the Company. President, Chief
Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which is
Boston Institutional Group, Inc. Age: 41 years old.

B-16
<PAGE>

B-17
<PAGE>

The address of each officer of the Company is 200 Park Avenue, New York,
New York 10166.

B-18
<PAGE>

...... Total Compensation
...... Aggregate From the Company
Name of Board..... Compensation and Fund Complex
MEMBER ..... FROM THE COMPANY# PAID TO BOARD MEMBER****

Joseph S. DiMartino*

James M. Fitzgibbons

J. Tomlinson Fort** none none

Arthur L. Goeschel

Kenneth A. Himmel

Stephen J. Lockwood

John J. Sciullo

Roslyn M. Watson

Benaree Pratt Wiley***
- ----------------------------
# 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. Amount does not include reimbursed expenses for
attending Board meetings, which amounted to $[ ] for the Company.
* Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board member
of the Company and the funds in the Dreyfus/Laurel Funds and separately by
the Dreyfus High Yield Strategies Fund. For the fiscal year ended October 31,
1998, the aggregate amount of fees and expenses received by J. Tomlinson Fort
from Dreyfus for serving as a Board member of the Company was
______________________. For the year ended December 31, 1998, the aggregate
amount of fees and expenses received by Mr. Fort for serving as a Board
member of all funds in the Dreyfus/Laurel Funds (including the Company) and
Dreyfus High Yield Strategies Fund (for which payment is made directly by the
fund) was ______________________. In addition, Dreyfus reimbursed Mr. Fort a
total of $__________________ for expenses attributable to the Company's Board
meetings which is not included in the $__________________ amount in note #
above.
***Payments to Ms. Wiley were for the period from April 23, 1998 (the date she
was elected as a Board member) through October 31, 1998.
****The Dreyfus Family of Funds consists of ___ mutual funds.

The officers and Directors of the Company as a group owned beneficially
less than 1% of the total shares of the Fund outstanding as of November __,
1998.

B-19
<PAGE>

PRINCIPAL SHAREHOLDERS. As of January 31, 1999, the following
shareholder(s) owned of record 5% or more of Investor and BASIC shares of the
Fund: _________.

MANAGEMENT ARRANGEMENTS

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN THE FUND'S PROSPECTUS ENTITLED "EXPENSES" AND "Management."

Dreyfus is a wholly-owned subsidiary of Mellon Bank Corporation ("Mellon").
Mellon is a publicly owned multibank holding company incorporated under
Pennsylvania law in 1971 and registered under the Federal Bank Holding Company
Act of 1956, as amended. Mellon provides a comprehensive range of financial
products and services in domestic and selected international markets. Mellon is
among the 25 largest bank holding companies in the United States based on total
assets.

The Fund is not managed according to traditional methods of "active"
investment management, which involve the buying and selling of securities based
upon economic, financial and market analysis and investment judgment. Instead,
the Fund utilizes a "passive" investment approach, attempting to duplicate the
investment performance of the Aggregate Bond Index through the use of
statistical procedures.

The Management Agreement will continue from year to year provided that a
majority of the Directors who are not "interested persons" of the Company and
either a majority of all Directors or a majority (as defined in the 1940 Act) of
the shareholders of the Fund approve its continuance. The Management Agreement
was last approved by the Board of Directors on _____________, 1999 to continue
until _____________, 2000. The Company may terminate the Management Agreement
upon the vote of a majority of the Board of Directors or upon the vote of a
majority of the Fund's outstanding voting securities on 60 days' written notice
to Dreyfus. Dreyfus may terminate the Management Agreement upon 60 days' written
notice to the Company. The Management Agreement will terminate immediately and
automatically upon its assignment.

B-20
<PAGE>

Officer and a director; Lawrence S. Kash, Vice Chairman-Distribution and a
director; Ronald P. O'Hanley III, Vice Chairman; J. David Officer, Vice Chairman
and a director; William T. Sandalls, Jr., Executive Vice President; Mark N.
Jacobs, Vice President, General Counsel and Secretary; Patrice M. Kozlowski,
Vice President-Corporate Communications; Mary Beth Leibig, Vice President-Human
Resources; Andrew S. Wasser, Vice-President-Information Systems; Theodore A.
Schachar, Vice President; Wendy Strutt, Vice President; Richard Terres, Vice
President; William H. Maresca, Controller; James Bitetto, Assistant Secretary;
Steven F. Newman, Assistant Secretary; and Mandell L. Berman, Burton C. Borgelt,
Frank V. Cahouet and Richard F. Syron, directors.

EXPENSES. Effective August 15, 1997, the Management Agreement was amended
to reflect a reduction in the annual management fee payable by the Fund to
Dreyfus from 0.40% to 0.15% of the value of the Fund's average daily net assets.
Dreyfus pays all of the Fund's expenses, except brokerage fees, taxes, interest,
fees and expenses of the non-interested directors (including counsel fees), Rule
12b-1 fees (if applicable) and extraordinary expenses. Although Dreyfus does not
pay for the fees and expenses of the non-interested Directors (including counsel
fees), Dreyfus is contractually required to reduce its investment management fee
by an amount equal to the Fund's allocable share of such fees and expenses. From
time to time, Dreyfus may voluntarily waive a portion of the investment
management fees payable by the Fund, which would have the effect of lowering the
expense ratio of the Fund and increasing return to investors. Expenses
attributable to the Fund are charged against the Fund's assets; other expenses
of the Company are allocated among its funds on the basis determined by the
Board, including, but not limited to, proportionately in relation to the net
assets of each fund.

For the last three years, the Fund had the following expenses:

For the Fiscal Year Ended October 31,
1998 1997 1996

Management fees $_____ $______ $69,108

THE DISTRIBUTOR. Premier Mutual Fund Services, Inc. (the "Distributor"),
located at 60 State Street, Boston, Massachusetts 02109, serves as the Fund's
distributor on a best efforts basis pursuant to an agreement which is renewable
annually. Dreyfus may pay the Distributor for shareholder services from Dreyfus'
own assets, including past profits but not including the management fee paid by
the Fund. The Distributor may use part or all of such payments to pay certain
banks, securities brokers or dealers and other financial institutions ("Agents")
for these services. The Distributor also acts as sub-administrator for the
Fund and as distributor for the other funds in the Dreyfus Family of Funds.

B-21
<PAGE>

PURCHASE OF SHARES

GENERAL. The Fund offers Investor shares and BASIC shares. (Investor
shares and BASIC shares of the Fund were formerly called Institutional shares
and Retail shares, respectively.) Investor shares and BASIC shares are
identical, except as to the services offered to, the expenses borne by, and the
minimum purchase and account balance maintenance requirements of, each Class.
Investor shares and BASIC shares are offered to any investor. You should consult
your Agent to determine which Class of shares is offered by the Agent. You may
be charged a fee if you effect transactions in Fund shares through an Agent.
Unless the Fund is otherwise instructed, new purchases by existing shareholders
will be in the same Class of shares that the shareholder then holds. The Fund
reserves the right to reject any purchase order.

The minimum initial investment for BASIC shares is $10,000. The minimum
initial investment for Investor shares is $2,500, or $1,000 if you are a client
of an Agent which maintains an omnibus account in the Investor Class of the Fund
and has made an aggregate minimum initial purchase for its customers of $2,500.
Subsequent investments for BASIC shares must be at least $1,000 (or at least
$100 in the case of persons who have held BASIC shares since August 14, 1997)
and for Investor shares must be at least $100. However, the minimum initial
investment for BASIC shares with respect to Dreyfus-sponsored Keogh Plans, IRAs
(including regular IRAs, spousal IRAs for a non-working spouse, Roth IRAs,
SEP-IRAs and rollover IRAs), and 403(b)(7) Plans with only one participant is
$5,000; subsequent investments for BASIC shares with respect to such accounts
must be at least $1,000 (with no minimum on subsequent purchases by holders of
BASIC shares in such accounts since August 14, 1997). The minimum initial
investment for Investor shares with respect to Dreyfus-sponsored Keogh Plans,
IRAs (including regular IRAs, spousal IRAs for a non-working spouse, Roth IRAs,
SEP-IRAs and rollover IRAs) and 403(b)(7) Plans with only one participant is
$750 and with respect to Dreyfus-sponsored Education IRAs is $500. There is no
minimum on subsequent purchases of Investor shares with respect to such
accounts. The initial investment must be accompanied by the Fund's Account
Application. For full-time or part-time employees of Dreyfus or any of its
affiliates or subsidiaries, directors of Dreyfus, Board members of a fund
advised by Dreyfus including members of the Company's Board, or the spouse or
minor child of any of the foregoing, the minimum initial investment for Investor
shares is $1,000. For full-time or part-time employees of Dreyfus or any of its
affiliates or subsidiaries who elect to have a portion of their pay directly
deposited into their Fund account, the minimum initial investment for Investor
shares is $50. The Fund reserves the right to offer shares without regard to
minimum purchase requirements to employees participating in certain qualified or
non-qualified employee benefit plans or other programs where contributions or
account information can be transmitted in a manner and form acceptable to the
Fund. The Fund reserves the right to vary further the initial and subsequent
investment minimum requirements at any time.

Investor shares are offered without regard to the minimum initial
investment requirements through Dreyfus-Automatic Asset Builder, Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan pursuant to
the Dreyfus Step Program (described under "Shareholder Services"). These

B-22
<PAGE>

services enable you to make regularly scheduled investments and may provide you
with a convenient way to invest for long-term financial goals. You should be
aware, however, that periodic investment plans do not guarantee a profit and
will not protect an investor against loss in a declining market.

Both Investor shares and BASIC shares are sold on a continuous basis. NAV
per share is determined as of the close of trading on the floor of the New York
Stock Exchange ("NYSE") (currently 4:00 p.m., New York time), on each day the
NYSE is open for business. NAV per share of each class is computed by dividing
the value of the Fund's net assets represented by such class (i.e., the value of
its assets less liabilities) by the total number of shares of such class
outstanding. For further information regarding the methods employed in valuing
the Fund's investments, see "Determination of Net Asset Value".

If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the NYSE (currently 4:00 p.m., New York time) on a
business day, Fund shares will be purchased at the NAV determined as of the
close of trading on the floor of the NYSE on that day. Otherwise, Fund shares
will be purchased at the NAV determined as of the close of trading on the floor
of the NYSE on the next business day, except where shares are purchased through
a dealer as provided below.

Orders for the purchase of Fund shares received by dealers by the close of
trading on the floor of the NYSE on any business day and transmitted to the
Distributor or its designee by the close of its business day (normally 5:15
p.m., New York time) will be based on the NAV per share determined as of the
close of trading on the floor of the NYSE on that day. Otherwise, the orders
will be based on the next determined NAV. It is the dealers' responsibility to
transmit orders so that they will be received by the Distributor or its designee
before the close of its business day. For certain institutions that have entered
into agreements with the Distributor, payment for the purchase of Fund shares
may be transmitted, and must be received by the Transfer Agent, within three
business days after the order is placed. If such payment is not received within
three business days after the order is placed, the order may be canceled and the
institution could be held liable for resulting fees and/or losses.

The Distributor may pay dealers a fee of up to 0.5% of the amount invested
through such dealers in Fund shares by employees participating in qualified or
non-qualified employee benefit plans or other programs where (i) the employers
or affiliated employers maintaining such plans or programs have a minimum of 250
employees eligible for participation in such plans or programs or (ii) such
plan's or program's aggregate investment in the Dreyfus Family of Funds or
certain other products made available by the Distributor to such plans or
programs exceeds $1,000,000 ("Eligible Benefit Plans"). Shares of funds in the
Dreyfus Family of Funds then held by Eligible Benefit Plans will be aggregated
to determine the fee payable. The Distributor reserves the right to cease paying
these fees at any time. The Distributor will pay such fees from its own funds,
other than amounts received from the Fund, including past profits or any other
source available to it.

B-23
<PAGE>

Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Fund's Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service.

DREYFUS TELETRANSFER PRIVILEGE. You may purchase Fund shares by telephone
through the TELETRANSFER Privilege if you have checked the appropriate box and
supplied the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these documents and
your Fund account. Only a bank account maintained in a domestic financial
institution that is an Automated Clearing House ("ACH") member may be so
designated. DREYFUS TELETRANSFER purchase orders may be made at any time.
Purchase orders received by 4:00 p.m., New York time, on any business day that
the Transfer Agent and the NYSE are open for business will be credited to the
shareholder's Fund account on the next bank business day following such purchase
order. Purchase orders made after 4:00 p.m., New York time, on any business day
the Transfer Agent and the NYSE are open for business, or orders made on
Saturday, Sunday or any Fund holiday (e.g., when the NYSE is not open for
business), will be credited to the shareholder's Fund account on the second bank
business day following such purchase order. To qualify to use the DREYFUS
TELETRANSFER Privilege, the initial payment for purchase of Fund shares must be
drawn on, and redemption proceeds paid to, the same bank and account as are
designated on the Account Application or Shareholder Services Form on file. If
the proceeds of a particular redemption are to be wired to an account at any
other bank, the request must be in writing and signature-guaranteed. See
"Redemption of Shares -DREYFUS TELETRANSFER Privilege." The Fund may modify or
terminate this Privilege at any time or charge a service fee upon notice to
shareholders. No such fee currently is contemplated.

REOPENING AN ACCOUNT. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar

B-24
<PAGE>

year the account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.

SHARE CERTIFICATES. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.

DISTRIBUTION PLAN

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "YOUR INVESTMENT."

Investor shares are subject to annual fees for distribution and
shareholder services. Distribution and shareholder servicing fees paid by
Investor shares will cause Investor shares to have a higher expense ratio and
pay lower dividends than BASIC shares.

The Securities and Exchange Commission has adopted Rule 12b-1 under the
1940 Act (the "Rule") regulating the circumstances under which investment
companies such as the Company may, directly or indirectly, bear the expenses of
distributing their shares. The Rule defines distribution expenses to include
expenditures for "any activity which is primarily intended to result in the sale
of fund shares." The Rule, among other things, provides that an investment
company may bear such expenses only pursuant to a plan adopted in accordance
with the Rule.

DISTRIBUTION PLAN - INVESTOR SHARES. With respect to the Investor shares
of the Fund, the Company has adopted a Distribution Plan ("Plan") and may enter
into Agreements with Agents pursuant to the Plan.

B-25
<PAGE>

expenses primarily intended to result in the sale of Investor shares of the
Fund. The Plan allows the Distributor to make payments from the Rule 12b-1 fees
it collects from the Fund to compensate Agents that have entered into Selling
Agreements ("Agreements") with the Distributor. Under the Agreements, the Agents
are obligated to provide distribution-related services with regard to the Fund
and/or shareholder services to the Agent's clients that own Investor shares of
the Fund.

The Plan provides that a report of the amounts expended under the Plan,
and the purposes for which such expenditures were incurred, must be made to the
Company's Directors for their review at least quarterly. In addition, the Plan
provides that it may not be amended to increase materially the costs which the
Fund may bear for distribution pursuant to the Plan without approval of the
Fund's shareholders, and that other material amendments of the Plan must be
approved by the vote of a majority of the Directors and of the Directors who are
not "interested persons" (as defined in the 1940 Act) of the Company and who do
not have any direct or indirect financial interest in the operation of the Plan,
cast in person at a meeting called for the purpose of considering such
amendments. The Plan is subject to annual approval by the entire Board of
Directors and by the Directors who are neither interested persons nor have any
direct or indirect financial interest in the operation of the Plan, by vote cast
in person at a meeting called for the purpose of voting on the Plan. The Plan
was so approved by the Directors at a meeting held on ___________________. The
Plan is terminable, as to the Fund's Investor shares, at any time by vote of a
majority of the Directors who are not interested persons and have no direct or
indirect financial interest in the operation of the Plan or by vote of the
holders of a majority of the outstanding Investor shares of the Fund.

An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one Class of
shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under the Plan are payable without regard to actual
expenses incurred. The Fund and the Distributor may suspend or reduce payments
under the Plan at any time, and payments are subject to the continuation of the
Fund's Plan and the Agreements described above. From time to time, the Agents,
the Distributor and the Fund may voluntarily agree to reduce the maximum fees
payable under the Plan.

For the fiscal year ended October 31, 1998, the Fund paid the Distributor
and Dreyfus Service Corporation: $____ and $______, respectively, pursuant to
the Plan with respect to Investor shares.

REDEMPTION OF SHARES

The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Account Policies," "Services
For Fund Investors," "Instructions for Regular Accounts" and "Instructions for
IRAs."

B-26
<PAGE>

Class than specified to be redeemed, the redemption request may be delayed until
the Transfer Agent receives further instructions from you or your Agent.

The Fund imposes no charges when shares are redeemed. Agents or other
institutions may charge their clients a nominal fee for effecting redemptions of
Fund shares. Any certificates representing Fund shares being redeemed must be
submitted with the redemption request. The value of the shares redeemed may be
more or less than their original cost, depending upon the Fund's then-current
NAV per share.

PROCEDURES. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or through the Telephone Redemption
Privilege which is granted automatically unless you specifically refuse it by
checking the applicable "No" box on the Account Application. The Telephone
Redemption Privilege may be established for an existing account by a separate
signed Shareholder Services Form or by oral request from any of the authorized
signatories on the account by calling 1-800-645-6561. You also may redeem shares
through the Wire Redemption Privilege or the Dreyfus TELETRANSFER Privilege if
you have checked the appropriate box and supplied the necessary information on
the Account Application or have filed a Shareholders Services Form with the
Transfer Agent. If you are a client of certain Agents ("Selected Dealers"), you
can also redeem Fund shares through the Selected Dealer. Other redemption
procedures may be in effect for clients of certain Agents and institutions. The
Fund makes available to certain large institutions the ability to issue
redemption instructions through compatible computer facilities. The Fund
reserves the right to refuse any request made by telephone, including requests
made shortly after a change of address, and may limit the amount involved or the
number of such requests. The Fund may modify or terminate any redemption
privilege at any time or charge a service fee upon notice to shareholders. No
such fee currently is contemplated. Shares held under Keogh Plans, IRAs, or
other retirement plans, and shares for which certificates have been issued, are
not eligible for the Wire Redemption, Telephone Redemption or TELETRANSFER
Privilege.

The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including over
The Dreyfus Touch(R) automated telephone system) from any person representing
himself or herself to be you, or a representative of your Agent, and reasonably
believed by the Transfer Agent to be genuine. The Fund will require the Transfer
Agent to employ reasonable procedures, such as requiring a form of personal
identification, to confirm that instructions are genuine and, if it does not
follow such procedures, the Fund or the Transfer Agent may be liable for any
losses due to unauthorized or fraudulent instructions. Neither the Fund nor the
Transfer Agent will be liable for following telephone instructions reasonably
believed to be genuine.

B-27
<PAGE>

REDEMPTION THROUGH A SELECTED DEALER. Customers of Selected Dealers may
make redemption requests to their Selected Dealer. If the Selected Dealer
transmits the redemption request so that it is received by the Transfer Agent
prior to the close of trading on the floor of the NYSE (currently 4:00 p.m., New
York time), the redemption request will be effective on that day. If a
redemption request is received by the Transfer Agent after the close of trading
on the floor of the NYSE, the redemption request will be effective on the next
business day. It is the responsibility of the Selected Dealer to transmit a
request so that it is received in a timely manner. The proceeds of the
redemption are credited to your account with the Selected Dealer.

In addition, the Distributor will accept orders from Selected Dealers with
which it has sales agreements for the repurchase of Fund shares held by
shareholders. Repurchase orders received by dealers by the close of trading on
the floor of the NYSE on any business day and transmitted to the Distributor or
its designee prior to the close of its business day (normally 5:15 p.m., New
York time) are effected at the price determined as of the close of trading on
the floor of the NYSE on that day. Otherwise, the Fund shares will be redeemed
at the next determined NAV per share. It is the responsibility of the Selected
Dealer to transmit orders on a timely basis. The Selected Dealer may charge the
shareholder a fee for executing the order. This repurchase arrangement is
discretionary and may be withdrawn at any time.

WIRE REDEMPTION PRIVILEGE. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone, or letter redemption
instructions from any person representing himself or herself to be the investor,
or a representative of the investor's Agent, and reasonably believed by the
Transfer Agent to be genuine. Ordinarily, the Fund will initiate payment for
shares redeemed pursuant to this Privilege on the next business day after
receipt by the Transfer Agent of the redemption request in proper form.
Redemption proceeds ($1,000 minimum), will be transferred by Federal Reserve
wire only to the commercial bank account specified by the investor on the
Account Application or Shareholder Services Form. Redemption proceeds, if wired,
will be wired to the investor's account at the bank of record designated in the
investor's file at the Transfer Agent, if the investor's bank is a member of the
Federal Reserve System, or to a correspondent bank if the investor's bank is not
a member. Holders of jointly registered Fund or bank accounts may have
redemption proceeds of only up to $250,000 wired within any 30-day period. Fees
ordinarily are imposed by such bank and usually are borne by the investor.
Immediate notification by the correspondent bank to the investor's bank is
necessary to avoid a delay in crediting the funds to the investor's bank
account.

Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code which
may be used for domestic or overseas transmissions:

Transfer Agent's
TRANSMITTAL CODE ANSWER BACK SIGN

144295 144295 TSSG PREP

B-28
<PAGE>

STOCK CERTIFICATES; SIGNATURES. Any certificates representing Fund shares
to be redeemed must be submitted with the redemption request. Written redemption
requests must be signed by each shareholder, including each holder of a joint
account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations,
as well as from participants in the NYSE Medallion Signature Program, the
Securities Transfer Agents Medallion Program ("STAMP") and the Stock Exchanges
Medallion Program. Guarantees must be signed by an authorized signatory of the
guarantor and "Signature-Guaranteed" must appear with the signature. The
Transfer Agent may request additional documentation from corporations,
executors, administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular verification.
For more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.

DREYFUS TELETRANSFER PRIVILEGE. You may request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an ACH member may be designated. Redemption
proceeds will be on deposit in the investor's account at an ACH member bank
ordinarily two business days after receipt of the redemption request. Investors
should be aware that if they have selected the DREYFUS TELETRANSFER Privilege,
any request for a wire redemption will be effected as a DREYFUS TELETRANSFER
transaction through the ACH system unless more prompt transmittal specifically
is requested. Holders of jointly registered Fund or bank accounts may redeem
through the DREYFUS TELETRANSFER Privilege for transfer to their bank account
not more than $250,000 within any 30-day period. See "Purchase of Shares
- -DREYFUS TELETRANSFER Privilege."

REDEMPTION COMMITMENT. The Company has committed itself to pay in cash all
redemption requests by any shareholder of record of the Fund, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the SEC. In the case of requests for
redemptions in excess of such amount, the Company's Board of Directors reserves
the right to make payments in whole or in part in securities or other assets in
case of an emergency or any time a cash distribution would impair the liquidity
of the Fund to the detriment of the existing shareholders. In such event, the

B-29
<PAGE>

securities would be valued in the same manner as the Fund's portfolio is valued.
If the recipient sold such securities, brokerage charges might be incurred.

SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or the
date of payment postponed (a) during any period when the NYSE is closed (other
than customary weekend and holiday closings), (b) when trading in the markets
the Fund ordinarily utilizes is restricted, or when an emergency exists as
determined by the SEC so that disposal of the Fund's investments or
determination of its NAV is not reasonably practicable, or (c) for such other
periods as the SEC by order may permit to protect the Fund's shareholders.

SHAREHOLDER SERVICES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES" AND
"SERVICES FOR FUND INVESTORS."

FUND EXCHANGES. Shares of any Class of the Fund may be exchanged for
shares of certain other funds advised or administered by Dreyfus. Unless the
Fund is otherwise instructed, exchanges are in the same class of shares that the
shareholder then holds. Shares of the funds purchased by exchange will be
purchased on the basis of relative NAV per share as follows:

A. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.

B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the applicable
sales load will be deducted.

C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a sales
load.

To accomplish an exchange under item D above, shareholders must notify the
Transfer Agent of their prior ownership of Fund shares and their account number.
Any such exchange is subject to confirmation of an investor's holdings through a
check of appropriate records.

B-30
<PAGE>

To request an exchange, an investor or an investor's Agent acting on the
investor's behalf must give exchange instructions to the Transfer Agent in
writing or by telephone. The ability to issue exchange instructions by telephone
is given to all Fund shareholders automatically unless the investor checks the
applicable "No" box on the Account Application, indicating that the investor
specifically refuses this privilege. The Telephone Exchange Privilege may be
established for an existing account by written request signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-645-6561, or by oral request from any of the
authorized signatories on the account, also by calling 1-800-645-6561. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent to
act on telephonic instructions (including over The Dreyfus Touch(R) Automated
Telephone System) from any person representing himself or herself to be the
investor or a representative of the investor's Agent, and reasonably believed by
the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange. No fees currently are charged shareholders directly in connection with
exchanges, although the Fund reserves the right, upon not less than 60 days'
written notice, to charge shareholders a nominal fee in accordance with rules
promulgated by the SEC.

Exchanges of Fund shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such investor's
Retirement Plan account in another fund.

DREYFUS AUTO-EXCHANGE PRIVILEGE. The Dreyfus Auto-Exchange Privilege
permits an investor to regularly purchase (on a semi-monthly, monthly, quarterly
or annual basis), in exchange for shares of the Fund, shares of certain other
eligible funds in the Dreyfus Family of Funds of which the investor is a
shareholder. The amount the investor designates, which can be expressed either
in terms of a specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to the
schedule the investor has selected. This Privilege is available only for
existing accounts. With respect to Fund shares held by a Retirement Plan,
exchanges may be made only between the investor's Retirement Plan account in one
fund and such investor's Retirement Plan account in another fund. Shares will be
exchanged on the basis of relative NAV per share as described above under "Fund
Exchanges." Enrollment in or modification or cancellation of this Privilege is
effective three business days following notification by the investor. An
investor will be notified if the investor's account falls below the amount
designated to be exchanged under this Privilege. In this case, an investor's
account will fall to zero unless additional investments are made in excess of
the designated amount prior to the next Auto-Exchange transaction. Shares held
under IRAs and other retirement plans are eligible for this Privilege. Exchanges
of IRA shares may be made between IRA accounts and from regular accounts to IRA
accounts, but not from IRA accounts to regular accounts. With respect to all
other retirement accounts, exchanges may be made only among those accounts.

B-31
<PAGE>

The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. The Fund may charge a
service fee for the use of this Privilege. No such fee currently is
contemplated. For more information concerning this Privilege and the funds in
the Dreyfus Family of Funds eligible to participate in this Privilege, or to
obtain a Dreyfus Auto-Exchange Authorization Form, please call toll free
1-800-645-6561.

Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund exchange service or the Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.

DREYFUS-AUTOMATIC ASSET BUILDER(R). Dreyfus Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000 per
transaction) at regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. Only an account
maintained at a domestic financial institution which is an ACH member may be so
designated. To establish a Dreyfus-Automatic Asset Builder account, you must
file an authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may cancel your participation
in this Privilege or change the amount of purchase at any time by mailing
written notification to The Dreyfus Family of Funds, P.O. Box 9671, Providence,
Rhode Island 02940-9671 and the notification will be effective three business
days following receipt. The Fund may modify or terminate this Privilege at any
time or charge a service fee. No such fee currently is contemplated.

AUTOMATIC WITHDRAWAL PLAN. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends and other
distributions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by filing an Automatic
Withdrawal Plan application with the Transfer Agent or by oral request from any
of the authorized signatories on the account by calling 1-800-645-6561.
Automatic Withdrawal may be terminated at any time by the investor, the Fund or
the Transfer Agent. Shares for which certificates have been issued may not be
redeemed through the Automatic Withdrawal Plan.

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<PAGE>

DREYFUS DIVIDEND OPTIONS. Dreyfus Dividend Sweep allows investors to invest
automatically their dividends or dividends and other distributions, if any, from
the Fund in shares of certain other funds in the Dreyfus Family of Funds of
which the investor is a shareholder. Shares of the other funds purchased
pursuant to this Privilege will be purchased on the basis of relative NAV per
share as follows:

A. Dividends and other distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that are
offered without a sales load.

B. Dividends and other distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds sold
with a sales load, and the applicable sales load will be deducted.

C. Dividends and other distributions paid by a fund which charges a
sales load may be invested in shares of other funds sold with a
sales load referred to herein as ("Offered Shares"), provided that,
if the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or other
distributions are being swept, without giving effect to any reduced
loads, the difference will be deducted.

D. Dividends and other distributions paid by a fund may be invested
in shares of other funds that impose a CDSC and the applicable CDSC,
if any, will be imposed upon redemption of such shares.

Dreyfus Dividend ACH permits you to transfer electronically dividends or
dividends and other distributions, if any, from the Fund to a designated bank
account. Only an account maintained at a domestic financial institution which is
an ACH member may be so designated. Banks may charge a fee for this service.

For more information concerning these Privileges, or to request a Dreyfus
Dividend Options Form, please call toll free 1-800-645-6561. You may cancel
these Privileges by mailing written notification to The Dreyfus Family of Funds,
P.O. Box 9671, Providence, Rhode Island, 02940-9671. To select a new fund after
cancellation, you must submit a new Dividend Options Form. Enrollment in or
cancellation of these privileges is effective three business days following
receipt. These privileges are available only for existing accounts and may not
be used to open new accounts. Minimum subsequent investments do not apply for
Dreyfus Dividend Sweep. The Fund may modify or terminate these privileges at any
time or charge a service fee. No such fee currently is contemplated. Shares held

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<PAGE>

under Keogh Plans, IRAs or other retirement plans are not eligible for Dreyfus
Dividend Sweep.

DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social Security or
certain veterans', military or other payments from the Federal government
automatically deposited into your Fund account. You may deposit as much of such
payments as you elect. You should consider whether Direct Deposit of your entire
payment into a fund with fluctuating NAV, such as the Fund, may be appropriate
for you. To enroll in Dreyfus Government Direct Deposit, you must file with the
Transfer Agent a completed Direct Deposit Sign-Up Form for each type of payment
that you desire to include in this Privilege. The appropriate form may be
obtained by calling 1-800-645-6561. Death or legal incapacity will terminate
your participation in this Privilege. You may elect at any time to terminate
your participation by notifying in writing the appropriate Federal agency.
Further, the Fund may terminate your participation upon 30 days' notice to you.

DREYFUS PAYROLL SAVINGS PLAN. Dreyfus Payroll Savings Plan permits you to
purchase Fund shares (minimum $100 per transaction) automatically on a regular
basis. Depending upon your employer's direct deposit program, you may have part
or all of your paycheck transferred to your existing Dreyfus account
electronically through the ACH system at each pay period. To establish a Dreyfus
Payroll Savings Plan account, you must file an authorization form with your
employer's payroll department. Your employer must complete the reverse side of
the form and return it to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. You may obtain the necessary authorization
form by calling 1-800-645-6561. You may change the amount of purchase or cancel
the authorization only by written notification to your employer. It is the sole
responsibility of your employer, not the Distributor, your Agent, Dreyfus, the
Fund, the Transfer Agent or any other person, to arrange for transactions under
the Dreyfus Payroll Savings Plan. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated.

DREYFUS STEP PROGRAM. Dreyfus Step Program enables you to purchase Investor
shares without regard to the Fund's minimum initial investment requirements
through Dreyfus-Automatic Asset Builder, Dreyfus Government Direct Deposit
Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step Program
account, you must supply the necessary information on the Account Application
and file the required authorization form(s) with the Transfer Agent. For more
information concerning this Program, or to request the necessary authorization
form(s), please call toll free 1-800-782-6620. You may terminate your
participation in this Program at any time by discontinuing your participation in
Dreyfus-Automatic Asset Builder, Dreyfus Government Direct Deposit Privilege or
Dreyfus Payroll Savings Plan, as the case may be, as provided under the terms of
such Privilege(s). The Fund reserves the right to redeem your account if you
have terminated your participation in the Program and your account's NAV is $500
or less. See "Account Policies - General Policies" in the Fund's Prospectus. The
Fund may modify or terminate this Program at any time. Investors who wish to
purchase Investor shares through the Dreyfus Step Program in conjunction with a
Dreyfus-sponsored retirement plan may do so only for IRAs (including regular
IRAs, spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs and Rollover
IRAs), SEP-IRAs and IRA "Rollover Accounts."

RETIREMENT PLANS. The Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs and,
with respect to Investor shares, Education IRAs), 401(k) Salary Reduction Plans
and 403(b)(7) Plans. Plan support services also are available. You can obtain
details on the various plans by calling the following numbers toll free: for
Keogh Plans, please call 1-800-358-5566; for IRAs and IRA "Rollover Accounts,"
please call 1-800-645-6561; for SEP-IRAs, 401(k) Salary Reduction Plans and
403(b)(7) Plans, please call 1-800-322-7880.

Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.

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<PAGE>

SHARES MAY BE PURCHASED IN CONNECTION WITH THESE PLANS ONLY BY DIRECT
REMITTANCE TO THE ENTITY ACTING AS CUSTODIAN. PURCHASES FOR THESE PLANS MAY NOT
BE MADE IN ADVANCE OF RECEIPT OF FUNDS.

ADDITIONAL INFORMATION ABOUT PURCHASES, EXCHANGES
AND REDEMPTIONS

The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculation on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to the
Fund's performance and its shareholders. Accordingly, if the Fund's management
determines that an investor is engaged in excessive trading, the Fund, with or
without prior notice, may temporarily or permanently terminate the availability
of Fund exchanges, or reject in whole or part any purchase or exchange request,
with respect to such investor's account. Such investors also may be barred from
purchasing other funds in the Dreyfus Family of Funds. Generally, an investor
who makes more than four exchanges out of the Fund during any calendar year or
who makes exchanges that appear to coincide with an active market-timing
strategy may be deemed to be engaged in excessive trading. Accounts under common
ownership or control will be considered as one account for purposes of
determining a pattern of excessive trading. In addition, the Fund may refuse or
restrict purchase or exchange requests by any person or group if, in the
judgment of the Fund's management, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies or could
otherwise be adversely affected or if the Fund receives or anticipates receiving
simultaneous orders that may significantly affect the Fund (e.g., amounts equal
to 1% or more of the Fund's total assets). If an exchange request is refused,
the Fund will take no other action with respect to the shares until it receives
further instructions from the investor. The Fund may delay forwarding redemption
proceeds for up to seven days if the investor redeeming shares is engaged in
excessive trading or if the amount of the redemption request otherwise would be
disruptive to efficient portfolio management or would adversely affect the Fund.
The Fund's policy on excessive trading applies to investors who invest in the
Fund directly or through financial intermediaries, but does not apply to the
Dreyfus Auto-Exchange Privilege, to any automatic investment or withdrawal
privilege described herein, or to participants in employer-sponsored retirement
plans.

DETERMINATION OF NET ASSET VALUE

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE read IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES."

VALUATION OF PORTFOLIO SECURITIES. The Fund's securities are valued at the
last sale price on the securities exchange or national securities market on

B-35
<PAGE>

which such securities primarily are traded. Securities not listed on an exchange
or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked prices.
Bid price is used when no asked price is available. Where market quotations are
not readily available, the Fund's investments are valued based on fair value as
determined in good faith by the Company's Board. Debt securities may be valued
by an independent pricing service approved by the Company's Board and are valued
at fair value as determined by the pricing service. Any assets or liabilities
initially expressed in terms of foreign currency will be translated into U.S.
dollars at the midpoint of the New York interbank market spot exchange rate as
quoted on the day of such translation or, if no such rate is quoted on such
date, such other quoted market exchange rate as may be determined to be
appropriate by Dreyfus. If the Fund has to obtain prices as of the close of
trading on various exchanges throughout the world, the calculation of NAV may
not take place contemporaneously with the determination of prices of certain of
the Fund's securities. Short-term investments are carried at amortized cost,
which approximates value. Expenses and fees, including the management fee, are
accrued daily and taken into account for the purpose of determining the NAV of
the Fund's shares.

Restricted securities, as well as securities or other assets for which
market quotations are not readily available or which are not valued by a pricing
service approved by the Board of Directors, are valued at fair value as
determined in good faith by the Board of Directors. The Board of Directors will
review the method of valuation on a current basis. In making their good faith
valuation of restricted securities, the Board of Directors generally will take
the following factors into consideration: restricted securities which are, or
are convertible into, securities of the same class of securities for which a
public market exists usually will be valued at market value less the same
percentage discount at which purchased. This discount will be revised
periodically by the Board of Directors if it believes that the discount no
longer reflects the value of the restricted securities. Restricted securities
not of the same class as securities for which a public market exists usually
will be valued initially at cost. Any subsequent adjustment from cost will be
based upon considerations deemed relevant by the Board of Directors.

DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "DISTRIBUTIONS AND TAXES."

GENERAL. To qualify for treatment as a regulated investment company
("RIC") under the Internal Revenue Code of 1986, as amended (the "Code"), the
Fund--which is treated as a separate corporation for federal tax purposes--(1)
must distribute to its shareholders each taxable year at least 90% of its
investment company taxable income (generally consisting of net investment
income, net short-term capital gains and net gains from certain foreign currency
transactions) ("Distribution Requirement"), (2) must derive at least 90% of its

B-36
<PAGE>

annual gross income from specified sources ("Income Requirement"), (3) must
derive less than 30% of its annual gross income from gain on the sale or
disposition of any of the following that are held for less than three months --
(i) securities, (ii) non-foreign-currency options and futures and (iii) foreign
currencies (or foreign currency options, futures and forward contracts) that are
not directly related to the Fund's principal business of investing in securities
(or options and futures with respect thereto) ("Short-Short Limitation") -- and
(4) must meet certain asset diversification and other requirements.

The Fund declares daily and pays monthly dividends from its net investment
income and distributes net realized capital gains, if any, once a year, but it
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"), in
all events in a manner consistent with the provisions of the 1940 Act. Fund
shares begin earning dividends on the day following the date of purchase. The
Fund will not make distributions from net realized capital gains unless all
capital loss carryovers, if any, have been utilized or have expired. All
expenses are accrued daily and deducted before declaration of dividends to
investors. Dividends paid by each Class are calculated at the same time and in
the same manner and are in the same amount, except that the expenses
attributable solely to a particular Class are borne exclusively by that Class.
Investors shares will receive lower per share dividends than Basic shares
because of the higher expenses borne by the Investor shares.

Investors other than qualified retirement plans may choose whether to
receive dividends and other distributions in cash, to receive dividends in cash
and reinvest other distributions in additional Fund shares at NAV, or to
reinvest both dividends and other distributions in additional Fund shares.
Dividends and other distributions paid to qualified retirement plans are
reinvested automatically in additional Fund shares at NAV.

Dividends derived from net investment income, together with distributions
from net realized short-term capital gains, and all or a portion of any gains
realized from the sale or other disposition of certain market discount bonds
(collectively, "dividend distributions"), paid by the Fund will be taxable to
U.S. shareholders, including certain non-qualified Retirement Plans, as ordinary
income to the extent of the Fund's earnings and profits, whether received in
cash or reinvested in additional Fund shares. Distributions from net capital
gain (the excess of net long-term capital gain over net short-term capital loss)

B-37
<PAGE>

are taxable to such shareholders as long-term capital gains regardless of how
long the shareholders have held their Fund shares and whether such distributions
are received in cash or reinvested in additional Fund shares.

Dividend distributions paid by the Fund to a non-resident foreign investor
generally are subject to U.S. withholding tax at the rate of 30%, unless the
non-resident foreign investor claims the benefit of a lower rate specified in a
tax treaty. Capital gain distributions paid by the Fund to a non-resident
foreign investor, as well as the proceeds of any redemptions by such an
investor, regardless of the extent to which gain or loss may be realized,
generally are not subject to U.S. withholding tax. However, such distributions
may be subject to backup withholding, unless the foreign investor certifies his
or her non-U.S. residency status.

Dividends and other distributions paid by the Fund to qualified Retirement
Plans ordinarily will not be subject to taxation until the proceeds are
distributed from the Retirement Plans. The Fund will not report to the IRS
distributions paid to such plans. Generally, distributions from qualified
Retirement Plans, except those representing returns of non-deductible
contributions thereto, will be taxable as ordinary income and, if made prior to
the time the participant reaches age 59 1/2, generally will be subject to an
additional tax equal to 10% of the taxable portion of the distribution. If the
distribution from such a Retirement Plan (other than certain governmental or
church plans) for any taxable year following the year in which the participant
reaches age 70 1/2 is less than the "minimum required distribution" for that
taxable year, an excise tax equal to 50% of the deficiency may be imposed by the
IRS. The administrator, trustee or custodian of such a Retirement Plan will be
responsible for reporting distributions from such plans to the IRS. Moreover,
certain contributions to a qualified Retirement Plan in excess of the amounts
permitted by law may be subject to an excise tax. If a distributee of an
"eligible rollover distribution" from a qualified Retirement Plan does not elect
to have the eligible rollover distribution paid directly from the plan to an
eligible Retirement Plan in a "direct rollover," the eligible rollover
distribution is subject to a 20% income tax withholding.

B-38
<PAGE>

distributions payable to such a shareholder if (1) that shareholder fails to
certify that he or she has not received notice from the IRS of being subject to
backup withholding as a result of a failure properly to report taxable dividend
or interest income on a Federal income tax return or (2) the IRS notifies the
Fund to institute backup withholding because the IRS determines that the
shareholder's TIN is incorrect or that the shareholder has failed properly to
report such income.

The Fund may be subject to a non-deductible 4% excise tax, measured with
respect to certain undistributed amounts of taxable investment income and
capital gains.

Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares below
the cost of his or her investment. Such a dividend or other distribution would
be a return on investment in an economic sense, although taxable as discussed
above. In addition, if a shareholder sells shares of the Fund held for six
months or less and receives a capital gain distribution with respect to those
shares, any loss incurred on the sale of those shares will be treated as a
long-term capital loss to the extent of the capital gain distribution received.

Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a date
in any of those months are deemed to have been paid by the Fund and received by
the shareholders on December 31 of that year if the distributions are paid by
the Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.

A portion of the dividends paid by the Fund, whether received in cash or
reinvested in additional Fund shares, may be eligible for the dividends received
deduction allowed to corporations. The eligible portion may not exceed the
aggregate dividends received by the Fund from U.S. corporations. However,
dividends received by a corporate shareholder and deducted by it pursuant to the
dividends received deduction are subject indirectly to the alternative minimum
tax.

Dividends and interest received by the Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.

STATE AND LOCAL TAXES. Depending upon the extent of the Fund's activities
in states and localities in which it is deemed to be conducting business, it may
be subject to the tax laws thereof. Shareholders are advised to consult their
tax advisers concerning the application of state and local taxes.

B-39
<PAGE>

FOREIGN SHAREHOLDERS - U.S. FEDERAL INCOME TAXATION. U.S. federal income
taxation of a shareholder who, as to the United States, is a non-resident alien
individual, a foreign trust or estate, a foreign corporation or a foreign
partnership (a "foreign shareholder") depends on whether the income from the
Fund is "effectively connected" with a U.S. trade or business carried on by the
shareholder, as discussed generally below. Special U.S. federal income tax rules
that differ from those described below may apply to certain foreign persons who
invest in the Fund, such as a foreign shareholder entitled to claim the benefits
of an applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in the Fund.

FOREIGN SHAREHOLDERS - INCOME NOT EFFECTIVELY CONNECTED. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the foreign
shareholder generally will be subject to U.S. federal withholding tax of 30% (or
lower treaty rate). Capital gains realized by foreign shareholders on the sale
of Fund shares and distributions to them of net capital gain (the excess of net
long-term capital gain over net short-term capital loss) generally will not be
subject to U.S. federal income tax unless the foreign shareholder is a
non-resident alien individual and is physically present in the United States for
more than 182 days during the taxable year. In the case of certain foreign
shareholders, the Fund may be required to withhold U.S. Federal income tax at a
rate of 31% of capital gain distributions and of the gross proceeds from a
redemption of Fund shares unless the shareholder furnishes the Fund with a
certificate regarding the shareholder's foreign status.

FOREIGN SHAREHOLDERS - EFFECTIVELY CONNECTED INCOME. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by a foreign shareholder, then all distributions to
that shareholder and any gains realized by that shareholder on the disposition
of Fund shares will be subject to U.S. federal income tax at the graduated rates
applicable to U.S. citizens and domestic corporations, as the case may be.
Foreign shareholders also may be subject to the branch profits tax.

FOREIGN SHAREHOLDERS - ESTATE TAX. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. situs property, such as shares
of the Fund, that they own at the time of their death. Certain credits against
that tax and relief under applicable tax treaties may be available.

B-40
<PAGE>

PORTFOLIO TRANSACTIONS

B-41
<PAGE>

organizations were to attempt to develop comparable information through their
own staffs.

Dreyfus may use research services of and place brokerage transactions with
broker-dealers affiliated with it or Mellon Bank if the commissions are
reasonable, fair and comparable to commissions charged by non-affiliated
brokerage firms for similar services. During the fiscal years ended October 31,
1998, 1997 and 1996, the Fund paid brokerage commissions of $______, $ and
$_____, respectively, to affiliates of Dreyfus or Mellon Bank. The amount paid
to affiliated brokerage firms during the fiscal years ended October 31, 1998,
1997 and 1996, was approximately ____%, ____%, and ___%, respectively, of the
aggregate brokerage commissions paid by the Fund, for transactions involving
approximately ____%, ____% and ___%, respectively, of the aggregate dollar
volume of transactions for which the Fund paid brokerage commissions. The
difference in these percentages was due to the lower commissions paid to
affiliates of Dreyfus.

When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated in
accordance with a formula considered by Dreyfus to be equitable to each account.
In some cases this system could have a detrimental effect on the price or volume
of the investment instrument as far as the Fund is concerned. In other cases,
however, the ability of the Fund to participate in volume transactions will
produce better executions for the Fund. While the Directors will continue to
review simultaneous transactions, it is their present opinion that the
desirability of retaining Dreyfus as investment manager to the Fund outweighs
any disadvantages that may be said to exist from exposure to simultaneous
transactions.

For the fiscal years ended October 31, 1998 and 1997, the Fund paid
brokerage commissions amounting to $______ and $______, respectively. During the
fiscal year ended October 31, 1996, the Fund paid no brokerage commissions on
portfolio transactions.

PORTFOLIO TURNOVER. While securities are purchased for the Fund on the
basis of potential for replicating the total return of the Aggregate Bond Index
and not for short-term trading profits, the Fund's portfolio turnover rate may
exceed 100%. A portfolio turnover rate of 100% would occur, for example, if all
the securities held by the Fund were replaced once in a period of one year. A
higher rate of portfolio turnover involves correspondingly greater brokerage

B-42
<PAGE>

commissions and other expenses that must be borne directly by the Fund and,
thus, indirectly by its shareholders. In addition, a higher rate of portfolio
turnover may result in the realization of larger amounts of short-term capital
gains that, when distributed to the Fund's shareholders, are taxable to them as
ordinary income. Nevertheless, securities transactions for the Fund will be
based only upon investment considerations and will not be limited by any other
considerations when Dreyfus deems its appropriate to make changes in the Fund's
assets. The portfolio turnover rate for the Fund is calculated by dividing the
lesser of the Fund's annual sales or purchases of portfolio securities
(exclusive of purchases and sales of securities whose maturities at the time of
acquisition were one year or less) by the monthly average value of securities in
the Fund during the year. Portfolio turnover may vary from year to year as well
as within a year. The portfolio turnover rates for the fiscal years ended
October 31, 1998 and 1997 were ____________ and ______________, respectively.

PERFORMANCE INFORMATION

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "PAST PERFORMANCE."

Average annual total returns (expressed as a percentage) for BASIC shares
of the Fund for the periods noted were:

AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIODS ENDED OCTOBER 31, 1998
FUND: 1 YEAR INCEPTION
- ----- ------ ---------
BASIC SHARES _____% _____%
- ------------
(11/30/93)

Inception date appears in parentheses following the average annual total return
since inception.

The total return (expressed as a percentage) for BASIC shares of the Fund
for the period beginning with the date of inception (November 30, 1993) and
ending October 31, 1998 w%.

Average annual total returns (expressed as a percentage) for Investor
shares of the Fund for the periods noted were:
AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIODS ENDED OCTOBER 31, 1998

FUND: 1 YEAR INCEPTION
- ---- ------ ---------
INVESTOR SHARES % %
- --------------- ------ ------
(4/28/94)

Inception date appears in parentheses following the average annual total return
since inception.

The total return (expressed as a percentage) for Investor shares of the
Fund for the period beginning with the date of inception (April 30, 1994) and
ending October 31, 1998 _________%.

B-43
<PAGE>

Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at NAV per share with a hypothetical
$1,000 payment made at the beginning of the period (assuming the reinvestment of
dividends and other distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number of
years in the period) and subtracting 1 from the result.

Total return is calculated by subtracting the amount of the Fund's NAV per
share at the beginning of a stated period from the NAV per share at the end of
the period (after giving effect to the reinvestment of dividends and other
distributions during the period) and dividing the result by the NAV per share at
the beginning of the period.

The Fund may also advertise yield from time to time. The current yield for
the 30-day period ended October 31, 1998 was _______% for BASIC shares and
______% for Investor shares. Yields are computed by using standardized methods
of calculation required by the SEC. Yields are calculated by dividing the net
investment income per share earned during a 30-day (or one-month) period by the
maximum offering price per share on the last day of the period, according to the
following formula:

YIELD = 2[(A-B + 1)6-1]
---
cd

Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = average daily number of shares outstanding during the
period that were entitled to receive dividends; and
d = maximum offering price per share on the last day of the
period.

Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the Lehman
Brothers Aggregate Bond Index; (ii) the Standard & Poor's 500 Composite Stock
Price Index, the Dow Jones Industrial Average, or other appropriate unmanaged
domestic or foreign indices of performance of various types of investments so
that investors may compare the Fund's results with those of indices widely
regarded by investors as representative of the securities markets in general;
(iii) other groups of mutual funds tracked by Lipper Analytical Services, a
widely used independent research firm which ranks mutual funds by overall
performance, investment objectives and assets, or tracked by other services,
companies, publications, or persons who rank mutual funds on overall performance
or other criteria; (iv) the Consumer Price Index (a measure of inflation) to
assess the real rate of return from an investment in the Fund; and (v) products
managed by a universe of money managers with similar country allocation and
performance objectives. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions or administrative and
management costs and expenses. From time to time, advertising materials for the
Fund may refer to Morningstar ratings and related analyses supporting the
rating.

From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to or

B-44
<PAGE>

include commentary by the portfolio manager relating to investment strategy,
asset growth, current or past business, political, economic or financial
conditions and other matters of general interest to investors.

INFORMATION ABOUT THE FUND

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "THE FUND."

The Company has an authorized capitalization of 25 billion shares of
$0.001 per value stock.

Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. The Fund is
one of nineteen portfolios of the Company. Fund shares have no preemptive,
subscription or conversion rights and are freely transferable.

The Fund will send annual and semi-annual financial statements to all of
its shareholders.

B-45
<PAGE>

TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS

Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Company,
Dreyfus Transfer, Inc. arranges for the maintenance of shareholder account
records for the Fund, the handling of certain communications between
shareholders and the Fund, and the payment of dividends and distributions
payable by the Fund. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses.

___________________, 1800 Massachusetts Avenue, N.W., Second Floor,
Washington, D.C. 20036-1800, has passed upon the legality of the shares offered
by the Prospectus and this Statement of Additional Information.

___________________, was appointed by the Directors to serve as the Fund's
independent auditors for the year ending October 31, 1999, providing audit
services including (1) examination of the annual financial statements, (2)
assistance, review and consultation in connection with SEC filings and (3)
review of the annual federal income tax return filed on behalf of the Fund.

FINANCIAL STATEMENTS

The financial statements for the fiscal year ended October 31, 1998,
including notes to the financial statements and supplementary information, and
the Independent Auditors' Report are included in the Annual Report to
shareholders. A copy of the Annual Report accompanies this Statement of
Additional Information. The financial statements included in the Annual Report,
and the Independent Auditors' Report thereon contained therein, and related
notes, are incorporated herein by reference.

B-46
<PAGE>

APPENDIX

DESCRIPTION OF STANDARD AND POOR'S, MOODY'S, FITCH IBCA
AND DUFF RATINGS

STANDARD & POOR'S ("S&P")

BOND RATINGS

AAA An obligation rated 'AAA' has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.

AA An obligation rated 'AA' differs from the highest rated issues only
in small degree. The obligors capacity to meet its financial
commitment on the obligation is very strong.

A An obligation rated 'A' is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's
capacity to meet its financial commitment on the obligation is still
strong.

BBB An obligation rated 'BBB' exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet
its financial commitment on the obligation.

Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having
significant speculative characteristics. 'BB' indicates the least degree
of speculation and 'C' the highest. While such obligations will likely
have some quality and protective characteristics, these may be outweighed
by large uncertainties or major exposures to adverse conditions.

BB An obligation rated 'B' is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions,
which could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.

B An obligation rated 'B' is more vulnerable to nonpayment than
obligations rated 'BB', but the obligor currently has the capacity
to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair the
obligor's capacity or willingness to meet its financial commitment
on the obligation.

CCC An obligation rated 'CCC' is currently vulnerable to nonpayment and
is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or economic
conditions, the obligor is not likely to have the capacity to meet
its financial commitment on the obligation.

CC An obligation rated 'CC' is currently highly vulnerable to
nonpayment.

B-47
<PAGE>

C The 'C' rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.

D An obligation rated 'D' is in payment default. The 'D' rating
category is used when payments on a obligation are not made on the
date due even if the applicable grace period has not expired, unless
S&P believes that such payments will be made during such grace
period. The 'D' rating also will be used upon the filing of a
bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.

The ratings from 'AA' to 'CCC' may be modified by the addition of a plus
(+) or a minus (-) sign to show relative standing within the major rating
categories

NOTE RATINGS

SP-1 Strong capacity to pay principal and interest. An issue determined
to possess a very strong capacity to pay debt service is given a
plus (+) designation.

SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the term
of the notes.

SP-3 Speculative capacity to pay principal and interest.

COMMERCIAL PAPER RATINGS

An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than 365 days.

A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high
as for issuers designated 'A-1.'

A-3 Issues carrying this designation have an adequate capacity for
timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the
higher designations.

B Issues rated 'B' are regarded as having only speculative capacity
for timely payment.

B-48
<PAGE>

C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.

D Debt rated 'D' is in payment default. The 'D' rating category is
used when interest payments of principal payments are not made on
the date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.

MOODY'S

BOND RATINGS

A Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment some time in the future.

Baa Bonds which are rated Baa are considered as medium grade obligations
(i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.

Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very moderate,
and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this
class.

B-49
<PAGE>

B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long
period of time may be small.

Caa Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect
to principal or interest.

Ca Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked short-comings.

C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.

Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through B. The
modifier 1 indicates a ranking for the security in the higher end of a
rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates a ranking in the lower end of a rating category.

NOTES AND OTHER SHORT-TERM OBLIGATIONS

MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.

MIG 3/
VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.

B-50
<PAGE>

MIG 4/
VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.

COMMERCIAL PAPER RATING

Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated issuers:

o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
o Well-established access to a range of financial markets
and assured sources of alternate liquidity.

Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term obligations.
The effect of industry characteristics and market compositions may
be more pronounced. Variability in earnings and profitability may
result in changes in the level of debt protection measurements and
may require relatively high financial leverage.
Adequate alternative liquidity is maintained.

B-51
<PAGE>

FITCH IBCA

BOND RATINGS

AAA Highest credit quality. 'AAA' ratings denote the lowest expectation
of credit risk. They are assigned only in case of exceptionally
strong capacity for timely payment of financial commitments. This
capacity is highly unlikely to be adversely affected by foreseeable
events.

AA Very high credit quality. 'AA' ratings denote a very low expectation
of credit risk. They indicate very strong capacity for timely
payment of financial commitments. This capacity is not significantly
vulnerable to foreseeable events.

A High credit quality. 'A' ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is
considered strong. This capacity may, nevertheless, be more
vulnerable to changes in circumstances or in economic conditions
than is the case for higher ratings.

BBB Good credit quality. 'BBB' rating indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of
financial commitments is considered adequate, but adverse changes in
circumstances and in economic conditions are more likely to impair
this capacity. This is the lowest investment-grade category.

BB Speculative. 'BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse
economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.

B Highly speculative. 'B' ratings indicate that significant credit
risk is present, but a limited margin of safety remains. Financial
commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and
economic environment.

CCC, CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained,
favorable business or economic developments. A 'CC' rating indicates
that default of some kind appears probable. 'C' ratings signal
imminent default.

DDD, DD,
and D Default. Securities are not meeting current obligations and are
extremely speculative. 'DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For U.S.
corporates, for example, 'DD' indicates expected recovery of 50% -
90% of such outstandings, and 'D' the lowest recovery potential,
i.e. below 50%.

B-52
<PAGE>

SHORT-TERM AND COMMERCIAL PAPER RATINGS

F-1+ Highest credit quality. Indicates the strongest capacity for timely
payment of financial commitments; may have an added "+" to denote
any exceptionally strong credit feature.

F-2 Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as
in the case of the higher ratings.

F-3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could
result in a reduction to non-investment grade.

B Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in
financial and economic conditions.

C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.

D Default. Denotes actual or imminent payment default.

"+" or "-" may be appended to a rating to denote relative status within
major rating categories. Such suffixes are not added to the 'AAA'
long-term rating category, to categories below 'CCC', or to
short-term ratings other than 'F-1'.

DUFF & PHELPS INC. ("DUFF & PHELPS")

LONG-TERM RATINGS

AAA Highest credit quality. The risks factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.

AA+ High credit quality. Protection factors are strong. Risk is modest
but AA may vary slightly from time to time because of economic
conditions.

AA- Protections factors are average but adequate. However, risk factors
A+ are A more variable and greater in periods of economic stress.
A-

B-53
<PAGE>

BBB+ Below-average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.

BB+ Below investments grade but deemed likely to meet obligations when
BB due. Present or prospective financial protection factors fluctuate
BB- according to industry conditions or company fortunes. Overall
quality may move up or down frequently within this category.

B+ Below investment grade and possessing risk that obligations will not
B be met when due. Financial protection factors will fluctuate widely
B- according to economic cycles, industry conditions and/or company
fortunes. Potential exists for frequent changes in the rating within
this category or into a higher or lower rating grade.

CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be substantial
with unfavorable economic/industry conditions, and/or with
unfavorable company developments.

DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.

SHORT-TERM AND COMMERCIAL PAPER RATINGS

D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk
factors are minor.

D-1- High certainly of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are
very small.

D-3 Satisfactory liquidity and other protection factors qualify issues
as to investment grade. Risk factors are larger and subject to more
variation. Nevertheless, timely payment is expected.

B-54
<PAGE>

D-4 Speculative investment characteristics. Liquidity is not sufficient
to insure against disruption in debt service. Operating factors and
market access may be subject to a high degree of variation.

D-5 Issuer failed to meet scheduled principal and/or interest payments.

B-55
<PAGE>
Dreyfus Disciplined Intermediate Bond Fund

Investing in bonds for investment returns that exceed the Lehman Brothers
Aggregate Bond Index

PROSPECTUS March 1, 1999

<PAGE>

Contents

THE FUND
- ----------------------------------------------------

What every investor 2 Goal/Approach
should know about
the fund 3 Main Risks

4 Past Performance

5 Expenses

6 Management

7 Financial Highlights

YOUR INVESTMENT
- --------------------------------------------------------------------

Information for 8 Account Policies
managing your
fund account 11 Distributions and Taxes

12 Services for Fund Investors

14 Instructions for Regular Accounts

16 Instructions for IRAs

FOR MORE INFORMATION
- -------------------------------------------------------------------------------

Where to learn Back Cover
more about this and
other Dreyfus funds

<PAGE>

Dreyfus Disciplined Intermediate Bond Fund The Fund
- ------------------------------------------
Ticker Symbols: Investor shares DDIBX
Restricted shares DDIRX

GOAL/APPROACH
- -------------

The fund seeks to outperform the Lehman Brothers Aggregate Bond Index while
maintaining a similar risk level. This objective may be changed without
shareholder approval. To pursue its goal, the fund actively manages bond market
and maturity exposure and invests at least 65% of total assets in debt
securities, such as:

. U.S. government and agency bonds

. corporate bonds

. mortgage-related securities

. foreign corporate and government bonds (up to
20% of total assets)

The fund's investments in debt securities must be investment grade (or deemed of
comparable quality by Dreyfus). Generally, the average maturity of the fund's
portfolio is between 3 and 10 years. The fund may invest in individual debt
securities with remaining maturities between 1 and 30 years.

The manager uses a disciplined process to select securities and manage risk. The
manager chooses securities based on yield, credit quality, the level of interest
rates and inflation, general economic and financial trends, and its outlook for
the securities markets. Securities selected must fit within management's
pre-determined targeted positions for quality, duration, coupon, maturity and
sector. The process includes computer modeling and scenario testing of possible
changes in market conditions. The manager will use other techniques in an
attempt to manage market risk and maturity.

INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT (SEE BACK COVER).

Concepts to understand

AVERAGE MATURITY: an average of the stated maturities of the bonds held in the
fund, based on their dollar-weighted proportions in the fund.

INVESTMENT GRADE BONDS: independent rating organizations analyze and evaluate a
bond issuer's credit history and ability to repay debts. Based on their
assessment, they assign letter grades that reflect the issuer's
creditworthiness. AAA or Aaa represents the highest credit rating, AA/Aa the
second highest, and so on down to D, for defaulted debt. Bonds rated BBB or Baa
and above are considered investment grade.

2
<PAGE>

MAIN RISKS

Prices of bonds tend to move inversely with changes in interest rates. While a
rise in rates may allow the fund to invest for higher yields, the most immediate
effect is usually a drop in bond prices, and therefore in the fund's share price
as well. As a result, the value of your investment in the fund could go up and
down, which means that you could lose money. To the extent that the fund
maintains a longer maturity than short-term funds, its share price will react
more strongly to interest rate movements. Other risk factors that could have an
effect on the fund's performance include:

. if an issuer fails to make timely interest or principal payments
or there is a decline in the bond's credit quality, or perception
of a decline, the bond's value could fall, potentially lowering
the share price

. if the loans underlying the fund's mortgage-related securities
are paid off earlier or later than expected, which could occur
because of movements in market interest rates, the fund's share
price or yield could be hurt

. the price and yield of foreign debt securities could be affected
by such factors as political and economic instability, changes in
currency exchange rates and less liquid markets for such
securities

While some of the fund's securities may carry guarantees of the U.S. government
or its agencies, these guarantees do not apply to shares of the fund itself.

Under adverse market conditions, the fund could invest some or all of its assets
in money market instruments. Although the fund would do so only in seeking to
avoid losses, it could reduce the fund's total return.

Other potential risks

The fund may invest in certain derivatives, including futures, options, and some
mortgage-related securities. Derivatives can be illiquid and highly sensitive to
changes in their underlying security, interest rate or index, and as a result
can be highly volatile. The value and interest rates of some derivatives, such
as inverse floaters, may be inversely related to their underlying instrument. A
small investment in certain derivatives could have a potentially large impact on
the fund.

At times, the fund may engage in short-term trading. This could increase the
fund's transaction costs and taxable distributions, lowering its after-tax
performance accordingly.

3
The Fund
<PAGE>

PAST PERFORMANCE

The two tables below show the fund's annual returns and its long-term
performance. The first table shows you how the fund's performance has varied
from year to year. The second compares the fund's performance over time to that
of the Lehman Brothers Aggregate Bond Index, a broad-based, unmanaged,
market-weighted index covering the U.S. investment-grade fixed-rate bond market.
Both tables assume reinvestment of dividends and distributions. As with all
mutual funds, the past is not a prediction of the future.

________________________________________________________________________________

Year-by-year total return AS OF 12/31 EACH YEAR (%)

INVESTOR SHARES

BAR GRAPH

- --------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98

BEST QUARTER: Q0 '00 +0.00%

WORST QUARTER: Q0 '00 -0.00%

________________________________________________________________________________

Average annual total return AS OF 12/31/98

Inception

1 Year (11/1/95)
- --------------------------------------------------------------------------------

INVESTOR SHARES X.XX% X.XX%

RESTRICTED SHARES X.XX% X.XX%

LEHMAN BROTHERS

AGGREGATE BOND INDEX XX.XX% XX.XX%*

* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 10/31/95 IS USED AS THE
BEGINNING VALUE ON 11/1/95.

What this fund is -- and isn't

4
<PAGE>

EXPENSES

________________________________________________________________________________

Fee table

Investor Restricted
shares shares
- --------------------------------------------------------------------------------

SHAREHOLDER TRANSACTION FEES
% OF TRANSACTION AMOUNT NONE NONE

ANNUAL FUND OPERATING EXPENSES

% OF AVERAGE DAILY NET ASSETS

Management fees 0.55% 0.55%

12b-1 fee 0.25% none

Other expenses 0.00% 0.00%
- --------------------------------------------------------------------------------

TOTAL 0.80% 0.55%

________________________________________________________________________________

Expense example

1 Year 3 Years 5 Years 10 Years

- --------------------------------------------------------------------------------

INVESTOR SHARES $XX $XX $XX $XX

RESTRICTED SHARES $XX $XX $XX $XX

This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. The figures
shown would be the same whether you sold your shares at the end of a period or
kept them. Because actual return and expenses will be different, the example is
for comparison only.

Concepts to understand

12B-1 FEE: the fee paid to Dreyfus Service Corporation, an affiliate of The
Dreyfus Corporation, for shareholder service and to the fund's distributor for
shareholder service and promotional expenses. For Investor shares, the fee is
paid out of the fund's assets on an ongoing basis; over time this will increase
the cost of your investment and may cost you more than paying other types of
sales charges.

5
The Fund
<PAGE>

MANAGEMENT

The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages one of the nation's
leading mutual fund complexes, with more than $112 billion in more than 160
mutual fund portfolios. Dreyfus is the mutual fund business of Mellon Bank
Corporation, a broad-based financial services company with a bank at its core.
With more than $350 billion of assets under management and $1.7 trillion of
assets under administration and custody, Mellon provides a full range of
banking, investment and trust products and services to individuals, businesses
and institutions. Its mutual fund companies place Mellon as the leading bank
manager of mutual funds. Mellon is headquartered in Pittsburgh, Pennsylvania.

Daniel J. Fasciano, portfolio manager of Dreyfus and Senior Portfolio Manager of
Boston Safe Deposit and Trust Company, an affiliate of Dreyfus, has managed the
fund since June 1998 and has been a portfolio manager of Dreyfus since October
1995. Mr. Fasciano joined the Boston Safe Deposit and Trust Company in 1990.

Concepts to understand

Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.

6
<PAGE>

FINANCIAL HIGHLIGHTS

This table describes the fund's 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 financial highlights have been independently audited by
________________, whose report, along with the fund's financial statements, is
included in the annual report.

________________________________________________________________________________

INVESTOR SHARES RESTRICTED SHARES
- --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
1998 1997 1996* 1998 1997 1996*
- --------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value,
beginning of period 12.29 12.50 12.29 12.50

Investment operations:

Investment income - net .74 .71 .77 .74

Net realized and
unrealized gain (loss)
on investments .23 (.21) .23 (.21)

Total from
investment operations .97 .50 1.00 .53

Distributions:
Dividends from
investment income - net (.74) (.71) (.77) (.74)

Net asset value, end of period 12.52 12.29 12.52 12.29

Total return (%) 8.21 4.18 8.49 4.45

- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to
average net assets (%) .80 .79 .55 .55

Ratio of net investment income
to average net assets (%) 6.01 561 6.31 6.29

Portfolio turnover rate (%) 143.91 198.16 143.91 198.16
- --------------------------------------------------------------------------------
Net assets, end of period
($ x 1,000) 317 126 108,688 58,466

* FROM NOVEMBER 1, 1995 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1996.

7
The Fund
<PAGE>

YOUR INVESTMENT

ACCOUNT POLICIES
- ----------------

Buying shares

The Fund Offers two share classes--Investor shares and Restricted shares.
Investor shares are offered to any investor. Restricted shares are sold
primarily to financial service providers acting on behalf of customers having a
qualified trust or investment account or relationship at such institution or to
customers who hold shares of the fund distributed to them by such account or
relationship. YOU PAY NO SALES CHARGES to invest in this fund. Your price for
fund shares is the net asset value per share (NAV) for the class of shares you
purchase, which is generally calculated as of the close of trading on the New
York Stock Exchange (usually 4:00 p.m. Eastern time) every day the exchange is
open. Your order will be priced at the next NAV calculated after your order is
accepted by the fund's transfer agent or other entity authorized to accept
orders on behalf of the fund.

________________________________________________________________________________

Minimum investments

Initial Additional
- --------------------------------------------------------------------------------
REGULAR ACCOUNTS $2,500 $100
$500 FOR
TELETRANSFER
INVESTMENTS

TRADITIONAL IRAS $750 NO MINIMUM

SPOUSAL IRAS $750 NO MINIMUM

ROTH IRAS $750 NO MINIMUM

EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST
YEAR

DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS

All investments must be in U.S. dollars. Third-party checks cannot be accepted.
You may be charged a fee for any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.

Concepts to understand

NET ASSET VALUE (NAV): a mutual fund's share price on a given day. A fund's NAV
is calculated by dividing the value of its net assets by the number of existing
shares.

8
<PAGE>

Selling shares

________________________________________________________________________________

Limitations on selling shares by phone

Proceeds
sent by Minimum Maximum
- --------------------------------------------------------------------------------

CHECK NO MINIMUM $150,000 PER DAY

WIRE $1,000 $250,000 FOR JOINT
ACCOUNTS EVERY 30 DAYS

TELETRANSFER $500 $250,000 FOR JOINT
ACCOUNTS EVERY 30 DAYS

- --------------------------------------------------------------------------------
Written sell orders

Some circumstances require written sell orders along with signature guarantees.
These include:

.. amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days

.. requests to send the proceeds to a different payee or address

Written sell orders of $100,000 or more must also be signature guaranteed.

9
Your Investment
<PAGE>

ACCOUNT POLICIES (CONTINUED)

General policies

If your account falls below $500, the fund may ask you to increase your balance.
If it is still below $500 after 45 days, the fund may close your account and
send you the proceeds.

Unless you decline telephone privileges on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.

The fund reserves the right to:

.. refuse any purchase or exchange request that could adversely affect the
fund or its operations, including those from any individual or group who,
in the fund's view, is likely to engage in excessive trading (usually
defined as more than four exchanges out of the fund within a calendar year)

.. refuse any purchase or exchange request in excess of 1% of the fund's total
assets

.. change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions

.. change its minimum investment amounts

.. delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions)

Third-party investments

10
<PAGE>

DISTRIBUTIONS AND TAXES

Each share class will generate a different dividend because each has different
expenses.

________________________________________________________________________________

Taxability of distributions

Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------

INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE

SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE

LONG-TERM
CAPITAL GAINS 10% 20%

The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund.

Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.

Taxes on transactions

Except in tax-advantaged accounts, any sale or exchange of fund shares,
including through the checkwriting privilege, may generate a tax liability.

11
<PAGE>

SERVICES FOR FUND INVESTORS

Automatic services

________________________________________________________________________________

For investing

DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER(REGISTERED TRADEMARK) from a designated bank account.

DREYFUS PAYROLL For making automatic investments
SAVINGS PLAN through a payroll deduction.

DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.

DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
- --------------------------------------------------------------------------------

For exchanging shares

DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
- --------------------------------------------------------------------------------

For selling shares

DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds.

Dreyfus Financial Centers

12
<PAGE>

Checkwriting privilege

Exchange privilege

Dreyfus TeleTransfer privilege

Account statements

Every Dreyfus Investor automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.

Retirement plans

Dreyfus offers a variety of retirement plans, including traditional, Roth and
Education IRAs. Here's where you call for information:

.. for traditional, rollover, Roth and Education IRAs, call 1-800-645-6561

.. for SEP-IRAs, Keogh accounts, 401(k) and 403(b) accounts, call
1-800-358-0910

13
Your Investment
<PAGE>

INSTRUCTIONS FOR REGULAR ACCOUNTS

TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
In Writing----------------------------------------------------------------------

Complete the application. Fill out an investment slip, and write
your account number on your check.
Mail your application and a check to:
The Dreyfus Family of Funds Mail the slip and the check to:
P.O. Box 9387, The Dreyfus Family of Funds
Providence, RI 02940-9387 P.O. Box 105
Newark, NJ 07101-0105

By Telephone--------------------------------------------------------------------
WIRE Have your bank send your WIRE Have your bank send your
investment to Boston Safe Deposit investment to Boston Safe Deposit
and Trust Company, with these and Trust Company, with these
instructions: instructions:
.. DDA# 044210 . DDA# 044210
.. the fund name and share class . the fund name and share class
.. your Social Security or tax ID . your account number
number . name(s) of investor(s)
.. name(s) of investor(s)
Call us to obtain an account number. ELECTRONIC CHECK Same as wire, but
Return your application. before your account number insert
"4970" for Investor shares OR "4980"
for Restricted shares, and add ABA#
011-001234
TELETRANSFER Request TeleTransfer on
your application. Call us to request
your transaction.

Automatically-------------------------------------------------------------------

WITH AN INITIAL INVESTMENT Indicate ALL SERVICES Call us to request a form
on your application which automatic to add any automatic investing service
service(s) you want. Return your (see "Services for Fund Investors").
application with your investment. Complete and return the forms along
with any other required materials.
WITHOUT ANY INITIAL INVESTMENT
(Investor shares only) Check the
Dreyfus Step Program option on your
application. Return your application,
then complete the additional materials
when they are sent to you.

Via the Internet----------------------------------------------------------------

COMPUTER Visit the Dreyfus Web site
http://www.dreyfus.com and follow the
instructions to download an account
application.

14
<PAGE>

INSTRUCTIONS FOR REGULAR ACCOUNTS

TO SELL SHARES
- ---------------------------------

Write a redemption check To reach Dreyfus, call toll free
OR letter of instruction in the U.S.
that includes:
.. your name(s) and signature(s) 1-800-645-6561
.. your account number
.. the fund name Outside the U.S.
.. the dollar amount you want 516-794-5452
to sell
.. how and where to send the Make checks payable to:
proceeds

Obtain a signature guarantee THE DREYFUS FAMILY OF FUNDS
or other documentation, if
required (see "Account Policies You also can deliver requests to any Dreyfus
- -- Selling Shares"). Financial Center. Because processing time may
vary, please ask the representative when your
Mail your request to: account will be credited or debited.
The Dreyfus Family of Funds
P.O. Box 9671,
Providence, RI 02940-9671

________________________________

WIRE Be sure the fund has your Concepts to understand
bank account information on _____________________________________
file. Call us to request your
transaction. Proceeds will be WIRE TRANSFER: for transferring money
wired to your bank. from one financial institutional to
another. Wiring is the fastest way to move
TELETRANSFER Be sure the fund money, although your bank may charge a fee
has your bank account information to send or receive wire transfers. Wire
on file. Call us to request your redemptions from the fund are subject to a
transaction. Proceeds will be sent $1,000 minimum.
to your bank by electronic check.
ELECTRONIC CHECK: for transferring
CHECK Call us to request your money out of a bank account. Your
transaction. A check will be transaction is entered electronically,
sent to your address of record. but may take up to eight business days to
clear. Electronic checks usually are
available without a fee at all Automated
Clearing House (ACH) banks.
________________________________

DREYFUS AUTOMATIC WITHDRAWAL
PLAN Call us to request a form
to add the plan. Complete the
form, specifying the amount
and frequency of withdrawals
you would like.

Be sure to maintain an account
balance of $5,000 or more.

15
Your Investment
<PAGE>

Concepts to understand

Your Investment

INSTRUCTIONS FOR IRAS

TO OPEN AN ACCOUNT
In Writing----------------------------------------------------------------------

Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.

Mail your application and a check to:
The Dreyfus Trust Company, Custodian P.O. Box 6427, Providence, RI 02940-6427

TO ADD TO AN ACCOUNT

Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.

Mail in the slip and the check (see "To Open an Account" at left).

By Telephone--------------------------------------------------------------------

WIRE Have your bank send your investment to Boston Safe Deposit and Trust
Company, with these instructions:

* DDA# 044210

* the fund name and share class

* your account number

* name of investor

* the contribution year

ELECTRONIC CHECK Same as wire, but before your account number insert "4970" for
Investor shares OR "4980" for Restricted shares, and add ABA# 011-001234

TELEPHONE CONTRIBUTION Call to request us to move money from a regular Dreyfus
account to an IRA (both accounts must be held in the same shareholder name).

Automatically-------------------------------------------------------------------

WITHOUT ANY INITIAL INVESTMENT (Investor shares only) Call us to request a
Dreyfus Step Program form. Complete and return the form along with your
application.

ALL SERVICES Call us to request a form to add an automatic investing service
(see "Services for Fund Investors"). Complete and return the form along with any
other required materials.

All contributions will count as current year.

Via the Internet----------------------------------------------------------------

COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.

<PAGE>

TO SELL SHARES

Write a redemption check* OR write a letter of instruction that includes:

* your name and signature

* your account number and fund name

* the dollar amount you want to sell

* how and where to send the proceeds

* whether the distribution is qualified or premature

* whether the 10% TEFRA should be withheld

Obtain a signature guarantee or other documentation, if required. Mail in your
request (see "To Open an Account" at left).

*A redemption check written for a qualified distribution is not subject to
TEFRA.

DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request instructions to establish
the plan.

To reach Dreyfus, call toll free in the U.S.

1-800-645-6561

Outside the U.S. 516-794-5452

Make checks payable to:

THE DREYFUS TRUST CO., CUSTODIAN

You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.

Concepts to understand

Your Investment

<PAGE>

For More Information

Dreyfus Disciplined Intermediate Bond Fund

A Series of The Dreyfus/Laurel Funds, Inc.
-----------------------------

SEC file number: 811-5270

More information on this fund is available free upon
request, including the following:

Annual/Semiannual Report

Describes the fund's performance, lists portfolio
holdings and contains a letter from the fund's manager
discussing recent market conditions, economic trends and
fund strategies that significantly affected the fund's
performance during the last fiscal year.

Statement of Additional Information (SAI)

To obtain information:

BY TELEPHONE Call 1-800-645-6561

BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144

BY E-MAIL Send your request to [email protected]

ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from:

SEC
http://www.sec.gov

DREYFUS
http://www.dreyfus.com

<PAGE>
DREYFUS DISCIPLINED INTERMEDIATE BOND FUND
INVESTOR SHARES AND RESTRICTED SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 1999

This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of the
Dreyfus Disciplined Intermediate Bond Fund (the "Fund"), dated March 1, 1999, as
it may be revised from time to time. The Fund is a separate, diversified
portfolio of The Dreyfus/Laurel Funds, Inc., an open-end management investment
company (the "Company"), known as a mutual fund. To obtain a copy of the Fund's
Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale,
New York 11556-0144, or call one of the following numbers:

Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452

TABLE OF CONTENTS
Page

Description of the Fund........................................... B-2
Management of the Fund............................................ B-27
Management Arrangements........................................... B-33
Purchase of Shares................................................ B-35
Distribution Plan................................................. B-39
Redemption of Shares.............................................. B-40
Shareholder Services.............................................. B-44
Additional Information About Purchases, Exchanges and Redemptions. B-49
Determination of Net Asset Value.................................. B-50
Dividends, Other Distributions and Taxes.......................... B-51
Portfolio Transactions............................................ B-56
Performance Information........................................... B-58
Information About the Fund........................................ B-60
Transfer and Dividend Disbursing
Agent, Custodian, Counsel and Independent Auditors.............. B-61
Financial Statements.............................................. B-61
Appendix.......................................................... B-62

<PAGE>

DESCRIPTION OF THE FUND

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS OF THE FUND'S PROSPECTUS ENTITLED "GOAL/APPROACH" AND "MAIN
RISKS."

The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.

The Fund seeks investment returns that exceed those of the Lehman Brothers
Aggregate Bond Index (the "Benchmark"). The Benchmark is a broad market weighted
index which covers the U.S. investment grade fixed-rate bond market, including
government and corporate securities, agency mortgage pass-through securities,
and asset-backed securities. The Benchmark covers those securities in the Lehman
Brothers Government/Corporate Bond Index, the Lehman Brothers Mortgage-Backed
Securities Index and the Lehman Brothers Asset-Backed Securities Index. All
issues have at least one year to maturity. The Fund is not (and will not operate
as) an index fund, and the Fund's portfolio investments will not be limited to
debt issues included in the Benchmark.

CERTAIN PORTFOLIO SECURITIES

The following information regarding the securities that the Fund may
purchase supplements that are found in the Fund's prospectus.

CORPORATE OBLIGATIONS. The Fund may invest in corporate obligations rated
at least Baa by Moody's Investors Service, Inc. ("Moody's") or BBB by Standard &
Poor's, or if unrated, of comparable quality as determined by Dreyfus.
Securities rated BBB by Standard & Poor's or Baa by Moody's are considered by
those rating agencies to be "investment grade" securities, although Moody's
considers securities rated Baa to have speculative characteristics. Further,
while bonds rated BBB by Standard & Poor's exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and principal for debt in
this category than debt in higher rated categories. The Fund will dispose in a
prudent and orderly fashion of bonds whose ratings drop below these minimum
ratings.

B-2
<PAGE>

In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are supported by any of the following: (a) the full faith
and credit of the U.S. Treasury, (b) the right of the issuer to borrow an amount
limited to a specific line of credit from the U.S. Treasury, (c) the
discretionary authority of the U.S. Treasury to lend to such Government agency
or instrumentality, or (d) the credit of the instrumentality. (Examples of
agencies and instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage Association
("GNMA"), Central Bank for Cooperatives, Federal Intermediate Credit Banks,
Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory Board,
Inter-American Development Bank, Asian-American Development Bank, Student Loan
Marketing Association, International Bank for Reconstruction and Development,
Federal Home Loan Mortgage Corporation ("FHLMC"), and Federal National Mortgage
Association ("FNMA"). No assurance can be given that the U.S. Government will
provide financial support to the agencies or instrumentalities described in (b),
(c) and (d) in the future, other than as set forth above, since it is not
obligated to do so by law.

FIXED-INCOME SECURITIES. The Fund may invest in fixed-income securities to
achieve its investment objective. In periods of declining interest rates, the
Fund's yield (its income from portfolio investments over a stated period of
time) may tend to be higher than prevailing market rates, and in periods of
rising interests rates, the Fund's yield may tend to be lower than prevailing
market rates. Also, in periods of falling interest rates, the inflow of net new
money to the Fund from the continuous sales of its shares will likely be
invested in portfolio instruments producing lower yield than the balance of the
Fund's portfolio, thereby reducing the yield of the Fund. In periods of rising
interest rates, the opposite can be true. The net asset value ("NAV") of a fund
investing in fixed-income securities also may change as general levels of
interest rates fluctuate. When interest rates rise, the value of a portfolio of
fixed-income securities can be expected to decline. Conversely, when interest
rates decline, the value of a portfolio of fixed-income securities can be
expected to rise.

VARIABLE AND FLOATING RATE SECURITIES. The Fund may invest in variable and
floating rate securities. A variable rate security provides for the adjustment
of its interest either at predesignated periodic intervals or whenever the
market rate to which the security's interest rate is tied changes. A floating
rate security provides for the automatic adjustment of its interest whenever a
specified interest rate changes. Interest rates on floating rate securities are
ordinarily tied to, and are a percentage of, a widely recognized interest rate,
such as the yield on 90-day U.S. Treasury bills or the prime rate of a specified
bank. These rates may change as often as twice daily. Generally, changes in
interest rates will have a smaller effect on the market value of variable and
floating rate securities than on the market value of comparable fixed-income
obligations. Thus, investing in variable and floating rate securities generally
allows less opportunity for capital appreciation and depreciation than investing
in comparable fixed-income securities.

B-3
<PAGE>

dealers that meet the Fund's credit guidelines. This technique offers a method
of earning income on idle cash. In a repurchase agreement, the Fund buys a
security from a seller that has agreed to repurchase the same security at a
mutually agreed upon date and price. The Fund's resale price will be in excess
of the purchase price, reflecting an agreed upon interest rate. This interest
rate is effective for the period of time the Fund is invested in the agreement
and is not related to the coupon rate on the underlying security. Repurchase
agreements may also be viewed as a fully collateralized loan of money by the
Fund to the seller. The period of these repurchase agreements will usually be
short, from overnight to one week, and at no time will the Fund invest in
repurchase agreements for more than one year. The Fund will always receive as
collateral securities whose market value including accrued interest is, and
during the entire term of the agreement remains, at least equal to 100% of the
dollar amount invested by the Fund in each agreement, and the Fund will make
payment for such securities only upon physical delivery or upon evidence of book
entry transfer to the account of the Custodian. If the seller defaults, the Fund
might incur a loss if the value of the collateral securing the repurchase
agreement declines and might incur disposition costs in connection with
liquidating the collateral. In addition, if bankruptcy proceedings are commenced
with respect to the seller of a security which is the subject of a repurchase
agreement, realization upon the collateral by the Fund may be delayed or
limited. The Fund seeks to minimize the risk of loss through repurchase
agreements by analyzing the creditworthiness of the obligors under repurchase
agreements, in accordance with the Fund's credit guidelines.

B-4
<PAGE>

MORTGAGE-RELATED SECURITIES. Mortgage-related securities are securities
that, directly or indirectly, represent interests in, or are secured by and
payable from, loans secured by real property, including pass-through securities
such as GNMA, FNMA and FHLMC certificates, private pass-through securities,
commercial mortgage-related securities, and certain collateralized mortgage
obligations. See "Mortgage Pass-Through Certificates" discussed below. Investors
should note that mortgage-related securities in which the Fund may invest are
developed and marketed from time-to-time and that, consistent with its
investment limitations, the Fund may invest in those mortgage-related securities
that Dreyfus believes may assist the Fund in achieving its investment objective.

B-5
<PAGE>

securities may be significantly affected by changes in interest rates, the
market's perception of the issuers, and the creditworthiness of the parties
involved.

In determining the Fund's average maturity, the maturity of a
mortgage-related security is deemed to be its effective life (i.e., the average
time in which the principal amount of the security is repaid), as estimated by
Dreyfus based on scheduled principal amortization and an anticipated rate of
principal prepayments, which rate, in turn, is based on past prepayment
patterns, prevailing interest rates and other factors. The effective life of a
mortgage-related security generally is substantially shorter than its stated
maturity.

B-6
<PAGE>

(1) GNMA Mortgage Pass-Through Certificates ("Ginnie Maes"). Ginnie Maes
represent an undivided interest in a pool of mortgages that are insured by the
Federal Housing Administration or the Farmers Home Administration or guaranteed
by the Veterans Administration. Ginnie Maes entitle the holder to receive all
payments (including prepayments) of principal and interest owed by the
individual mortgagors, net of fees paid to GNMA and to the issuer which
assembles the mortgage pool and passes through the monthly mortgage payments to
the certificate holders (typically, a mortgage banking firm), regardless of
whether the individual mortgagor actually makes the payment. Because payments
are made to certificate holders regardless of whether payments are actually
received on the underlying mortgages, Ginnie Maes are of the "modified
pass-through" mortgage certificate type. The GNMA is authorized to guarantee the
timely payment of principal and interest on the Ginnie Maes as securities backed
by an eligible pool of mortgages. The GNMA guarantee is backed by the full faith
and credit of the United States, and the GNMA has unlimited authority to borrow
funds from the U.S. Treasury to make payments under the guarantee. This is not a
guarantee against market decline of the value of these securities or the shares
of the Fund. It is possible that the availability (i.e., liquidity) of these
securities could be adversely affected by actions of the U.S. Government to
tighten the availability of its credit. The market for Ginnie Maes is highly
liquid because of the size of the market and the active participation in the
secondary market of securities dealers and a variety of investors.

(2) FHLMC Mortgage Participation Certificates ("Freddie Macs"). Freddie
Macs represent interests in groups of specified first lien residential
conventional mortgages underwritten and owned by FHLMC. Freddie Macs entitle the
holder to timely payment of interest, which is guaranteed by FHLMC. FHLMC
guarantees either ultimate collection or timely payment of all principal
payments on the underlying mortgage loans. In cases where FHLMC has not
guaranteed timely payment of principal, FHLMC may remit the amount due on
account of its guarantee of ultimate payment of principal at any time after
default on an underlying mortgage, but in no event later than one year after it
becomes payable. Freddie Macs are not guaranteed by the United States or by any
of the Federal Home Loan Banks and do not constitute a debt or obligation of the
United States or of any Federal Home Loan Bank. The secondary market for Freddie
Macs is highly liquid because of the size of the market and the active
participation in the secondary market of FHLMC, securities dealers and a variety
of investors.

(3) FNMA Guaranteed Mortgage Pass-Through Certificates ("Fannie Maes").
Fannie Maes represent an undivided interest in a pool of conventional mortgage
loans secured by first mortgages or deeds of trust, on one family, or two to
four family, residential properties. FNMA is obligated to distribute scheduled
monthly installments of principal and interest on the mortgages in the pool,
whether or not received, plus full principal of any foreclosed or otherwise
liquidated mortgages. The obligation of FNMA under its guaranty is solely the
obligation of FNMA and is not backed by, nor entitled to, the full faith and
credit of the United States.

(4) Private issuer mortgage certificates are pass-through securities
structured in a similar fashion to Ginnie Maes, Fannie Maes and Freddie Macs.
Private issuer mortgage certificates are generally backed by conventional single
family, multi-family and commercial mortgages. Private issuer mortgage
certificates typically are not guaranteed by the U.S. Government, its agencies
or instrumentalities, but generally have some form of credit support in the form

B-7
<PAGE>

of over-collateralization, pool insurance or other form of credit enhancement.

MUNICIPAL BONDS AND OTHER MUNICIPAL OBLIGATIONS. The Fund may invest in
debt obligations issued by or on behalf of states, territories and possessions
of the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, or multistate agencies or
authorities. Municipal obligations bear fixed, floating or variable rates of
interest that are determined in some instances by formulas under which the
municipal obligation's interest rate will change directly or inversely to
changes in interest rates or an index, or multiples thereof, in many cases
subject to a maximum and minimum. The Fund limits its investments in municipal
obligations to those obligations the interest on which is subject to federal
income tax.

MUNICIPAL BONDS. Municipal bonds, which generally have a maturity of more
than one year when issued, have two principal classifications: general
obligation bonds and revenue bonds. A private activity bond is a particular kind
of revenue bond. The classification of general obligation bonds, revenue bonds
and private activity bonds are discussed below.

(1) General Obligation Bonds. The proceeds of these obligations are used
to finance a wide range of public projects, including construction or
improvement of schools, highways and roads, and water and sewer systems. General
obligation bonds are secured by the issuer's pledge of its faith, credit and
taxing power for the payment of principal and interest.

(2) Revenue Bonds. Revenue bonds are issued to finance a wide variety of
capital projects including: electric, gas, water and sewer systems; highways,
bridges and tunnels; port and airport facilities; colleges and universities; and
hospitals. The principal security for a revenue bond is generally the net
revenues derived from a particular facility, group of facilities or, in some
cases, the proceeds of a special excise or other specific revenue source.
Although the principal security behind these bonds may vary, many provide
additional security in the form of a debt service reserve fund whose money may

B-8
<PAGE>

be used to make principal and interest payments on the issuer's obligations.
Some authorities provide further security in the form of a state's ability
(without obligation) to make up deficiencies in the debt service reserve fund.

(3) Private Activity Bonds. Private activity bonds are issued by or on
behalf of public authorities to raise money to finance various privately
operated facilities for business and manufacturing, housing, sports and
pollution control. These bonds are also used to finance public facilities such
as airports, mass transit systems, ports and parking. The payment of the
principal and interest on such bonds is dependent solely on the ability of the
facility's user to meet its financial obligations and the pledge, if any, of
real and personal property so financed as security for such payment.

MUNICIPAL NOTES. Municipal notes generally are used to provide for
short-term capital needs and generally have maturities of thirteen months or
less. Municipal notes include:

(1) Tax Anticipation Notes. Tax anticipation notes are issued to finance
working capital needs of municipalities. Generally, they are issued in
anticipation of various seasonal tax revenue, such as income, sales, use and
business taxes, and are payable from these specific future taxes.

(2) Revenue Anticipation Notes. Revenue anticipation notes are issued in
expectation of receipt of other kinds of revenue, such as Federal revenues
available under the Federal Revenue Sharing Programs.

(3) Bond Anticipation Notes. Bond anticipation notes are issued to provide
interim financing until long-term financing can be arranged. In most cases, the
long-term bonds then provide the money for the repayment of the notes.

MUNICIPAL COMMERCIAL PAPER. Issues of municipal commercial paper typically
represent short-term, unsecured, negotiable promissory notes. These obligations
are issued by agencies of state and local governments to finance seasonal
working capital needs of municipalities or to provide interim construction
financing and are paid from general revenues of municipalities or are refinanced
with long-term debt. In most cases, municipal commercial paper is backed by
letters of credit, lending agreements, note repurchase agreements or other
credit facility agreements offered by banks or other institutions.

B-9
<PAGE>

the security is converted). As a fixed-income security, the market value of a
convertible security generally increases when interest rates decline and
generally decreases when interest rates rise. However, the price of a
convertible security also is influenced by the market value of the security's
underlying common stock. Thus, the price of a convertible security generally
increases as the market value of the underlying stock rises, and generally
decreases as the market value of the underlying stock declines. Investments in
convertible securities generally entail less risk than investments in the common
stock of the same issuer. The Fund does not invest in common stocks and does not
intend to exercise conversion rights for any convertible security that it may
hold and will sell any common stocks received upon the conversion of convertible
securities as promptly as it can and in a manner that it believes will reduce
its risk of loss in connection with the sale.

PREFERRED STOCK. The Fund may also purchase preferred stock, which is a
class of capital stock that typically pays dividends at a specified rate.
Preferred stock is generally senior to common stock, but subordinate to debt
securities, with respect to the payment of dividends and on liquidation of the
issuer. In general, the market value of preferred stock is its "investment
value," or its value as a fixed-income security. Accordingly, the market value
of preferred stock generally increases when interest rates decline and decreases
when interest rates rise, but, as with debt securities, is also affected by the
issuer's ability to make payments on the preferred stock.

ZERO COUPON SECURITIES. The Fund may invest in zero coupon securities,
which are debt securities that do not entitle the holder to any periodic payment
of interest, but instead are issued or sold at a discount from their face value.
The amount of the discount varies depending on, among other factors, prevailing
interest rates, the liquidity of the security, and the perceived
creditworthiness of the issuer. Zero coupon securities may take the form of debt
securities that have been stripped of their unmatured interest coupons, the
coupons themselves and receipts or certificates representing interests in such
stripped debt obligations and coupons. The market prices of zero coupon
securities generally are more volatile than the market prices of securities that
pay interest periodically and are likely to respond to a greater degree to
changes in interest rates than non-zero coupon securities having similar
maturities and credit qualities.

ILLIQUID INVESTMENTS. The Fund will not knowingly invest more than 15% of
the value of its net assets in illiquid investments. Investments currently
considered to be illiquid include securities for which market quotations are not
readily available; repurchase agreements and time deposits with maturities in
excess of seven days; certain mortgage-related securities; securities involved
in swap, cap, collar and floor transactions; and certain options traded in the
over-the-counter market and securities used to cover such options. The Fund may
not be able to sell illiquid securities when Dreyfus considers it desirable to
do so or may have to sell such securities at a price lower than the price that
could be obtained if they were more liquid. Illiquid securities may be more
difficult to value due to the unavailability of reliable market quotations for
such securities, and investment in illiquid securities may have an adverse
impact on the Fund's NAV. The Fund may invest in commercial obligations issued
in reliance on the so-called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act of 1933, as amended ("Section
4(2) paper"). The Fund may also purchase securities that are not registered
under the Securities Act of 1933, as amended, but that can be sold to qualified
institutional buyers in accordance with Rule 144A under that Act ("Rule 144A

B-10
<PAGE>

securities"). Liquidity determinations with respect to Section 4(2) paper and
Rule 144A securities will be made by the Board of Directors or by Dreyfus
pursuant to guidelines established by the Board of Directors. The Board or
Dreyfus will consider availability of reliable price information and other
relevant information in making such determinations. Section 4(2) paper is
restricted as to disposition under the federal securities laws, and generally is
sold to institutional investors, such as the Fund, that agree that they are
purchasing the paper for investment and not with a view to public distribution.
Any resale by the purchaser must be pursuant to registration or an exemption
therefrom. Section 4(2) paper normally is resold to other institutional
investors like the Fund through or with the assistance of the issuer or
investment dealers who make a market in the Section 4(2) paper, thus providing
liquidity. Rule 144A securities generally must be sold to other qualified
institutional buyers. If a particular investment in Section 4(2) paper or Rule
144A securities is not determined to be liquid, that investment will be included
within the percentage limitation on investment in illiquid securities. The
ability to sell Rule 144A securities to qualified institutional buyers is a
recent development and it is not possible to predict how this market will
mature. Investing in Rule 144A securities could have the effect of increasing
the level of Fund illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing these securities from the Fund or
other holder.

Over-the-counter ("OTC") options purchased by the Fund will be considered
illiquid for purposes of the Fund's operating policy that provides that it may
not invest more than 15% of its net assets in illiquid investments. When the
Fund sells OTC options, it will segregate assets or cover its obligations with
respect to OTC options written by it. The assets used as cover for OTC options
written by the Fund will also be considered illiquid investments for purposes of
this limitation unless the OTC options are sold to qualified dealers who agree
that the Fund may repurchase any OTC option it writes at a maximum price to be
calculated by a formula set forth in the option agreement. The cover for an OTC
option written subject to this procedure would be considered illiquid only to
the extent that the maximum repurchase price under the formula exceeds the
intrinsic value of the option.

Under current guidelines of the staff of the SEC, IOs and POs are also
considered to be illiquid; however, IO and PO classes of fixed-rate
mortgage-related securities issued by the U.S. Government or one of its agencies
or instrumentalities will not be considered illiquid if Dreyfus determines that
they are liquid pursuant to guidelines established by or under the direction of
the Company's Board of Directors.

COMMERCIAL PAPER. To maintain liquidity, or to establish temporary
liquidity positions necessary to effect pending investments, the Fund may invest
in commercial paper. These instruments are short-term obligations issued by
banks and corporations that have maturities ranging from two to 270 days. Each
instrument may be backed only by the credit of the issuer or may be backed by
some form of credit enhancement, typically in the form of a guarantee by a
commercial bank. Commercial paper backed by guarantees of foreign banks may
involve additional risk due to the difficulty of obtaining and enforcing
judgments against such banks and the generally less restrictive regulations to
which such banks are subject. The Fund will only invest in commercial paper of
U.S. and foreign companies rated at the

B-11
<PAGE>

time of purchase at least A-1 by Standard & Poor's, Prime-1 by Moody's, F-1 by
Fitch Investors Service, LLP, Duff 1 by Phoenix Duff & Phelps, Corp., or A1 by
IBCA, Inc.

To maintain liquidity, or to establish temporary liquidity positions
necessary to effect pending investments, Instruments may purchase bankers'
acceptances, certificates of deposit, time deposits, and other short-term
obligations issued by domestic banks, foreign subsidiaries or foreign branches
of domestic banks, domestic and foreign branches of foreign banks, domestic
savings and loan associations and other banking institutions.

BANK INSTRUMENTS. To maintain liquidity, or to establish temporary
liquidity positions necessary to effect pending investments, the Fund may
purchase bankers' acceptances, certificates of deposit, time deposits, and other
short-term obligations issued by domestic banks, foreign subsidiaries or foreign
branches of domestic banks, domestic and foreign branches of foreign banks,
domestic savings and loan associations and other banking institutions. Included
among such obligations are Eurodollar certificates of deposit ("ECDs") and
Eurodollar time deposits ("ETDs") and Yankee Dollar certificates of deposit
("Yankee CDs"). ECDs are U.S. dollar-denominated certificates of deposit issued
by foreign branches of domestic banks. ETDs are U.S. dollar-denominated time
deposits in a foreign branch of a U.S. bank or a foreign bank. Yankee CDs are
certificates of deposit issued by a U.S. branch of a foreign bank denominated in
U.S. dollars and held in the United States. The Fund may also invest in
Eurodollar bonds and notes, which are obligations that pay principal and
interest in U.S. dollars held in banks outside the United States, primarily in
Europe. All of these obligations are subject to somewhat different risks than
are the obligations of domestic banks or issuers in the United States. See
"Foreign Securities."

FOREIGN SECURITIES. The Fund may purchase securities of foreign issuers
and may invest in obligations of foreign branches of domestic banks and domestic
branches of foreign banks. Investment in foreign securities presents certain
risks, including those resulting from fluctuations in currency exchange rates,
revaluation of currencies, adverse political and economic developments, the
possible imposition of currency exchange blockages or other foreign governmental
laws or restrictions, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
Moreover, securities of many foreign issuers may be less liquid and their prices
more volatile than those of comparable domestic issuers. In addition, with
respect to certain foreign countries, there is the possibility of expropriation,
confiscatory taxation and limitations on the use or removal of funds or other
assets of the Fund, including withholding of dividends. Foreign securities may
be subject to foreign government taxes that would reduce the yield on such
securities.

OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued by
other investment companies to the extent that such investments are consistent
with the Fund's investment objective and policies and permissible under the
Investment Company Act of 1940, as amended ("1940 Act"). As a shareholder of
another investment company, the Fund would bear, along with other shareholders,
its pro rata portion of the other investment company's expenses, including
advisory fees. These expenses would be in addition to the advisory and other
expenses that the Fund bears directly in connection with its own operations.

INVESTMENT TECHNIQUES

B-12
<PAGE>

BORROWING. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.

WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. In when-issued
transactions, delivery and payment for the securities normally takes place
approximately seven to 45 days after the date the buyer commits to purchase them
(delivery and payment could take place considerably later in the case of some
mortgage related securities). The payment obligation and the interest rate that
will be received on securities purchased on a "when-issued" basis are each fixed
at the time the buyer enters into the commitment. The Fund will make commitments
to purchase such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities or dispose of the commitment
before the settlement date if it is deemed advisable as a matter of investment
strategy. Cash or marketable high-grade debt securities equal to the amount of
the above commitments will be segregated on the Fund's records. For the purpose
of determining the adequacy of these securities the segregated securities will
be valued at market. If the market value of such securities declines, additional
cash or securities will be segregated on the Fund's records on a daily basis so
that the market value of the account will equal the amount of such commitments
by the Fund.

B-13
<PAGE>

FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS. The Fund may purchase
and sell various financial instruments ("Derivative Instruments"), such as
financial futures contracts (including interest rate, index and foreign currency
futures contracts), options (including options on securities, indices, foreign
currencies and futures contracts), forward currency contracts, and interest rate
and currency swaps, caps, collars and floors. The index Derivative Instruments
the Fund may use may be based on indices of U.S. or foreign equity or debt
securities. These Derivative Instruments may be used, for example, to preserve a
return or spread, to lock in unrealized market value gains or losses, to
facilitate or substitute for the sale or purchase of securities, to manage the
duration of securities, to alter the exposure of a particular investment or
portion of the Fund's portfolio to fluctuations in interest rates or currency
rates, to uncap a capped security or to convert a fixed rate security into a
variable rate security or a variable rate security into a fixed rate security.

B-14
<PAGE>

(1) Successful use of most Derivative Instruments depends upon Dreyfus'
ability not only to forecast the direction of price fluctuations of the
investment involved in the transaction, but also to predict movements of the
overall securities, currency and interest rate markets, which requires different
skills than predicting changes in the prices of individual securities. There can
be no assurance that any particular strategy will succeed.

B-15
<PAGE>

volatility between the contract and the securities, although this may not be
successful in all cases. If price changes in the Fund's options or futures
positions are poorly correlated with its other investments, the positions may
fail to produce anticipated gains or result in losses that are not offset by
gains in other investments.

(4) As described below, the Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in Derivative Instruments involving obligations to third parties
(I.E., Derivative Instruments other than purchased options). If the Fund were
unable to close out its positions in such Derivative Instruments, it might be
required to continue to maintain such assets or accounts or make such payments
until the position expired or matured. These requirements might impair the
Fund's ability to sell a portfolio security or make an investment at a time when
it would otherwise be favorable to do so, or require that the Fund sell a
portfolio security at a disadvantageous time. The Fund's ability to close out a
position in a Derivative Instrument prior to expiration or maturity depends on
the existence of a liquid secondary market or, in the absence of such a market,
the ability and willingness of the other party to the transaction
("counterparty") to enter into a transaction closing out the position.
Therefore, there is no assurance that any position can be closed out at a time
and price that is favorable to the Fund.

COVER FOR DERIVATIVE INSTRUMENTS. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund will
not enter into any such transactions unless it owns either (1) an offsetting
("covered") position in securities, futures, options, currencies or forward
contracts or (2) cash and short-term liquid debt securities with a value
sufficient at all times to cover its potential obligations to the extent not
covered as provided in (1) above. The Fund will comply with SEC guidelines
regarding cover for Derivative Instruments and will, if the guidelines so
require, set aside cash, U.S. Government securities or other liquid, high-grade
debt securities in a segregated account with its custodian in the prescribed
amount.

B-16
<PAGE>

Options on indices are similar to options on securities or currencies
except that all settlements are in cash and gain or loss depends on changes in
the index in question rather than on price movements in individual securities or
currencies.

The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of the
underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised have
no value and the Fund would experience losses to the extent of premiums paid for
them.

B-17
<PAGE>

purchased by writing an identical put or call option; this is known as a closing
sale transaction. Closing transactions permit the Fund to realize profits or
limit losses on an option position prior to its exercise or expiration.

The Fund may purchase and sell both exchange-traded and OTC options.
Exchange-traded options in the United States are issued by a clearing
organization that, in effect, guarantees completion of every exchange-traded
option transaction. In contrast, OTC options are contracts between the Fund and
its counterparty (usually a securities dealer or a bank) with no clearing
organization guarantee. Thus, when the Fund purchases an OTC option, it relies
on the counterparty from whom it purchased the option to make or take delivery
of the underlying investment upon exercise of the option. Failure by the
counterparty to do so would result in the loss of any premium paid by the Fund
as well as the loss of any expected benefit of the transaction. The Fund will
enter into only those option contracts that are listed on a national securities
or commodities exchange or traded in the OTC market for which there appears to
be a liquid secondary market. The Fund will not purchase put or call options
that are traded on a national exchange in an amount exceeding 5% of its net
assets.

Generally, the OTC debt and foreign currency options used by the Fund are
European style options. This means that the option is only exercisable
immediately prior to its expiration. This is in contrast to American style
options, which are exercisable at any time prior to the expiration date of the
option.

The Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. However, there can be no
assurance that such a market will exist at any particular time. Closing
transactions can be made for OTC options only by negotiating directly with the
counterparty, or by a transaction in the secondary market if any such market
exists. Although the Fund will enter into OTC options only with major dealers in
unlisted options, there is no assurance that the Fund will in fact be able to
close out an OTC option position at a favorable price prior to expiration. In
the event of insolvency of the counterparty, the Fund might be unable to close
out an OTC option position at any time prior to its expiration.

B-18
<PAGE>

The Fund may write only covered call options on securities. A call option
is covered if the Fund owns the underlying security or a call option on the same
security with a lower strike price.

Futures strategies also can be used to manage the average duration of the
Fund's fixed income portfolio. If Dreyfus wishes to shorten the average duration
of the Fund's fixed income portfolio, the Fund may sell an interest rate futures
contract or a call option thereon, or purchase a put option on that futures
contract. If Dreyfus wishes to lengthen the average duration of the Fund's fixed
income portfolio, the Fund may buy an interest rate futures contact or a call
option thereon, or sell a put option thereon.

B-19
<PAGE>

To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for BONA FIDE hedging purposes
(as defined by the CFTC), the aggregate initial margin and premiums required to
establish those positions (excluding the amount by which options are
"in-the-money" at the time of purchase) will not exceed 5% of the liquidation
value of the Fund's portfolio, after taking into account unrealized profits and
unrealized losses on any contracts the Fund has entered into. This policy does

B-20
<PAGE>

not limit to 5%, the percentage of the Fund's assets that are at risk in futures
contracts and options on futures contracts.

FOREIGN CURRENCY STRATEGIES - SPECIAL CONSIDERATIONS. The Fund may use
Derivative Instruments on foreign currencies to hedge against movements in the
values of the foreign currencies in which the Fund's securities are denominated.
Such currency hedges can protect against price movements in a security that the
Fund owns or intends to acquire that are attributable to changes in the value of
the currency in which it is denominated. Such hedges do not, however, protect
against price movements in the securities that are attributable to other causes.

The Fund might seek to hedge against changes in the value of particular
currency when no Derivative Instruments on that currency are available or such
Derivative Instruments are more expensive than certain other Derivative
Instruments. In such cases, the Fund may hedge against price movements in that
currency by entering into transactions using Derivative Instruments on another
currency or a basket of currencies, the values of which Dreyfus believes will
have a high degree of positive correlation to the value of the currency being
hedged. The risk that movements in the price of the Derivative Instrument will
not correlate perfectly with movements in the price of the currency being hedged
is magnified when this strategy is used.

The value of Derivative Instruments on foreign currencies depends on the
value of the underlying currency relative to the U.S. dollar. Because foreign
currency transactions occurring in the interbank market might involve
substantially larger amounts than those involved in the use of foreign currency
Derivative Instruments, the Fund could be disadvantaged by having to deal in the
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.

There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information generally is representative of very large transactions in the
interbank market and thus might not reflect odd-lot transactions where rates
might be less favorable. The interbank market in foreign currencies is a global,
round-the-clock market.

Settlement of transactions involving foreign currencies might be required
to take place within the country issuing the underlying currency. Thus, the Fund
might be required to accept or make delivery of the underlying foreign currency
in accordance with any U.S. or foreign regulations regarding the maintenance of
foreign banking arrangements by U.S. residents and might be required to pay any
fees, taxes and charges associated with such delivery assessed in the issuing
country.

FORWARD CONTRACTS. The Fund may engage in currency exchange transactions
on a spot or forward basis and may hold foreign currency deposits. (See "ECDs,
ETDs and Yankee CDs".) The Fund may exchange foreign currency on a spot basis at
the spot rate then prevailing for purchasing or selling foreign currencies in
the foreign exchange market.

B-21
<PAGE>

The Fund may also enter into forward foreign currency exchange contracts
("forward contracts"). Forward contracts are contracts to purchase or sell a
currency at a future date. The two parties to the contract set the number of
days and the price. Forward contracts are used as a hedge against future
movements in foreign exchange rates with respect to either specific transactions
or portfolio positions. The Fund may enter into forward contracts to purchase or
sell foreign currencies for a fixed amount of U.S. dollars or other foreign
currency.

Forward contracts may serve as long hedges -- for example, the Fund may
purchase a forward contract to lock in the U.S. dollar price of a security
denominated in a foreign currency that the Fund intends to acquire. Forward
contracts may also serve as short hedges -- for example, the Fund may sell a
forward contract to lock in the U.S. dollar equivalent of the proceeds from the
anticipated sale of a security denominated in a foreign currency or from
anticipated dividend or interest payments denominated in a foreign currency.
Dreyfus may seek to hedge against changes in the value of a particular currency
by using forward contracts on another foreign currency or basket of currencies,
the value of which Dreyfus believes will bear a positive correlation to the
value of the currency being hedged.

The cost to the Fund of engaging in forward contracts varies with factors
such as the currency involved, the length of the contract period and the market
conditions then prevailing. Because forward contracts are usually entered into a
principal basis, no fees or commissions are involved. When the Fund enters into
a forward contract, it relies on the counterparty to make or take delivery of
the underlying currency at the maturity of the contract. Failure by the
counterparty to do so would result in the loss of any expected benefit of the
transaction.

Buyers and sellers of forward contracts can enter into offsetting closing
transactions by selling or purchasing, respectively, an instrument identical to
the instrument purchased or sold. Secondary markets generally do not exist for
forward contracts, with the result that closing transactions generally can be
made for forward contracts only by negotiating directly with the counterparty.
Thus, there can be no assurance that the Fund will in fact be able to close out
a forward contract at a favorable price prior to maturity. In addition, in the
event of insolvency of the counterparty, the Fund might be unable to close out a
forward contract at any time prior to maturity. In either event, the Fund would
continue to be subject to market risk with respect to the position, and would
continue to be required to maintain a position in the securities or currencies
that are the subject of the hedge or to maintain cash or securities in a
segregated account.

The precise matching of forward currency contract amounts and the value of
the securities involved generally will not be possible because the value of such
securities measured in the foreign currency will change after the forward
contract has been established. Thus, the Fund might need to purchase or sell
foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward contracts. The projection of short-term
currency market movements is extremely difficult, and the successful execution
of a short-term hedging strategy is highly uncertain.

B-22
<PAGE>

Forward currency contracts may substantially change the Fund's investment
exposure to changes in currency exchange rates and could result in losses if
currencies do not perform as Dreyfus anticipates. There is no assurance that
Dreyfus' use of forward currency contracts will be advantageous to the Fund or
that it will hedge at an appropriate time.

SWAPS, CAPS, COLLARS AND FLOORS. Swap agreements, including interest rate
and currency swaps, caps, collars and floors, may be individually negotiated and
structured to include exposure to a variety of different types of investments or
market factors. Swaps involve two parties exchanging a series of cash flows at
specified intervals. In the case of an interest rate swap, the parties exchange
interest payments based on an agreed upon principal amount (referred to as the
"notional principal amount"). Under the most basic scenario, Party A would pay a
fixed rate on the notional principal amount to Party B, which would pay a
floating rate on the same notional principal amount to Party A. Depending on
their structure, swap agreements may increase or decrease the Fund's exposure to
long or short-term interest rates (in the U.S. or abroad), foreign currency
values, mortgage securities, corporate borrowing rates, or other factors. Swap
agreements can take many different forms and are known by a variety of names.

In a typical cap or floor agreement, one party agrees to make payments
only under specified circumstances, usually in return for payment of a fee by
the other party. For example, the buyer of an interest rate cap obtains the
right to receive payments to the extent that a specified interest rate exceeds
an agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.

The Fund will set aside cash or appropriate liquid assets to cover its
current obligations under swap transactions. If the Fund enters into a swap
agreement on a net basis (that is, the two payment streams are netted out, with
the Fund receiving or paying, as the case may be, only the net amount of the two
payments), the Fund will maintain cash or liquid assets with a daily value at
least equal to the excess, if any, of the Fund's accrued obligations under the
swap agreement over the accrued amount the Fund is entitled to receive under the
agreement. If the Fund enters into a swap agreement on other than a net basis or
writes a cap, collar or floor, it will maintain cash or liquid assets with a
value equal to the full amount of the Fund's accrued obligations under the
agreement.

The most important factor in the performance of swap agreements is the
change in the specific interest rate, currency or other factor(s) that determine
the amounts of payments due to and from the Fund. If a swap agreement calls for
payments by the Fund, the Fund must be prepared to make such payments when due.
In addition, if the counterparty's creditworthiness declines, the value of a
swap agreement would likely decline, potentially resulting in losses.

The Fund will enter into swaps, caps, collars and floors only with banks
and recognized securities dealers believed by Dreyfus to present minimal credit
risks in accordance with guidelines established by the Board. If there is a
default by the other party to such a transaction, the Fund will have to rely on
its contractual remedies (which may be limited by bankruptcy, insolvency or
similar laws) pursuant to the agreement relating to the transaction.

B-23
<PAGE>

The Fund understands that it is the position of the staff of the SEC that
assets involved in swap transactions are illiquid and, therefore, are subject to
the limitations on illiquid investments. See "Illiquid Investments."

MORTGAGE DOLLAR ROLLS. The Fund may enter into mortgage "dollar rolls" in
which the Fund sells mortgage-related securities for delivery in the current
month and simultaneously contracts to purchase substantially similar securities
on a specified future date. The mortgage-related securities that are purchased
will be of the same type and will have the same interest rate as those
securities sold, but generally will be supported by different pools of mortgages
with different prepayment histories than those sold. The Fund forgoes principal
and interest paid during the roll period on the securities sold in a dollar
roll, but the Fund is compensated by the difference between the current sales
price and the lower price of the future purchase, as well as by any interest
earned on the proceeds of the securities sold. The Fund could be compensated
also through the receipt of fee income equivalent to a lower forward price. The
dollar rolls entered into by the Fund normally will be "covered." A covered roll
is a specific type of dollar roll for which there is an offsetting cash position
or a cash equivalent security position that matures on or before the forward
settlement date of the related dollar roll transaction. Covered rolls are not
treated as a borrowing or other senior security and will be excluded from the
calculation of the Fund's borrowings and other senior securities.

INVESTMENT RESTRICTIONS

FUNDAMENTAL. The following limitations have been adopted by the Fund. The
Fund may not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of shareholders
duly called if the holders of more than 50% of the outstanding shares of the
Fund are present or represented by proxy, or (b) more than 50% of the
outstanding shares of the Fund, whichever is less. The Fund may not:

B-24
<PAGE>

2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) the Fund may borrow money in an amount not exceeding one-third
of the Fund's total assets at the time of such borrowings, and (b) the Fund may
issue multiple classes of shares. The purchase or sale of futures contracts,
options, forward contracts, swaps, caps, collars and floors shall not be
considered to involve the borrowing of money or issuance of senior securities.

4. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans. For
purposes of this limitation debt instruments, swaps, caps, collars, floors, and
repurchase agreements shall not be treated as loans.

7. Purchase or sell commodities except that the Fund may purchase and sell
foreign currency, futures contracts, options, forward currency contracts, swaps,
caps, collars and floors, and other similar instruments.

B-25
<PAGE>

1. The Fund shall not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amounts to the securities sold
short, and provided that transactions in futures contracts, options, forward
contracts, swaps, caps, collars, floors, and other similar financial instruments
are not deemed to constitute selling short.

2. The Fund shall not purchase securities on margin, except that the Fund
may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with futures
contracts, options, forward contracts, swaps, caps, collars, floors, and other
similar financial instruments shall not constitute purchasing securities on
margin.

3. The Fund shall not purchase oil, gas or mineral leases.

4. The Fund will not purchase or retain the securities of any issuer if
the officers, Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of 1% of the securities of such issuer, together
own beneficially more than 5% of such securities.

6. The Fund will not invest more than 15% of the value of its net assets
in illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, time deposits with maturities in excess of
seven days and other securities which are not readily marketable. For purposes
of this limitation, illiquid securities shall not include interest only (IO) and
principal only (PO) classes of fixed rate mortgage related securities issued by
the U.S. Government or one of its agencies or instrumentalities; provided, that
the Board of Directors, or its delegate, determines that such securities are
liquid pursuant to guidelines established by or under the direction of the Board
of Directors. Also, for purposes of this limitation, illiquid securities shall
not include Section 4(2) paper or securities that may be resold under Rule 144A
under the Securities Act of 1933; provided that the Board of Directors, or its
delegate, determines that such securities are liquid based upon the trading
markets for the specific security.

8. The Fund shall not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.

B-26
<PAGE>

invested in warrants that are not listed on the New York or American Stock
Exchange (for purposes of this limitation, warrants acquired by the Fund in
units or attached to securities will be deemed to have no value).

10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if, as a result of such purchase, the value of its aggregate
investment in such securities will exceed 5% of its total assets except that:
(a) this limitation shall not apply to standby commitments, and (b) this
limitation shall not apply to the Fund's transactions in futures contracts and
options on futures contracts.

To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for BONA FIDE hedging purposes
(as defined by the CFTC), the aggregate initial margin and premiums required to
establish those positions (excluding the amount by which options are
"in-the-money" at the time of purchase) will not exceed 5% of the liquidation
value of the Fund's portfolio, after taking into account unrealized profits and
unrealized losses on any contracts the Fund has entered into. This policy does
not limit to 5% the percentage of the Fund's assets that are at risk in futures
contracts and options on futures contracts.

MANAGEMENT OF THE FUND

FEDERAL LAW AFFECTING MELLON BANK

The Glass-Steagall Act of 1933 prohibits national banks from engaging in
the business of underwriting, selling or distributing securities and prohibits a
member bank of the Federal Reserve System from having certain affiliations with
an entity engaged principally in that business. The activities of Mellon Bank in
informing its customers of, and performing, investment and redemption services
in connection with the Fund, and in providing services to the Fund as custodian,
as well as Dreyfus' investment advisory activities, may raise issues under these
provisions. Mellon Bank has been advised by counsel that the activities
contemplated under these arrangements are consistent with its statutory and
regulatory obligations.

Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of such
future statutes and regulations, could prevent Mellon Bank or Dreyfus from
continuing to perform all or a part of the above services for its customers
and/or the Fund. If Mellon Bank or Dreyfus were prohibited from serving the Fund

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<PAGE>

in any of its present capacities, the Board of Directors would seek an
alternative provider(s) of such services.

DIRECTORS AND OFFICERS

DIRECTORS OF THE COMPANY

o+JAMES M. FITZGIBBONS. Director of the Company; Director, Lumber Mutual
Insurance Company; Director, Barrett Resources, Inc. Age: 64 years
old. Address: 40 Norfolk Road, Brookline, Massachusetts 02167.

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<PAGE>

o*J. TOMLINSON FORT. Director of the Company; Partner, Reed, Smith, Shaw &
McClay (law firm). Age: 70 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.

o+JOHNJ. SCIULLO. Director of the Company; Dean Emeritus and Professor of Law,
Duquesne University Law School; Director, Urban Redevelopment Authority of
Pittsburgh; Member of Advisory Committee, Decedents Estates Laws of
Pennsylvania. Age: 67 years old. Address: 321 Gross Street, Pittsburgh,
Pennsylvania 15224.

___________________

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<PAGE>

* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.

OFFICERS OF THE COMPANY

#MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior Vice
President and General Counsel of Funds Distributor, Inc. From August 1996
to March 1998, she was Vice President and Assistant General Counsel for
Loomis, Sayles & Company, L.P. From January 1986 to July 1996, she was an
associate with the law firm of Ropes & Gray. Age: 39 years old.

B-30
<PAGE>

she was an Assistant Vice President with Hudson Valley Bank, and from
September 1990 to August 1995, she was a Second Vice President with Chase
Manhattan Bank. Age: 30 years old.

___________________________
# Officer also serves as an officer for other investment companies advised by
Dreyfus, including The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel
Tax-Free Municipal Funds.

The address of each officer of the Company is 200 Park Avenue, New York,
New York 10166.

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<PAGE>

Total Compensation
Aggregate From the Company
Name of Board Compensation and Fund Complex
Member From the Company# Paid to Board Member****
- ------------- ----------------- ------------------------

Joseph S. DiMartino*

James M. Fitzgibbons

J. Tomlinson Fort** none none

Arthur L. Goeschel

Kenneth A. Himmel

Stephen J. Lockwood

John J. Sciullo

Roslyn M. Watson

Benaree Pratt Wiley***

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<PAGE>

non-interested Directors. Amount does not include reimbursed expenses for
attending Board meetings, which amounted to $[ ] for the Company.
* Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.

The officers and Directors of the Company as a group owned beneficially
less than 1% of the total shares of the Fund outstanding as of November __,
1998.

PRINCIPAL SHAREHOLDERS. As of January 31, 1999, the following
shareholder(s) owned of record 5% or more of Investor and Restricted shares of
the Fund: _________.

MANAGEMENT ARRANGEMENTS

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN THE FUND'S PROSPECTUS ENTITLED "EXPENSES" AND "Management."

B-33
<PAGE>

EXPENSES. Under the Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 0.55% of the value of the Fund's
average daily net assets. Dreyfus pays all of the Fund's expenses, except
brokerage fees, taxes, interest, fees and expenses of the non-interested
directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and expenses
of the non-interested Directors (including counsel fees), Dreyfus is
contractually required to reduce its investment management fee by an amount
equal to the Fund's allocable share of such fees and expenses. From time to
time, Dreyfus may voluntarily waive a portion of the investment management fees
payable by the Fund, which would have the effect of lowering the expense ratio
of the Fund and increasing return to investors. Expenses attributable to the
Fund are charged against the Fund's assets; other expenses of the Company are
allocated among its funds on the basis determined by the Board, including, but
not limited to, proportionately in relation to the net assets of each fund.

For the last three years, the Fund had the following expenses:

For the Fiscal Year Ended October 31,
1998 1997 1996
---- ---- ----

Management fees $____ $426,110 $169,710

B-34
<PAGE>

THE DISTRIBUTOR. Premier Mutual Fund Services, Inc. (the "Distributor"),
located at 60 State Street, Boston, Massachusetts 02109, serves as the Fund's
distributor on a best efforts basis pursuant to an agreement which is renewable
annually. Dreyfus may pay the Distributor for shareholder services from Dreyfus'
own assets, including past profits but not including the management fee paid by
the Fund. The Distributor may use part or all of such payments to pay certain
banks, securities brokers or dealers and other financial institutions ("Agents")
for these services. The Distributor also acts as sub-administrator for the Fund
and as distributor for the other funds in the Dreyfus Family of Funds and for
certain other investment companies.

PURCHASE OF SHARES

GENERAL. The Fund offers Investor shares and Restricted shares. (Investor
and Restricted shares of the Fund were formerly called Institutional and Retail
shares, respectively.) Investor shares and Restricted shares are identical,
except as to the services offered to and the expenses borne by each Class.
Investor shares are offered to any investor. Restricted shares are sold
primarily to bank trust departments and other financial service providers acting
on behalf of customers having a qualified trust or investment account or
relationship at such institution, or to customers who have received and hold
shares of the Fund, distributed to them by virtue of such an account or
relationship. Unless the Fund is otherwise instructed, new purchases by existing
shareholders are in the same class of shares that the shareholder then holds.
The Fund reserves the right to reject any purchase order. You may be charged a
fee if you effect transactions in Fund shares through an Agent.

The minimum initial investment is $2,500, or $1,000 if you are a client of
an Agent that maintains an omnibus account in the Fund and has made an aggregate
minimum initial purchase for its customers of $2,500. Subsequent investments
must be at least $100. The minimum initial investment is $750 for
Dreyfus-sponsored Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a
non-working spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans
with only one participant and $500 for Dreyfus-sponsored Education IRAs, with no
minimum on subsequent purchases. The initial investment must be accompanied by
the Fund's Account Application. For full-time or part-time employees of Dreyfus
or any of its affiliates or subsidiaries, directors of Dreyfus, Board members of
a fund advised by Dreyfus including members of the company's Board, or the
spouse or minor child of any of the foregoing, the minimum initial investment
for Investor shares is $1,000. For full-time or part-time employees of Dreyfus
or any of its affiliates or subsidiaries who elect to have a portion of their
pay directly deposited into their Fund account, the minimum initial investment
for Investor shares is $50. The Fund reserves the right to offer Fund shares
without regard to minimum purchase requirements to employees participating in
certain qualified or non-qualified employee benefit plans or other programs
where contributions or account information can be transmitted in a manner and
form acceptable to the Fund. The Fund reserves the right to vary further the

B-35
<PAGE>

initial and subsequent investment minimum requirements at any time.

Investor shares are also offered without regard to the minimum initial
investment requirements, through Dreyfus-Automatic Asset Builder, Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan pursuant to
the Dreyfus Step Program (described under "Shareholder Services"). These
services enable you to make regularly scheduled investments and may provide you
with a convenient way to invest for long-term financial goals. You should be
aware, however, that periodic investment plans do not guarantee a profit and
will not protect an investor against loss in a declining market.

Both Investor shares and Restricted shares are sold on a continuous basis.
NAV per share is determined as of the close of trading on the floor of the New
York Stock Exchange ("NYSE") (currently 4:00 p.m., New York time), on each day
the NYSE is open for business. For purposes of determining NAV, options and
futures contracts will be valued 15 minutes after the close of trading on the
floor of the NYSE. NAV per share of each class is computed by dividing the value
of the Fund's net assets represented by such class (i.e., the value of its
assets less liabilities) by the total number of shares of such class
outstanding. For further information regarding the methods employed in valuing
the Fund's investments, see "Determination of Net Asset Value".

Orders for the purchase of Fund shares received by dealers by the close of
trading on the floor of the NYSE on any business day and transmitted to the
Distributor or its designee by the close of its business day (normally 5:15
p.m., New York time) will be based on the NAV determined as of the close of
trading on the floor of the NYSE on that day. Otherwise, the orders will be
based on the next determined NAV. It is the dealers' responsibility to transmit
orders so that they will be received by the Distributor or its designee before
the close of its business day. For certain institutions that have entered into
agreements with the Distributor, payment for the purchase of Fund shares may be
transmitted, and must be received by the Transfer Agent, within three business
days after the order is placed. If such payment is not received within three
business days after the order is placed,

B-36
<PAGE>

the order may be canceled and the institution could be held liable for resulting
fees and/or losses.

Agents may receive different levels of compensation for selling different
Classes of shares. Management understands that some Agents may impose certain
conditions on their clients which are different from those described in the
Fund's Prospectus, and, to the extent permitted by applicable regulatory
authority, may charge their clients direct fees which would be in addition to
any amounts which might be received under the Distribution Plan. Each Agent has
agreed to transmit to its clients a schedule of such fees. You should consult
your Agent in this regard.

The Distributor may pay dealers a fee of up to 0.5% of the amount invested
through such dealers in Fund shares by employees participating in qualified or
non-qualified employee benefit plans or other programs where (i) the employers
or affiliated employers maintaining such plans or programs have a minimum of 250
employees eligible for participation in such plans or programs or (ii) such
plan's or program's aggregate investment in the Dreyfus Family of Funds or
certain other products made available by the Distributor to such plans or
programs exceeds $1,000,000 ("Eligible Benefit Plans"). Shares of funds in the
Dreyfus Family of Funds then held by Eligible Benefit Plans will be aggregated
to determine the fee payable. The Distributor reserves the right to cease paying
these fees at any time. The Distributor will pay such fees from its own funds,
other than amounts received from the Fund, including past profits or any other
source available to it.

Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Fund's Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service.

B-37
<PAGE>

DREYFUS TELETRANSFER PRIVILEGE. You may purchase Fund shares by telephone
through the TELETRANSFER Privilege if you have checked the appropriate box and
supplied the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these documents and
your Fund account. Only a bank account maintained in a domestic financial
institution that is an Automated Clearing House ("ACH") member may be so
designated. Dreyfus TELETRANSFER purchase orders may be made at any time.
Purchase orders received by 4:00 p.m., New York time, on any business day that
the Transfer Agent and the NYSE are open for business will be credited to the
shareholder's Fund account on the next bank business day following such purchase
order. Purchase orders made after 4:00 p.m., New York time, on any business day
the Transfer Agent and the NYSE are open for business, or orders made on
Saturday, Sunday or any Fund holiday (e.g., when the NYSE is not open for
business), will be credited to the shareholder's Fund account on the second bank
business day following such purchase order. To qualify to use the DREYFUS
TELETRANSFER Privilege, the initial payment for purchase of Fund shares must be
drawn on, and redemption proceeds paid to, the same bank and account as are
designated on the Account Application or Shareholder Services Form on file. If
the proceeds of a particular redemption are to be wired to an account at any
other bank, the request must be in writing and signature-guaranteed. See
"Redemption of Shares -Dreyfus TELETRANSFER Privilege." The Fund may modify or
terminate this Privilege at any time or charge a service fee upon notice to
shareholders. No such fee currently is contemplated.

SHARE CERTIFICATES. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.

B-38
<PAGE>

DISTRIBUTION PLAN

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "YOUR INVESTMENT."

Under the Plan, the Fund may spend annually up to 0.25% of its average
daily net assets attributable to Investor shares to compensate Dreyfus Service
Corporation, an affiliate of Dreyfus, for shareholder servicing activities and
the Distributor for shareholder servicing activities and for activities or
expenses primarily intended to result in the sale of Investor shares of the
Fund. The Plan allows the Distributor to make payments from the Rule 12b-1 fees
it collects from the Fund to compensate Agents that have entered into Selling
Agreements ("Agreements") with the Distributor. Under the Agreements, the Agents
are obligated to provide distribution-related services with regard to the Fund
and/or shareholder services to the Agent's clients that own Investor shares of
the Fund.

B-39
<PAGE>

An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one Class of
shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under the Plan are payable without regard to actual
expenses incurred. The Fund and the Distributor may suspend or reduce payments
under the Plan at any time, and payments are subject to the continuation of
the Fund's Plan and the Agreements described above. From time to time, the
Agents, the Distributor and the Fund may voluntarily agree to reduce the maximum
fees payable under the Plan.

For the fiscal year ended October 31, 1998, the Fund paid the Distributor
and Dreyfus Service Corporation: $____ and $______, respectively, pursuant to
the Plan with respect to Investor shares.

REDEMPTION OF SHARES

GENERAL. If you hold Fund shares of more than one Class, any request for
redemption must specify the Class of shares being redeemed. If you fail to
specify the Class of shares to be redeemed or if you own fewer shares of the
Class than specified to be redeemed, the redemption request may be delayed until
the Transfer Agent receives further instructions from you or your Agent.

PROCEDURES. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or through the Telephone Redemption
Privilege or the Check Redemption Privilege, which are granted automatically
unless you specifically refuse them by checking the applicable "No" box on the
Account Application. The Telephone Redemption Privilege and the Check Redemption
Privilege may be established for an existing account by a separate signed
Shareholder Services Form or, with respect to the Telephone Redemption
Privilege, by oral request from any of the authorized signatories on the account
by calling 1-800-645-6561. You also may redeem shares through the Wire
Redemption Privilege or the Dreyfus TELETRANSFER Privilege if you have checked
the appropriate box and supplied the necessary information on the Account
Application or have filed a Shareholders Services Form with the Transfer Agent.
If you are a client of certain Agents ("Selected Dealers"), you can also redeem
Fund shares through the Selected Dealer. Other redemption procedures may be in
effect for clients of other Agents and institutions. The Fund makes available to

B-40
<PAGE>

certain large institutions the ability to issue redemption instructions through
compatible computer facilities. The Fund reserves the right to refuse any
request made by telephone, including requests made shortly after a change of
address, and may limit the amount involved or the number of such requests. The
Fund may modify or terminate any redemption privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is contemplated.
Shares held under Keogh Plans, IRAs, or other retirement plans, and shares for
which certificates have been issued, are not eligible for the Check Redemption,
Wire Redemption, Telephone Redemption or Dreyfus TELETRANSFER Privilege.

The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including
over The Dreyfus Touch(R) automated telephone system) from any person
representing himself or herself to be you, or a representative of your Agent,
and reasonably believed by the Transfer Agent to be genuine. The Fund will
require the Transfer Agent to employ reasonable procedures, such as requiring
a form of personal identification, to confirm that instructions are genuine and,
if it does not follow such procedures, the Fund or the Transfer Agent may be
liable for any losses due to unauthorized or fraudulent instructions. Neither
the Fund nor the Transfer Agent will be liable for following telephone
instructions reasonably believed to be genuine.

CHECK REDEMPTION PRIVILEGE. You may write Redemption Checks drawn on your
Fund account. Redemption Checks may be made payable to the order of any person
in the amount of $500 or more. Potential fluctuations in the Fund's NAV per
share should be considered in determining the amount of the check. Redemption
Checks should not be used to close your account. Redemption Checks are free, but
the Transfer Agent will impose a fee for stopping payment of a Redemption Check
upon your request or if the Transfer Agent cannot honor a Redemption Check due
to insufficient funds or other valid reason. You should date your Redemption
Checks with the current date when you write them. Please do not postdate your
Redemption Checks. If you do, the Transfer Agent will honor, upon presentment,
even if presented before the date of the check, all postdated Redemption Checks
which are dated within six months of presentment for payment, if they are
otherwise in good order.

REDEMPTION THROUGH A SELECTED DEALER. Customers of Selected Dealers may
make redemption requests to their Selected Dealer. If the Selected Dealer
transmits the redemption request so that it is received by the Transfer Agent
prior to the close of trading on the floor of the NYSE (currently 4:00 p.m., New
York time), the redemption request will be effective on that day. If a
redemption request is received by the Transfer Agent after the close of trading
on the floor of the NYSE, the redemption request will be effective on the next
business day. It is the responsibility of the Selected Dealer to transmit a
request so

B-41
<PAGE>

that it is received in a timely manner. The proceeds of the redemption are
credited to your account with the Selected Dealer.

In addition, the Distributor will accept orders from Selected Dealers with
which it has sales agreements for the repurchase of Fund shares held by
shareholders. Repurchase orders received by dealers by the close of trading on
the floor of the NYSE on any business day and transmitted to the Distributor or
its designee prior to the close of its business day (normally 5:15 p.m., New
York time) are effected at the price determined as of the close of trading on
the floor of the NYSE on that day. Otherwise, the Fund shares will be redeemed
at the next determined NAV per share. It is the responsibility of the Selected
Dealer to transmit orders on a timely basis. The Selected Dealer may charge the
shareholder a fee for executing the order. This repurchase arrangement is
discretionary and may be withdrawn at any time.

Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code which
may be used for domestic or overseas transmissions:

Transfer Agent's
Transmittal Code Answer Back Sign
---------------- ----------------

144295 144295 TSSG PREP

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<PAGE>

below under "Stock Certificates; Signatures."

STOCK CERTIFICATES; SIGNATURES. Any certificates representing Fund shares
to be redeemed must be submitted with the redemption request. Written redemption
requests must be signed by each shareholder, including each holder of a joint
account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations,
as well as from participants in the NYSE Medallion Signature Program, the
Securities Transfer Agents Medallion Program ("STAMP") and the Stock Exchanges
Medallion Program. Guarantees must be signed by an authorized signatory of the
guarantor and "Signature-Guaranteed" must appear with the signature. The
Transfer Agent may request additional documentation from corporations,
executors, administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular verification.
For more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.

DREYFUS TELETRANSFER PRIVILEGE. You may request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an ACH member may be designated. Redemption
proceeds will be on deposit in the investor's account at an ACH member bank
ordinarily two business days after receipt of the redemption request. Investors
should be aware that if they have selected the DREYFUS TELETRANSFER Privilege,
any request for a wire redemption will be effected as a DREYFUS TELETRANSFER
transaction through the ACH system unless more prompt transmittal specifically
is requested. Holders of jointly registered Fund or bank accounts may redeem
through the DREYFUS TELETRANSFER Privilege for transfer to their bank account
not more than $250,000 within any 30-day period. See "Purchase of Shares
- -DREYFUS TELETRANSFER Privilege."

REDEMPTION COMMITMENT. The Company has committed itself to pay in cash all
redemption requests by any shareholder of record of the Fund, limited in amount
during any 90day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the SEC. In the case of requests for
redemptions in excess of such amount, the Company's Board of Directors reserves
the right to make payments in whole or in part in securities or other assets in
case of an emergency or any time a cash distribution would impair the liquidity
of the Fund to the detriment of the existing shareholders. In such event, the
securities would be valued in the same manner as the Fund's portfolio is valued.
If the recipient sold such securities, brokerage charges might be incurred.

SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or the
date of payment postponed (a) during any period when the NYSE is closed (other
than customary weekend and holiday closings), (b) when trading in the markets
the Fund ordinarily utilizes is restricted, or when an emergency exists as
determined by the SEC so that disposal of the Fund's investments or

B-43
<PAGE>

determination of its NAV is not reasonably practicable, or (c) for such other
periods as the SEC by order may permit to protect the Fund's shareholders.

SHAREHOLDER SERVICES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES" AND
"SERVICES FOR FUND INVESTORS."

A. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.

B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the applicable
sales load will be deducted.

C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a sales
load.

B-44
<PAGE>

act on telephonic instructions (including over The Dreyfus Touch(R) automated
telephone system) from any person representing himself or herself to be the
investor or a representative of the investor's Agent, and reasonably believed by
the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange. No fees currently are charged shareholders directly in connection with
exchanges, although the Fund reserves the right, upon not less than 60 days'
written notice, to charge shareholders a nominal fee in accordance with rules
promulgated by the SEC.

Exchanges of Fund shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such investor's
Retirement Plan account in another fund.

DREYFUS AUTO-EXCHANGE PRIVILEGE. The Dreyfus Auto-Exchange Privilege
permits an investor to regularly purchase (on a semi-monthly, monthly, quarterly
or annual basis), in exchange for shares of the Fund, shares of certain other
eligible funds in the Dreyfus Family of Funds of which the investor is a
shareholder. The amount the investor designates, which can be expressed either
in terms of a specific dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth day of the month according to the
schedule the investor has selected. This Privilege is available only for
existing accounts. With respect to Fund shares held by a Retirement Plan,
exchanges may be made only between the investor's Retirement Plan account in one
fund and such investor's Retirement Plan account in another fund. Shares will be
exchanged on the basis of relative NAV per share as described above under "Fund
Exchanges." Enrollment in or modification or cancellation of this Privilege is
effective three business days following notification by the investor. An
investor will be notified if the investor's account falls below the amount
designated to be exchanged under this Privilege. In this case, an investor's
account will fall to zero unless additional investments are made in excess of
the designated amount prior to the next Auto-Exchange transaction. Shares held
under IRAs and other retirement plans are eligible for this Privilege. Exchanges
of IRA shares may be made between IRA accounts and from regular accounts to IRA
accounts, but not from IRA accounts to regular accounts. With respect to all
other retirement accounts, exchanges may be made only among those accounts.

B-45
<PAGE>

For more information concerning this Privilege and the funds in the
Dreyfus Family of Funds eligible to participate in this Privilege, or to obtain
a Dreyfus Auto-Exchange Authorization Form, please call toll free
1-800-645-6561.

Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund exchange service or the Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.

DREYFUS-AUTOMATIC ASSET BUILDER(REGISTRATIONMARK). Dreyfus Automatic Asset
Builder permits you to purchase Fund shares (minimum of $100 and maximum of
$150,000 per transaction) at regular intervals selected by you. Fund shares are
purchased by transferring funds from the bank account designated by you. Only an
account maintained at a domestic financial institution which is an ACH member
may be so designated. To establish a Dreyfus-Automatic Asset Builder account,
you must file an authorization form with the Transfer Agent. You may obtain the
necessary authorization form by calling 1-800-645-6561. You may cancel your
participation in this Privilege or change the amount of purchase at any time by
mailing written notification to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671 and the notification will be effective three
business days following receipt. The Fund may modify or terminate this Privilege
at any time or charge a service fee. No such fee currently is contemplated.

AUTOMATIC WITHDRAWAL PLAN. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends and other
distributions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by filing an Automatic
Withdrawal Plan application with the Transfer Agent or by oral request from any
of the authorized signatories on the account by calling 1-800-645-6561.
Automatic Withdrawal may be terminated at any time by the investor, the Fund or
the Transfer Agent. Shares for which certificates have been issued may not be
redeemed through the Automatic Withdrawal Plan.

B-46
<PAGE>

which the investor is a shareholder. Shares of the other funds purchased
pursuant to this Privilege will be purchased on the basis of relative NAV per
share as follows:

A. Dividends and other distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that are
offered without a sales load.

B. Dividends and other distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds sold
with a sales load, and the applicable sales load will be deducted.

C. Dividends and other distributions paid by a fund which charges a
sales load may be invested in shares of other funds sold with a
sales load referred to herein as (referred to hereinafter as
"Offered Shares"), provided that, if the sales load applicable to
the Offered Shares exceeds the maximum sales load charged by the
fund from which dividends or other distributions are being swept,
without giving effect to any reduced loads, the difference will be
deducted.

D. Dividends and other distributions paid by a fund may be invested
in shares of other funds that impose a CDSC and the applicable CDSC,
if any, will be imposed upon redemption of such shares.

For more information concerning these Privileges, or to request a Dreyfus
Dividend Options Form, please call toll free 1-800-645-6561. You may cancel
these Privileges by mailing written notification to The Dreyfus Family of Funds,
P.O. Box 9671, Providence, Rhode Island, 02940-9671. To select a new fund after
cancellation, you must submit a new Dividend Options Form. Enrollment in or
cancellation of these privileges is effective three business days following
receipt. These privileges are available only for existing accounts and may not
be used to open new accounts. Minimum subsequent investments do not apply for
Dreyfus Dividend Sweep. The Fund may modify or terminate these privileges at any
time or charge a service fee. No such fee currently is contemplated. Shares held
under Keogh Plans, IRAs or other retirement plans are not eligible for Dreyfus
Dividend Sweep.

B-47
<PAGE>

for you. To enroll in Dreyfus Government Direct Deposit, you must file with the
Transfer Agent a completed Direct Deposit Sign-Up Form for each type of payment
that you desire to include in this Privilege. The appropriate form may be
obtained from your Agent or by calling 1-800-645-6561. Death or legal incapacity
will terminate your participation in this Privilege. You may elect at any time
to terminate your participation by notifying in writing the appropriate Federal
agency. Further, the Fund may terminate your participation upon 30 days' notice
to you.

DREYFUS PAYROLL SAVINGS PLAN. Dreyfus Payroll Savings Plan permits you to
purchase Fund shares (minimum $100 per transaction) automatically on a regular
basis. Depending upon your employer's direct deposit program, you may have part
or all of your paycheck transferred to your existing Dreyfus account
electronically through the ACH system at each pay period. To establish a Dreyfus
Payroll Savings Plan account, you must file an authorization form with your
employer's payroll department. Your employer must complete the reverse side of
the form and return it to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. You may obtain the necessary authorization
form by calling 1-800-645-6561. You may change the amount of purchase or cancel
the authorization only by written notification to your employer. It is the sole
responsibility of your employer, not the Distributor, your Agent, Dreyfus, the
Fund, the Transfer Agent or any other person, to arrange for transactions under
the Dreyfus Payroll Savings Plan. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated.

DREYFUS STEP PROGRAM. Dreyfus Step Program enables you to purchase
Investor shares without regard to the Fund's minimum initial investment
requirements through Dreyfus-Automatic Asset Builder, Dreyfus Government Direct
Deposit Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step
Program account, you must supply the necessary information on the Account
Application and file the required authorization form(s) with the Transfer Agent.
For more information concerning this Program, or to request the necessary
authorization form(s), please call toll free 1-800-782-6620. You may terminate
your participation in this Program at any time by discontinuing your
participation in Dreyfus-Automatic Asset Builder, Dreyfus Government Direct
Deposit Privilege or Dreyfus Payroll Savings Plan, as the case may be, as
provided under the terms of such Privilege(s). The Fund reserves the right to
redeem your account if you have terminated your participation in the Program and
your account's NAV is $500 or less. See "Account Policies - General Policies" in
the Fund's Prospectus. The Fund may modify or terminated this Program at any
time. Investors who wish to purchase Investor shares through the Dreyfus
Step-Program in conjunction with a Dreyfus-sponsored retirement plan may do so
only for IRAs, SEP-IRAs and IRA "Rollover Accounts."

RETIREMENT PLANS. The Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs and
Education IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support
services also are available. You can obtain details on the various plans by
calling the following numbers toll free: for Keogh Plans, please call
1-800-358-5566; for IRAs and IRA "Rollover Accounts," please call
1-800-645-6561; for SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans,
please call 1-800-322-7880.

Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.

SHARES MAY BE PURCHASED IN CONNECTION WITH THESE PLANS ONLY BY DIRECT
REMITTANCE TO THE ENTITY ACTING AS CUSTODIAN. PURCHASES FOR THESE PLANS MAY NOT
BE MADE IN ADVANCE OF RECEIPT OF FUNDS.

B-48
<PAGE>

ADDITIONAL INFORMATION ABOUT PURCHASES, EXCHANGES
AND REDEMPTIONS

The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculation on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to the
Fund's performance and its shareholders. Accordingly, if the Fund's management
determines that an investor is engaged in excessive trading, the Fund, with or
without prior notice, may temporarily or permanently terminate the availability
of Fund exchanges, or reject in whole or part any purchase or exchange request,
with respect to such investor's account. Such investors also may be barred from
purchasing other funds in the Dreyfus Family of Funds. Generally, an investor
who makes more than four exchanges out of the Fund during any calendar year or
who makes exchanges that appear to coincide with an active market-timing
strategy may be deemed to be engaged in excessive trading. Accounts under common
ownership or control will be considered as one account for purposes of
determining a pattern of excessive trading. In addition, the Fund may refuse or
restrict purchase or exchange requests by any person or group if, in the
judgment of the Fund's management, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies or could
otherwise be adversely affected or if the Fund receives or anticipates receiving
simultaneous orders that may significantly affect the Fund (e.g., amounts equal
to 1% or more of the Fund's total assets). If an exchange request is refused,
the Fund will take no other action with respect to the shares until it receives
further instructions from the investor. The Fund may delay forwarding redemption
proceeds for up to seven days if the investor redeeming shares is engaged in
excessive trading or if the amount of the redemption request otherwise would be
disruptive to efficient portfolio management or would adversely affect the Fund.
The Fund's policy on excessive trading applies to investors who invest in the
Fund directly or through financial intermediaries, but does not apply to the
Dreyfus Auto-Exchange Privilege, to any automatic investment or withdrawal
privilege described herein, or to participants in employer-sponsored retirement
plans.

B-49
<PAGE>

DETERMINATION OF NET ASSET VALUE

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES."

B-50
<PAGE>

DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "DISTRIBUTIONS AND TAXES."

GENERAL. The Fund declares daily and pays monthly dividends from its net
investment income and distributes net realized capital and foreign currency
gains, if any, once a year, but it 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"), in all events in a manner consistent with the
provisions of the 1940 Act. The Fund will not make distributions from net
realized capital gains unless all capital loss carryovers, if any, have been
utilized or have expired. Shares begin accruing dividends on the day following
the date of purchase. The Fund's earnings for Saturdays, Sundays and holidays
are declared as dividends on the next business day. If you redeem all shares in
your account at any time during the month, all dividends to which you are
entitled will be paid to you along with the proceeds of the redemption.
Investors other than qualified retirement plans may choose whether to receive
dividends and other distributions in cash, to receive dividends in cash and
reinvest other distributions in additional Fund shares at NAV, or to reinvest
both dividends and other distributions in additional Fund shares; dividends and
other distributions paid to qualified retirement plans are reinvested
automatically in additional Fund shares at NAV. All expenses are accrued daily
and deducted before declaration of dividends to investors. Dividends paid by
each Class are calculated at the same time and in the same manner and are in the
same amount, except that the expenses attributable solely to a particular Class
are borne exclusively by that Class. Investor shares will receive lower per
share dividends than Restricted shares because of the higher expenses borne by
the Investor shares.

It is expected that the Fund will qualify for treatment as a regulated
investment company ("RIC") under the Code so long as such qualification is in
the best interests of its shareholders. Such qualification will relieve the Fund
of any liability for Federal income tax to the extent its earnings and realized
gains are distributed in accordance with applicable provisions of the Code. To
qualify for treatment as a RIC under the Code, the Fund -- which is treated as a
separate corporation for federal tax purposes -- (1) must distribute to its
shareholders each year at least 90% of its investment company taxable income
(generally consisting of net investment income, net short-term capital gains and
net gains from certain foreign currency transactions) (the "Distribution
Requirement"), (2) must derive at least 90% of its annual gross income from
specified sources (the "Income Requirement"), and (3) must meet certain asset
diversification and other requirements. The term "regulated investment company"
does not imply the supervision of management or investment practices or policies
by any government agency.

B-51
<PAGE>

Dividends derived from net investment income, together with distributions
from net realized short-term capital gains, certain foreign currency gains and
all or a portion of any gains realized from the sale or other disposition of
certain market discount bonds (collectively, "dividend distributions"), paid by
the Fund will be taxable to U.S. shareholders, including certain non-qualified
Retirement Plans, as ordinary income to the extent of the Fund's earnings and
profits, whether received in cash or reinvested in additional Fund shares.
Distributions from net capital gain (the excess of net long-term capital gain
over net short-term capital loss) are taxable to such shareholders as long-term
capital gains regardless of how long the shareholders have held their Fund
shares and whether such distributions are received in cash or reinvested in
additional Fund shares.

B-52
<PAGE>

eligible Retirement Plan in a "direct rollover," the eligible rollover
distribution is subject to a 20% income tax withholding.

The Fund must withhold and remit to the U.S. Treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized, paid
to an individual or certain other non-corporate shareholders if such shareholder
fails to certify that the TIN furnished to the Fund is correct. Backup
withholding at that rate also is required from dividends and capital gain
distributions payable to such a shareholder if (1) that shareholder fails to
certify that he or she has not received notice from the IRS of being subject to
backup withholding as a result of a failure properly to report taxable dividend
or interest income on a Federal income tax return or (2) the IRS notifies the
Fund to institute backup withholding because the IRS determines that the
shareholder's TIN is incorrect or that the shareholder has failed properly to
report such income.

The Fund may be subject to a non-deductible 4% excise tax, measured with
respect to certain undistributed amounts of taxable investment income and
capital gains.

Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares below
the cost of his or her investment. Such a dividend or other distribution would
be a return on investment in an economic sense, although taxable as discussed
above. In addition, if a shareholder sells shares of the Fund held for six
months or less and receives a capital gain distribution with respect to those
shares, any loss incurred on the sale of those shares will be treated as a
long-term capital loss to the extent of the capital gain distribution received.

Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a date
in any of those months are deemed to have been paid by the Fund and received by
the shareholders on December 31 of that year if the distributions are paid by
the Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.

Interest received by the Fund may be subject to income, withholding or
other taxes imposed by foreign countries and U.S. possessions that would reduce
the yield on its securities. Tax conventions between certain countries and the
United States may reduce or eliminate these foreign taxes, however, and many
foreign countries do not impose taxes on capital gains in respect of investments
by foreign investors.

Gains from the sale or other disposition of foreign currencies (except
certain gains that may be excluded by future regulations), and gains from
options, futures and forward contracts derived by the Fund with respect to its

B-53
<PAGE>

business of investing in securities or foreign currencies, will qualify as
permissible income under the Income Requirement.

Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gain and loss. However, a portion of the gains or losses from
the disposition of foreign currencies and certain foreign-currency-denominated
instruments (including debt instruments and financial forward, futures and
option contracts) may be treated as ordinary income or loss under Section 988 of
the Code. In addition, all or a portion of any gain realized from the sale or
other disposition of certain market discount bonds will be treated as ordinary
income. Moreover, all or a portion of the gain realized from engaging in
"conversion transactions" that otherwise would be treated as capital gain may be
treated as ordinary income under Section 1258 of the Code. "Conversion
transactions" are defined to include certain straddle transactions, transactions
marketed or sold as producing capital gains and other transactions described in
Treasury regulations to be issued in the future.

Under Section 1256 of the Code, any gain or loss realized by the Fund from
certain futures, forward contracts and options transactions will be treated as
60% long-term capital gain or loss and 40% short-term capital gain or loss. Gain
or loss will arise upon exercise or lapse of such contracts and options as well
as from closing transactions. In addition, any such contracts or options
remaining unexercised at the end of the Fund's taxable year will be treated as
sold for their then fair market value (a process known as "marking-to-market"),
resulting in additional gain or loss to the Fund characterized in the manner
described above.

Offsetting positions held by the Fund involving certain contracts or
options may constitute "straddles", which are defined to include "offsetting
positions" in actively traded personal property. The tax treatment of straddles
is governed by Sections 1092 and, to the extent noted above, 1258 of the Code,
which in certain circumstances override or modify Sections 1256 and 988. As a
result, all or a portion of any capital gain from certain straddle transactions
may be recharacterized as ordinary income. If the Fund were treated as entering
into straddles by reason of its engaging in certain forward contracts or options
transactions, such straddles would be characterized as "mixed straddles" if the
forward contracts or options transactions comprising a part of such straddles
were governed by Section 1256. The Fund may make one or more elections with
respect to mixed straddles; depending on which election is made, if any, the
results to the Fund may differ. If no election is made, then to the extent the
straddle and conversion transactions rules apply to positions established by the
Fund, losses realized by the Fund will be deferred to the extent of unrealized
gain in the offsetting position. Moreover, as a result of the straddle rules,
short-term capital loss on straddle positions may be recharacterized as
long-term capital loss, and long-term capital gains may be treated as short-term
capital gains or ordinary income.

Investment by the Fund in securities issued or acquired at a discount (for
example, zero coupon securities) could affect the amount and timing of
distributions to shareholders by causing the Fund to recognize income prior to
the receipt of cash payments. For example, the Fund would be required to take
into gross income annually a portion of the discount (or deemed discount) at
which the securities were issued and could need to distribute such income to
satisfy the Distribution Requirement and to avoid imposition of the 4% excise

B-54
<PAGE>

tax referred to in the Fund's Prospectus under "Dividends, Other Distributions
and Taxes." In such case, the Fund may have to dispose of securities it might
otherwise have continued to hold in order to generate cash to satisfy these
requirements.

STATE AND LOCAL TAXES. Depending upon the extent of the Fund's activities
in states and localities in which it is deemed to be conducting business, it may
be subject to the tax laws thereof. Shareholders are advised to consult their
tax advisers concerning the application of state and local taxes.

FOREIGN SHAREHOLDERS - U.S. FEDERAL INCOME TAXATION. U.S. federal income
taxation of a shareholder who, as to the United States, is a non-resident alien
individual, a foreign trust or estate, a foreign corporation or a foreign
partnership (a "foreign shareholder") depends on whether the income from the
Fund is "effectively connected" with a U.S. trade or business carried on by the
shareholder, as discussed generally below. Special U.S. federal income tax rules
that differ from those described below may apply to certain foreign persons who
invest in the Fund, such as a foreign shareholder entitled to claim the benefits
of an applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in the Fund.

FOREIGN SHAREHOLDERS - INCOME NOT EFFECTIVELY CONNECTED. Dividends (other
than exempt-interest dividends) distributed to a foreign shareholder whose
ownership of Fund shares is not effectively connected with a U.S. trade or
business carried on by the foreign shareholder ("effectively connected")
generally will be subject to U.S. federal withholding tax of 30% (or lower
treaty rate). Capital gains realized by foreign shareholders on the sale of Fund
shares and distributions to them of net capital gain (the excess of net
long-term capital gain over net short-term capital loss) generally will not be
subject to U.S. federal income tax unless the foreign shareholder is a
non-resident alien individual and is physically present in the United States for
more than 182 days during the taxable year. In the case of certain foreign
shareholders, the Fund may be required to withhold U.S. Federal income tax at a
rate of 31% of capital gain distributions and of the gross proceeds from a
redemption of Fund shares unless the shareholder furnishes the Fund with a
certificate regarding the shareholder's foreign status.

If a foreign shareholder's ownership of Fund shares is effectively
connected, however, with a U.S. trade or business carried on by then all
distributions to that shareholder and any gains realized by that shareholder on
the disposition of Fund shares will not be subject to withholding and instead
will be subject to U.S. federal income tax at the graduated rates applicable to
U.S. citizens and domestic corporations, as the case may be. Foreign
shareholders also may be subject to the branch profits tax.

FOREIGN SHAREHOLDERS - ESTATE TAX. Foreign individuals generally are
subject to U.S. federal estate tax on their U.S. property, such as shares of the
Fund, that they own at the time of their death. Certain credits against that tax
and relief under applicable tax treaties may be available.

B-55
<PAGE>

PORTFOLIO TRANSACTIONS

B-56
<PAGE>

independent research activities; however, it enables these organizations to
avoid the additional expenses which might otherwise be incurred if these
organizations were to attempt to develop comparable information through their
own staffs.

When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated in
accordance with a formula considered by Dreyfus to be equitable to each account.
In some cases this system could have a detrimental effect on the price or volume
of the investment instrument as far as the Fund is concerned. In other cases,
however, the ability of the Fund to participate in volume transactions will
produce better executions for the Fund. While the Directors will continue to
review simultaneous transactions, it is their present opinion that the
desirability of retaining Dreyfus as investment manager to the Fund outweighs
any disadvantages that may be said to exist from exposure to simultaneous
transactions.

For the fiscal years ended October 31, 1998, 1997 and 1996, the Fund paid
brokerage commissions amounting to $______, $________ and $______, respectively.

B-57
<PAGE>

higher rate of portfolio turnover involves correspondingly greater brokerage
commissions and other expenses that must be borne directly by the Fund and,
thus, indirectly by its shareholders. In addition, a higher rate of portfolio
turnover (100% or higher) may result in the realization of larger amounts of
short-term and/or long-term capital gains that, when distributed to the Fund's
shareholders, are taxable to them at the then current rate. Nevertheless,
securities transactions for the Fund will be based only upon investment
considerations and will not be limited by any other considerations when Dreyfus
deems its appropriate to make changes in the Fund's assets. The portfolio
turnover rate for the Fund is calculated by dividing the lesser of the Fund's
annual sales or purchases of portfolio securities (exclusive of purchases and
sales of securities whose maturities at the time of acquisition were one year or
less) by the monthly average value of securities in the Fund during the year.
Portfolio turnover may vary from year to year as well as within a year. The
portfolio turnover rates for the fiscal years ended October 31, 1997 and 1998
were 143.91% and _________%, respectively.

PERFORMANCE INFORMATION

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "PAST PERFORMANCE."

Average annual total returns (expressed as a percentage) for Investor
shares of the Fund for the periods noted were:

AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIODS ENDED OCTOBER 31, 1998

FUND: 1 YEAR INCEPTION
INVESTOR SHARES ______% ________%
(11/1/95)
Inception date appears in parentheses following the average annual total return
since inception.

The total return (expressed as a percentage) for Investor shares
of the Fund for the period beginning with the date of inception (November 1,
1995) and ending October 31, 1998 was %.

Average annual total returns (expressed as a percentage) for Restricted
shares of the Fund for the periods noted were:

AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIODS ENDED OCTOBER 31, 1998

FUND: 1 YEAR INCEPTION
Restricted shares ______% _________%
(11/1/95)

Inception date appears in parentheses following the average annual total return
since inception.

B-58
<PAGE>

The total return (expressed as a percentage) for Restricted
shares of the Fund for the period beginning with the date of inception (November
1, 1995) and ending October 31, 1998 was ________%.

Total return is calculated by subtracting the amount of the Fund's NAV per
share at the beginning of a stated period from the NAV per share at the end of
the period (after giving effect to the reinvestment of dividends and other
distributions durin the period), and dividing the result by the NAV per share at
the beginning of the period.

The current yield for the 30-day period ended October 31, 1998 was
_______% for Investor shares and ______% for Restricted shares. Yields are
computed by using standardized methods of calculation required by the SEC.
Yields are calculated by dividing the net investment income per share earned
during a 30-day (or one-month) period by the maximum offering price per share on
the last day of the period, according to the following formula:

YIELD = 2[(a-b + 1)6(SUPERSCRIPT)-1] over cd

Where:a = dividends and interest earned during the period;
b= expenses accrued for the period (net of reimbursements);
c= average daily number of shares outstanding during the
period that were entitled to receive dividends; and
d= maximum offering price per share on the last day of
the period.

Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the Lehman
Brothers Aggregate Bond Index; (ii) other Lehman Brothers indices, the Dow Jones
Industrial Average, or other appropriate unmanaged domestic or foreign indices
of performance of various types of investments so that investors may compare the
Fund's results with those of indices widely regarded by investors as
representative of the securities markets in general; (iii) other groups of
mutual funds tracked by Lipper Analytical Services, a widely used independent
research firm which ranks mutual funds by overall performance, investment
objectives and assets, or tracked by other services, companies, publications, or
persons who rank mutual funds on overall performance or other criteria; (iv) the
Consumer Price Index (a measure of inflation) to assess the real rate of return
from an investment in the Fund; and (v) products managed by a universe of money
managers with similar country allocation and performance objectives. Unmanaged
indices may assume the reinvestment of dividends but generally do not reflect
deductions or administrative and management costs and expenses. From time to
time, advertising materials for the Fund may refer to Morningstar ratings and
related analyses supporting the rating.

B-59
<PAGE>

From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to or
include commentary by the portfolio manager relating to investment strategy,
asset growth, current or past business, political, economic or financial
conditions and other matters of general interest to investors.

INFORMATION ABOUT THE FUND

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "THE FUND."

The Company has an authorized capitalization of 25 billion shares of
$0.001 per value stock.

B-60
<PAGE>

The Fund will send annual and semi-annual financial statements to all of
its shareholders.

TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS

Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Company,
Dreyfus Transfer, Inc. arranges for the maintenance of shareholder account
records for the Fund, the handling of certain communications between
shareholders and the Fund, and the payment of dividends and distributions
payable by the Fund. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses.

FINANCIAL STATEMENTS

The financial statements for the fiscal year ended October 31, 1998,
including notes to the financial statements and supplementary information, and
the Independent Auditors' Report are included in the Annual Report to
shareholders. A copy of the Annual Report accompanies this Statement of
Additional Information. The financial statements included in the Annual Report,
and the Independent Auditors' Report thereon contained therein, and related
notes, are incorporated herein by reference.

B-61
<PAGE>

APPENDIX

DESCRIPTION OF STANDARD AND POOR'S, MOODY'S, FITCH IBCA
AND DUFF RATINGS

STANDARD & POOR'S ("S&P")

BOND RATINGS

AAA An obligation rated `AAA' has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.

AA An obligation rated `AA' differs from the highest rated issues only
in small degree. The obligors capacity to meet its financial
commitment on the obligation is very strong.

A An obligation rated `A' is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's
capacity to meet its financial commitment on the obligation is still
strong.

BBB An obligation rated `BBB' exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet
its financial commitment on the obligation.

Obligations rated `BB', `B', `CCC', `CC', and `C' are regarded as having
significant speculative characteristics. `BB' indicates the least degree
of speculation and `C' the highest. While such obligations will likely
have some quality and protective characteristics, these may be outweighed
by large uncertainties or major exposures to adverse conditions.

BB An obligation rated `B' is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions,
which could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.

B An obligation rated `B' is more vulnerable to nonpayment than
obligations rated `BB', but the obligor currently has the capacity
to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair the
obligor's capacity or willingness to meet its financial commitment
on the obligation.

CCC An obligation rated `CCC' is currently vulnerable to nonpayment and
is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or economic
conditions, the obligor is not likely to have the capacity to meet
its financial commitment on the obligation.

CC An obligation rated `CC' is currently highly vulnerable to
nonpayment.

B-62
<PAGE>

C The `C' rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.

D An obligation rated `D' is in payment default. The `D' rating
category is used when payments on a obligation are not made on the
date due even if the applicable grace period has not expired, unless
S&P believes that such payments will be made during such grace
period. The `D' rating also will be used upon the filing of a
bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.

The ratings from `AA' to `CCC' may be modified by the addition of a plus
(+) or a minus (-) sign to show relative standing within the major rating
categories

NOTE RATINGS

SP-1 Strong capacity to pay principal and interest. An issue determined
to possess a very strong capacity to pay debt service is given a
plus (+) designation.

SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the term
of the notes.

SP-3 Speculative capacity to pay principal and interest.

COMMERCIAL PAPER RATINGS

An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than 365 days.

A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issuers designated `A-1.'

B Issues rated `B' are regarded as having only speculative capacity
for timely payment.

B-63
<PAGE>

C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.

D Debt rated `D' is in payment default. The `D' rating category is
used when interest payments of principal payments are not made on
the date due, even if the applicable grace period has not expired,
unless S&P believes such payments will be made during such grace
period.

MOODY'S

BOND RATINGS

Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally
are referred to as "gilt edge." Interest payments are protected
by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger
than in Aaa securities.

Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.

B-64
<PAGE>

Caa Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect
to principal or interest.

Ca Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked short-comings.

C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.

NOTES AND OTHER SHORT-TERM OBLIGATIONS

B-65
<PAGE>

MIG-2/
MIG2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.

COMMERCIAL PAPER RATING

Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated issuers:

. Leading market positions in well-established industries.
. High rates of return on funds employed.
. Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
. Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
. Well-established access to a range of financial markets
and assured sources of alternate liquidity.

Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations.
This will normally be evidenced by many of the characteristics
cited above but to a lesser agree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.

B-66
<PAGE>

may require relatively high financial leverage. Adequate alternative
liquidity is maintained.

FITCH IBCA

BOND RATINGS

A High credit quality. `A' ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is
considered strong. This capacity may, nevertheless, be more
vulnerable to changes in circumstances or in economic conditions
than is the case for higher ratings.

BBB Good credit quality. `BBB' rating indicate that there is currently
a low expectation of credit risk. The capacity for timely payment of
financial commitments is considered adequate, but adverse changes in
circumstances and in economic conditions are more likely to impair
this capacity. This is the lowest investment-grade category.

BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse
economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.

B Highly speculative. `B' ratings indicate that significant credit
risk is present, but a limited margin of safety remains. Financial
commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and
economic environment.

CCC, CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained,
favorable business or economic developments. A `CC' rating indicates
that default of some kind appears probable. `C' ratings signal
imminent default.

B-67
<PAGE>

DDD, DD,
and D Default. Securities are not meeting current obligations and are
extremely speculative. `DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For
U.S. corporates, for example, `DD' indicates expected recovery of
50% - 90% of such outstandings, and `D' the lowest recovery
potential, i.e. below 50%.

SHORT-TERM AND COMMERCIAL PAPER RATINGS

F-1+ Highest credit quality. Indicates the strongest capacity for timely
payment of financial commitments; may have an added "+" to denote
any exceptionally strong credit feature.

F-2 Good credit quality. A satisfactory capacity for timely payment
of financial commitments, but the margin of safety is not as great
as in the case of the higher ratings.

F-3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could
result in a reduction to non-investment grade.

B Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in
financial and economic conditions.

C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.

D Default. Denotes actual or imminent payment default.

"+" or "-" may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to the `AAA'
long-term rating category, to categories below `CCC', or to
short-term ratings other than `F-1'.

B-68
<PAGE>

DUFF & PHELPS INC. ("DUFF & PHELPS")

Long-Term Ratings
- -----------------

AAA Highest credit quality. The risks factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.

AA+ High credit quality. Protection factors are strong. Risk is
AA modest but may vary slightly from time to time because of economic
AA- conditions.

A+ Protections factors are average but adequate. However, risk
A factors are more variable and greater in periods of economic stress.
A-

BBB+ Below-average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.

B+ Below investment grade and possessing risk that obligations will
B not be met when due. Financial protection factors will fluctuate
B- widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the
rating within this category or into a higher or lower rating grade.

CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be
substantial with unfavorable economic/industry conditions, and/or
with unfavorable company developments.

DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.

SHORT-TERM AND COMMERCIAL PAPER RATINGS

B-69
<PAGE>

D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.

D-1- High certainly of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.

D-3 Satisfactory liquidity and other protection factors qualify issues
as to investment grade. Risk factors are larger and subject to more
variation. Nevertheless, timely payment is expected.

D-4 Speculative investment characteristics. Liquidity is not sufficient
to insure against disruption in debt service. Operating factors and
market access may be subject to a high degree of variation.

D-5 Issuer failed to meet scheduled principal and/or interest payments.

B-70
<PAGE>

Dreyfus Premier Balanced Fund

Investing in stocks and bonds for total return

PROSPECTUS March 1, 1999

(reg.tm)

<PAGE>

The Fund

Dreyfus Premier Balanced Fund
---------------------------------

Ticker Symbols CLASS A: PRBAX

CLASS B: PRBBX

CLASS C: DPBCX

CLASS R: XXXXX

Contents

The Fund
- --------------------------------------------------------------------------------

Goal/Approach INSIDE COVER

Main Risks 1

Past Performance 1

Expenses 2

Management 3

Financial Highlights 4

Your Investment
- --------------------------------------------------------------------------------

Account Policies 6

Distributions and Taxes 8

Services for Fund Investors 9

Instructions for Regular Accounts 10

Instructions for IRAs 11

For More Information
- --------------------------------------------------------------------------------

INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.

GOAL/APPROACH

The fund seeks to outperform a hybrid index, 60% of which is the Standard &
Poor's 500 Composite Stock Price Index ("S&P 500") and 40% of which is the
Lehman Brothers Intermediate Government/Corporate Bond Index ("Intermediate
Index"). This objective may be changed without shareholder approval. To pursue
its goal, the fund invests in a diversified mix of stocks and investment grade
bonds of both U.S. and foreign issuers.

The fund's normal asset allocation is around 60% stocks and 40% bonds. However,
the fund is permitted to invest up to 75%, and as little as 40%, of its assets
in stocks, and up to 60% and as little as 25% of its assets in bonds.

In allocating assets between stocks and bonds, the portfolio managers assess the
relative return and risks of each asset class using a model which analyzes
several factors, including interest rate adjusted price/earnings ratio, the
valuation and volatility levels of stocks relative to bonds, and other economic
factors, such as interest rates.

In selecting stocks, Dreyfus uses a valuation model to identify and rank stocks
within an industry or sector based on:

.. VALUE, or how a stock is priced relative to its perceived intrinsic worth;

.. GROWTH, in this case the sustainability or growth of earnings;

.. FINANCIAL PROFILE, which measures the financial health of the company

Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities. Then, Dreyfus manages risk by diversifying across
companies and industries and by maintaining risk characteristics, such as
growth, size, quality and yield, that are similar to those of the S&P 500.
<PAGE>

In choosing bonds, the portfolio managers review economic, market and other
factors, leading to valuations by sector, maturity and quality. The fund's bond
component consists primarily of domestic and foreign bonds issued by
corporations or governments and rated investment grade or considered to be of
comparable quality by Dreyfus. The fund's dollar-weighted average maturity
normally will not exceed 10 years.

INSIDE COVER

<PAGE>

MAIN RISKS

Because stocks and bonds fluctuate in price, the value of your investment will
go up and down, and you could lose money. The stock and bond markets can perform
differently from each other, so the fund will be affected by its asset
allocation. If the fund favors an asset class during a period when that class
underperforms, performance may be hurt.

The fund is exposed to risks of both growth and value companies. Value stocks
may never reach what the manager believes is their full market value, and even
though they are undervalued may decline in price. Prices of growth stocks are
based in part on future expectations, which means they can fall sharply if the
prospects for a stock, industry or the economy in general are below the market's
expectations.

Prices of bonds tend to move inversely with changes in interest rates. Bond
prices also may be hurt by a decline in or the perception of a decline in the
financial condition of the issuer, which could potentially lower the fund's
share price.

In general, the risks of foreign stocks and bonds are greater than the risks of
their U.S. counterparts because of less liquidity, changes in currency exchange
rates, a lack of adequate company information and political instability.

Other potential risks

The fund may invest some of its assets in options and futures--primarily to
hedge its portfolio, but also to increase returns. At times these practices may
lower returns or increase volatility. The fund may also engage in short-term
trading. This could increase the fund's transaction costs and taxable
distributions, lowering its after-tax performance accordingly.

PAST PERFORMANCE

The first table below shows how the performance of the fund's Class R shares has
varied from year to year. The second table compares the performance of each of
the fund's share classes over time to that of the indices described below. These
returns reflect any applicable sales loads. Both tables assume the reinvestment
of dividends and distributions. As with all mutual funds, the past is not a
prediction of the future.
- --------------------------------------------------------------------------------

Year-by-year total return AS OF 12/31 EACH YEAR (%)

CLASS R SHARES

[GRAPHIC BAR GRAPH]

BEST QUARTER: QX 'XX X.XX%

WORST QUARTER: QX 'XX X.XX%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

Average annual total return AS OF 12/31/98
<S> <C> <C> <C> <C>

Inception Date 1 Year 5 Years Life of fund
- ------------------------------------------------------------------------------------------------------------------------------------

CLASS A (4/14/94) X.XX% -- X.XX%

CLASS B (12/19/94) X.XX% -- X.XX%

CLASS C (12/19/94) X.XX% -- X.XX%

CLASS R (9/15/93) X.XX% X.XX% X.XX%

S&P 500* X.XX% X.XX% X.XX%

HYBRID INDEX X.XX% X.XX% X.XX%

INTERMEDIATE INDEX X.XX% X.XX% X.XX%

* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDICES ON XX/XX/XX IS USED AS THE
BEGINNING VALUE ON XX/XX/XX.
</TABLE>

The Fund 1
<PAGE>

Concepts to understand

S&P 500: a widely recognized unmanaged index of stock market performance.

THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX: a widely
accepted unmanaged index of government and corporate bond market performance
composed of U.S. Government, Treasury and agency securities, fixed-income
securities and non-convertible investment-grade corporate debt, with an average
maturity of 1-10 years.

HYBRID INDEX: an unmanaged index composed of 60% S&P 500 and 40% Intermediate
Index.

What this fund is -- and isn't

This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results. An investment in this fund is not a bank deposit. It is not
insured or guaranteed by the FDIC or any other government agency. It is not a
complete investment program. You could lose money in this fund, but you also
have the potential to make money.

The Fund 1A

<PAGE>

EXPENSES

As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
<TABLE>
<CAPTION>

Fee table
<S> <C> <C> <C> <C>

CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------------------------------------------

SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)

Maximum sales charge on purchases

AS A % OF OFFERING PRICE 5.75 NONE NONE NONE

Maximum deferred sales charge (CDSC)

AS A % OF PURCHASE OR SALE PRICE, WHICHEVER IS LESS NONE* 4.00 1.00 NONE
- ------------------------------------------------------------------------------------------------------------------------------------

ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)

% OF AVERAGE DAILY NET ASSETS

Management fees 1.00 1.00 1.00 1.00

12b-1 fee .25 1.00 1.00 NONE

Other expenses .00 .00 .00 .00
- ------------------------------------------------------------------------------------------------------------------------------------

TOTAL 1.25 2.00 2.00 1.00

* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1
MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF REDEEMED WITHIN ONE YEAR.

Expense example

1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------

CLASS A $0,000 $0,000 $0,000 $0,000

CLASS B
WITH REDEMPTION $0,000 $0,000 $0,000 $0,000**

WITHOUT REDEMPTION $0,000 $0,000 $0,000 $0,000**

CLASS C
WITH REDEMPTION $0,000 $0,000 $0,000 $0,000
WITHOUT REDEMPTION $0,000 $0,000 $0,000 $0,000

CLASS R $0,000 $0,000 $0,000 $0,000

** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.
</TABLE>

This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. Because actual
return and expenses will be different, the example is for comparison only.

Concepts to understand

MANAGEMENT FEE: the fee paid to The Dreyfus Corporation for managing the fund.
Unlike the arrangements between most investment advisers, Dreyfus pays all fund
expenses except for brokerage fees, taxes, interest, fees and expenses of the
independent directors, Rule 12b-1 fees and extraordinary expenses.

12B-1 FEE: the fee paid out of fund assets (attributable to appropriate share
classes) for promotional expenses and shareholder service. Because this fee is
paid out of the fund's assets on an ongoing basis, over time it will increase
the cost of your investment and may cost you more than paying other types of
sales charges.

<PAGE>

MANAGEMENT

The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, NY 10166. Founded in 1947, Dreyfus manages one of the nation's leading
mutual fund complexes, with more than $112 billion in more than 160 mutual fund
portfolios. Dreyfus is the mutual fund business of Mellon Bank Corporation, a
broad-based financial services company with a bank at its core. With more than
$350 billion of assets under management and $1.7 trillion of assets under
administration and custody, Mellon provides a full range of banking, investment
and trust products and services to individuals, businesses and institutions. Its
mutual fund companies place Mellon as the leading bank man-ager of mutual funds.
Mellon is headquartered in Pittsburgh, Pennsylvania.

Management philosophy

Portfolio manager

The asset allocation equity portion of the fund is managed by Ron Gala. Mr. Gala
has managed the Fund since its inception and has been employed by Dreyfus as a
portfolio manager since October 17, 1994. Mr. Gala is a Senior Vice President
and portfolio manager at Mellon Bank and has been employed there since 1982.

The bond portion is managed by Laurie Carroll. Ms. Carroll has managed the fund
since its inception and has been employed by Dreyfus as a portfolio manager
since October 17, 1994. Ms. Carroll is a Senior Vice President and portfolio
manager at Mellon Bank. Ms. Carroll has been employed by Mellon Bank since 1986

Concepts to understand

Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.

The Fund 3

<PAGE>

FINANCIAL HIGHLIGHTS

The following tables describe the performance of each share class 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
independently audited by [ ], whose report, along with the
fund's financial statements, is included in the annual report.

YEAR ENDED OCTOBER 31,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>

CLASS A 1998 1997 1996 1995 1994(1)
- ------------------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period 13.71 11.91 10.08 9.73

Investment operations: Investment income -- net .34 .31 .28 .11

Net realized and unrealized gain (loss)
on investments 2.77 1.88 1.82 .34

Total from investment operations 3.11 2.19 2.10 .45

Distributions: Dividends from investment income -- net (.28) (.31) (.27) (.10)

Dividends from net realized gain on investments (1.37) (.08) -- --

Total distributions (1.65) (.39) (.27) (.10)

Net asset value, end of period 15.17 13.71 11.91 10.08

Total return (%) (3) 25.24 18.71 21.17 4.68(3)
- ------------------------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) 1.25 1.25 1.25 .71(3)

Ratio of net investment income to average net assets (%) 2.21 2.39 2.65 1.09(3

Portfolio turnover rate (%) 98.88 85.21 53.20 83.00
- ------------------------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 14,687 6,275 1,650 1,798

(1) THE FUND COMMENCED SELLING INVESTOR SHARES ON APRIL 14, 1994. ON OCTOBER 17, 1994, INVESTOR SHARES WERE REDESIGNATED AS CLASS A
SHARES.

(2) EXCLUSIVE OF SALES LOAD.

(3) NOT ANNUALIZED.

YEAR ENDED OCTOBER 31,

CLASS B 1998 1997 1996 1995(1)
- ------------------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period 13.68 11.89 9.76

Investment operations: Investment income -- net .23 .21 .14

Net realized and unrealized gain (loss) on investments 2.77 1.87 2.11

Total from investment operations 3.00 2.08 2.25

Distributions: Dividends from investment income -- net (.19) (.21) (.12)

Dividends from net realized gain on investments (1.37) (.08) --

Total distributions (1.56) (.29) (.12)

Net asset value, end of period 15.12 13.68 11.89

Total return (%) (2) 24.27 17.76 23.19(3)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) 2.00 2.00 1.73(3)

Ratio of net investment income to average net assets (%) 1.47 1.65 2.16(3)

Portfolio turnover rate (%) 98.88 85.21 53.20(3)
- ------------------------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 28,940 9,141 3,118

(1) THE FUND COMMENCED SELLING CLASS B SHARES ON DECEMBER 19, 1994.

(2) EXCLUSIVE OF SALES LOAD. (3) NOT ANNUALIZED.

</TABLE>

<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,

CLASS C 1998 1997 1996 1995(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)

Net asset value, beginning of period 13.70 11.90 9.76

Investment operations: Investment income -- net .24 .25 .11

Net realized and unrealized gain (loss) on investments 2.78 1.84 2.15

Total from investment operations 3.02 2.09 2.26

Distributions: Dividends from investment income -- net (.19) (.21) (.12)

Dividends from net realized gain on investments (1.37) (.08) --

Total distributions (1.56) (.29) (.12)

Net asset value, end of period 15.16 13.70 11.90

Total return (%) (2) 24.41 17.83 23.29(3)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) 2.00 2.00 1.73(3)

Ratio of net investment income to average net assets (%) 1.47 1.62 2.16(3)

Portfolio turnover rate (%) 98.88 85.21 53.20(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 2,017 237 6

(1) THE FUND COMMENCED SELLING CLASS C SHARES ON DECEMBER 19, 1994.

(2) EXCLUSIVE OF SALES LOAD.

(3) NOT ANNUALIZED.

YEAR ENDED OCTOBER 31,

CLASS R 1998 1997 1996 1995 1994(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)

Net asset value, beginning of period 13.72 11.92 10.09 10.18

Investment operations: Investment income -- net .36 .34 .31 .20(3)

Net realized and unrealized gain (loss) on investments 2.79 1.88 1.81 (.13)

Total from investment operations 3.15 2.22 2.12 .07

Distributions: Dividends from investment income -- net (.32) (.34) (.29) (.16)

Dividends from net realized gain on investments (1.37) (.08) -- --

Total distributions (1.69) (.42) (.29) (.16)

Net asset value, end of period 15.18 13.72 11.92 10.09

Total return (%) 25.56 18.99 21.46 .68
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) 1.00 1.00 1.00 1.04(5)

Ratio of net investment income to average net assets (%) 2.44 2.68 2.89 2.23

Portfolio turnover rate (%) 98.88 85.21 53.20 83.00
- ------------------------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 148,605 129,744 97,881 75,720

[PLEASE EVALUATE. THERE ARE 7 FOOTNOTES FOR THIS TABLE.]

The Fund 5
</TABLE>

<PAGE>

Your Investment

ACCOUNT POLICIES

THE DREYFUS PREMIER FUNDS are designed primarily for people who are investing
through a third party, such as a bank, broker-dealer or financial adviser, or in
a 401(k) or other retirement plan. Third parties with whom you open a fund
account may impose policies, limitations and fees which are different from
those described here.

YOU WILL NEED TO CHOOSE A SHARE CLASS before making your initial investment. In
making your choice, you should weigh the impact of all potential costs over the
length of your investment, including sales charges and annual fees. For example,
in some cases, it can be more economical to pay an initial sales charge than to
choose a class with no initial sales charge but higher annual fees and a CDSC.

.. Class A shares can be the most cost-effective choice, if you are investing
for the long term, especially if you are investing $100,000 or more.

.. Class B shares can make sense if you have a long time horizon and are
investing less than $50,000.

.. Class C shares may be appropriate if you have a shorter or less certain time
horizon and are investing less than $50,000.

.. Class R shares are designed for eligible institu- tions on behalf of their
clients. Individuals may not purchase these shares directly.

Consult your financial representative for more information.

Share class charges

EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay, or may qualify for a reduced sales charge to buy or sell shares. Contact
your financial representative to see if this may apply to you. Shareholders
owning Class A shares on December 19, 1994 are not subject to any front-end
sales loads. Shareholders owning Class A shares on November 30, 1996 are subject
to reduced loads. See the SAI.
- --------------------------------------------------------------------------------

Sales charges

CLASS A -- CHARGED WHEN YOU BUY SHARES

Sales charge Sales charge as
deducted as a % a % of your
Your investment of offering price net investment
- --------------------------------------------------------------------------------

Up to $49,999 5.75% 6.10%

$50,000 -- $99,999 4.50% 4.70%

$100,000 -- $249,999 3.50% 3.60%

$250,000 -- $499,999 2.50% 2.60%

$500,000 -- $999,999 2.00% 2.00%

$1 million or more* 0.00% 0.00%

* A 1.00% contingent deferred sales charge may be charged on any shares sold
within one year of purchase (except shares bought through reinvestment).

Class A shares also carry an annual Rule 12b-1 fee of 0.25% of the class's
average net assets.
- --------------------------------------------------------------------------------

6
<PAGE>

CLASS B -- CHARGED WHEN YOU SELL SHARES

Contingent deferred sales charge
Time since you bought as a % of your initial investment or
the shares you are selling your redemption (whichever is less)
- --------------------------------------------------------------------------------

Up to 2 years 4.00%

2 -- 4 years 3.00%

4 -- 5 years 2.00%

5 -- 6 years 1.00%

More than 6 years Shares will automatically
convert to Class A

Class B shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------

CLASS C -- CHARGED WHEN YOU SELL SHARES

A 1.00% CDSC is imposed on redemptions made within the first year of purchase.
Class C shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------

CLASS R -- NO SALES LOAD OR 12B-1 FEES

Reduced Class A sales charge

LETTER OF INTENT: lets you purchase Class A shares over a 13-month period and
receive the same sales charge as if all shares had been purchased at once.

RIGHT OF ACCUMULATION: lets you add the value of any Class A shares you already
own to the amount of your next Class A investment for purposes of calculating
the sales charge.

CONSULT THE STATEMENT OF ADDITIONAL INFORMATION (SAI) OR YOUR FINANCIAL
REPRESENTATIVE FOR MORE DETAILS.

<PAGE>

Buying shares

THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. The fund's investments
are valued based on market value or, where market quotations are not readily
available, based on fair value as determined in good faith by the fund's board.

ORDERS RECEIVED BY DEALERS by the close of trading on the NYSE and transmitted
to the distributor or its designee by the close of its business day (normally 5:
15 p.m. Eastern time) will be based on the NAV determined as of the close of
trading on the NYSE that day.
- --------------------------------------------------------------------------------
Minimum investments
Initial Additional
- --------------------------------------------------------------------------------

REGULAR ACCOUNTS $1,000 $100; $500 FOR
TELETRANSFER INVESTMENTS

TRADITIONAL IRAS $750 NO MINIMUM

SPOUSAL IRAS $750 NO MINIMUM

ROTH IRAS $750 NO MINIMUM

EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST YEAR

DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS

All investments must be in U.S. dollars. Third-party checks cannot be accepted.
You may be charged a fee for any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.

Concepts to understand

NET ASSET VALUE (NAV): the market value of one share, computed by dividing the
total net assets of a fund or class by its shares outstanding. The fund's Class
A shares are offered to the public at NAV plus a sales charge. Classes B, C and
R are offered at NAV, but may be subject to higher annual operating fees and a
sales charge upon redemption.

Selling shares

YOU MAY SELL SHARES AT ANY TIME through your financial representative, or you
can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. Any certificates
representing fund shares being sold must be returned with your redemption
request. Your order will be processed promptly and you will generally receive
the proceeds within a week.

TO KEEP YOUR CDSC AS LOW AS POSSIBLE, each time you request to sell shares we
will first sell shares that are not subject to a CDSC, and then those subject to
the lowest charge. The CDSC is based on the lesser of the original purchase cost
or the current market value of the shares being sold, and is not charged on
shares you acquired by reinvesting your dividends. There are certain instances
when you may qualify to have the CDSC waived. Consult your financial
representative or the SAI for details.

Written sell orders

Some circumstances require written sell orders along with signature guarantees.
These include:

.. amounts of $1,000 or more on accounts whose address has been changed within
the last 30 days

.. requests to send the proceeds to a different payee or address

Written sell orders of $100,000 or more must also be signature guaranteed.

Your Investment 7

<PAGE>

ACCOUNT POLICIES (CONTINUED)

General policies

IF YOUR ACCOUNT FALLS BELOW $500, the fund may ask you to increase your balance.
If it is still below $500 after 45 days, the fund may close your account and
send you the proceeds.

UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.

THE FUND RESERVES THE RIGHT TO:

.. refuse any purchase or exchange request that could adversely affect the fund
or its operations, including those from any individual or group who, in the
fund's view, is likely to engage in excessive trading (usually defined as
more than four exchanges out of the fund within a calendar year)

.. refuse any purchase or exchange request in excess of 1% of the fund's total
assets

.. change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions

.. change its minimum investment amounts

.. delay sending out redemption proceeds for up to seven days (generally applies
only in cases of very large redemptions, excessive trading or during unusual
market conditions)

DISTRIBUTIONS AND TAXES

THE FUND GENERALLY PAYS ITS SHAREHOLDERS quarterly dividends from its net
investment income, and distributes any net capital gains that it has realized
once a year. Each share class will generate a different dividend because each
has different expenses. Your distributions will be reinvested in the fund unless
you instruct the fund otherwise. There are no fees or sales charges on
reinvestments.

FUND DIVIDENDS AND DISTRIBUTIONS ARE TAXABLE to most investors (unless your
investment is in an IRA or other tax-advantaged account). The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash. In general,
distributions are taxable as follows:
- --------------------------------------------------------------------------------

Taxability of distributions

Type of Tax rate for Tax rate for

distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------

INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE

SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE

LONG-TERM
CAPITAL GAINS 10% 20%

Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.

Taxes on transactions

Except between tax-deferred accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.

The table above can provide a guide for potential tax liability when selling or
exchanging fund shares. "Short-term capital gains" applies to fund shares sold
up to 12 months after buying them. "Long-term capital gains" applies to shares
sold after 12 months.

<PAGE>

SERVICES FOR FUND INVESTORS

THE THIRD PARTY THROUGH WHOM YOU PURCHASED fund shares may impose different
restrictions on these services and privileges offered by the fund, or may not
make them available at all. Consult your financial representative for more
information on the availability of these services and privileges.

Automatic services

BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application, or by
calling your financial representative or 1-800-554-4611.
- --------------------------------------------------------------------------------

For investing

DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.

DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.

DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
- --------------------------------------------------------------------------------

For exchanging shares

DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
- --------------------------------------------------------------------------------

For selling shares

DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds. There will be no CDSC
on Class B shares, as long as the amounts
withdrawn do not exceed 12% annually of the
account value at the time the shareholder elects
to participate in the plan.

Exchange privilege

YOU CAN EXCHANGE SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one class of the fund or into the same class of another Dreyfus Premier
fund. You can request your exchange by contacting your financial representative.
Be sure to read the current prospectus for any fund into which you are
exchanging before investing. Any new account established through an exchange
will have the same privileges as your original account (as long as they are
available). There is currently no fee for exchanges, although you may be charged
a sales load when exchanging into any fund that has a higher one.

TeleTransfer privilege

TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the TeleTransfer privilege. You can set up TeleTransfer on your
account by providing bank account information and following the instructions on
your application, or contact your financial representative.

Reinvestment privilege

UPON WRITTEN REQUEST, YOU CAN REINVEST up to the number of Class A or B shares
you redeemed within 45 days of selling them at the current share price without
any sales charge. If you paid a CDSC, it will be credited back to your account.
This privilege may be used only once.

Account statements

EVERY FUND INVESTOR automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.

Your Investment 9

<PAGE>

INSTRUCTIONS FOR REGULAR ACCOUNTS

TO OPEN AN ACCOUNT

In Writing

Complete the application.

Mail your application and a check to:
Name of Fund P.O. Box 6587, Providence, RI 02940-6587 Attn: Institutional
Processing

TO ADD TO AN ACCOUNT

Fill out an investment slip, and write your account number on your check.

Mail the slip and the check to: Name of Fund P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing

By Telephone

WIRE Have your bank send your
investment to Boston Safe Deposit & Trust Co, with these instructions:

* ABA# 011001234

* DDA# 044350

* the fund name

* the share class

* your Social Security or tax ID number

* name(s) of investor(s)

* dealer number if applicable

Call us to obtain an account number. Return your application with the account
number on the application.

WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co,
with these instructions:

* ABA# 011001234

* DDA# 044350

* the fund name

* the share class

* your account number

* name(s) of investor(s)

* dealer number if applicable

ELECTRONIC CHECK Same as wire, but before your account number insert "4130" for
Class A, "4140" for Class B, "4150" for Class C, "4160" for Class R

TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.

10
<PAGE>

Automatically

WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.

ALL SERVICES Call us or your financial representative to request a form to add
any automatic investing service (see "Services for Fund Investors"). Complete
and return the form along with any other required materials.

TO SELL SHARES

Write a letter of instruction that includes:

* your name(s) and signature(s)

* your account number

* the fund name

* the dollar amount you want to sell

* how and where to send the proceeds

Obtain a signature guarantee or other documentation, if required (see Page 9)

Mail your request to: The Dreyfus Family of Funds P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing

TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.

AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative to request a
form to add the plan. Complete the form, specifying the amount and frequency of
withdrawals you would like.

Be sure to maintain an account balance of $5,000 or more.

To open an account, make subsequent investments or to sell shares, please
contact your financial representative or call toll free in the U.S.
1-800-554-4611. Make checks payable to: THE DREYFUS FAMILY OF FUNDS

Concepts to understand

10A

<PAGE>

INSTRUCTIONS FOR IRAS

TO OPEN AN ACCOUNT

In Writing

Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.

Mail your application and a check to:
The Dreyfus Trust Company, Custodian P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing

TO ADD TO AN ACCOUNT

Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.

Mail in the slip and the check to: The Dreyfus Trust Company, Custodian P.O. Box
6427, Providence, RI 02940-6427 Attn: Institutional Processing

By Telephone

WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:

* ABA# 021000018

* DDA# 044350

* the fund name

* the share class

* your account number

* name of investor

* the contribution year

* dealer number if applicable

ELECTRONIC CHECK Same as wire, but before your account number insert "4130" for
Class A, "4140" for Class B, "4150" for Class C, "4160" for Class R

Automatically

TO SELL SHARES

Write a letter of instruction that includes:

* your name and signature

* your account number and fund name

* the dollar amount you want to sell

* how and where to send the proceeds

* whether the distribution is qualified or premature

* whether the 10% TEFRA should be withheld

Obtain a signature guarantee or other documentation, if required (see Page 9).

Mail in your request to: The Dreyfus Trust Company P.O. Box 6427, Providence,
RI 02940-6427 Attn: Institutional Processing

SYSTEMATIC WITHDRAWAL PLAN Call us to request instructions to establish the
plan.

For information and assistance, contact your financial representative or call
toll free in the U.S. 1-800-554-4611. Make checks payable to: THE DREYFUS TRUST
COMPANY, CUSTODIAN

Your Investment 11

<PAGE>

For More Information

Dreyfus Premier Balanced Fund

A Series of The Dreyfus/Laurel Funds, Inc.
- --------------------------------------

SEC file number: 811-5270

More information on this fund is available free upon request, including the
following:

Annual/Semiannual Report

Describes the fund's performance, lists portfolio holdings and contains a letter
from the fund's manager discussing recent market conditions, economic trends
and fund strategies that significantly affected the fund's performance during
the last fiscal year.

Statement of Additional Information (SAI)

Provides more details about the fund and its policies. A current SAI is on file
with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).

To obtain information:

BY TELEPHONE Call your financial representative or 1-800-554-4611

BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss
Boulevard Uniondale, NY 11556-0144

ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from: http://www.sec.gov

(COPYRIGHT) 1999, Dreyfus Service Corporation
342P0399

<PAGE>

[Application p 1 here]

<PAGE>

[Application p 2 here]
<PAGE>

Dreyfus Premier Limited Term Income Fund

Investing in fixed income securities for high current income

PROSPECTUS March 1, 1999

(REGISTERED)

As with all mutual funds, the Securities and Exchange Commission doesn't
guarantee that the information in this prospectus is accurate or complete, nor
has it approved or disapproved these securities. It is a criminal offense to
state otherwise.

<PAGE>

The Fund

Dreyfus Premier Limited Term Income Fund
---------------------------------
Ticker Symbols CLASS A: DPIAX
CLASS B: DPIBX
CLASS C: DPICX
CLASS R: N/A

Contents

The Fund
- --------------------------------------------------------------------------------

Goal/Approach 2

Main Risks 3

Past Performance 3

Expenses 4

Management 5

Financial Highlights 6

Your Investment
- --------------------------------------------------------------------------------

Account Policies 8

Distributions and Taxes 10

Services for Fund Investors 11

Instructions for Regular Accounts 12

Instructions for IRAs 13

For More Information
- --------------------------------------------------------------------------------

INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.

GOAL/APPROACH
- ------------------

The fund seeks to provide shareholders with as high a level of current income as
is consistent with safety of principal and maintenance of liquidity. This
objective may be changed without shareholder approval. To pursue its goal, the
fund normally invests at least 65% of total assets in various types of U.S. and
foreign investment grade bonds or their unrated equivalent as determined by
Dreyfus. The fund's portfolio may include government bonds, mortgage-backed
securities and corporate debt.

To select securities for the fund, the portfolio manager conducts extensive
research into the credit history and current financial strength of investment
grade bond issuers. The portfolio manager also examines such factors as maturity
of the securities, the long-term outlook for the industry in which an issuer
operates, the economy and the bond market.

Although the portfolio manager may invest in individual bonds with different
remaining maturities, the fund's dollar-weighted average maturity will be no
more than 10 years. Investors generally consider such a maturity to be
intermediate.

Concepts to understand

MATURITY: length of time between the date on which a bond is issued and the date
the principal amount must be paid. Bonds with a longer maturity tend to offer
higher yields, but generally fluctuate more in price than shorter-term
counterparts.

<PAGE>

MAIN RISKS----------------------------------------------------------------------

Prices of bonds tend to move inversely with changes in interest rates. While a
rise in rates may allow the fund to invest for higher yields, the most immediate
effect is usually a drop in bond prices, and therefore in the fund's share price
as well. As a result, the value of your investment in the fund could go up and
down, which means you could lose money. To the extent that the fund maintains a
longer maturity than short-term funds, its share price will react more strongly
to interest rate movements.

Other risk factors could have an effect on the fund's performance:

o if an issuer fails to make timely interest or principal payments or there is
a decline in the credit quality of a bond, or the perception of a decline,
the bond's value could fall, potentially lowering the fund's share price.

o while some of the fund's securities may carry guarantees by the U.S.
government or its agencies, these guarantees do not apply to shares of the
fund itself.

o if the loans underlying the fund's mortgage related securities are paid off
earlier or later than expected, which could occur because of movements in
market interest rates, the fund's share price or yield could be hurt.

o foreign securities carry additional risks beyond comparable types of
securities from the United States, meaning that the price and yield of any
foreign debt security the fund may own could be affected by such factors of
political and economic instability, changes in currency exchange rates and
less liquid markets for such securities.

Other potential risks

At times, the fund may engage in short-term trading. This could increase the
fund's transaction costs and taxable distributions, lowering its after-tax
performance accordingly.

PAST PERFORMANCE----------------------------------------------------------------

The first table below shows how the performance of the fund's Class R shares has
varied from year to year. The second table compares the performance of each of
the fund's share classes over time to that of the Lehman Brothers Aggregate Bond
Index, a widely recognized unmanaged index of bond performance. These returns
reflect any applicable sales loads. Both tables assume the reinvestment of
dividends and distributions. As with all mutual funds, the past is not a
prediction of the future.
- --------------------------------------------------------------------------------

Year-by-year total return AS OF 12/31 EACH YEAR (%)

[INSERT BAR GRAPH INFORMATION]

BEST QUARTER: QX 'XX X.XX%

WORST QUARTER: QX 'XX X.XX%

- --------------------------------------------------------------------------------

Average annual total return AS OF 12/31/98

Inception date 1 Year 5 Years Life of fund
- --------------------------------------------------------------------------------

CLASS A (4/7/94) X.XX% -- X.XX%

CLASS B (12/19/94) X.XX% -- X.XX%

CLASS C (12/19/94) X.XX% -- X.XX%

CLASS R (7/11/91) X.XX% -- X.XX%

LEHMAN BROTHERS
AGGREGATE BOND INDEX X.XX% X.XX% X.XX%*

* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON XX/XX/XX IS USED AS THE
BEGINNING VALUE ON XX/XX/XX.

What this fund is -- and isn't

The Fund 3

<PAGE>

EXPENSES------------------------------------------------------------------------

As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.

Fee table
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------------------------------------------

SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)

Maximum sales charge on purchases

AS A % OF OFFERING PRICE 3.00 NONE NONE NONE

Maximum deferred sales charge (CDSC)

AS A % OF PURCHASE OR SALE PRICE, WHICHEVER IS LESS NONE* 3.00 .75 NONE
- ------------------------------------------------------------------------------------------------------------------------------------

ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)

% OF AVERAGE DAILY NET ASSETS

Management fees .60 .60 .60 .60

12b-1 fee .25 .75 .75 NONE

Other expenses .00 .00 .00 .00
- ------------------------------------------------------------------------------------------------------------------------------------

TOTAL .85 1.35 1.35 .60

</TABLE>

* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1
MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF REDEEMED WITHIN ONE YEAR.

Expense example

1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------

CLASS A $0,000 $0,000 $0,000 $0,000

CLASS B
WITH REDEMPTION $0,000 $0,000 $0,000 $0,000**

WITHOUT REDEMPTION $0,000 $0,000 $0,000 $0,000**

CLASS C
WITH REDEMPTION $0,000 $0,000 $0,000 $0,000
WITHOUT REDEMPTION $0,000 $0,000 $0,000 $0,000

CLASS R $0,000 $0,000 $0,000 $0,000

** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.

This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. Because actual
return and expenses will be different, the example is for comparison only.

Concepts to understand

<PAGE>

MANAGEMENT----------------------------------------------------------------------

Management philosophy

Portfolio manager

The fund is managed by Laurie Carroll. Ms. Carroll has managed the fund since
its inception and has been employed by Dreyfus as a portfolio manager since
October 17, 1994. Ms. Carroll is a Senior Vice President and portfolio manager
at Mellon Bank. Ms. Carroll has been employed by Mellon Bank since 1986.

Concepts to understand

Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.

The Fund 5

<PAGE>

FINANCIAL HIGHLIGHTS------------------------------------------------------------

The following tables describe the performance of each share class 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
independently audited by [ ], whose report, along with the fund's financial
statements, is included in the annual report.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
CLASS A 1998 1997 1996 1995 1994(1)
- ------------------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period 10.78 10.84 10.22 10.49

Investment operations: Investment income -- net .62 .58 .56 .28

Net realized and unrealized gain (loss) on investments .19 (.07) .62 (.27)

Total from investment operations .81 .51 1.18 .01

Distributions: Dividends from investment income -- net (.63) (.57) (.56) (.28)

Net asset value, end of period 10.96 10.78 10.84 10.22

Total return (%) (3) 7.80 4.85 11.83 .11
- ------------------------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) .85 .85 .85 .83(3)

Ratio of net investment income to average net assets (%) 5.80 5.38 5.33 4.47(3)

Portfolio turnover rate (%) 129.94 153.63 73.00 117.00
- ------------------------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 1,169 1,001 1,150 932
</TABLE>

(1) FOR THE PERIOD FROM APRIL 7, 1994 THROUGH OCTOBER 31, 1994.

(2) EXCLUSIVE OF SALES LOAD.

(3) ANNUALIZED.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
CLASS B 1998 1997 1996 1995(1)
- ------------------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period 10.78 10.84 10.15

Investment operations: Investment income -- net .56 .52 .47

Net realized and unrealized gain (loss) on investments .23 (.07) .69

Total from investment operations .79 .45 1.16

Distributions: Dividends from investment income -- net (.57) (.51) (.47)

Net asset value, end of period 11.00 10.78 10.84

Total return (%)(3) 7.56 4.33 11.32
- ------------------------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) 1.35 1.35 1.35(3)

Ratio of net investment income to average net assets (%) 5.06 4.86 4.85(3)

Portfolio turnover rate (%) 129.94 153.63 73.00
- ------------------------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 542 143 78

</TABLE>

(1) FOR THE PERIOD FROM DECEMBER 19, 1994 THROUGH OCTOBER 31, 1995.

(2) EXCLUSIVE OF SALES LOAD.

(3) ANNUALIZED.

<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
CLASS C 1998 1997 1996 1995(1)
- ------------------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period 10.73 10.84 10.15

Investment operations: Investment income (loss) -- net (1.98) 3.05 .48

Net realized and unrealized gain (loss) on investments 2.65 (2.65) .69

Total from investment operations .67 .40 1.17

Distributions: Dividends from investment income -- net (.56) (.51) (.48)

Net asset value, end of period 10.84 10.73 10.84

Total return (%)(3) 6.49 3.83 11.32
- ------------------------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) 1.35 1.41 --

Ratio of net investment income to average net assets (%) 4.98 5.50 --

Portfolio turnover rate (%) 129.94 153.63 73.00
- ------------------------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 349 -- --

</TABLE>

(1) FOR THE PERIOD FROM DECEMBER 19, 1994 THROUGH OCTOBER 31, 1995.

(2) EXCLUSIVE OF SALES LOAD.

YEAR ENDED OCTOBER 31,

CLASS R 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period 10.78 10.84 10.22 11.07

Investment operations: Investment income -- net .65 .60 .58 .49

Net realized and unrealized gain (loss) on investments .19 (.06) .62 (.75)

Total from investment operations .84 .54 1.20 (.26)

Distributions: Dividends from investment income -- net (.66) (.60) (.58) (.53)

Dividends from net realized gain on investments -- -- -- (.06)

Total distributions (.66) (.60) (.58) (.59)

Net asset value, end of period 10.96 10.78 10.84 10.22

Total return (%) 8.09 5.12 12.11 (2.46)
- ------------------------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) .60 .60 .60 .60

Ratio of net investment income to average net assets (%) 6.06 5.62 5.58 4.70

Portfolio turnover rate (%) 129.94 153.63 73.00 117.00
- ------------------------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 47,532 49, 664 69,924 82,406
</TABLE>

The Fund 7

<PAGE>

YOUR INVESTMENT

ACCOUNT POLICIES
- -------------------

o Class A shares can be the most cost-effective choice, if you are investing
for the long term, especially if you are investing $100,000 or more.

o Class B shares can make sense if you have a long time horizon and are
investing less than $100,000.

o Class C shares may be appropriate if you have a shorter or less certain time
horizon and are investing less than $100,000.

o Class R shares are designed for eligible institutions on behalf of their
clients. Individuals may not purchase these shares directly.

Reduced Class A sales charge

LETTER OF INTENT: lets you purchase Class A shares over a 13-month period and
receive the same sales charge as if all shares had been purchased at once.

RIGHT OF ACCUMULATION: lets you add the value of any Class A shares you already
own to the amount of your next Class A investment for purposes of calculating
the sales charge.

CONSULT THE STATEMENT OF ADDITIONAL INFORMATION (SAI) OR YOUR FINANCIAL
REPRESENTATIVE FOR MORE DETAILS.

Share class charges

EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay a sales charge to buy or sell shares. Contact your financial representative
to see if this may apply to you. Shareholders owning Class A shares of the fund
as of December 19, 1994 may continue to purchase Class A shares without a
front-end sales load.
- --------------------------------------------------------------------------------

Sales charges

CLASS A -- CHARGED WHEN YOU BUY SHARES

Sales charge Sales charge as
deducted as a % a % of your
Your investment of offering price net investment
- --------------------------------------------------------------------------------

Less than $100,000 3.00% 3.10%

$100,000 -- $249,999 2.75% 2.80%

$250,000 -- $499,999 2.25% 2.30%

$500,000 -- $999,999 2.00% 2.00%

$1 million or more* 0.00% 0.00%

* A 1.00% contingent deferred sales charge may be charged on any shares sold
within one year of purchase (except shares bought through reinvestment).

Class A shares also carry an annual Rule 12b-1 fee of 0.25% of the class's
average net assets.
- --------------------------------------------------------------------------------

CLASS B -- CHARGED WHEN YOU SELL SHARES

Up to 2 years 3.00%

2 -- 4 years 2.00%

4 -- 5 years 1.00%

5 -- 6 years 0.00%

More than 6 years Shares will automatically
convert to Class A

Class B shares also carry an annual Rule 12b-1 fee of 0.75% of the class's
average daily net assets.
- --------------------------------------------------------------------------------

CLASS C -- CHARGED WHEN YOU SELL SHARES

A 0.75% CDSC is imposed on redemptions made within the first year of purchase.
Class C shares also carry an annual Rule 12b-1 fee of 0.75% of the class's
average daily net assets.
- --------------------------------------------------------------------------------

CLASS R -- NO SALES LOAD OR 12B-1 FEES

<PAGE>

Buying shares

THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. The fund's investments
are generally valued based on market value or, where market quotations are not
readily available, based on fair value as determined in good faith by the fund's
board.

- --------------------------------------------------------------------------------

Minimum investments

Initial Additional
- --------------------------------------------------------------------------------

REGULAR ACCOUNTS $1,000 $100; $500 FOR
TELETRANSFER INVESTMENTS

TRADITIONAL IRAS $750 NO MINIMUM

SPOUSAL IRAS $750 NO MINIMUM

ROTH IRAS $750 NO MINIMUM

EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST YEAR

DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS

All investments must be in U.S. dollars. Third-party checks cannot be accepted.
You may be charged a fee for any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.

Concepts to understand

Selling shares

Written sell orders

Some circumstances require written sell orders along with signature guarantees.
These include:

o amounts of $1,000 or more on accounts whose address has been changed within
the last 30 days

o requests to send the proceeds to a different payee or address

Written sell orders of $100,000 or more must also be signature guaranteed.

Your Investment 9

<PAGE>

ACCOUNT POLICIES (CONTINUED)

General policies

IF YOUR ACCOUNT FALLS BELOW $500, the fund may ask you to increase your balance.
If it is still below $500 after 45 days, the fund may close your account and
send you the proceeds.

UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.

THE FUND RESERVES THE RIGHT TO:

o refuse any purchase or exchange request that could adversely affect the fund
or its operations, including those from any individual or group who, in the
fund's view, is likely to engage in excessive trading (usually defined as
more than four exchanges out of the fund within a calendar year)

o refuse any purchase or exchange request in excess of 1% of the fund's total
assets

o change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions

o change its minimum investment amounts

o delay sending out redemption proceeds for up to seven days (generally applies
only in cases of very large redemptions, excessive trading or during unusual
market conditions)

DISTRIBUTIONS AND TAXES---------------------------------------------------------

THE FUND GENERALLY PAYS ITS SHAREHOLDERS monthly dividends from its net
investment income, and distributes any net capital gains that it has realized
once a year. Each share class will generate a different dividend because each
has different expenses. Your distributions will be reinvested in the fund unless
you instruct the fund otherwise. There are no fees or sales charges on
reinvestments.

- --------------------------------------------------------------------------------

Taxability of distributions

Type of Tax rate for Tax rate for

distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------

INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE

SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE

LONG-TERM
CAPITAL GAINS 10% 20%

Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.

Taxes on transactions

Except between tax-deferred accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.

<PAGE>

SERVICES FOR FUND INVESTORS-----------------------------------------------------

Automatic services

- --------------------------------------------------------------------------------

For investing

DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((REGISTERED)) from a designated bank account.

DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.

DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
- --------------------------------------------------------------------------------

For exchanging shares

DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
- --------------------------------------------------------------------------------

For selling shares

DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds. There
will be no CDSC on Class B
shares, as long as the amounts
withdrawn do not exceed 12%
annually of the account value
at the time the shareholder
elects to participate in the
plan.

Exchange privilege

YOU CAN EXCHANGE SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one class of the fund into the same class of another Dreyfus Premier fund.
You can request your exchange by contacting your financial representative. Be
sure to read the current prospectus for any fund into which you are exchanging
before investing. Any new account established through an exchange will generally
have the same privileges as your original account (as long as they are
available). There is currently no fee for exchanges, although you may be charged
a sales load when exchanging into any fund that has a higher one.

TeleTransfer privilege

Reinvestment privilege

Account statements

EVERY FUND INVESTOR automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.

Your Investment 11

<PAGE>

INSTRUCTIONS FOR REGULAR ACCOUNTS

TO OPEN AN ACCOUNT

In Writing----------------------------------------------------------------------

Complete the application.

Mail your application and a check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing

TO ADD TO AN ACCOUNT

Fill out an investment slip, and write your account number on your check.

Mail the slip and the check to: Name of Fund P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing

TO SELL SHARES

Write a letter of instruction that includes:

* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds

Obtain a signature guarantee or other documentation, if required (see Page 9)

Mail your request to: The Dreyfus Family of Funds P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing

By Telephone--------------------------------------------------------------------

WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co,
with these instructions:

* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your Social Security or tax ID number
* name(s) of investor(s)
* dealer number if applicable

Call us to obtain an account number. Return your application with the account
number on the application.

WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co, with
these instructions:

* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable

ELECTRONIC CHECK Same as wire, but before your account number insert "4240" for
Class A, "4250" for Class B, "4260" for Class C, "4270" for Class R

TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.

TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.

Automatically-------------------------------------------------------------------

WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.

AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative to request a
form to add the plan. Complete the form, specifying the amount and frequency of
withdrawals you would like.

Be sure to maintain an account balance of $5,000 or more.

Concepts to understand

<PAGE>

INSTRUCTIONS FOR IRAS

TO OPEN AN ACCOUNT

In Writing----------------------------------------------------------------------

Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.

Mail your application and a check to:
The Dreyfus Trust Company, custodian
P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing

TO ADD TO AN ACCOUNT

Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.

Mail in the slip and the check to: The Dreyfus Trust Company P.O. Box 6427,
Providence, RI 02940-6427 Attn: Institutional Processing

TO SELL SHARES

Write a letter of instruction that includes:

* your name and signature
* your account number and fund name
* the dollar amount you want to sell
* how and where to send the proceeds
* whether the distribution is qualified or premature
* whether the 10% TEFRA should be withheld

Obtain a signature guarantee or other documentation, if required (see Page 9).

Mail in your request to: The Dreyfus Trust Company P.O. Box 6427, Providence,
RI 02940-6427

By Telephone--------------------------------------------------------------------

__________

WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:

* ABA# 0011001234
* DDA# 044350
* the fund name
* the share class * your account number
* name of investor
* the contribution year
* dealer number if applicable

ELECTRONIC CHECK Same as wire, but before your account number insert "4240" for
Class A, "4250" for Class B, "4260" for Class C, "4270" for Class R

__________

Automatically-------------------------------------------------------------------

__________

SYSTEMATIC WITHDRAWAL PLAN Call us to request instructions to establish the
plan.

For information and assistance, contact your financial representative or call
toll free in the U.S. 1-800-554-4611. Make checks payable to: THE DREYFUS TRUST
COMPANY, CUSTODIAN

Your Investment 13

<PAGE>

For More Information

Dreyfus Premier Limited Term Income Fund

A Series of The Dreyfus/Laurel Funds, Inc.
- ------------------------------------------

SEC file number: 811-5270

More information on this fund is available free upon request, including the
following:

Annual/Semiannual Report

Describes the fund's performance, lists portfolio holdings and contains a letter
from the fund's manager discussing recent market conditions, economic trends
and fund strategies that significantly affected the fund's performance during
the last fiscal year.

Statement of Additional Information (SAI)

Provides more details about the fund and its policies. A current SAI is on file
with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).

To obtain information:

BY TELEPHONE Call your financial representative or 1-800-554-4611

BY MAIL Write to:
The Dreyfus Premier Family of Funds
144 Glenn Curtiss
Boulevard Uniondale, NY 11556-0144

ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from:
http://www.sec.gov

<PAGE>

[Application p 1 here]

<PAGE>

[Application p 2 here]
<PAGE>
DREYFUS PREMIER LIMITED TERM INCOME FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
DREYFUS PREMIER BALANCED FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 1999

This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of the
Dreyfus Premier Limited Term Income Fund (the "Limited Term Income Fund") and
the current Prospectus of the Dreyfus Premier Balanced Fund (the "Balanced
Fund") (Limited Term Income Fund and Balanced Fund are referred to herein
individually, as a "Fund" and, collectively, as the "Funds") each dated March 1,
1999, as they may be revised from time to time. The Funds are separate,
diversified portfolios of The Dreyfus/Laurel Funds, Inc., an open-end management
investment company (the "Company"), known as a mutual fund. To obtain a copy of
a Fund's Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call one of the following numbers:

Call Toll Free 1-800-554-4611
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452

TABLE OF CONTENTS
Page

Description of the Funds.......................................... B-2
Management of the Funds........................................... B-19
Management Arrangements........................................... B-25
Purchase of Shares................................................ B-27
Distribution and Service Plans.................................... B-35
Redemption of Shares.............................................. B-37
Shareholder Services.............................................. B-42
Additional Information About Purchases, Exchanges and Redemptions. B-47
Determination of Net Asset Value.................................. B-48
Dividends, Other Distributions and Taxes.......................... B-49
Portfolio Transactions............................................ B-57
Performance Information........................................... B-59
Information About the Funds....................................... B-62
Transfer and Dividend Disbursing
Agent, Custodian, Counsel and Independent Auditors.............. B-63
Financial Statements.............................................. B-63
Appendix.......................................................... B-64

<PAGE>

DESCRIPTION OF THE FUNDS

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS OF EACH FUND'S PROSPECTUS ENTITLED "GOAL/APPROACH" AND "MAIN
RISKS."

Limited Term Income Fund seeks to provide shareholders with as high a
level of current income as is consistent with safety of principal and
maintenance of liquidity.

Balanced Fund seeks to outperform a hybrid index, 60% of which is the
Standard & Poor's 500 Composite Stock Price Index ("S&P 500") and 40% of which
is the Lehman Brothers Intermediate Government/Corporate Bond Index
("Intermediate Index"). The S&P 500 is composed of 500 common stocks which are
chosen by Standard & Poor's to best capture the price performance of a large
cross-section of the U.S. publicly traded stock market. The S&P 500 is
structured to approximate the general distribution of industries in the U.S.
economy. The inclusion of a stock in the S&P 500 does not imply that Standard &
Poor's believes the stock to be an attractive or appropriate investment, nor is
Standard & Poor's in any way affiliated with the Fund. The 500 securities, most
of which trade on the New York Stock Exchange ("NYSE"), represent approximately
75% of the market value of all U.S. common stocks. Each stock in the S&P 500 is
weighted by its market capitalization. That is, each security is weighted by its
total market value relative to the total market values of all the securities in
the S&P 500. Component stocks included in the S&P 500 are chosen with the aim of
achieving a distribution at the index level representative of the various
components of the U.S. economy and therefore do not represent the 500 largest
companies. Aggregate market value and trading activity are also considered in
the selection process. A limited percentage of the S&P 500 may include foreign
securities. The Intermediate Index is an index established by Lehman Brothers,
Inc. which includes fixed rate debt issues rated investment grade or higher by
Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Rating Services,
a division of McGraw-Hill Companies, Inc. ("Standard & Poor's"), or Fitch
Investors Service LLP. All issues have at least one year to maturity and an
outstanding par value of at least $100 million for U.S. Government issues and
$50 million for all others. The Intermediate Index includes bonds with
maturities of up to ten years.

The Dreyfus Corporation ("Dreyfus") serves as each Fund's investment
manager.

B-2
<PAGE>

CERTAIN PORTFOLIO SECURITIES

The following information regarding the securities that the Funds may
purchase supplements that found in each Fund's Prospectus.

AMERICAN DEPOSITORY RECEIPTS ("ADRS"). The Funds may invest in U.S.
dollar-denominated ADRs. ADRs typically are issued by an American bank or trust
company and evidence ownership of underlying securities issued by foreign
companies. ADRs are traded in the United States on national securities exchanges
or in the over-the-counter market. Investment in securities of foreign issuers
presents certain risks. See "Foreign Securities."

CORPORATE OBLIGATIONS. The Funds may invest in corporate obligations rated
at least Baa by Moody's or BBB by Standard & Poor's, or if unrated, of
comparable quality as determined by Dreyfus. Securities rated BBB by Standard &
Poor's or Baa by Moody's are considered by those rating agencies to be
"investment grade" securities, although Moody's considers securities rated Baa
to have speculative characteristics. Further, while bonds rated BBB by Standard
& Poor's exhibit adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and principal for debt in this category than debt in higher rated
categories. Each Fund will dispose in a prudent and orderly fashion of bonds
whose ratings drop below these minimum ratings.

GOVERNMENT OBLIGATIONS. Each Fund may invest in a variety of U.S. Treasury
obligations, which differ only in their interest rates, maturities and times of
issuance: (a) U.S. Treasury bills have a maturity of one year or less, (b) U.S.
Treasury notes have maturities of one to ten years, and (c) U.S. Treasury bonds
generally have maturities of greater than ten years.

In addition to U.S. Treasury obligations, each Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are supported by any of the following: (a) the full faith
and credit of the U.S. Treasury, (b) the right of the issuer to borrow an amount
limited to a specific line of credit from the U.S. Treasury, (c) the
discretionary authority of the U.S. Treasury to lend to such Government agency
or instrumentality, or (d) the credit of the instrumentality. (Examples of
agencies and instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Central Bank for Cooperatives, Federal Intermediate Credit Banks,
Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory Board,
Inter-American Development Bank, Asian-American Development Bank, Student Loan
Marketing Association, International Bank for Reconstruction and Development,
Small Business Administration and Fannie Mae). No assurance can be given that
the U.S. Government will provide financial support to the agencies or
instrumentalities described in (b), (c) and (d) in the future, other than as set
forth above, since it is not obligated to do so by law.

GNMA CERTIFICATES. The Funds may invest in Government National Mortgage
Association ("GNMA") Certificates. GNMA Certificates are mortgage-backed
securities representing part ownership of a pool of mortgage loans. These loans
are made by mortgage bankers, commercial banks, savings and loan associations,

B-3
<PAGE>

and other lenders and are either insured by the Federal Housing Administration
or guaranteed by the Veterans Administration. A "pool" or group of such
mortgages is assembled and, after being approved by GNMA, is offered to
investors through securities dealers. Once approved by GNMA, the timely payment
of interest and principal on each mortgage is guaranteed by the full faith and
credit of the U.S. Government. Although the mortgage loans in a pool underlying
a GNMA Certificate will have maturities of up to 30 years, the average life of a
GNMA Certificate will be substantially less because the mortgages will be
subject to normal principal amortization and also may be prepaid prior to
maturity. Prepayment rates vary widely and may be affected by changes in
mortgage interest rates. In periods of falling interest rates, the rate of
prepayment on higher interest mortgage rates tends to increase, thereby
shortening the actual average life of the GNMA Certificate. Conversely, when
interest rates are rising, the rate of prepayment tends to decrease, thereby
lengthening the average life of the GNMA Certificates. Reinvestment of
prepayments may occur at higher or lower rates than the original yield of the
Certificates. Due to the prepayment feature and the need to reinvest prepayments
of principal at current rates, GNMA Certificates, with underlying mortgages
bearing higher interest rates can be less effective than typical non-callable
bonds of similar maturities at locking in yields during periods of declining
interest rates, although they may have comparable risks of decline in value
during periods of rising interest rates.

FIXED-INCOME SECURITIES. The Funds may invest in fixed-income securities.
In periods of declining interest rates, a Fund's yield (its income from
portfolio investments over a stated period of time) may tend to be higher than
prevailing market rates, and in periods of rising interest rates, a Fund's yield
may tend to be lower than prevailing interest rates. Also, in periods of falling
interest rates, the inflow of net new money to a Fund from the continuous sale
of its shares will likely be invested in portfolio instruments producing lower
yields than the balance of a Fund's portfolio, thereby reducing the yield of the
Fund. In periods of rising interest rates, the opposite can be true. The net
asset value ("NAV") of a Fund investing in fixed-income securities also may
change as general levels of interest rates fluctuate. When interest rates
increase, the value of a portfolio of fixed-income securities can be expected to
decline. Conversely, when interest rates decline, the value of a portfolio of
fixed-income securities can be expected to increase.

VARIABLE AMOUNT MASTER DEMAND NOTES. The Funds may invest in Variable
Amount Master Demand Notes. Variable amount master demand notes are unsecured
obligations that are redeemable upon demand and are typically unrated. These
instruments are issued pursuant to written agreements between their issuers and
holders. The agreements permit the holders to increase (subject to an agreed
maximum) and the holders and issuers to decrease the principal amount of the
notes, and specify that the rate of interest payable on the principal fluctuates
according to an agreed-upon formula. If an issuer of a variable amount master
demand note were to default on its payment obligations, a Fund might be unable
to dispose of the note because of the absence of a secondary market and might,
for this or other reasons, suffer a loss to the extent of the default. The Funds
will only invest in variable amount master demand notes issued by entities that
Dreyfus considers creditworthy.

B-4
<PAGE>

FLOATING RATE SECURITIES (LIMITED TERM INCOME FUND ONLY). The Fund may
invest in floating rate securities. A floating rate security provides for the
automatic adjustment of its interest whenever a specified interest rate changes.
Interest rates on these securities are ordinarily tied to, and are a percentage
of, a widely recognized interest rate, such as the yield on 90-day U.S. Treasury
bills or the prime rate of a specified bank. These rates may change as often as
twice daily. Generally, changes in interest rates will have a smaller effect on
the market value of floating rate securities than on the market value of
comparable fixed income obligations. Thus, investing in variable and floating
rate securities generally allows less opportunity for capital appreciation and
depreciation than investing in comparable fixed income securities.

MORTGAGE PASS-THROUGH CERTIFICATES. The Fund may invest in mortgage
pass-through certificates. Mortgage pass-through certificates are issued by
governmental, government-related and private organizations and are backed by
pools of mortgage loans. These mortgage loans are made by lenders such as
savings and loan associations, mortgage bankers, commercial banks and others to
residential home buyers throughout the United States. The securities are deemed
"pass-through" securities because they provide investors with monthly payments
of principal and interest that, in effect, are a "pass-through" of the monthly
payments made by the individual borrowers on the underlying mortgage loans. The
principal governmental issuer of such securities is GNMA, which is a wholly
owned U.S. government corporation within the Department of Housing and Urban
Development. Government related issuers include the Federal Home Loan Mortgage
Corporation ("FHLMC"), and the Federal National Mortgage Association ("FNMA"),
both government-sponsored corporations owned entirely by private stockholders.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Such issuers may
be originators of the underlying mortgage loans as well as the guarantors of the
mortgage-related securities. The market value of mortgage-related securities
depends on, among other things, the level of interest rates, the certificates'
coupon rates and the payment history of underlying mortgage loans.

REPURCHASE AGREEMENTS. The Funds may enter into repurchase agreements with
U.S. Government securities dealers recognized by the Federal Reserve Board, with
member banks of the Federal Reserve System, or with such other brokers or
dealers that meet the Funds' credit guidelines. This technique offers a method
of earning income on idle cash. In a repurchase agreement, a Fund buys a
security from a seller that has agreed to repurchase the same security at a
mutually agreed upon date and price. A Fund's resale price will be in excess of
the purchase price, reflecting an agreed upon interest rate. This interest rate
is effective for the period of time the Fund is invested in the agreement and is
not related to the coupon rate on the underlying security. Repurchase agreements
may also be viewed as a fully collateralized loan of money by a Fund to the
seller. The period of these repurchase agreements will usually be short, from
overnight to one week, and at no time will a Fund invest in repurchase
agreements for more than one year. A Fund will always receive as collateral
securities whose market value including accrued interest is, and during the
entire term of the agreement remains, at least equal to 100% of the dollar
amount invested by the Fund in each agreement, and the Fund will make payment
for such securities only upon physical delivery or upon evidence of book entry
transfer to the account of the Custodian. If the seller defaults, a Fund might

B-5
<PAGE>

incur a loss if the value of the collateral securing the repurchase agreement
declines and might incur disposition costs in connection with liquidating the
collateral. In addition, if bankruptcy proceedings are commenced with respect to
the seller of a security which is the subject of a repurchase agreement,
realization upon the collateral by the Fund may be delayed or limited. The Funds
seek to minimize the risk of loss through repurchase agreements by analyzing the
creditworthiness of the obligors under repurchase agreements, in accordance with
the Funds' credit guidelines.

COMMERCIAL PAPER. The Funds may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from two to 270 days. Each instrument may be backed only
by the credit of the issuer or may be backed by some form of credit enhancement,
typically in the form of a guarantee by a commercial bank. Commercial paper
backed by guarantees of foreign banks may involve additional risk due to the
difficulty of obtaining and enforcing judgments against such banks and the
generally less restrictive regulations to which such banks are subject. The
Funds will only invest in commercial paper of U.S. and foreign companies rated
at the time of purchase at least A-1 by Standard & Poor's, Prime-1 by Moody's,
F-1 by Fitch Investors Service, LLP, Duff 1 by Phoenix Duff & Phelps, Corp., or
A1 by IBCA, Inc.

BANK INSTRUMENTS. The Funds may purchase bankers' acceptances, certificates
of deposit, time deposits, and other short-term obligations issued by domestic
banks, foreign subsidiaries or foreign branches of domestic banks, domestic and
foreign branches of foreign banks, domestic savings and loan associations and
other banking institutions. Included among such obligations are Eurodollar
certificates of deposit ("ECDs"), Eurodollar time deposits ("ETDs") and Yankee
Dollar certificates of deposit ("Yankee CDs"). ECDs are U.S. dollar-denominated
certificates of deposit issued by foreign branches of domestic banks. ETDs are
U.S. dollar-denominated time deposits in a foreign branch of a U.S. bank or a
foreign bank. Yankee CDs are certificates of deposit issued by a U.S. branch of
a foreign bank denominated in U.S. dollars and held in the United States. The
Funds may also invest in Eurodollar bonds and notes, which are obligations that
pay principal and interest in U.S. dollars held in banks outside the United
States, primarily in Europe. All of these obligations are subject to somewhat
different risks than are the obligations of domestic banks or issuers in the
United States. See "Foreign Securities."

FOREIGN SECURITIES. The Funds may purchase securities of foreign issuers
and may invest in obligations of foreign branches of domestic banks and domestic
branches of foreign banks. Investment in foreign securities presents certain
risks, including those resulting from fluctuations in currency exchange rates,
revaluation of currencies, adverse political and economic developments, the
possible imposition of currency exchange blockages or other foreign governmental
laws or restrictions, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
Moreover, securities of many foreign issuers may be less liquid and their prices
more volatile than those of comparable domestic issuers. In addition, with
respect to certain foreign countries, there is the possibility of expropriation,
confiscatory taxation and limitations on the use or removal of funds or other
assets of a Fund, including withholding of dividends. Foreign securities may be
subject to foreign government taxes that would reduce the yield on such
securities.

B-6
<PAGE>

ILLIQUID SECURITIES. A Fund will not knowingly invest more than 15% of the
value of its net assets in illiquid securities, including time deposits and
repurchase agreements having maturities longer than seven days. Securities that
have readily available market quotations are not deemed illiquid for purposes of
this limitation (irrespective of any legal or contractual restrictions on
resale). The Funds may invest in commercial obligations issued in reliance on
the so-called "private placement" exemption from registration afforded by
Section 4(2) of the Securities Act of 1933, as amended ("Section 4(2) paper").
The Funds may also purchase securities that are not registered under the
Securities Act of 1933, as amended, but that can be sold to qualified
institutional buyers in accordance with Rule 144A under that Act ("Rule 144A
securities"). Liquidity determinations with respect to Section 4(2) paper and
Rule 144A securities will be made by the Board of Directors or by Dreyfus
pursuant to guidelines established by the Board of Directors. The Board or
Dreyfus will consider availability of reliable price information and other
relevant information in making such determinations. Section 4(2) paper is
restricted as to disposition under the federal securities laws, and generally is
sold to institutional investors, such as the Funds, that agree that they are
purchasing the paper for investment and not with a view to public distribution.
Any resale by the purchaser must be pursuant to registration or an exemption
therefrom. Section 4(2) paper normally is resold to other institutional
investors, like the Funds, through or with the assistance of the issuer or
investment dealers who make a market in the Section 4(2) paper, thus providing
liquidity. Rule 144A securities generally must be sold to other qualified
institutional buyers. If a particular investment in Section 4(2) paper or Rule
144A securities is not determined to be liquid, that investment will be included
within the percentage limitation on investment in illiquid securities. The
ability to sell Rule 144A securities to qualified institutional buyers is a
recent development and it is not possible to predict how this market will
mature. Investing in Rule 144A securities could have the effect of increasing
the level of Fund illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing these securities from a Fund or
other holders.

OTHER INVESTMENT COMPANIES. A Fund may invest in securities issued by other
investment companies to the extent that such investments are consistent with the
Fund's investment objective and policies and permissible under the Investment
Company Act of 1940, as amended (the "1940 Act"). As a shareholder of another
investment company, a Fund would bear, along with other shareholders, its pro
rata portion of the other investment company's expenses, including advisory
fees. These expenses would be in addition to the advisory and other expenses
that a Fund bears directly in connection with its own operations.

INVESTMENT TECHNIQUES

In addition to the principal investment strategies discussed in each
Fund's Prospectus, the Funds also may engage in the investment techniques
described below. The Funds might not use, or may not have the ability to use,
any of these strategies and there can be no assurance that any strategy that is
used will succeed.

BORROWING. The Funds are authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.

B-7
<PAGE>

WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. New issues of
U.S. Treasury and Government securities are often offered on a "when-issued"
basis. This means that delivery and payment for the securities normally will
take place approximately 7 to 45 days after the date the buyer commits to
purchase them. The payment obligation and the interest rate that will be
received on securities purchased on a "when-issued" basis are each fixed at the
time the buyer enters into the commitment. Each Fund will make commitments to
purchase such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities or dispose of the commitment
before the settlement date if it is deemed advisable as a matter of investment
strategy. Cash or marketable high-grade debt securities equal to the amount of
the above commitments will be segregated on each Fund's records. For the purpose
of determining the adequacy of these securities the segregated securities will
be valued at market. If the market value of such securities declines, additional
cash or securities will be segregated on the Fund's records on a daily basis so
that the market value of the account will equal the amount of such commitments
by the Fund.

To secure advantageous prices or yields, each Fund may purchase or sell
securities for delayed delivery. In such transactions, delivery of the
securities occurs beyond the normal settlement periods, but no payment or
delivery is made by a Fund prior to the actual delivery or payment by the other
party to the transaction. The purchase of securities on a delayed delivery basis
involves the risk that the value of the securities purchased will decline prior
to the settlement date. The sale of securities for delayed delivery involves the
risk that the prices available in the market on the delivery date may be greater
than those obtained in the sale transaction. Each Fund will establish a
segregated account consisting of cash, U.S. Government Securities or other
high-grade debt obligations in an amount at least equal at all times to the
amounts of its delayed delivery commitments.

LOANS OF FUND SECURITIES. A Fund may lend securities from its portfolio to
brokers, dealers and other financial institutions needing to borrow securities
to complete certain transactions. A Fund continues to be entitled to payments in

B-8
<PAGE>

amounts equal to the interest, dividends or other distributions payable on the
loaned securities, which affords the Fund an opportunity to earn interest on the
amount of the loan and on the loaned securities' collateral. Loans of portfolio
securities may not exceed 33-1/3% of the value of a Fund's total assets and the
Fund will receive collateral consisting of cash, U.S. Government securities or
irrevocable letters of credit which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities.
These loans are terminable by a Fund at any time upon specified notice. A Fund
might experience loss if the institution to which it has lent its securities
fails financially or breaches its agreement with the Fund. In addition, it is
anticipated that a Fund may share with the borrower some of the income received
on the collateral for the loan or that it will be paid a premium for the loan.
In determining whether to lend securities, a Fund considers all relevant factors
and circumstances including the creditworthiness of the borrower.

REVERSE REPURCHASE AGREEMENTS. A Fund may enter into reverse repurchase
agreements to meet redemption requests where the liquidation of Fund securities
is deemed by Dreyfus to be disadvantageous. Under a reverse repurchase
agreement, a Fund: (1) transfers possession of Fund securities to a bank or
broker-dealer in return for cash in an amount equal to a percentage of the
securities' market value; and (2) agrees to repurchase the securities at a
future date by repaying the cash with interest. The Fund retains record
ownership of the security involved including the right to receive interest and
principal payments. Cash or liquid high-grade debt securities held by a Fund
equal in value to the repurchase price including any accrued interest will be
maintained in a segregated account while a reverse repurchase agreement is in
effect.

FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS (BALANCED FUND ONLY;
LIMITED TERM INCOME FUND MAY ENTER INTO FUTURES CONTRACTS AND RELATED OPTIONS
FOR HEDGING PURPOSES BUT DOES NOT INTEND TO DO SO DURING THE COMING YEAR). The
Fund may purchase and sell various financial instruments ("Derivative
Instruments"), such as financial futures contracts (including interest rate and
index futures contracts) and options (including options on securities, indices,
and futures contracts). The index Derivative Instruments the Fund may use may be
based on indices of U.S. or foreign equity or debt securities. These Derivative
Instruments may be used, for example, to preserve a return or spread, to lock in
unrealized market value gains or losses, to facilitate or substitute for the
sale or purchase of securities, or to alter the exposure of a particular
investment or portion of a Fund's portfolio to fluctuations in interest rates.

B-9
<PAGE>

anticipatory hedge. In an anticipatory hedge transaction, the Fund does not own
a corresponding security and, therefore, the transaction does not relate to a
security the Fund owns. Rather, it relates to a security that the Fund intends
to acquire. If the Fund does not complete the hedge by purchasing the security
it anticipated purchasing, the effect on the Fund's portfolio is the same as if
the transaction were entered into for speculative purposes.

(1) Successful use of most Derivative Instruments depends upon Dreyfus'
ability not only to forecast the direction of price fluctuations of the
investment involved in the transaction, but also to predict movements of the
overall securities, currency and interest rate markets, which requires different
skills than predicting changes in the prices of individual securities. There can
be no assurance that any particular strategy will succeed.

B-10
<PAGE>

Instruments on indices will depend on the degree of correlation between price
movements in the index and price movements in the securities being hedged.

(4) As described below, the Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in Derivative Instruments involving obligations to third parties
(I.E., Derivative Instruments other than purchased options). If the Fund were
unable to close out its positions in such Derivative Instruments, it might be
required to continue to maintain such assets or accounts or make such payments
until the position expired or matured. These requirements might impair the
Fund's ability to sell a portfolio security or make an investment at a time when
it would otherwise be favorable to do so, or require that the Fund sell a
portfolio security at a disadvantageous time. The Fund's ability to close out a
position in a Derivative Instrument prior to expiration or maturity depends on
the existence of a liquid secondary market or, in the absence of such a market,

B-11
<PAGE>

the ability and willingness of the other party to the transaction
("counterparty") to enter into a transaction closing out the position.
Therefore, there is no assurance that any position can be closed out at a time
and price that is favorable to the Fund.

B-12
<PAGE>

appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and the Fund will be obligated to
sell the investment at less than its market value.

The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of the
underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised have
no value and the Fund would experience losses to the extent of premiums paid for
them.

The Fund may purchase and sell both exchange-traded and over-the-counter
("OTC") options. Exchange-traded options in the United States are issued by a
clearing organization that, in effect, guarantees completion of every
exchange-traded option transaction. In contrast, OTC options are contracts
between the Fund and its counterparty (usually a securities dealer or a bank)
with no clearing organization guarantee. Thus, when the Fund purchases an OTC
option, it relies on the counterparty from whom it purchased the option to make
or take delivery of the underlying investment upon exercise of the option.
Failure by the counterparty to do so would result in the loss of any premium
paid by the Fund as well as the loss of any expected benefit of the transaction.
The Fund will enter into only those option contracts that are listed on a
national securities or commodities exchange or traded in the OTC market for
which there appears to be a liquid secondary market. The Fund will not purchase
put or call options that are traded on a national exchange in an amount
exceeding 5% of its net assets.

B-13
<PAGE>

repurchase price less the amount by which the option is "in-the-money" (the
difference between the current market value of the underlying securities and the
option's strike price). The repurchase price with primary dealers is typically a
formula price that is generally based on a multiple of the premium received for
the option plus the amount by which the option is "in-the-money."

The Fund may write only covered call options on securities. A call option
is covered if the Fund owns the underlying security or a call option on the same
security with a lower strike price.

The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures can

B-14
<PAGE>

serve as a short hedge. Writing call options on futures contracts can serve as a
limited short hedge, using a strategy similar to that used for writing call
options on securities or indices. Similarly, writing put options on futures
contracts can serve as a limited long hedge.

Futures strategies also can be used to manage the average duration of the
Fund's fixed income portfolio. If Dreyfus wishes to shorten the average duration
of the Fund's fixed income portfolio, the Fund may sell an interest rate futures
contract or a call option thereon, or purchase a put option on that futures
contract. If Dreyfus wishes to lengthen the average duration of the Fund's fixed
income portfolio, the Fund may buy an interest rate futures contract or a call
option thereon, or sell a put option thereon.

No price is paid upon entering into a futures contract. Instead, at the
inception of a futures contract the Fund is required to deposit "initial margin"
consisting of cash or U.S. Government securities in an amount generally equal to
10% or less of the contract value. Margin must also be deposited when writing a
call or put option on a futures contract, in accordance with applicable exchange
rules. Unlike margin in securities transactions, initial margin on futures
contracts does not represent a borrowing, but rather is in the nature of a
performance bond or good-faith deposit that is returned to the Fund at the
termination of the transaction if all contractual obligations have been
satisfied. Under certain circumstances, such as periods of high volatility, the
Fund may be required by an exchange to increase the level of its initial margin
payment.

B-15
<PAGE>

not limit potential losses because prices could move to the daily limit for
several consecutive days with little or no trading, thereby preventing
liquidation of unfavorable positions.

To the extent that the Fund enters into futures contracts or options on
futures contracts on an exchange regulated by the CFTC, in each case other than
for BONA FIDE hedging purposes (as defined by the CFTC), the aggregate initial
margin and premiums required to establish those positions (excluding the amount
by which options are "in-the-money" at the time of purchase) will not exceed 5%
of the liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has entered
into. This policy does not limit to 5%, the percentage of the Fund's assets that
are at risk in futures contracts and options on futures contracts.

MASTER/FEEDER OPTION. The Company may in the future seek to achieve a
Fund's investment objective by investing all of the Fund's net investable assets
in another investment company having the same investment objective and
substantially the same investment policies and restrictions as those applicable
to the Fund. Shareholders of a Fund will be given at least 30 days' prior notice
of any such investment. Such investment would be made only if the Company's
Board of Directors determines it to be in the best interest of a Fund and its
shareholders. In making that determination, the Company's Board of Directors
will consider, among other things, the benefits to shareholders and/or the
opportunity to reduce costs and achieve operational efficiency. Although the
Funds believe that the Company's Board of Directors will not approve an
arrangement that is likely to result in higher costs, no assurance is given that
costs will be materially reduced if this option is implemented.

INVESTMENT RESTRICTIONS

FUNDAMENTAL. The following limitations have been adopted by each Fund. A
Fund may not change any of these fundamental investment limitations without the
consent of: (a) 67% or more of the shares present at a meeting of shareholders
duly called if the holders of more than 50% of the outstanding shares of a Fund
are present or represented by proxy; or (b) more than 50% of the outstanding
shares of a Fund, whichever is less. Each Fund may not:

1. Purchase any securities which would cause more than 25% of the value of
a Fund's total assets at the time of such purchase to be invested in the

B-16
<PAGE>

securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities, and
state or municipal governments and their political subdivisions are not
considered members of any industry. In addition, this limitation does not apply
to investments in domestic banks, including U.S. branches of foreign banks and
foreign branches of U.S. banks).

2. Borrow money or issue senior securities as defined in the Investment
Company Act of 1940, as amended (the "1940 Act") except that (a) a Fund may
borrow money in an amount not exceeding one-third of the Fund's total assets at
the time of such borrowings, and (b) a Fund may issue multiple classes of
shares. The purchase or sale of futures contracts and related options shall not
be considered to involve the borrowing of money or issuance of securities.

7. Purchase or sell commodities except that each Fund may enter into
futures contracts and related options, forward currency contacts and other
similar instruments.

NONFUNDAMENTAL. Each Fund has adopted the following additional
non-fundamental restrictions. These non-fundamental restrictions may be changed
without shareholder approval, in compliance with applicable law and regulatory
policy.

1. No Fund shall sell securities short, unless it owns or has the right to
obtain securities equivalent in kind and amounts to the securities sold short,
and provided that transactions in futures contracts and options are not deemed
to constitute selling short.

B-17
<PAGE>

2. No Fund shall purchase securities on margin, except that a Fund may
obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with futures
contracts and options shall not constitute purchasing securities on margin.

3. No Fund shall purchase oil, gas or mineral leases.

4. Each Fund will not purchase or retain the securities of any issuer if
the officers or Directors of the Fund, its advisers, or managers, owning
beneficially more than one half of one percent of the securities of such issuer,
together own beneficially more than 5% of such securities.

6. No Fund will invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements with remaining maturities
in excess of seven days, time deposits with maturities in excess of seven days
and other securities which are not readily marketable. For purposes of this
limitation, illiquid securities shall not include Section 4(2) Paper and
securities which may be resold under Rule 144A under the Securities Act of 1933,
provided that the Board of Directors, or its delegate, determines that such
securities are liquid based upon the trading markets for the specific security.

8. No Fund shall purchase any security while borrowings representing more
than 5% of the Fund's total assets are outstanding.

9. No Fund will purchase warrants if at the time of such purchase: (a)
more than 5% of the value of such Fund's assets would be invested in warrants,
or (b) more than 2% of the value of the Fund's assets would be invested in
warrants that are not listed on the New York or American Stock Exchange (for
purposes of this undertaking, warrants acquired by a Fund in units or attached
to securities will be deemed to have no value).

10. No Fund will purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate investment
in such classes of securities would exceed 5% of its total assets except that:
(a) this limitation shall not apply to standby commitments, and (b) this

B-18
<PAGE>

limitation shall not apply to a Fund's transactions in futures contracts and
related options.

As an operating policy, each Fund will not invest more than 25% of the
value of its total assets, at the time of such purchase in domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S. banks. The
Company's Board of Directors may change this policy without shareholder
approval. Notice will be given to shareholders if this policy is changed by the
Board of Directors.

MANAGEMENT OF THE FUNDS

FEDERAL LAW AFFECTING MELLON BANK

The Glass-Steagall Act of 1933 prohibits national banks from engaging in
the business of underwriting, selling or distributing securities and prohibits a
member bank of the Federal Reserve System from having certain affiliations with
an entity engaged principally in that business. The activities of Mellon Bank in
informing its customers of, and performing, investment and redemption services
in connection with the Funds, and in providing services to the Funds as
custodian, as well as Dreyfus' investment advisory activities, may raise issues
under these provisions. Mellon Bank has been advised by counsel that the
activities contemplated under these arrangements are consistent with its
statutory and regulatory obligations.

DIRECTORS AND OFFICERS

The Dreyfus Corporation...............................Investment Adviser

B-19
<PAGE>

Premier Mutual Fund Services, Inc............................Distributor
Dreyfus Transfer, Inc.....................................Transfer Agent
Mellon Bank.......................................Custodian for the Fund

DIRECTORS OF THE COMPANY

o*J. TOMLINSON FORT. Director of the Company; Partner, Reed, Smith, Shaw &
McClay (law firm). Age: 70 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.

B-20
<PAGE>

o+JOHNJ. SCIULLO. Director of the Company; Dean Emeritus and Professor of Law,
Duquesne University Law School; Director, Urban Redevelopment Authority of
Pittsburgh; Member of Advisory Committee, Decedents Estates Laws of
Pennsylvania. Age: 67 years old. Address: 321 Gross Street, Pittsburgh,
Pennsylvania 15224.

- --------------------------------
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.

OFFICERS OF THE COMPANY

#MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior Vice
President and General Counsel of Funds Distributor, Inc. From August 1996
to March 1998, she was Vice President and Assistant General Counsel for
Loomis, Sayles & Company, L.P. From January 1986 to July 1996, she was an
associate with the law firm of Ropes & Gray. Age: 39 years old.

B-21
<PAGE>

B-22
<PAGE>

The address of each officer of the Company is 200 Park Avenue, New York,
New York 10166.

B-23
<PAGE>

Total Compensation
Aggregate From the Company
Name of Board Compensation and Fund Complex
Member From the Company# Paid to Board Member****
- ------------- ----------------- ------------------------

Joseph S. DiMartino*

James M. Fitzgibbons

J. Tomlinson Fort** none none

Arthur L. Goeschel

Kenneth A. Himmel

Stephen J. Lockwood

John J. Sciullo

Roslyn M. Watson

Benaree Pratt Wiley***

- ----------------------------
# 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. Amount does not include reimbursed expenses for
attending Board meetings, which amounted to $[ ] for the Company.
* Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board member
of the Company and the funds in the Dreyfus/Laurel Funds and separately by
the Dreyfus High Yield Strategies Fund. For the fiscal year ended October 31,
1998, the aggregate amount of fees and expenses received by J. Tomlinson Fort
from Dreyfus for serving as a Board member of the Company was
______________________. For the year ended December 31, 1998, the aggregate
amount of fees and expenses received by Mr. Fort for serving as a Board
member of all funds in the Dreyfus/Laurel Funds (including the Company) and
Dreyfus High Yield Strategies Fund (for which payment is made directly by the
fund) was ______________________. In addition, Dreyfus reimbursed Mr. Fort a
total of $__________________ for expenses attributable to the Company's Board
meetings which is not included in the $__________________ amount in note #
above.

B-24
<PAGE>

*** Payments to Ms. Wiley were for the period from April 23, 1998 (the date she
was elected as a Board member) through October 31, 1998.
**** The Dreyfus Family of Funds consists of ___ mutual funds.

The officers and Directors of the Company as a group owned beneficially
less than 1% of the total shares of Balanced Fund outstanding as of November __,
1998.

The officers and Directors of the Company as a group owned beneficially
less than 1% of the total shares of Limited Term Income Fund outstanding as of
November __, 1998.

PRINCIPAL SHAREHOLDERS. As of January 31, 1999, the following
shareholder(s) owned of record 5% or more of Class A, Class B, Class C or Class
R of Balanced Fund: _________.

PRINCIPAL SHAREHOLDERS. As of January 31, 1999, the following
shareholder(s) owned of record 5% or more of Class A, Class B, Class C or Class
R of Limited Term Income Fund: ________.

MANAGEMENT ARRANGEMENTS

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN EACH FUND'S PROSPECTUS ENTITLED "EXPENSES" AND
"MANAGEMENT."

MANAGEMENT AGREEMENT. Dreyfus serves as the investment manager for the
Funds pursuant to an Investment Management Agreement with the Company on behalf
of each Fund, dated April 4, 1994 (the "Management Agreement"), transferred to
Dreyfus as of October 17, 1994, subject to the overall authority of the
Company's Board of Directors in accordance with Maryland law. Pursuant to the
Management Agreement, Dreyfus provides, or arranges for one or more third
parties to provide, investment advisory, administrative, custody, fund
accounting and transfer agency services to the Fund. As investment manager,
Dreyfus manages the Funds by making investment decisions based on each Fund's
investment objective, policies and restrictions. The Management Agreement is
subject to review and approval at least annually by the Board of Directors.

B-25
<PAGE>

Directors or upon the vote of a majority of the respective Fund's outstanding
voting securities on 60 days' written notice to Dreyfus. Dreyfus may terminate
the Management Agreement upon 60 days' written notice to the Company. The
Management Agreement will terminate immediately and automatically upon its
assignment.

EXPENSES. Under the Management Agreement, Balanced Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 1.00% of the value of Balanced
Fund's average daily net assets and Limited Term Income Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 0.60% of the value of Limited Term
Income Fund's average daily net assets. Dreyfus pays all of the Funds' expenses,
except brokerage fees, taxes, interest, fees and expenses of the non-interested
directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and expenses
of the non-interested Directors (including counsel fees), Dreyfus is
contractually required to reduce its investment management fee by an amount
equal to each Fund's allocable share of such fees and expenses. From time to
time, Dreyfus may voluntarily waive a portion of the investment management fees
payable by the Funds, which would have the effect of lowering the expense ratio
of the Funds and increasing return to investors. Expenses attributable to the
Funds are charged against the respective Fund's assets; other expenses of the
Company are allocated among its funds on the basis determined by the Board,
including, but not limited to, proportionately in relation to the net assets of
each fund.

For the last three years, each Fund had the following management fees:

For the Fiscal Year Ended October 31,
1998 1997 1996
---- ---- ----

Balanced Fund $____ $1,690,361 $1,888,750

Limited Term Income Fund $____ $301,794 $351,360

B-26
<PAGE>

THE DISTRIBUTOR. Premier Mutual Fund Services, Inc. (the "Distributor"),
located at 60 State Street, Boston, Massachusetts 02109, serves as each Fund's
distributor on a best efforts basis pursuant to an agreement which is renewable
annually. Dreyfus may pay the Distributor for shareholder services from Dreyfus'
own assets, including past profits but not including the management fee paid by
a Fund. The Distributor may use part or all of such payments to pay certain
banks, securities brokers or dealers and other financial institutions ("Agents")
for these services. The Distributor also acts as sub-administrator for the Funds
and as distributor for the other funds in the Dreyfus Family of Funds.

PURCHASE OF SHARES

Class A shares, Class B shares and Class C shares may be purchased only by
clients of Agents, except that full-time or part-time employees of Dreyfus or
any of its affiliates or subsidiaries, directors of Dreyfus, Board members of a
fund advised by Dreyfus, including members of the Company's Board, or the spouse
or minor child of any of the foregoing may purchase Class A shares directly
through the Distributor. Subsequent purchases may be sent directly to the
Transfer Agent or your Agent.

B-27
<PAGE>

distributed to them by virtue of such an account or relationship. In addition,
holders of Restricted shares of a Fund who have held their shares since April 4,
1994, may continue to purchase Class R shares of that Fund whether or not they
would otherwise be eligible to do so. Class R shares may be purchased for a
retirement plan only by a custodian, trustee, investment manager or other entity
authorized to act on behalf of such a plan. Institutions effecting transactions
in Class R shares for the accounts of their clients may charge their clients
direct fees in connection with such transactions.

The minimum initial investment is $1,000. Subsequent investments must be
at least $100. The minimum initial investment is $750 for Dreyfus-sponsored
Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a non working
spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans with only one
participant and $500 for Dreyfus-sponsored Education IRAs, with no minimum on
subsequent purchases. The initial investment must be accompanied by the
respective Fund's Account Application. Each Fund reserves the right to offer
shares without regard to minimum purchase requirements to employees
participating in certain qualified or non-qualified employee benefit plans or
other programs where contributions or account information can be transmitted in
a manner and form acceptable to such Fund. Each Fund reserves the right to vary
further the initial and subsequent investment minimum requirements at any time.

The Internal Revenue Code of 1986, as amended (the "Code") imposes various
limitations on the amount that may be contributed annually to certain qualified
or non-qualified employee benefit plans or other programs, including pension,
profit-sharing and other deferred compensation plans, whether established by
corporations, partnerships, non-profit entities or state and local governments
("Retirement Plans"). These limitations apply with respect to participants at
the plan level and, therefore, do not directly affect the amount that may be
invested in a Fund by a Retirement Plan. Participants and plan sponsors should
consult their tax advisers for details.

Fund shares are sold on a continuous basis. NAV per share is determined as
of the close of trading on the floor of the New York Stock Exchange ("NYSE")
(currently 4:00 p.m., New York time), on each day the NYSE is open for business.
For purposes of determining NAV, options and futures contracts will be valued 15
minutes after the close of trading on the floor of the NYSE. NAV per share of
each class is computed by dividing the value of the Fund's net assets
represented by such class (i.e., the value of its assets less liabilities) by
the total number of shares of such class outstanding. For further information
regarding the methods employed in valuing the Fund's investments, see
"Determination of Net Asset Value".

If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the NYSE (currently 4:00 p.m., New York time) on a
business day, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, Fund shares will be purchased at the public offering price determined
as of the close of trading on the floor of the NYSE on the next business day,
except where shares are purchased through a dealer as provided below.

B-28
<PAGE>

Orders for the purchase of Fund shares received by dealers by the close of
trading on the floor of the NYSE on any business day and transmitted to the
Distributor or its designee by the close of its business day (normally 5:15
p.m., New York time) will be based on the public offering price per share
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, the orders will be based on the next determined public offering
price. It is the dealers' responsibility to transmit orders so that they will be
received by the Distributor or its designee before the close of its business
day. For certain institutions that have entered into agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted, and
must be received by the Transfer Agent, within three business days after the
order is placed. If such payment is not received within three business days
after the order is placed, the order may be canceled and the institution could
be held liable for resulting fees and/or losses.

Agents may receive different levels of compensation for selling different
Classes of shares. Management understands that some Agents may impose certain
conditions on their clients which are different from those described in the
respective Fund's Prospectus, and, to the extent permitted by applicable
regulatory authority, may charge their clients direct fees which would be in
addition to any amounts which might be received under the Distribution and
Service Plans. Each Agent has agreed to transmit to its clients a schedule of
such fees. You should consult your Agent in this regard.

Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
respective Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to a Fund could subject you to a
$50 penalty imposed by the Internal Revenue Service.

CLASS A SHARES. The public offering price for Class A shares of Balanced
Fund is the NAV per share of that Class, plus, except for shareholders
beneficially owning Class A shares of Balanced Fund on November 30, 1996, a
sales load as shown below:

B-29
<PAGE>
<TABLE>
<CAPTION>

<S> <C> <C>
Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
--------------------- --------------------------- ------------------------
Less than $50,000 5.75 5.00
$50,000 to less than $100,000 4.50 3.75
$100,000 to less than $250,000 3.50 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more -0- -0-

For shareholders who opened Balanced Fund accounts after December 19,
1994, but who beneficially owned Class A shares of Balanced Fund on November 30,
1996, the public offering price for Class A shares of Balanced Fund is the NAV
per share of that Class plus a sales load as shown below:

Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
--------------------- --------------------------- ------------------------
Less than $50,000 4.50 4.25
$50,000 to less than $100,000 4.00 3.75
$100,000 to less than $250,000 3.00 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more -0- -0-

Holders of Class A accounts of Balanced Fund as of December 19, 1994 may
continue to purchase Class A shares of Balanced Fund at NAV. However,
investments by such holders in other funds advised by Dreyfus will be subject to
any applicable front-end sales load.

The public offering price of Class A shares of Limited Term Income Fund is
the NAV per share of that Class plus a sales load as shown below:

Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
--------------------- --------------------------- ------------------------
Less than $100,000 3.00 2.75
$100,000 to less than $250,000 2.75 2.50
$250,000 to less than $500,000 2.25 2.00
$500,000 to less than $1,000,000 2.00 1.75
</TABLE>

Holders of Class A accounts of Limited Term Income Fund as of December 19,
1994, may continue to purchase Class A shares of the Fund at NAV. However,
investments by such holders in other funds advised by Dreyfus will be subject to
any applicable front-end sales load.

B-30
<PAGE>

pension, profit-sharing or other employee benefit trust created pursuant to a
plan qualified under Section 401 of the Internal Revenue Code of 1986, as
amended (the "Code")) although more than one beneficiary is involved; or a group
of accounts established by or on behalf of the employees of an employer or
affiliated employers pursuant to an employee benefit plan or other program
(including accounts established pursuant to Sections 403(b), 408(k) and 457 of
the Code); or an organized group which has been in existence for more than six
months, provided that it is not organized for the purpose of buying redeemable
securities of a registered investment company and provided that the purchases
are made through a central administration or a single dealer, or by other means
which result in economy of sales effort or expense.

Set forth below is an example of the method of computing the offering
price of the Class A shares of each Fund. The example assumes a purchase of
Class A shares for each Fund aggregating less than $50,000 with respect to
Balanced Fund and less than $100,000 with respect to Limited Term Income Fund
subject to the schedule of sales charges set forth in each Fund's Prospectus at
a price based upon the NAV of a Class A share for each Fund at the close of
business on October 31, 1998:

FOR BALANCED FUND

NAV per share $_____

Per Share Sales Charge - 5.75%* of offering price
(6.10% of NAV per share) $_____

Per Share Offering Price to Public $_____

- ---------------
* Class A shares purchased by shareholders beneficially owning Class A shares on
November 30, 1996, but who opened their accounts after December 19, 1994, are
subject to a different sales load schedule as described above.

FOR LIMITED TERM INCOME FUND

NAV per share $_____

Per Share Sales Charge - 3.00% of offering price
(3.10% of NAV per share) $_____

Per Share Offering Price to Public $_____

B-31
<PAGE>

under "Redemption of Shares - Contingent Deferred Sales Charge - Class B Shares"
(other than the amount of the CDSC and time periods) and "Redemption of Shares -
Waiver of CDSC" are applicable to the Class A shares subject to a CDSC. Letter
of Intent and Right of Accumulation apply to such purchases of Class A shares.

Full-time employees of NASD member firms and full-time employees of other
financial institutions which have entered into an agreement with the Distributor
pertaining to the sale of Fund shares (or which otherwise have a brokerage
related or clearing arrangement with an NASD member firm or financial
institution with respect to the sale of Fund shares) may purchase Class A shares
for themselves directly or pursuant to an employee benefit plan or other
program, or for their spouses or minor children at NAV, provided that they have
furnished the Distributor with such information as it may request from time to
time in order to verify eligibility for this privilege. This privilege also
applies to full-time employees of financial institutions affiliated with NASD
member firms whose full-time employees are eligible to purchase Class A shares
at NAV. In addition, Class A shares are offered at NAV to full-time or part-time
employees of Dreyfus or any of its affiliates or subsidiaries, directors of
Dreyfus, Board members of a fund advised by Dreyfus, including members of the
Company's Board, or the spouse or minor child of any of the foregoing.

Class A shares are offered at NAV without a sales load to employees
participating in Eligible Benefit Plans. Class A shares also may be purchased
(including by exchange) at NAV without a sales load for Dreyfus-sponsored IRA
"Rollover Accounts" with the distribution proceeds from a qualified retirement
plan or a Dreyfus-sponsored 403(b)(7) plan, provided that, at the time of such
distribution, such qualified retirement plan or Dreyfus-sponsored 403(b)(7) plan
(a) met the requirements of an Eligible Benefit Plan and all or a portion of
such plan's assets were invested in funds in the Dreyfus Premier Family of Funds
or the Dreyfus Family of Funds or certain other products made available by the
Distributor to such plans, or (b) invested all of its assets in certain funds in
the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds or certain
other products made available by the Distributor to such plans.

Class A shares may be purchased at NAV through certain broker-dealers and
other financial institutions which have entered into an agreement with the
Distributor, which includes a requirement that such shares be sold for the
benefit of clients participating in a "wrap account" or a similar program under
which such clients pay a fee to such broker-dealer or other financial
institution.

Class A shares also may be purchased at NAV, subject to appropriate
documentation, through a broker-dealer or other financial institution with the
proceeds from the redemption of shares of a registered open-end management
investment company not managed by Dreyfus or its affiliates. The purchase of
Class A shares of a Fund must be made within 60 days of such redemption and the
shareholder must have either (i) paid an initial sales charge or a CDSC or (ii)
been obligated to pay at any time during the holding period, but did not
actually pay on redemption, a deferred sales charge with respect to such
redeemed shares.

B-32
<PAGE>

Class A shares also may be purchased at NAV, subject to appropriate
documentation, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or instrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000 or
more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 501(c)(3) of the Code).

The dealer reallowance may be changed from time to time but will remain
the same for all dealers. The Distributor, at its own expense, may provide
additional promotional incentives to dealers that sell shares of funds advised
by Dreyfus which are sold with a sales load, such as Class A shares. In some
instances, these incentives may be offered only to certain dealers who have sold
or may sell significant amounts of such shares. Dealers receive a larger
percentage of the sales load from the Distributor than they receive for selling
most other funds.

CLASS B SHARES. The public offering price for Class B shares is the NAV
per share of that Class. No initial sales charge is imposed at the time of
purchase. A CDSC is imposed, however, on certain redemptions of Class B shares
as described in each Fund's Prospectus. The Distributor compensates certain
Agents for selling Class B shares at the time of purchase from the Distributor's
own assets. The proceeds of the CDSC and the distribution fee, in part, are used
to defray these expenses.

Approximately six years after the date of purchase, Class B shares
automatically will convert to Class A shares, based on the relative NAVs for
shares of each such Class. Class B shares that have been acquired through the
reinvestment of dividends and distributions will be converted on a pro rata
basis together with other Class B shares, in the proportion that a shareholder's
Class B shares converting to Class A shares bears to the total Class B shares
not acquired through the reinvestment of dividends and distributions.

CLASS C SHARES. The public offering price for Class C shares is the NAV
per share of that Class. No initial sales charge is imposed at the time of
purchase. A CDSC is imposed, however, on redemptions of Class C shares made
within the first year of purchase.
See "Class B Shares" above and "How to Redeem Shares."

CLASS R SHARES. The public offering for Class R shares is the NAV per
share of that Class.

RIGHT OF ACCUMULATION--CLASS A SHARES. Reduced sales loads apply to any
purchase of Class A shares, shares of other funds in the Dreyfus Premier Family
of Funds, shares of certain other funds advised by Dreyfus which are sold with a
sales load and shares acquired by a previous exchange of such shares
(hereinafter referred to as "Eligible Funds"), by you and any related
"purchaser" as defined above, where the aggregate investment, including such
purchase, is $50,000 or more in the case of Balanced Fund and $100,000 or more
in the case of Limited Term Income Fund. If, for example, you previously
purchased and still hold Class A shares of Balanced Fund, or shares of any other
Eligible Fund or combination thereof, with an aggregate current market value of
$40,000 and subsequently purchase Class A shares of Balanced Fund or shares of

B-33
<PAGE>

an Eligible Fund having a current value of $20,000, the sales load applicable to
the subsequent purchase would be reduced to 4.5% of the offering price. Class A
shares purchased by shareholders beneficially owning Balanced Fund shares on
November 30, 1996, but who opened their Fund accounts after December 19, 1994,
are subject to a different sales load schedule, as described above. Similarly,
if you previously purchased and still hold Class A shares of Limited Term Income
Fund or shares of any other Eligible Fund or combination thereof, with an
aggregate market value of $80,000 and subsequently purchase Class A shares of
Limited Term Income Fund or shares of an Eligible Fund having a current value of
$40,000, the sales load applicable to the subsequent purchase would be reduced
to 2.75% of the offering price. All present holdings of Eligible Funds may be
combined to determine the current offering price of the aggregate investment in
ascertaining the sales load applicable to each subsequent purchase.

To qualify for reduced sales loads, at the time of purchase you or your
Agent must notify the Distributor if orders are made by wire, or the Transfer
Agent if orders are made by mail. The reduced sales load is subject to
confirmation of your holdings through a check of appropriate records.

TELETRANSFER PRIVILEGE. You may purchase Fund shares by telephone through
the TELETRANSFER Privilege if you have checked the appropriate box and supplied
the necessary information on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. The proceeds will be transferred between
the bank account designated in one of these documents and your Fund account.
Only a bank account maintained in a domestic financial institution that is an
Automated Clearing House ("ACH") member may be so designated. TELETRANSFER
purchase orders may be made at any time. Purchase orders received by 4:00 p.m.,
New York time, on any business day that the Transfer Agent and the NYSE are open
for business will be credited to the shareholder's Fund account on the next bank
business day following such purchase order. Purchase orders made after 4:00
p.m., New York time, on any business day the Transfer Agent and the NYSE are
open for business, or orders made on Saturday, Sunday or any Fund holiday (e.g.,
when the NYSE is not open for business), will be credited to the shareholder's
Fund account on the second bank business day following such purchase order. To
qualify to use the TELETRANSFER Privilege, the initial payment for purchase of
Fund shares must be drawn on, and redemption proceeds paid to, the same bank and
account as are designated on the Account Application or Shareholder Services
Form on file. If the proceeds of a particular redemption are to be wired to an
account at any other bank, the request must be in writing and
signature-guaranteed. See "Redemption of Shares - TELETRANSFER Privilege." Each
Fund may modify or terminate this Privilege at any time or charge a service fee
upon notice to shareholders. No such fee currently is contemplated by either
Fund.

IN-KIND PURCHASES. If the following conditions are satisfied, a Fund may
at its discretion, permit the purchase of shares through an "in-kind" exchange

B-34
<PAGE>

of securities. Any securities exchanged must meet the investment objective,
policies and limitations of the applicable Fund, must have a readily
ascertainable market value, must be liquid and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus any
cash, must be at least equal to $25,000. Shares purchased in exchange for
securities generally cannot be redeemed for fifteen days following the exchange
in order to allow time for the transfer to settle.

The basis of the exchange will depend upon the relative NAVs of the shares
purchased and securities exchanged. Securities accepted by a Fund will be valued
in the same manner as the Fund values its assets. Any interest earned on the
securities following their delivery to a Fund and prior to the exchange will be
considered in valuing the securities. All interest, dividends, subscription or
other rights attached to the securities become the property of the Fund, along
with the securities. For further information about "in-kind" purchases, call
1-800-554-4611.

SHARE CERTIFICATES. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.

DISTRIBUTION AND SERVICE PLANS

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN EACH FUND'S PROSPECTUS ENTITLED "YOUR INVESTMENT."

Class A, Class B and Class C shares are subject to annual fees for
distribution and shareholder services.

DISTRIBUTION PLAN--CLASS A SHARES. With respect to the Class A shares of
each Fund, the Company has adopted a Distribution Plan pursuant to the Rule
(each a "Class A Plan"), whereby Class A shares of a Fund may spend annually up
to 0.25% of the average of its net assets to compensate Dreyfus Service
Corporation, an affiliate of Dreyfus, for shareholder servicing activities and
the Distributor for shareholder servicing activities and expenses primarily
intended to result in the sale of Class A shares of the Fund. Each Class A Plan
allows the Distributor to make payments from the Rule 12b-1 fees it collects
from a Fund to compensate Agents that have entered into Selling Agreements
("Agreements") with the Distributor. Under the Agreements, the Agents are
obligated to provide distribution related services with regard to the Funds
and/or shareholder services to the Agent's clients that own Class A shares of
the Funds.

The Class A Plan provides that a report of the amounts expended under the
Class A Plan, and the purposes for which such expenditures were incurred, must

B-35
<PAGE>

be made to the Company's Directors for their review at least quarterly. In
addition, the Class A Plan provides that it may not be amended to increase
materially the costs which a Fund may bear for distribution pursuant to the
Class A Plan without approval of the Fund's shareholders, and that other
material amendments of the Class A Plan must be approved by the vote of a
majority of the Directors and of the Directors who are not "interested persons"
(as defined in the 1940 Act) of the Company or the Distributor and who do not
have any direct or indirect financial interest in the operation of the Class A
Plan, cast in person at a meeting called for the purpose of considering such
amendments. The Class A Plan is subject to annual approval by the entire Board
of Directors and by the Directors who are neither interested persons nor have
any direct or indirect financial interest in the operation of the Class A Plan,
by vote cast in person at a meeting called for the purpose of voting on the
Class A Plan. Each Fund's Class A Plan was so approved by the Directors at a
meeting held on ______, 1999. The Class A Plan is terminable, as to a Fund's
Class A shares, at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Class A Plan or by vote of the holders of a majority of the
outstanding shares of such class of the Fund.

DISTRIBUTION AND SERVICE PLANS -- CLASS B AND CLASS C SHARES. In addition
to the above described current Class A Plan for Class A shares, with respect to
Class B and Class C shares of each Fund, the Board of Directors has adopted a
Service Plan (each a "Service Plan") under the Rule pursuant to which each Fund
pays the Distributor and Dreyfus Service Corporation a fee at the annual rate of
0.25% of the value of the average daily net assets of Class B and Class C shares
for the provision of certain services to the holders of Class B and Class C
shares. The services provided may include personal services relating to
shareholder accounts, such as answering shareholder inquiries regarding a Fund
and providing reports and other information, and providing services related to
the maintenance of such shareholder accounts. With regard to such services, each
Agent is required to disclose to its clients any compensation payable to it by a
Fund and any other compensation payable by its clients in connection with the
investment of their assets in Class B and Class C shares. The Distributor may
pay one or more Agents in respect of services for these Classes of shares. The
Distributor determines the amounts, if any, to be paid to Agents under the
Service Plan and the basis on which such payments are made. With respect to
Class B and Class C shares of each Fund, the Company's Board of Directors has
also adopted a Distribution Plan pursuant to the Rule (each a "Distribution
Plan") pursuant to which Balanced Fund pays the Distributor for distributing the
Balanced Fund's Class B and Class C shares at an aggregate annual rate of 0.75%
of the value of the average daily net assets of Class B and Class C shares of
Balanced Fund and Limited Term Income Fund pays the Distributor for distributing
Limited Term Income Fund's Class B and Class C shares at an aggregate annual
rate of 0.50% of the value of the average daily net assets of Class B and Class
C shares of Limited Term Income Fund. The Company's Board of Directors believes
that there is a reasonable likelihood that the Distribution and Service Plans
(the "Plans") will benefit the Funds and the holders of Class B and Class C
shares.

B-36
<PAGE>

Classes and that other material amendments of the Plan must be approved by the
Board of Directors and by the Directors who are not interested persons of the
Funds and have no direct or indirect financial interest in the operation of the
Plan or in any agreements entered into in connection with the Plan, by vote cast
in person at a meeting called for the purpose of considering such amendments.
Each Plan is subject to annual approval by such vote of the Directors cast in
person at a meeting called for the purpose of voting on the Plan. Each Plan was
so approved by the Directors at a meeting held on , 1999. Each Plan may be
terminated at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Plan or in any agreements entered into in connection with the
Plan or by vote of the holders of a majority of Class B and Class C shares.

An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one Class of
shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under the Distribution and Service Plans are payable
without regard to actual expenses incurred. The Fund and the Distributor may
suspend or reduce payments under the Distribution and Service Plans at any time,
and payments are subject to the continuation of the Fund's Plans and the
Agreements described above. From time to time, the Agents, the Distributor and
the Fund may voluntarily agree to reduce the maximum fees payable under the
Plans.

For the fiscal year ended October 31, 1998, Balanced Fund paid the
Distributor and Dreyfus Service Corporation $____ and $______, respectively,
pursuant to the respective Class A Plan. For the fiscal year ended October 31,
1998, Balanced Fund paid the Distributor $______ and $______, pursuant to the
applicable Distribution Plan with respect to Class B and Class C shares,
respectively, and paid the Distributor and Dreyfus Service Corporation $____ and
$_____, respectively, pursuant to the Service Plan with respect to Class B
shares and $______ and $______, respectively, pursuant to the Service Plan with
respect to Class C shares.

For the fiscal year ended October 31, 1998, Limited Term Income Fund paid
the Distributor and Dreyfus Service Corporation $_____ and $______,
respectively, pursuant to the respective Class A Plan. For the fiscal year ended
October 31, 1998, Limited Term Income Fund paid the Distributor $______ and
$______, pursuant to the applicable Distribution Plan with respect to Class B
and Class C shares, respectively, and paid the Distributor and Dreyfus Service
Corporation $ and $________, respectively, pursuant to the Service Plan with
respect to Class B shares and $________ and $____________, respectively,
pursuant to the Service Plan with respect to Class C shares.

REDEMPTION OF SHARES

B-37
<PAGE>

The Funds impose no charges (other than any applicable CDSC) when shares
are redeemed. Agents or other institutions may charge their clients a nominal
fee for effecting redemptions of Fund shares. Any certificates representing Fund
shares being redeemed must be submitted with the redemption request. The value
of the shares redeemed may be more or less than their original cost, depending
upon the Fund's then-current NAV.

PROCEDURES. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or if you have checked the appropriate box
and supplied the necessary information on the Account Application or have filed
a Shareholder Services Form with the Transfer Agent, through the TELETRANSFER
Privilege. If you are a client of a Selected Dealer, you may redeem Fund shares
through the Selected Dealer. Other redemption procedures may be in effect for
clients of certain Agents and institutions. Each Fund makes available to certain
large institutions the ability to issue redemption instructions through
compatible computer facilities. Each Fund reserves the right to refuse any
request made by telephone, including requests made shortly after a change of
address, and may limit the amount involved or the number of such requests. Each
Fund may modify or terminate any redemption privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is contemplated.
Shared held under Keogh Plans, IRAs, or other retirement plans, and shares for
which certificates have been issued, are not eligible for the TELETRANSFER
Privilege.

You may redeem Fund shares by telephone if you have checked the
appropriate box on the Account Application or have filed a Shareholder Services
Form with the Transfer Agent. If you select the TELETRANSFER redemption
privilege or telephone exchange privilege, which is granted automatically unless
you refuse it, you authorize the Transfer Agent to act on telephone instructions
(including over The Dreyfus Touch(R) automated telephone system) froM any person
representing himself or herself to be you, or a representative of your Agent,
and reasonably believed by the Transfer Agent to be genuine. Each Fund will
require the Transfer Agent to employ reasonable procedures, such as requiring a
form of personal identification, to confirm that instructions are genuine and,
if it does not follow such procedures, the Fund or the Transfer Agent may be
liable for any losses due to unauthorized or fraudulent instructions. Neither
the Funds nor the Transfer Agent will be liable for following telephone
instructions reasonably believed to be genuine.

During times of drastic economic or market conditions, you may experience
difficulty in contacting the Transfer Agent by telephone to request a
TELETRANSFER redemption or an exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being

B-38
<PAGE>

processed at a later time than it would have been if TELETRANSFER redemption had
been used. During the delay, the Fund's NAV may fluctuate.

REDEMPTION THROUGH A SELECTED DEALER. Customers of Selected Dealers may
make redemption requests to their Selected Dealer. If the Selected Dealer
transmits the redemption request so that it is received by the Transfer Agent
prior to the close of trading on the floor of the NYSE (currently 4:00 p.m., New
York time), the redemption request will be effective on that day. If a
redemption request is received by the Transfer Agent after the close of trading
on the floor of the NYSE, the redemption request will be effective on the next
business day. It is the responsibility of the Selected Dealer to transmit a
request so that it is received in a timely manner. The proceeds of the
redemption are credited to your account with the Selected Dealer.

In addition, the Distributor or its designee will accept orders from
Selected Dealers with which the Distributor has sales agreements for the
repurchase of Fund shares held by shareholders. Repurchase orders received by
dealers by the close of trading on the floor of the NYSE on any business day and
transmitted to the Distributor or its designee prior to the close of its
business day (normally 5:15 p.m., New York time) are effected at the price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, the Fund shares will be redeemed at the next determined NAV. It is
the responsibility of the Selected Dealer to transmit orders on a timely basis.
The Selected Dealer may charge the shareholder a fee for executing the order.
This repurchase arrangement is discretionary and may be withdrawn at any time.

REINVESTMENT PRIVILEGE. Upon written request, you may reinvest up to the
number of Class A or Class B shares you have redeemed, within 45 days of
redemption, at the then-prevailing NAV without a sales load, or reinstate your
account for the purpose of exercising Fund Exchanges. Upon reinstatement, with
respect to Class B shares, or Class A shares if such shares were subject to a
CDSC, your account will be credited with an amount equal to the CDSC previously
paid upon redemption of the Class A or Class B shares reinvested. The
Reinvestment Privilege may be exercised only once.

TELETRANSFER PRIVILEGE. You may request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only a bank account maintained in a domestic financial
institution which is an ACH member may be designated. Redemption proceeds will
be on deposit in your account at an ACH member bank ordinarily two days after
receipt of the redemption request. Investors should be aware that if they have
selected the TELETRANSFER Privilege, any request for a wire redemption will be
effected as a TELETRANSFER transaction through the ACH system unless more prompt
transmittal specifically is requested. Holders of jointly registered Fund or
bank accounts may redeem through the TELETRANSFER Privilege for transfer to
their bank account only up to $250,000 within any 30-day period. See "Purchase
of Shares--TELETRANSFEr Privilege."

B-39
<PAGE>

certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations,
as well as from participants in the NYSE Medallion Signature Program, the
Securities Transfer Agents Medallion Program ("STAMP") and the Stock Exchanges
Medallion Program. Guarantees must be signed by an authorized signatory of the
guarantor and "Signature-Guaranteed" must appear with the signature. The
Transfer Agent may request additional documentation from corporations,
executors, administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular verification.
For more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.

REDEMPTION COMMITMENT. The Company has committed itself to pay in cash all
redemption requests by any shareholder of record of a Fund, limited in amount
during any 90 day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the SEC. In the case of requests for
redemptions in excess of such amount, the Company's Board reserves the right to
make payments in whole or in part in securities or other assets in case of an
emergency or any time a cash distribution would impair the liquidity of the Fund
to the detriment of the existing shareholders. In such event, the securities
would be valued in the same manner as each Fund's portfolio is valued. If the
recipient sold such securities, brokerage charges might be incurred.

CONTINGENT DEFERRED SALES CHARGE - CLASS B SHARES. A CDSC payable to the
Distributor is imposed on any redemption of Class B shares which reduces the
current NAV of your Class B shares to an amount which is lower than the dollar
amount of all payments by you for the purchase of Class B shares of the Fund
held by you at the time of redemption. No CDSC will be imposed to the extent
that the NAV of the Class B shares redeemed does not exceed (i) the current NAV
of Class B shares acquired through reinvestment of dividends or other
distributions, plus (ii) increases in the NAV of Class B shares above the dollar
amount of all your payments for the purchase of Class B shares of the Fund held
by you at the time of redemption.

If the aggregate value of the Class B shares redeemed has declined below
their original cost as a result of a Fund's performance, a CDSC may be applied
to the then-current NAV rather than the purchase price.

In circumstances where the CDSC is imposed, the amount of the charge will
depend on the number of years from the time you purchased the Class B shares

B-40
<PAGE>

until the time of redemption of such shares. Solely for purposes of determining
the number of years from the time of any payment for the purchase of Class B
shares, all payments during a month will be aggregated and deemed to have been
made on the first day of the month.

In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible rate.
It will be assumed that the redemption is made first of amounts representing
shares acquired pursuant to the reinvestment of dividends and distributions;
then of amounts representing the increase in NAV of Class B shares above the
total amount of payments for the purchase of Class B shares made during the
preceding six years in the case of Balanced Fund and five years in the case of
Limited Term Income Fund; then of amounts representing the cost of shares
purchased six years prior to redemption in the case of Balanced Fund and five
years prior to the redemption in the case of Limited Term Income Fund; and
finally, of amounts representing the cost of shares held for the longest period
of time within the applicable six-year period in the case of Balanced Fund and
five-year period in the case of Limited Term Income Fund.

For example, assume an investor purchased 100 shares at $10 per share for
a cost of $1,000. Subsequently, the shareholder acquired five additional shares
through dividend reinvestment. During the second year after the purchase the
investor decided to redeem $500 of his or her investment. Assuming at the time
of the redemption the NAV has appreciated to $12 per share, the value of the
investor's shares would be $1,260 (105 shares at $12 per share). The CDSC would
not be applied to the value of the reinvested dividend shares and the amount
which represents appreciation ($260). Therefore, $240 of the $500 redemption
proceeds ($500 minus $260) would be charged at a rate of 4% (3% in the case of
Limited Term Income Fund) (the applicable rate in the second year after
purchase) for a total CDSC of $9.60 ($7.20 in the case of Limited Term Income
Fund).

For purposes of determining the applicable CDSC payable with respect to
redemption of Class B shares of a Fund where such shares were acquired through
exchange of Class B shares of another fund advised by Dreyfus, the year since
purchase payment was made is based on the date of purchase of the original Class
B shares of the fund exchanged.

CONTINGENT DEFERRED SALES CHARGE - CLASS C SHARES. A CDSC of 1% in the
case of Balanced Fund and 0.75% in the case of Limited Term Income Fund payable
to the Distributor is imposed on any redemption of Class C shares within one
year of the date of purchase. The basis for calculating the payment of any such
CDSC will be the method used in calculating the CDSC for Class B shares. See
"Contingent Deferred Sales Charge - Class B Shares" above.

B-41
<PAGE>

If the Company's Board determines to discontinue the waiver of the CDSC, the
disclosure herein will be revised appropriately. Any Fund shares subject to a
CDSC which were purchased prior to the termination of such waiver will have the
CDSC waived as provided in the Prospectus of each Fund or this Statement of
Additional Information at the time of the purchase of such shares.

To qualify for a waiver of the CDSC, at the time of redemption you must
notify the Transfer Agent or your Agent must notify the Distributor. Any such
qualification is subject to confirmation of your entitlement.

SHAREHOLDER SERVICES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN EACH FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES" AND
"SERVICES FOR FUND INVESTORS."

FUND EXCHANGES. Shares of any Class of a Fund may be exchanged for shares
of the respective Class of certain other funds advised or administered by
Dreyfus. Shares of the same Class of such other funds purchased by exchange will
be purchased on the basis of relative NAV per share as follows:

A. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.

B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the applicable
sales load will be deducted.

C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a sales
load.

B-42
<PAGE>

periods, if any, will be deemed to have been held since the date the
shares being exchanged were initially purchased.

To accomplish an exchange under item D above, an investor's Agent must
notify the Transfer Agent of the investor's prior ownership of shares with a
sales load and the investor's account number. Any such exchange is subject to
confirmation of an investor's holdings through a check of appropriate records.

To request an exchange, an investor or an investor's Agent acting on the
investor's behalf must give exchange instructions to the Transfer Agent in
writing or by telephone. The ability to issue exchange instructions by telephone
is given to all Fund shareholders automatically unless the investor checks the
applicable "No" box on the Account Application, indicating that the investor
specifically refuses this privilege. The Telephone Exchange Privilege may be
established for an existing account by written request signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-554-4611, or by oral request from any of the
authorized signatories on the account, also by calling 1-800-554-4611. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent to
act on telephonic instructions (including over The Dreyfus Touch(R) automated
telephone system) from any person representinG himself or herself to be the
investor or a representative of the investor's Agent, and reasonably believed by
the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange. No fees currently are charged shareholders directly in connection with
exchanges, although the Fund reserves the right, upon not less than 60 days'
written notice, to charge shareholders a nominal fee in accordance with rules
promulgated by the SEC.

Exchanges of Class R shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such investor's
Retirement Plan account in another fund.

B-43
<PAGE>

cancellation of this Privilege is effective three business days following
notification by the investor. An investor will be notified if the investor's
account falls below the amount designated to be exchanged under this Privilege.
In this case, an investor's account will fall to zero unless additional
investments are made in excess of the designated amount prior to the next
Auto-Exchange transaction. Shares held under IRAs and other retirement plans are
eligible for this Privilege. Exchanges of IRA shares may be made between IRA
accounts and from regular accounts to IRA accounts, but not from IRA accounts to
regular accounts. With respect to all other retirement accounts, exchanges may
be made only among those accounts.

The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to the applicable Fund at
P.O. Box 6587, Providence, Rhode Island 02940-6587. The Fund may charge a
service fee for the use of this Privilege. No such fee currently is
contemplated. For more information concerning this Privilege and the funds in
the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds eligible to
participate in this Privilege, or to obtain a Dreyfus Auto-Exchange
Authorization Form, please call toll free 1-800-554-4611.

Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-554-4611. The Funds reserve the right to reject any
exchange request in whole or in part. The Fund Exchange service or the Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.

DREYFUS-AUTOMATIC ASSET BUILDER(R). Dreyfus Automatic Asset Builder
permits you tO purchase Fund shares (minimum of $100 and maximum of $150,000 per
transaction) at regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. Only an account
maintained at a domestic financial institution which is an ACH member may be so
designated. To establish a Dreyfus-Automatic Asset Builder account, you must
file an authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-800-554-4611. You may cancel your participation
in this Privilege or change the amount of purchase at any time by mailing
written notification to the applicable Fund at P.O. Box 6587, Providence, Rhode
Island 02940-6587 and the notification will be effective three business days
following receipt. Each Fund may modify or terminate this Privilege at any time
or charge a service fee. No such fee currently is contemplated.

AUTOMATIC WITHDRAWAL PLAN. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends and other
distributions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by filing an Automatic
Withdrawal Plan application with the Transfer Agent or by oral request from any
of the authorized signatories on the account by calling 1-800-554-4611.
Automatic Withdrawal may be terminated at any time by the investor, a Fund or
the Transfer Agent. Shares for which certificates have been issued may not be
redeemed through the Automatic Withdrawal Plan.

Particular Retirement Plans, including Dreyfus-sponsored Retirement Plans,
may permit certain participants to establish an automatic withdrawal plan from
such Retirement Plans. Participants should consult their Retirement Plan sponsor
and tax adviser for details. Such a withdrawal plan is different from the
Automatic Withdrawal Plan. The Automatic Withdrawal Plan may be ended at any

B-44
<PAGE>

time by the shareholder, the Fund or the Transfer Agent. Shares for which
certificates have been issued may not be redeemed through the Automatic
Withdrawal Plan.

No CDSC with respect to Class B shares will be imposed on withdrawals made
under the Automatic Withdrawal Plan, provided that the amounts withdrawn under
the plan do not exceed on an annual basis 12% of the account value at the time
the shareholder elects to participate in the Automatic Withdrawal Plan.
Withdrawals with respect to Class B shares under the Automatic Withdrawal Plan
that exceed on an annual basis 12% of the value of the shareholder's account
will be subject to a CDSC on the amounts exceeding 12% of the initial account
value. Class C shares, and Class A shares to which a CDSC applies, that are
withdrawn pursuant to the Automatic Withdrawal Plan will be subject to any
applicable CDSC. Purchases of additional Class A shares where the sales load is
imposed concurrently with withdrawals of Class A shares generally are
undesirable.

DIVIDEND OPTIONS. Dreyfus Dividend Sweep allows investors to invest
automatically their dividends or dividends and other distributions, if any, from
a Fund in shares of the same Class of certain other funds in the Dreyfus Premier
Family of Funds or the Dreyfus Family of Funds of which the investor is a
shareholder. Shares of the same Class of other funds purchased pursuant to this
Privilege will be purchased on the basis of relative NAV per share as follows:

A. Dividends and other distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that are
offered without a sales load.

B. Dividends and other distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds sold
with a sales load, and the applicable sales load will be deducted.

D. Dividends and other distributions paid by a fund may be invested
in shares of other funds that impose a CDSC and the applicable CDSC,
if any, will be imposed upon redemption of such shares.

Dreyfus Dividend ACH permits you to transfer electronically dividends or
dividends and other distributions, if any, from a Fund to a designated bank
account. Only an account maintained at a domestic financial institution which is
an ACH member may be so designated. Banks may charge a fee for this service.

B-45
<PAGE>

For more information concerning these Privileges, or to request a Dividend
Options Form, please call toll free 1-800-554-4611. You may cancel these
Privileges by mailing written notification to the applicable Fund at P.O. Box
6587, Providence, Rhode Island 02940-6587. To select a new fund after
cancellation, you must submit a new Dividend Options Form. Enrollment in or
cancellation of these privileges is effective three business days following
receipt. These privileges are available only for existing accounts and may not
be used to open new accounts. Minimum subsequent investments do not apply for
Dreyfus Dividend Sweep. The Fund may modify or terminate these privileges at any
time or charge a service fee. No such fee currently is contemplated. Shares held
under Keogh Plans, IRAs or other retirement plans are not eligible for Dreyfus
Dividend Sweep.

DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social Security or
certain veterans', military or other payments from the Federal government
automatically deposited into your Fund account. You may deposit as much of such
payments as you elect. You should consider whether Direct Deposit of your entire
payment into a fund with fluctuating NAV, such as the Funds, may be appropriate
for you. To enroll in Dreyfus Government Direct Deposit, you must file with the
Transfer Agent a completed Direct Deposit Sign-Up Form for each type of payment
that you desire to include in this Privilege. The appropriate form may be
obtained from your Agent or by calling 1-800-554-4611. Death or legal incapacity
will terminate your participation in this Privilege. You may elect at any time
to terminate your participation by notifying in writing the appropriate Federal
agency. Further, the respective Fund may terminate your participation upon 30
days' notice to you.

LETTER OF INTENT--CLASS A SHARES. By signing a Letter of Intent form,
which can be obtained by calling 1-800-554-4611, you become eligible for the
reduced sales load applicable to the total number of Eligible Fund shares
purchased in a 13-month period pursuant to the terms and conditions set forth in
the Letter of Intent. A minimum initial purchase of $5,000 is required. To
compute the applicable sales load, the offering price of shares you hold (on the
date of submission of the Letter of Intent) in any Eligible Fund that may be
used toward "Right of Accumulation" benefits described above may be used as a
credit toward completion of the Letter of Intent. However, the reduced sales
load will be applied only to new purchases.

The Transfer Agent will hold in escrow 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if you do not purchase the
full amount indicated in the Letter of Intent. The escrow will be released when
you fulfill the terms of the Letter of Intent by purchasing the specified
amount. If your purchases qualify for a further sales load reduction, the sales
load will be adjusted to reflect your total purchase at the end of 13 months. If
total purchases are less than the amount specified, you will be requested to
remit an amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If such
remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will redeem an
appropriate number of Class A shares of the applicable Fund held in escrow to
realize the difference. Signing a Letter of Intent does not bind you to
purchase, or a Fund to sell, the full amount indicated at the sales load in

B-46
<PAGE>

effect at the time of signing, but you must complete the intended purchase to
obtain the reduced sales load. At the time you purchase Class A shares, you must
indicate your intention to do so under a Letter of Intent. Purchases pursuant to
a Letter of Intent will be made at the then-current NAV plus the applicable
sales load in effect at the time such Letter of Intent was executed.

RETIREMENT PLANS. Each Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs and
Education IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support
services also are available. You can obtain details on the various plans by
calling the following numbers toll free: for Keogh Plans, please call
1-800-358-5566; for IRAs and IRA "Rollover Accounts," please call
1-800-554-4611; for SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans,
please call 1-800-322-7880.

Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.

SHARES MAY BE PURCHASED IN CONNECTION WITH THESE PLANS ONLY BY DIRECT
REMITTANCE TO THE ENTITY ACTING AS CUSTODIAN. PURCHASES FOR THESE PLANS MAY NOT
BE MADE IN ADVANCE OF RECEIPT OF FUNDS.

ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS

The Funds are intended to be a long-term investment vehicles and are not
designed to provide investors with a means of speculation on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to a Fund's
performance and its shareholders. Accordingly, if a Fund's management determines
that an investor is engaged in excessive trading, the Fund, with or without

B-47
<PAGE>

prior notice, may temporarily or permanently terminate the availability of Fund
Exchanges, or reject in whole or part any purchase or exchange request, with
respect to such investor's account. Such investors also may be barred from
purchasing other funds in the Dreyfus Family of Funds. Generally, an investor
who makes more than four exchanges out of a Fund during any calendar year or who
makes exchanges that appear to coincide with an active market-timing strategy
may be deemed to be engaged in excessive trading. Accounts under common
ownership or control will be considered as one account for purposes of
determining a pattern of excessive trading. In addition, a Fund may refuse or
restrict purchase or exchange requests by any person or group if, in the
judgment of the Fund's management, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies or could
otherwise be adversely affected or if the Fund receives or anticipates receiving
simultaneous orders that may significantly affect the Fund (e.g., amounts equal
to 1% or more of the Fund's total assets). If an exchange request is refused, a
Fund will take no other action with respect to the shares until it receives
further instructions from the investor. A Fund may delay forwarding redemption
proceeds for up to seven days if the investor redeeming shares is engaged in
excessive trading or if the amount of the redemption request otherwise would be
disruptive to efficient portfolio management or would adversely affect the Fund.
A Fund's policy on excessive trading applies to investors who invest in the Fund
directly or through financial intermediaries, but does not apply to the Dreyfus
Auto-Exchange Privilege, to any automatic investment or withdrawal privilege
described herein, or to participants in employer-sponsored retirement plans.

During times of drastic economic or market conditions, a Fund may suspend
Fund Exchanges temporarily without notice and treat exchange requests based on
their separate components - redemption orders with a simultaneous request to
purchase the other fund's shares. In such a case, the redemption request would
be processed at the Fund's next determined NAV but the purchase order would be
effective only at the NAV next determined after the fund being purchased
receives the proceeds of the redemption, which may result in the purchase being
delayed.

DETERMINATION OF NET ASSET VALUE

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN EACH FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES."

B-48
<PAGE>

dollars at the midpoint of the New York interbank market spot exchange rate as
quoted on the day of such translation or, if no such rate is quoted on such
date, such other quoted market exchange rate as may be determined to be
appropriate by Dreyfus. If the Fund has to obtain prices as of the close of
trading on various exchanges throughout the world, the calculation of NAV may
not take place contemporaneously with the determination of prices of certain of
the Fund's securities. Short-term investments are carried at amortized cost,
which approximates value. Expenses and fees, including the management fee, are
accrued daily and taken into account for the purpose of determining the NAV of
the Fund's shares.

DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN EACH FUND'S PROSPECTUS ENTITLED "DISTRIBUTIONS AND TAXES."

GENERAL. Limited Term Income Fund declares daily and pays monthly (on the
first business day of the following month) dividends from its net investment
income, if any. Balanced Fund declares and pays dividends from its net
investment income, if any, four times yearly. Each Fund distributes net realized
capital gains, if any, once a year, but may make distributions on a more
frequent basis to comply with the distribution requirements of the Code, in all
events in a manner consistent with the provisions of the 1940 Act. The Funds
will not make distributions from net realized capital gains unless all capital
loss carryovers, if any, have been utilized or have expired. Investors other
than qualified retirement plans may choose whether to receive dividends and
other distributions in cash, to receive dividends in cash and reinvest other
distributions in additional Fund shares at NAV, or to reinvest both dividends
and other distributions in additional Fund shares at NAV; dividends and other
distributions paid to qualified retirement plans are reinvested automatically in
additional Fund shares at NAV. All expenses are accrued daily and deducted
before declaration of dividends to investors. Dividends and other distributions

B-49
<PAGE>

paid by each Class are calculated at the same time and in the same manner and
will be in the same amount, except that the expenses attributable solely to a
particular Class are borne exclusively by that Class. Class B and Class C shares
will receive lower per share dividends than Class A shares, which will in turn
receive lower per share dividends than Class R shares, because of the higher
expenses borne by the relevant Classes.

It is expected that each Fund will qualify for treatment as a regulated
investment company ("RIC") under the Code so long as such qualification is in
the best interests of its shareholders. Such qualification will relieve a Fund
of any liability for Federal income tax to the extent its earnings and realized
gains are distributed in accordance with applicable provisions of the Code. To
qualify for treatment as a RIC under the Code, a Fund -- which is treated as a
separate corporation for federal tax purposes -- (1) must distribute to its
shareholders each year at least 90% of its investment company taxable income
(generally consisting of net investment income, net short-term capital gains and
net gains from certain foreign currency transactions) (the "Distribution
Requirement"), (2) must derive at least 90% of its annual gross income from
specified sources (the "Income Requirement"), and (3) must meet certain asset
diversification and other requirements. The term "regulated investment company"
does not imply the supervision of management or investment practices or policies
by any government agency.

Dividend distributions paid by the Fund to a non-resident foreign investor
generally are subject to U.S. withholding tax at the rate of 30%, unless the
foreign investor claims the benefit of a lower rate specified in a tax treaty.
Distributions from net capital gain paid by the Fund to a non-resident foreign
investor, as well as the proceeds of any redemptions by such an investor,
regardless of the extent to which gain or loss may be realized, generally are
not subject to U.S. withholding tax. However, such distributions may be subject
to backup withholding, as described below, unless the foreign investor certifies
his or her non-U.S. residency status.

B-50
<PAGE>

The Code provides for the "carryover" of some or all of the sales load
imposed on Class A shares if (1) a shareholder redeems those shares or exchanges
those shares for shares of another fund advised or administered by Dreyfus
within 90 days of purchase and (2) in the case of a redemption, acquires other
Fund Class A shares through exercise of the Reinvestment Privilege or, in the
case of an exchange, such other fund reduces or eliminates its otherwise
applicable sales load for the purpose of the exchange. In these cases, the
amount of the sales load charged on the purchase of the original Class A shares,
up to the amount of the reduction of the sales load pursuant to the Reinvestment
Privilege or on the exchange, as the case may be, is not included in the basis
of such shares for purposes of computing gain or loss on the redemption or the
exchange and instead is added to the basis of the shares acquired pursuant to
the Reinvestment Privilege or the exchange.

Dividends and other distributions paid by the Fund to qualified retirement
plans ordinarily will not be subject to taxation until the proceeds are
distributed from the retirement plans. The Fund will not report to the IRS
distributions paid to such plans. Generally, distributions from Qualified
Retirement Plans, except those representing returns of non-deductible
contributions thereto, will be taxable as ordinary income and, if made prior to
the time the participant reaches age 59 1/2, generally will be subject to AN
additional tax equal to 10% of the taxable portion of the distribution. If the
distribution from such a retirement plan (other than certain governmental or
church plans) for any taxable year following the year in which the participant
reaches age 70 1/2 is leSS than the "minimum required distribution" for that
taxable year, an excise tax equal to 50% of the deficiency may be imposed by the
IRS. The administrator, trustee or custodian of such a retirement plan will be
responsible for reporting distributions from such plans to the IRS. Moreover,
certain contributions to a qualified retirement plan in excess of the amounts
permitted by law may be subject to an excise tax. If a distributee of an
"eligible rollover distribution" from a qualified retirement plan does not elect
to have the eligible rollover distribution paid directly from the plan to an
eligible retirement plan in a "direct rollover," the eligible rollover
distribution is subject to a 20% income tax withholding.

B-51
<PAGE>

fails to certify that the TIN furnished to the Fund is correct. Backup
withholding at that rate also is required from dividends and capital gain
distributions payable to such a shareholder if (1) that shareholder fails to
certify that he or she has not received notice from the IRS of being subject to
backup withholding as a result of a failure properly to report taxable dividend
or interest income on a Federal income tax return or (2) the IRS notifies the
Fund to institute backup withholding because the IRS determines that the
shareholder's TIN is incorrect or that the shareholder has failed properly to
report such income.

The Fund is subject to a non-deductible 4% excise tax, measured with
respect to certain undistributed amounts of taxable investment income and
capital gains.

Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares below
the cost of his or her investment. Such a dividend or other distribution would
be a return on investment in an economic sense, although taxable as discussed
above. In addition, if a shareholder sells shares of the Fund held for six
months or less and receives a capital gain distribution with respect to those
shares, any loss incurred on the sale of those shares will be treated as a
long-term capital loss to the extent of the capital gain distribution received.

Dividends and other distributions declared by a Fund in October, November
or December of any year and payable to shareholders of record on a date in any
of those months are deemed to have been paid by a Fund and received by the
shareholders on December 31 if the distributions are paid by a Fund during the
following January. Accordingly, those distributions will be taxed to
shareholders for the year in which that December 31 falls.

A portion of the dividends paid by a Fund, whether received in cash or
reinvested in additional Fund shares, may be eligible for the dividends-received
deduction allowed to corporations. The eligible portion may not exceed the
aggregate dividends received by the Fund from U.S. corporations. However,
dividends received by a corporate shareholder and deducted by it pursuant to the
dividends-received deduction are subject indirectly to the alternative minimum
tax.

B-52
<PAGE>

at the close of its taxable year consists of securities of foreign corporations,
it will be eligible to, and may, file an election ("Election") with the Internal
Revenue Service that would enable its shareholders, in effect, to receive the
benefit of the foreign tax credit with respect to any foreign income taxes paid
by it. Pursuant to the Election, the Fund would treat those taxes as dividends
paid to its shareholders and each shareholder would be required to (1) include
in gross income, and treat as paid by him or her, his or her proportionate share
of those taxes, (2) treat his or her share of those taxes and of any dividend
paid by the Fund that represents income from foreign or U.S. possession sources
as his or her own income from those sources and (3) either deduct the taxes
deemed paid by him or her in computing his or her taxable income or,
alternatively, use the foregoing information in calculating the foreign tax
credit against his or her federal income tax. No deduction for foreign taxes may
be claimed by a shareholder who does not itemize deductions. Generally, a credit
for foreign taxes may not exceed portion of the shareholder's federal income tax
attributable to his total foreign source taxable income. The Fund will report to
its shareholders shortly after each taxable year their respective shares of its
income from sources within, and taxes paid to, foreign countries and U.S.
possessions if it makes the Election and foreign taxes it paid if it makes the
Election.

FOREIGN CURRENCY, FUTURES, FOWARDS AND HEDGING TRANSACTIONS. Gains from
the sale or other disposition of foreign currencies (except certain gains
therefrom that may be excluded by future regulations), and gain from options,
futures and forward contracts derived by the Fund with respect to its business
of investing in securities or foreign currencies, will qualify as permissible
income under the Income Requirement. However, income from the disposition of
options and futures contracts (other than those on foreign currencies) will be
subject to the Short-Short Limitation if they are held for less than three
months. Income from the disposition of foreign currencies, and options, futures
and forward contracts thereon, that are not directly related to a Fund's
principal business of investing in securities (or options and futures with
respect to securities) also will be subject to the Short-Short Limitation if
they are held for less than three months.

If a Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether a Fund satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of that limitation. Each
Fund will consider whether it should seek to qualify for this treatment for its
hedging transactions. To the extent a Fund does not so qualify, it may be forced
to defer the closing out of certain options, futures, forward contracts and
foreign currency positions beyond the time when it otherwise would be
advantageous to do so, in order for such Fund to qualify as a RIC.

B-53
<PAGE>

sale or other disposition of certain market discount bonds will be treated as
ordinary income. Moreover, all or a portion of the gain realized from engaging
in "conversion transactions that otherwise would be treated as capital gain" may
be treated as ordinary income under Section 1258 of the Code. "Conversion
transactions" are defined to include certain forward, futures, option and
straddle transactions, transactions marketed or sold as producing capital gains,
and transactions described in Treasury regulations to be issued in the future.

Under Section 1256 of the Code, any gain or loss realized by a Fund from
certain futures, forward contracts and options transactions will be treated as
60% long-term capital gain or loss and 40% short-term capital gain or loss. Gain
or loss will arise upon exercise or lapse of such contracts and options as well
as from closing transactions. In addition, any such contracts or options
remaining unexercised at the end of a Fund's taxable year will be treated as
sold for their then fair market value (a process known as "marking-to-market"),
resulting in additional gain or loss to the Fund characterized in the manner
described above.

Offsetting positions held by a Fund involving certain contracts or options
may constitute "straddles," which are defined to include "offsetting positions"
in actively traded personal property. The tax treatment of straddles is governed
by Sections 1092 and, to the extent noted above, 1258 of the Code, which in
certain circumstances override or modify Sections 1256 and 988. As a result, all
or a portion of any capital gain from certain straddle transactions may be
recharacterized to ordinary income. If the Fund were treated as entering into
straddles by reason of its engaging in certain forward contracts or options
transactions, such straddles would be characterized as "mixed straddles" if the
forward contracts or options transactions comprising a part of such straddles
were governed by Section 1256. Each Fund may make one or more elections with
respect to mixed straddles. Depending on which election is made, if any, the
results to a Fund may differ. If no election is made, then to the extent the
straddle and conversion transactions rules apply to positions established by a
Fund, losses realized by a Fund will be deferred to the extent of unrealized
gain in the offsetting position. Moreover, as a result of the straddle rules,
short-term capital loss on straddle positions may be recharacterized as
long-term capital loss, and long-term capital gains may be treated as short-term
capital gains or ordinary income.

B-54
<PAGE>

PASSIVE FOREIGN INVESTMENT COMPANIES. Each Fund may invest in the stock of
"passive foreign investment companies" ("PFIC"). A PIFC is a foreign corporation
that, in general, meets either of the following tests: (1) at least 75% of its
gross income is passive or (2) an average of at least 50% of its assets produce,
or are held for the production of, passive income. Under certain circumstances,
a Fund will be subject to federal income tax on a portion of any "excess
distribution" received on the stock of a PFIC or of any gain on disposition of
the stock (collectively "PFIC income"), plus interest thereon, even if the Fund
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in a Fund's investment company
taxable income and, accordingly, will not be taxable to it to the extent that
income is distributed to its shareholders. If a Fund invests in a PFIC and
elects to treat the PFIC as "qualified electing fund," then in lieu of the
foregoing tax and interest obligation, the Fund would be required to include in
income each year its pro rate share of the qualified electing fund's annual
ordinary earnings and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) -- which probably would have to be distributed
to satisfy the Distribution Requirement and avoid imposition of the 4% excise
tax referred to in the Fund's Prospectus under "Dividends, Other Distributions
and Taxes" -- even if those earnings and gain were not received by the Fund.

Pursuant to proposed regulations, open-end RICs, such as the Funds, would
be entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).

FOREIGN CURRENCY GAINS AND LOSSES. Gain and losses attributable to
fluctuations in foreign currency exchange rates that occur between the time each
Fund accrues dividends, interest or other receivables, or expenses or other
liabilities, denominated in a foreign currency and the time the Fund actually
collects the receivables or pays the liabilities generally are treated as
ordinary income or ordinary loss. Similarly, on the disposition of a debt
security denominated in a foreign currency, or of an option or forward contract
on a foreign currency, gains or losses attributable to fluctuations in the value
of the foreign currency between the date of acquisition of the security, option
or contract and the date of disposition also are treated as ordinary income or
loss. These gains or losses may increase or decrease the amount of a Fund's
investment company taxable income to be distributed to its shareholders.

STATE AND LOCAL TAXES. Depending upon the extent of a Fund's activities in
states and localities in which it is deemed to be conducting business, the Fund
may be subject to the tax laws thereof. Shareholders are advised to consult
their tax advisers concerning the application of state and local taxes.

B-55
<PAGE>

shareholder, as discussed generally below. Special U.S. federal income tax rules
that differ from those described below may apply to certain foreign persons who
invest in the Fund, such as a foreign shareholder entitled to claim the benefits
of an applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in a Fund.

FOREIGN SHAREHOLDERS - INCOME NOT EFFECTIVELY CONNECTED. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the foreign
shareholder generally will be subject to a U.S. federal withholding tax of 30%
(or lower treaty rate). Capital gains realized by foreign shareholders on the
sale of Fund shares and distributions to them of net capital gain (the excess of
net long-term capital gain over net short-term capital loss) generally will not
be subject to U.S. federal income tax unless the foreign shareholder is a
non-resident alien individual and is physically present in the United States for
more than 182 days during the taxable year. In the case of certain foreign
shareholders, the Fund may be required to withhold U.S. federal income tax at a
rate of 31% of capital gain distributions and of the gross proceeds from a
redemption of Fund shares unless the shareholder furnishes the Fund with a
certificate regarding the shareholder's foreign status.

FOREIGN SHAREHOLDERS - EFFECTIVELY CONNECTED INCOME. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by a foreign shareholder, then all distributions to
that shareholder and any gains realized by that shareholder on the disposition
of the Fund shares will be subject to U.S. federal income tax at the graduated
rates applicable to U.S. citizens and domestic corporations, as the case may be.
Foreign shareholders also may be subject to the branch profits tax.

B-56
<PAGE>

PORTFOLIO TRANSACTIONS

All portfolio transactions of each Fund are placed on behalf of each Fund
by Dreyfus. Debt securities purchased and sold by each Fund are generally traded
on a net basis (i.e., without commission) through dealers acting for their own
account and not as brokers, or otherwise involve transactions directly with the
issuer of the instrument. This means that a dealer (the securities firm or bank
dealing with a Fund) makes a market for securities by offering to buy at one
price and sell at a slightly higher price. The difference between the prices is
known as a spread. Other portfolio transactions may be executed through brokers
acting as agent. Each Fund will pay a spread or commissions in connection with
such transactions. Dreyfus uses its best efforts to obtain execution of
portfolio transactions at prices which are advantageous to each Fund and at
spreads and commission rates, if any, which are reasonable in relation to the
benefits received. Dreyfus also places transactions for other accounts that it
provides with investment advice.

Brokers or dealers may be selected who provide brokerage and/or research
services to a Fund and/or other accounts over which Dreyfus or its affiliates
exercise investment discretion. Such services may include advice concerning the
value of securities; the advisability of investing in, purchasing or selling
securities; the availability of securities or the purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement).

The receipt of research services from broker-dealers may be useful to
Dreyfus in rendering investment management services to a Fund and/or its other
clients; and, conversely, such information provided by brokers or dealers who
have executed transaction orders on behalf of other clients of Dreyfus may be
useful to these organizations in carrying out their obligations to the Fund. The
receipt of such research services does not reduce these organizations' normal
independent research activities; however, it enables these organizations to
avoid the additional expenses which might otherwise be incurred if these
organizations were to attempt to develop comparable information through their
own staffs.

B-57
<PAGE>

1998, 1997 and 1996, Balanced Fund paid brokerage commissions of $______,
$________ and $________, respectively, to affiliates of Dreyfus or Mellon Bank.
The amount paid to affiliated brokerage firms during the fiscal years ended
October 31, 1998, 1997 and 1996, was approximately ____%, ____% and ____%,
respectively, of the aggregate brokerage commissions paid by Balanced Fund, for
transactions involving approximately ____%, ____% and ____%, respectively, of
the aggregate dollar volume of transactions for which Balanced Fund paid
brokerage commissions. The difference in these percentages was due to the lower
commissions paid to affiliates of Dreyfus.

During the fiscal years ended October 31, 1998, 1997 and 1996, Limited
Term Income Fund paid brokerage commissions of $______, $_______ and $_____,
respectively, to affiliates of Dreyfus or Mellon Bank. The amount paid to
affiliated brokerage firms during the fiscal years ended October 31, 1998, 1997
and 1996, was approximately ____%, ____% and ____%, respectively, of the
aggregate brokerage commissions paid by Limited Term Income Fund, for
transactions involving approximately ____%, ____% and ____%, respectively, of
the aggregate dollar volume of transactions for which Limited Term Income Fund
paid brokerage commissions. The difference in these percentages was due to the
lower commissions paid to affiliates of Dreyfus.

Although Dreyfus manages other accounts in addition to the Funds,
investment decisions for the Funds are made independently from decisions made
for these other accounts. It sometimes happens that the same security is held by
more than one of the accounts managed by Dreyfus. Simultaneous transactions may
occur when several accounts are managed by the same investment manager,
particularly when the same investment instrument is suitable for the investment
objective of more than one account.

When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated in
accordance with a formula considered by Dreyfus to be equitable to each account.
In some cases this system could have a detrimental effect on the price or volume
of the investment instrument as far as a particular Fund is concerned. In other
cases, however, the ability of a Fund to participate in volume transactions will
produce better executions for the Fund. While the Directors will continue to
review simultaneous transactions, it is their present opinion that the
desirability of retaining Dreyfus as investment manager to a Fund outweighs any
disadvantages that may be said to exist from exposure to simultaneous
transactions.

For the fiscal years ended October 31, 1998, 1997 and 1996, Balanced Fund
paid brokerage commissions amounting to $______, $171,266 and $152,452,
respectively. For the fiscal years ended October 31, 1998, 1997 and 1996,
Balanced Fund paid brokerage concessions amounting to $______, $32,249 and
$113,445, respectively.

B-58
<PAGE>

For the fiscal years ended October 31, 1998, Limited Term Income Fund paid
brokerage commissions amounting to $______. For fiscal years ended October 31,
1996 and 1997, the Limited Term Income Fund did not pay any brokerage
commission. Limited Term Income Fund typically does not pay a stated brokerage
fee on transactions.

PORTFOLIO TURNOVER. While securities are purchased for a Fund on the basis
of potential for high current income and not for short-term trading profits, in
the past the portfolio turnover rate of the Limited Term Income Fund has
exceeded 100% and may exceed 100% in the future for either Fund. A portfolio
turnover rate of 100% would occur, for example, if all the securities held by a
Fund were replaced once in a period of one year. In past years Limited Term
Income Fund's rate of portfolio turnover exceeded that of certain other mutual
funds with a similar investment objective. A higher rate of portfolio turnover
(100% or greater) involves correspondingly greater brokerage commissions and
other expenses that must be borne directly by a Fund and, thus, indirectly by
its shareholders. In addition, a high rate of portfolio turnover may result in
the realization of larger amounts of short-term capital gains that, when
distributed to a Funds' shareholder, are taxable to them as ordinary income.
Nevertheless, security transactions will be based only upon investment
considerations and will not be limited by any other considerations when Dreyfus
deems it appropriate to make changes in a Fund's assets. The portfolio turnover
rate for each Fund is calculated by dividing the lesser of the Fund's annual
sales or purchases of portfolio securities (exclusive of purchases and sales of
securities whose maturities at the time of acquisition were one year or less) by
the monthly average value of securities in the Fund during the year. Portfolio
turnover may vary from year to year as well as within a year. The portfolio
turnover rates for the last two years of each Fund were:

Fiscal Year Ended October 31,
____________________________
1998 1997
____ ____

Dreyfus Premier Limited Term Income Fund _______% 129.94%
Dreyfus Premier Balanced Fund. _______% 99.88%

PERFORMANCE INFORMATION

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN EACH FUND'S PROSPECTUS ENTITLED "PAST PERFORMANCE."

B-59
<PAGE>

Average annual total returns (expressed as a percentage) for Class A
shares, Class B shares, Class C shares and Class R shares of Balanced Fund for
the periods noted were:

AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIODS ENDED OCTOBER 31, 1998

1 Year 5 Years Inception
------ ------- ----------
Class A shares _____% - _____% (4/14/94)
Class B shares _____% - _____% (12/19/94)
Class C shares _____% - _____% (12/19/94)
Class R shares _____% _____% _____% (9/15/93)

Inception date appears in parentheses following the average annual total return
since inception.

The foregoing chart assumes, where applicable, deduction of the maximum
sales load from the hypothetical initial investment at the time of purchase and
the assessment of the maximum CDSC.

Average annual total returns (expressed as a percentage) for Class A
shares, Class B shares, Class C shares and Class R shares of Limited Term Income
Fund for the periods noted were:

AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIODS ENDED OCTOBER 31, 1998
1 Year 5 Years Inception
------ ------- ----------
Class A shares _____% - _____% (4/7/94)
Class B shares _____% - _____% (12/19/94)
Class C shares _____% - _____% (12/19/94)
Class R shares _____% _____% _____% (7/11/91)

Inception date appears in parentheses following the average annual total return
since inception.

The foregoing chart assumes, where applicable, deduction of the maximum
sales load from the hypothetical initial investment at the time of purchase and
the assessment of the maximum CDSC.

The total return (expressed as a percentage) for Class A shares, Class B
shares, Class C shares and Class R shares of Balanced Fund for the period from
inception of each class to October 31, 1998 was _____%, _____%, _____% and
_____%, respectively (assuming, where applicable, deduction of the maximum sales
load from the hypothetical initial investment at the time of purchase and the
assessment of the maximum CDSC).

The total return (expressed as a percentage) for Class A shares, Class B
shares, Class C shares and Class R shares of Limited Term Income Fund for the
period from inception of each class to October 31, 1998 was _____%, _____%,
_____% and _____%, respectively (assuming, where applicable, deduction of the
maximum sales load from the hypothetical initial investment at the time of
purchase and the assessment of the maximum CDSC).

B-60
<PAGE>

distributions), dividing by the amount of the initial investment, taking the
"n"th root of the quotient (where "n" is the number of years in the period) and
subtracting 1 from the result. The average annual total return figures for a
Class calculated in accordance with such formula assume that, in the case of
Class A, the maximum sales load has been deducted from the hypothetical initial
investment at the time of purchase or, in the case of Class B or Class C, the
maximum applicable CDSC has been paid upon redemption at the end of the period.

Total return is calculated by subtracting the amount of a Fund's NAV
(maximum offering price in the case of Class A) per share at the beginning of a
stated period from the NAV (maximum offering price in the case of Class A) per
share at the end of the period (after giving effect to the reinvestment of
dividends and other distributions during the period and any applicable CDSC),
and dividing the result by the NAV (maximum offering price in the case of Class
A) per share at the beginning of the period. Total return also may be calculated
based on the NAV per share at the beginning of the period instead of the maximum
offering price per share at the beginning of the period for Class A shares or
without giving effect to any applicable CDSC at the end of the period for Class
B or C shares. In such cases, the calculation would not reflect the deduction of
the sales load with respect to Class A shares or any applicable CDSC with
respect to Class B or C shares, which, if reflected would reduce the performance
quoted.

Performance information for the Funds may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the Morgan
Stanley European Index; (ii) the Standard & Poor's 500 Composite Stock Price
Index, the Dow Jones Industrial Average, or other appropriate unmanaged domestic
or foreign indices of performance of various types of investments so that
investors may compare the Fund's results with those of indices widely regarded
by investors as representative of the securities markets in general; (iii) other
groups of mutual funds tracked by Lipper Analytical Services, a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or other
criteria; (iv) the Consumer Price Index (a measure of inflation) to assess the
real rate of return from an investment in the Fund; and (v) products managed by
a universe of money managers with similar country allocation and performance
objectives. Unmanaged indices may assume the reinvestment of dividends but
generally do not reflect deductions or administrative and management costs and
expenses. From time to time, advertising materials for the Fund may refer to
Morningstar ratings and related analyses supporting the rating.

B-61
<PAGE>

INFORMATION ABOUT THE FUNDS

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "THE FUND."

The Company has an authorized capitalization of 25 billion shares of
$0.001 per value stock.

Each Fund will send annual and semi-annual financial statements to all of
its shareholders.

B-62
<PAGE>

TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS

Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Company,
Dreyfus Transfer, Inc. arranges for the maintenance of shareholder account
records for the Fund, the handling of certain communications between
shareholders and the Fund, and the payment of dividends and distributions
payable by the Fund. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses.

__________________, 1800 Massachusetts Avenue, N.W., Second Floor,
Washington, D.C. 20036-1800, has passed upon the legality of the shares offered
by the Prospectus and this Statement of Additional Information.

FINANCIAL STATEMENTS

The financial statements for the fiscal year ended October 31, 1998,
including notes to the financial statements and supplementary information, and
the Independent Auditors' Report are included in the Annual Report to
shareholders. A copy of the Annual Report accompanies this Statement of
Additional Information. The financial statements included in the Annual Report,
and the Independent Auditors' Report thereon contained therein, and related
notes, are incorporated herein by reference.

B-63
<PAGE>

APPENDIX

DESCRIPTION OF STANDARD AND POOR'S, MOODY'S, FITCH IBCA
AND DUFF RATINGS

STANDARD & POOR'S ("S&P")

BOND RATINGS

AAA An obligation rated `AAA' has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.

AA An obligation rated `AA' differs from the highest rated issues only
in small degree. The obligors capacity to meet its financial
commitment on the obligation is very strong.

CC An obligation rated `CC' is currently highly vulnerable to
nonpayment.

B-64
<PAGE>

C The `C' rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.

The ratings from `AA' to `CCC' may be modified by the addition of a plus
(+) or a minus (-) sign to show relative standing within the major rating
categories

NOTE RATINGS

SP-1 Strong capacity to pay principal and interest. An issue determined
to possess a very strong capacity to pay debt service is given a
plus (+) designation.

SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the term
of the notes.

SP-3 Speculative capacity to pay principal and interest.

COMMERCIAL PAPER RATINGS

An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than 365 days.

A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high
as for issuers designated `A-1.'

B Issues rated `B' are regarded as having only speculative capacity
for timely payment.

B-65
<PAGE>

C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.

MOODY'S

BOND RATINGS

B-66
<PAGE>

Caa Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect
to principal or interest.

Ca Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked short-comings.

C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.

NOTES AND OTHER SHORT-TERM OBLIGATIONS

B-67
<PAGE>

MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.

COMMERCIAL PAPER RATING

Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated issuers:

o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
o Well-established access to a range of financial markets
and assured sources of alternate liquidity.

B-68
<PAGE>

FITCH IBCA

BOND RATINGS

BBB Good credit quality. `BBB' rating indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of
financial commitments is considered adequate, but adverse changes in
circumstances and in economic conditions are more likely to impair
this capacity. This is the lowest investment-grade category.

CCC,CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained,
favorable business or economic developments. A `CC' rating indicates
that default of some kind appears probable. `C' ratings signal
imminent default.

B-69
<PAGE>

DDD, DD,
and D Default. Securities are not meeting current obligations and
are extremely speculative. `DDD' designates the highest potential
for recovery of amounts outstanding on any securities involved. For
U.S. corporates, for example, `DD' indicates expected recovery of
50% - 90% of such outstandings, and `D' the lowest recovery
potential, i.e. below 50%.

SHORT-TERM AND COMMERCIAL PAPER RATINGS

F-1+ Highest credit quality. Indicates the strongest capacity for timely
payment of financial commitments; may have an added "+" to denote
any exceptionally strong credit feature.

F-2 Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as
in the case of the higher ratings.

F-3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could
result in a reduction to non-investment grade.

B Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in
financial and economic conditions.

C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.

D Default. Denotes actual or imminent payment default.

"+" or "-" may be appended to a rating to denote relative status within
major rating categories. Such suffixes are not added to the `AAA'
long-term rating category, to categories below `CCC', or to
short-term ratings other than `F-1'.

B-70
<PAGE>

DUFF & PHELPS INC. ("DUFF & PHELPS")

LONG-TERM RATINGS

AAA Highest credit quality. The risks factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.

AA+ High credit quality. Protection factors are strong. Risk is modest but
AA may vary slightly from time to time because of economic conditions.
AA-

A+ Protections factors are average but adequate. However, risk factors
A are more variable and greater in periods of economic stress.
A-

BBB+ Below-average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.

DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.

SHORT-TERM AND COMMERCIAL PAPER RATINGS

B-71
<PAGE>

D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk
factors are minor.

D-1- High certainly of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are
very small.

D-3 Satisfactory liquidity and other protection factors qualify issues
as to investment grade. Risk factors are larger and subject to more
variation. Nevertheless, timely payment is expected.

D-4 Speculative investment characteristics. Liquidity is not sufficient
to insure against disruption in debt service. Operating factors and
market access may be subject to a high degree of variation.

D-5 Issuer failed to meet scheduled principal and/or interest payments.

B-72
<PAGE>
Dreyfus Premier Small Company Stock Fund

Investing in small cap stocks for investment returns that exceed the Russell
2500(tm) Stock Index

PROSPECTUS March 1, 1999

(reg.tm)

<PAGE>

The Fund

Dreyfus Premier Small Company Stock Fund
---------------------------------

Ticker Symbols CLASS A: DPSAX

CLASS B: DPSBX

CLASS C: DPSCX

CLASS R: DPSRX

Contents

The Fund
- --------------------------------------------------------------------------------

Goal/Approach INSIDE COVER

Main Risks 1

Past Performance 1

Expenses 2

Management 3

Financial Highlights 4

Your Investment
- --------------------------------------------------------------------------------

Account Policies 6

Distributions and Taxes 8

Services for Fund Investors 9

Instructions for Regular Accounts 10

Instructions for IRAs 11

For More Information
- --------------------------------------------------------------------------------

INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.

GOAL/APPROACH

The fund seeks investment returns (consisting of capital appreciation and
income) that are consistently superior to the Russell 2500(tm) Stock Index
(Russell 2500) . This objective may be changed without shareholder approval. To
pursue its goal, the fund normally invests at least 65% of total assets in a
blended portfolio of growth and value stocks of small and midsize domestic
companies, whose market values generally range between $100 million and $3
billion. Stocks are chosen through a disciplined process combining computer
modelling techniques, fundamental analysis and risk management. Consistency of
returns and stability of the fund's share price compared to the Russell 2500 are
primary goals of the investment process.

Dreyfus uses a computer model to identify and rank stocks within an industry or
sector, based on:

.. VALUE, or how a stock is priced relative to its perceived intrinsic worth

.. GROWTH, in this case the sustainability or growth of earnings

.. FINANCIAL PROFILE, which measures the financial health of the company

Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities, drawing on information technology as well as Wall Street
sources and company management.

Then, Dreyfus manages risk by diversifying across companies and industries,
limiting the potential adverse impact from any one stock or industry. The fund
is structured so that its sector weightings and risk characteristics, such as
growth, size, quality and yield, are similar to those of the Russell 2500.

Concepts to understand

SMALL COMPANIES: new and often entrepreneurial companies. Small companies tend
to grow faster than large-cap companies, but are also more volatile and have a
higher failure rate.

COMPUTER MODEL: a proprietary computer model that evaluates and ranks a universe
of 2,000 stocks. Dreyfus reviews each of the screens on a regular basis and
maintains the flexibility to adapt the screening criteria to changes in market
and economic conditions.

INSIDE COVER

<PAGE>

MAIN RISKS

Small and midsize companies carry additional risks because their earnings are
less predictable, their share prices more volatile and their securities less
liquid than larger, more established companies. Some of the fund's investments
will rise and fall based on investor perception rather than economics.

Although the fund seeks to manage risk by broadly diversifying among industries
and by maintaining a risk profile similar to the Russell 2500, the fund is
expected to hold fewer securities than the index. Owning fewer securities and
the ability to purchase companies not listed in the index can cause the fund to
underperform the index.

By investing in a mix of growth and value companies, the fund assumes the risks
of both and may achieve more modest gains than funds that use only one
investment style. Because the stock prices of growth companies are based in part
on future expectations, they may fall sharply if earnings expectation are not
met or investors believe the prospects for a stock, industry or the economy in
general are weak. Growth stocks also typically lack the dividend yield that
could cushion stock prices in market downturns. With value stocks, there is the
risk that they may never reach what the manager believes is their full market
value, or that their intrinsic values may fall. While investments in value
stocks may limit downside risk over time, they may produce smaller gains than
riskier stocks.

Other potential risks

The fund may invest in initial public offerings, options, futures and foreign
currencies to hedge the fund's portfolio or to increase returns. There is the
risk that such practices may reduce returns or increase volatility.

The fund may invest in securities of foreign issuers, which carry additional
risks such as less liquidity, changes in currency exchange rates, a lack of
adequate company information and political instability.

PAST PERFORMANCE

The first table below shows how the performance of the fund's Class A shares has
varied from year to year. Sales loads are not reflected, if they were, returns
would be less than shown. The second table compares the performance of each of
the fund' s share classes over time to that of the Russell 2500 Stock Index, a
widely recognized unmanaged index of small-cap stock performance. These returns
reflect any applicable sales loads. Both tables assume the reinvestment of
dividends and distributions. As with all mutual funds, the past is not a
prediction of the future.
- --------------------------------------------------------------------------------

Year-by-year total return AS OF 12/31 EACH YEAR (%)

BAR GRAPH

BEST QUARTER: QX 'XX X.XX%

WORST QUARTER: QX 'XX X.XX%
- --------------------------------------------------------------------------------

Average annual total return AS OF 12/31/98
<TABLE>
<CAPTION>

Inception date 1 Year 3 Years Life of fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

CLASS A (9/2/94) X.XX% X.XX% X.XX%

CLASS B (12/19/94) X.XX% X.XX% X.XX%

CLASS C (12/19/94) X.XX% X.XX% X.XX%

CLASS R (9/2/94) X.XX% X.XX% X.XX%

RUSSELL 2500 STOCK INDEX X.XX% X.XX% X.XX%*
</TABLE>

* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON XX/XX/XX IS USED AS THE
BEGINNING VALUE ON XX/XX/XX.

What this fund is -- and isn't

The Fund 1

<PAGE>

EXPENSES

As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.

Fee table
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>

CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------------------------------------------

SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)

Maximum sales charge on purchases

AS A % OF OFFERING PRICE 5.75 NONE NONE NONE

Maximum deferred sales charge (CDSC)

ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)

% OF AVERAGE DAILY NET ASSETS

Management fees 1.25 1.25 1.25 1.25

12b-1 fee .25 1.00 1.00 NONE

Other expenses .00 .00 .00 .00
- ------------------------------------------------------------------------------------------------------------------------------------

TOTAL 1.50 2.25 2.25 1.25

* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1
MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF REDEEMED WITHIN ONE YEAR.

Expense example

1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------

CLASS A $0,000 $0,000 $0,000 $0,000

CLASS B
WITH REDEMPTION $0,000 $0,000 $0,000 $0,000**
WITHOUT REDEMPTION $0,000 $0,000 $0,000 $0,000**

CLASS C
WITH REDEMPTION $0,000 $0,000 $0,000 $0,000
WITHOUT REDEMPTION $0,000 $0,000 $0,000 $0,000

CLASS R $0,000 $0,000 $0,000 $0,000
</TABLE>
** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.

This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. Because actual
return and expenses will be different, the example is for comparison only.

Concepts to understand

<PAGE>

MANAGEMENT

The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages one of the nation's
leading mutual fund complexes, with more than $112 billion in more than 160
mutual fund portfolios. Dreyfus is the mutual fund business of Mellon Bank
Corporation, a broad-based financial services company with a bank at its core.
With more than $350 billion of assets under management and $1.7 trillion of
assets under administration and custody, Mellon provides a full range of
banking, investment and trust products and services to individuals, businesses
and institutions. Its mutual fund companies place Mellon as the leading bank
manager of mutual funds. Mellon is headquartered in Pittsburgh, Pennsylvania.

Management philosophy

Portfolio managers

The fund is co-managed by James C. Wadsworth and Anthony J. Galise. Mr.
Wadsworth has been employed by Dreyfus as a portfolio manager since October 1994
and is also Chief Investment Officer at Laurel Capital Advisors. He has been
employed by Mellon Bank since 1977. He is also Chief Equity Officer and Senior
Vice President of Mellon Private Asset Management. Mr. Galise has been employed
by Dreyfus since April 1996. He is also a portfolio manager at Laurel Capital
Advisors, an affiliate of Dreyfus. He joined Mellon in 1993 with over 20 years
of equity investment experience. He is also a Vice President and Portfolio
Manager at Mellon Bank.

Concepts to understand

Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.

The Fund 3

<PAGE>

FINANCIAL HIGHLIGHTS

The following tables describe the performance of each share class 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
independently audited by [ ], whose report, along with the
fund's financial statements, is included in the annual report.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,

CLASS A 1998 1997 1996 1995 1994(1)
- ------------------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period 15.13 13.09 10.07 10.00

Investment operations: Investment income (loss) -- net (.04) (.02) .02 .01

Net realized and unrealized gain (loss) on investments 4.52 2.48 3.03 .06

Total from investment operations 4.48 2.46 3.05 .07

Distributions: Dividends from investment income -- net -- -- (.03) --

Dividends from net realized gain on investments (.72) (.42) -- --

Total distributions (.72) (.42) (.03) --

Net asset value, end of period 18.89 15.13 13.09 10.07

Total return (%)(2) 30.73 19.22 30.31 .70(3)
- ------------------------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) 1.50 1.50 1.50 .25(3)

Ratio of net investment income (loss) to average net assets (%) (.35) (.16) .10 .14(3)

Portfolio turnover rate (%) 39.18 49.03 56.00 8.00
- ------------------------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 9,190 3,884 1,359 60

(1)THE FUND COMMENCED OPERATIONS AND COMMENCED SELLING INVESTOR SHARES ON
SEPTEMBER 2, 1994. EFFECTIVE OCTOBER 17, 1994, THE FUND'S INVESTOR SHARES WERE
REDESIGNATED AS CLASS A SHARES.

(2) EXCLUSIVE OF SALES LOAD.

(3) NOT ANNUALIZED.

YEAR ENDED OCTOBER 31,

CLASS B 1998 1997 1996 1995(1)
- ------------------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period 14.95 13.05 9.49

Investment operations: Investment income (loss) -- net (.03) (.07) (.03)

Net realized and unrealized gain (loss) on investments 4.31 2.39 3.59

Total from investment operations 4.28 2.32 3.56

Distributions: Dividends from net realized gain on investments (.72) (.42) --

Net asset value, end of period 18.51 14.95 13.05

Total return (%)(2) 29.72 18.17 37.51(3)
- ------------------------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) 2.25 2.25 1.95(3)

Ratio of net investment income (loss) to average net assets (%) (1.02) (.93) (.56)(3)

Portfolio turnover rate (%) 39.18 49.03 56.00
- ------------------------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 19,257 4,633 1,025
</TABLE>
(1) THE FUND COMMENCED SELLING CLASS B SHARES ON DECEMBER 19, 1994.

(2) EXCLUSIVE OF SALES LOAD.

(3) NOT ANNUALIZED.

<PAGE>

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
<S> <C> <C> <C> <C>

CLASS C 1998 1997 1996 1995(1)
- ------------------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period 14.95 13.04 9.49

Investment operations: Investment income (loss) -- net .01 (.09) (.01)

Net realized and unrealized gain (loss) on investments 4.28 2.42 3.56

Total from investment operations 4.29 2.33 3.55

Distributions: Dividends from net realized gain on investments (.72) (.42) --

Net asset value, end of period 18.52 14.95 13.04

Total return (%)(2) 29.79 18.27 37.41(3)
- ------------------------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) 2.25 2.25 1.14(3)

Ratio of net investment income (loss) to average net assets (%) (1.01) (.93) (.33)(3)

Portfolio turnover rate (%) 39.18 49.03 56.00
- ------------------------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 3,647 514 147

(1) THE FUND COMMENCED SELLING CLASS C SHARES ON DECEMBER 19, 1994.

(2) EXCLUSIVE OF SALES LOAD.

(3) NOT ANNUALIZED.

YEAR ENDED OCTOBER 31,

CLASS R 1998 1997 1996 1995 1994(1)
- ------------------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period 15.15 13.10 10.07 10.00

Investment operations: Investment income (loss) -- net -- .01 .04 .02

Net realized and unrealized gain (loss) on investments 4.53 2.48 3.04 .05

Total from investment operations 4.53 2.49 3.08 .07

Distributions: Dividends from investment income -- net -- (.02) (.05) --

Dividends from net realized gain on investments (.72) (.42) -- --

Total distributions (.72) (.44) (.05) --

Net asset value, end of period 18.96 15.15 13.10 10.07

Total return (%) 31.04 19.43 30.70 .70(2)
- ------------------------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) 1.25 1.25 1.25 .21(2)

Ratio of net investment income (loss) to average net assets (%) .02 .09 .35 .18(2)

Portfolio turnover rate (%) 39.18 49.03 56.00 8.00(2)
- ------------------------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 244,292 112,209 44,091 10,747
</TABLE>
(1)THE FUND COMMENCED OPERATIONS AND COMMENCED SELLING TRUST SHARES ON
SEPTEMBER 2, 1994. EFFECTIVE OCTOBER 17, 1994, THE FUND'S TRUST SHARES WERE
REDESIGNATED AS CLASS R SHARES.

(2) NOT ANNUALIZED.

The Fund 5

<PAGE>

Your Investment

ACCOUNT POLICIES

.. Class A shares can be the most cost-effective choice, if you are investing
for the long term, especially if you are investing $50,000 or more.

.. Class B shares can make sense if you have a long time horizon and are
investing less than $50,000.

.. Class C shares may be appropriate if you have a shorter or less certain
time horizon and are investing less than $50,000.

.. Class R shares are designed for eligible institutions on behalf of their
clients. Individuals may not purchase these shares directly.

Share class charges

EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay a sales charge to buy or sell shares. Contact your financial representative
or the SAI to see if this may apply to you. Shareholders owning Class A shares
on or prior to November 30, 1996 may be eligible to purchase additional Class A
shares without a front-end sales load or with a lower front-end sales load. See
the SAI.
- --------------------------------------------------------------------------------

Sales charges

CLASS A -- CHARGED WHEN YOU BUY SHARES

Sales charge Sales charge as
deducted as a % a % of your
Your investment of offering price net investment
- --------------------------------------------------------------------------------

Up to $49,999 5.75% 6.10%

$50,000 - $99,999 4.50% 4.70%

$100,000 - $249,999 3.50% 3.60%

$250,000 - $499,999 2.50% 2.60%

$500,000 - $999,999 2.00% 2.00%

$1 million or more* 0.00% 0.00%

* A 1.00% contingent deferred sales charge may be charged on any shares sold
within one year of purchase (except shares bought through reinvestment).

Class A shares also carry an annual Rule 12b-1 fee of 0.25% of the class's
average net assets.
- --------------------------------------------------------------------------------

CLASS B -- CHARGED WHEN YOU SELL SHARES

Up to 2 years 4.00%

2 - 4 years 3.00%

4 - 5 years 2.00%

5 - 6 years 1.00%

More than 6 years Shares will automatically
convert to Class A

Class B shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------

CLASS C -- CHARGED WHEN YOU SELL SHARES

CLASS R -- NO SALES LOAD OR RULE 12B-1 FEES

Reduced Class A sales charge

LETTER OF INTENT: lets you purchase Class A shares over a 13-month period and
receive the same sales charge as if all shares had been purchased at once.

RIGHT OF ACCUMULATION: lets you add the value of any Class A shares you already
own to the amount of your next Class A investment for purposes of calculating
the sales charge.

CONSULT THE STATEMENT OF ADDITIONAL INFORMATION (SAI) OR YOUR FINANCIAL
REPRESENTATIVE FOR MORE DETAILS.

<PAGE>

Buying shares

Minimum investments

Initial Additional
- --------------------------------------------------------------------------------

REGULAR ACCOUNTS $1,000 $100; $500 FOR
TELETRANSFER INVESTMENTS

TRADITIONAL IRAS $750 NO MINIMUM

SPOUSAL IRAS $750 NO MINIMUM

ROTH IRAS $750 NO MINIMUM

EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST YEAR

DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS

All investments must be in U.S. dollars. Third-party checks cannot be accepted.
You may be charged a fee for any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.

Concepts to understand

Selling shares

Written sell orders

Some circumstances require written sell orders along with signature guarantees.
These include:

.. amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days

.. requests to send the proceeds to a different payee or address

Written sell orders of $100,000 or more must also be signature guaranteed.

Your Investment 7

<PAGE>

ACCOUNT POLICIES (CONTINUED)

General policies

IF YOUR ACCOUNT FALLS BELOW $500, the fund may ask you to increase your balance.
If it is still below $500 after 45 days, the fund may close your account and
send you the proceeds.

UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.

THE FUND RESERVES THE RIGHT TO:

.. refuse any purchase or exchange request that could adversely affect the
fund or its operations, including those from any individual or group who,
in the fund' s view, is likely to engage in excessive trading (usually
defined as more than four exchanges out of the fund within a calendar year)

.. refuse any purchase or exchange request in excess of 1% of the fund's total
assets

.. change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions

.. change its minimum investment amounts

.. delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions)

DISTRIBUTIONS AND TAXES

Taxability of distributions

Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------

INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE

SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE

LONG-TERM
CAPITAL GAINS 10% 20%

Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.

Taxes on transactions

Except between tax-deferred accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.

<PAGE>

SERVICES FOR FUND INVESTORS

Automatic services

For investing

DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.

DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.

DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
- --------------------------------------------------------------------------------

For exchanging shares

DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
- --------------------------------------------------------------------------------

For selling shares

DREYFUS AUTOMATIC For making regular withdrawals from most Dreyfus
WITHDRAWAL PLAN funds. There will be no CDSC on Class B shares,
as long as the amounts withdrawn do not exceed
12% annually of the account value at the time
the shareholder elects to participate in the
plan.

Exchange privilege

YOU CAN EXCHANGE SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one class of the fund into the same class of another Dreyfus Premier fund.
You can request your exchange by contacting your financial representative. Be
sure to read the current prospectus for any fund into which you are exchanging
before investing. Any new account established through an exchange will have the
same privileges as your original account (as long as they are available). There
is currently no fee for exchanges, although you may be charged a sales load when
exchanging into any fund that has a higher one.

TeleTransfer privilege

Reinvestment privilege

Account statements

EVERY FUND INVESTOR automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.

Your Investment 9

<PAGE>

INSTRUCTIONS FOR REGULAR ACCOUNTS

TO OPEN AN ACCOUNT

In Writing

Complete the application.

Mail your application and a check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing

TO ADD TO AN ACCOUNT

Fill out an investment slip, and write your account number on your check.

Mail the slip and the check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing

By Telephone

WIRE Have your bank send your
investment to Boston Safe Deposit & Trust Co., with these instructions:

* ABA# 011001234

* DDA# 044210

* the fund name

* the share class

* your Social Security or tax ID number

* name(s) of investor(s)

* dealer number if applicable

Call us to obtain an account number. Return your application with the account
number on the application.

WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:

* ABA# 011001234

* DDA# 044210

* the fund name

* the share class

* your account number

* name(s) of investor(s)

* dealer number if applicable

ELECTRONIC CHECK Same as wire, but before your account number insert "4040" for
Class A, "4700" for Class B, "4710" for Class C, "4030" for Class R

TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.

Automatically

WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.

<PAGE>

TO SELL SHARES

Write a letter of instruction that includes:

* your name(s) and signature(s)

* your account number

* the fund name

* the dollar amount you want to sell

* how and where to send the proceeds

Obtain a signature guarantee or other documentation, if required (see page 9).

Mail your request to: The Dreyfus Family of Funds
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing

TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.

AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative to request a
form to add the plan. Complete the form, specifying the amount and frequency of
withdrawals you would like.

Be sure to maintain an account balance of $5,000 or more.

Concepts to understand

10A

<PAGE>

INSTRUCTIONS FOR IRAS

TO OPEN AN ACCOUNT

In Writing

Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.

Mail your application and a check to:
The Dreyfus Trust Company, Custodian
P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing

TO ADD TO AN ACCOUNT

Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.

Mail in the slip and the check to:
The Dreyfus Trust Company
P.O. Box 6427,
Providence, RI 02940-6427
Attn: Institutional Processing

By Telephone

WIRE Have your bank send your investment to Boston Safe Depost & Trust Co.,
with these instructions:

* DDA# 044210

* the fund name

* the share class

* your account number

* name of investor

* the contribution year

* dealer number if applicable

ELECTRONIC CHECK Same as wire, but before your account number insert "4700" for
Class A, "4040" for Class B, "4710" for Class C, "4030" for Class R

Automatically

TO SELL SHARES

Write a letter of instruction that includes:

* your name and signature

* your account number and fund name

* the dollar amount you want to sell

* how and where to send the proceeds

* whether the distribution is qualified or premature

* whether the 10% TEFRA should be withheld

Obtain a signature guarantee or other documentation, if required (see page 9).

Mail in your request to: The Dreyfus Trust Company P.O. Box 6427, Providence,
RI 02940-6427 Attn: Institutional Processing

SYSTEMATIC WITHDRAWAL PLAN Call us to request instructions to establish the
plan.

For information and assistance, contact your financial representative or call
toll free in the U.S. 1-800-554-4611. Make checks payable to: THE DREYFUS TRUST
COMPANY, CUSTODIAN

Your Investment 11

<PAGE>

For More Information

Dreyfus Premier Small Company Stock Fund

A Series of The Dreyfus/Laurel Funds, Inc.
- --------------------------------------

SEC file number: 811-5270

More information on this fund is available free upon request, including the
following:

Annual/Semiannual Report

Describes the fund's performance, lists portfolio holdings and contains a letter
from the fund's manager discussing recent market conditions, economic trends
and fund strategies that significantly affected the fund's performance during
the last fiscal year.

Statement of Additional Information (SAI)

Provides more details about the fund and its policies. A current SAI is on file
with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).

To obtain information:

BY TELEPHONE Call your financial representative or 1-800-554-4611

BY MAIL Write to: The Dreyfus Premier Family of Funds
144 Glenn Curtiss
Boulevard Uniondale, NY 11556-0144

ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from: http://www.sec.gov

<PAGE>

[Application p 1 here]

<PAGE>

[Application p 2 here]
<PAGE>

DREYFUS PREMIER SMALL COMPANY STOCK FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 1999

This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of the
Dreyfus Premier Small Company Stock Fund (the "Fund"), dated March 1, 1999, as
it may be revised from time to time. The Fund is a separate, diversified
portfolio of The Dreyfus/Laurel Funds, Inc., an open-end management investment
company (the "Company"), known as a mutual fund. To obtain a copy of the Fund's
Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale,
New York 11556-0144, or call one of the following numbers:

Call Toll Free 1-800-554-4611
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452

TABLE OF CONTENTS
Page

Description of the Fund........................................... B-2
Management of the Fund............................................ B-21
Management Arrangements........................................... B-27
Purchase of Shares................................................ B-28
Distribution and Service Plans.................................... B-36
Redemption of Shares.............................................. B-38
Shareholder Services.............................................. B-42
Additional Information About Purchases, Exchanges
and Redemptions................................................. B-48
Determination of Net Asset Value.................................. B-49
Dividends, Other Distributions and Taxes.......................... B-50
Portfolio Transactions............................................ B-57
Performance Information........................................... B-59
Information About the Fund........................................ B-60
Transfer and Dividend Disbursing
Agent, Custodian, Counsel and Independent Auditors.............. B-61
Financial Statements.............................................. B-62
Appendix.......................................................... B-63

<PAGE>

DESCRIPTION OF THE FUND

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS OF THE FUND'S PROSPECTUS ENTITLED "GOAL/APPROACH" AND "MAIN
RISKS."

The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.

The Fund seeks investment returns that exceed those of the Russell
2500(TM) Stock Index. The Russell 2500(TM) Stock Index, published by Frank
Russell Company, is comprised of the bottom 500 companies in the Russell
1000(TM) Index as ranked by total market capitalization, and all 2,000 stocks in
the Russell 2000(TM) Index. The Russell 2000(TM) Index consists of the smallest
2,000 companies in the Russell Index 3000(TM), representing approximately 10% of
the Russell 3000(TM) Index total market capitalization. The Russell 3000(TM)
Index is composed of 3,000 large U.S. companies, as determined by market
capitalization. The Russell 1000(TM) Index consists of the 1,000 largest
companies in the Russell 3000(TM) Index. The Fund's managers do not attempt to
time the financial market, or use sector or industry rotation techniques.

CERTAIN PORTFOLIO SECURITIES

The following information regarding the securities that the Fund may
purchase supplements that found in the Fund's Prospectus.

BANK INSTRUMENTS. The Fund may invest in bank instruments. Bank
instruments consist mainly of certificates of deposit, time deposits and
bankers' acceptances.

AMERICAN DEPOSITORY RECEIPTS ("ADRS"). The Fund may invest in U.S.
dollar-denominated ADRs. ADRs typically are issued by an American bank or trust
company and evidence ownership of underlying securities issued by foreign
companies. ADRs are traded in the United States on national securities exchanges
or in the over-the-counter market. Investment in securities of foreign issuers
presents certain risks. See "Foreign Securities."

B-2
<PAGE>

or instrumentality, or (d) the credit of the instrumentality. (Examples of
agencies and instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Central Bank for Cooperatives, Federal Intermediate Credit Banks,
Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory Board,
Inter-American Development Bank, Asian-American Development Bank, Student Loan
Marketing Association, International Bank for Reconstruction and Development and
Fannie Mae). No assurance can be given that the U.S. Government will provide
financial support to the agencies or instrumentalities described in (b), (c) and
(d) in the future, other than as set forth above, since it is not obligated to
do so by law.

REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
U.S. Government securities dealers recognized by the Federal Reserve Board, with
member banks of the Federal Reserve System, or with such other brokers or
dealers that meet the Fund's credit guidelines. This technique offers a method
of earning income on idle cash. In a repurchase agreement, the Fund buys a
security from a seller that has agreed to repurchase the same security at a
mutually agreed upon date and price. The Fund's resale price will be in excess
of the purchase price, reflecting an agreed upon interest rate. This interest
rate is effective for the period of time the Fund is invested in the agreement
and is not related to the coupon rate on the underlying security. Repurchase
agreements may also be viewed as a fully collateralized loan of money by the
Fund to the seller. The period of these repurchase agreements will usually be
short, from overnight to one week, and at no time will the Fund invest in
repurchase agreements for more than one year. The Fund will always receive as
collateral securities whose market value including accrued interest is, and
during the entire term of the agreement remains, at least equal to 100% of the
dollar amount invested by the Fund in each agreement, and the Fund will make
payment for such securities only upon physical delivery or upon evidence of book
entry transfer to the account of the Custodian. If the seller defaults, the Fund
might incur a loss if the value of the collateral securing the repurchase
agreement declines and might incur disposition costs in connection with
liquidating the collateral. In addition, if bankruptcy proceedings are commenced
with respect to the seller of a security which is the subject of a repurchase
agreement, realization upon the collateral by the Fund may be delayed or
limited. The Fund seeks to minimize the risk of loss through repurchase
agreements by analyzing the creditworthiness of the obligors under repurchase
agreements, in accordance with the Fund's credit guidelines.

B-3
<PAGE>

COMMERCIAL PAPER. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from two to 270 days. Each instrument may be backed only
by the credit of the issuer or may be backed by some form of credit enhancement,
typically in the form of a guarantee by a commercial bank. Commercial paper
backed by guarantees of foreign banks may involve additional risk due to the
difficulty of obtaining and enforcing judgments against such banks and the
generally less restrictive regulations to which such banks are subject. The Fund
will only invest in commercial paper of U.S. and foreign companies rated at the
time of purchase at least A-1 by Standard & Poor's, Prime-1 by Moody's Investors
Service, Inc., F-1 by Fitch Investors Service, LLP, Duff 1 by Phoenix Duff &
Phelps, Corp., or A1 by IBCA, Inc.

B-4
<PAGE>

revaluation of currencies, adverse political and economic developments, the
possible imposition of currency exchange blockages or other foreign governmental
laws or restrictions, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.
Moreover, securities of many foreign issuers may be less liquid and their prices
more volatile than those of comparable domestic issuers. In addition, with
respect to certain foreign countries, there is the possibility of expropriation,
confiscatory taxation and limitations on the use or removal of funds or other
assets of the Fund, including withholding of dividends. Foreign securities may
be subject to foreign government taxes that would reduce the yield on such
securities.

ILLIQUID SECURITIES. The Fund will not knowingly invest more than 15% of
the value of its net assets in illiquid securities, including time deposits and
repurchase agreements having maturities longer than seven days. Securities that
have readily available market quotations are not deemed illiquid for purposes of
this limitation (irrespective of any legal or contractual restrictions on
resale.) The Fund may invest in commercial obligations issued in reliance on the
so-called "private placement" exemption from registration afforded by Section
4(2) of the Securities Act of 1933, as amended ("Section 4(2) paper"). The Fund
may also purchase securities that are not registered under the Securities Act of
1933, as amended, but that can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities"). Liquidity
determinations with respect to Section 4(2) paper and Rule 144A securities will
be made by the Board of Directors or by Dreyfus pursuant to guidelines
established by the Board of Directors. The Board or Dreyfus will consider
availability of reliable price information and other relevant information in
making such determinations. Section 4(2) paper is restricted as to disposition
under the federal securities laws, and generally is sold to institutional
investors, such as the Fund, that agree that they are purchasing the paper for
investment and not with a view to public distribution. Any resale by the
purchaser must be pursuant to registration or an exemption therefrom. Section
4(2) paper normally is resold to other institutional investors like the Fund
through or with the assistance of the issuer or investment dealers who make a
market in the Section 4(2) paper, thus providing liquidity. Rule 144A securities
generally must be sold to other qualified institutional buyers. If a particular
investment in Section 4(2) paper or Rule 144A securities is not determined to be
liquid, that investment will be included within the percentage limitation on
investment in illiquid securities. The ability to sell Rule 144A securities to
qualified institutional buyers is a recent development and it is not possible to
predict how this market will mature. Investing in Rule 144A securities could
have the effect of increasing the level of Fund illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in purchasing
these securities from the Fund or other holder.

INITIAL PUBLIC OFFERINGS ("IPOS"). The Fund may invest in an IPO, a
corporation's first offering of stock to the public. Shares are given a market
value reflecting expectations for the corporation's future growth. Special rules
of the National Association of Securities Dealers apply to the distribution of
IPOs. Corporations offering IPOs generally have a limited operating history and
may involve greater risk.

B-5
<PAGE>

INVESTMENT TECHNIQUES

BORROWING. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.

B-6
<PAGE>

B-7
<PAGE>

FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS. The Fund may purchase
and sell various financial instruments ("Derivative Instruments"), including
financial futures contracts (such as interest rate, index and foreign currency
futures contracts), options (such as options on securities, indices, foreign
currencies and futures contracts), forward currency contracts and interest rate,
equity index and currency swaps, caps, collars and floors. The index Derivative
Instruments the Fund may use may be based on indices of U.S. or foreign equity
or debt securities. These Derivative Instruments may be used, for example, to
preserve a return or spread, to lock in unrealized market value gains or losses,
to facilitate or substitute for the sale or purchase of securities, to manage
the duration of securities, to alter the exposure of a particular investment or
portion of the Fund's portfolio to fluctuations in interest rates or currency
rates, to uncap a capped security or to convert a fixed rate security into a
variable rate security or a variable rate security into a fixed rate security.

In addition to the instruments, strategies and risks described below and
in the Prospectus, Dreyfus expects to discover additional opportunities in

B-8
<PAGE>

connection with other Derivative Instruments. These new opportunities may become
available as Dreyfus develops new techniques, as regulatory authorities broaden
the range of permitted transactions and as new techniques are developed. Dreyfus
may utilize these opportunities to the extent that they are consistent with the
Fund's investment objective, and permitted by the Fund's investment policies and
applicable regulatory authorities.

(1) Successful use of most Derivative Instruments depends upon Dreyfus'
ability not only to forecast the direction of price fluctuations of the
investment involved in the transaction, but also to predict movements of the
overall securities, currency and interest rate markets, which requires different
skills than predicting changes in the prices of individual securities. There can
be no assurance that any particular strategy will succeed.

B-9
<PAGE>

fail to produce anticipated gains or result in losses that are not offset by
gains in other investments.

(4) As described below, the Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in Derivative Instruments involving obligations to third parties
(I.E., Derivative Instruments other than purchased options). If the Fund were
unable to close out its positions in such Derivative Instruments, it might be
required to continue to maintain such assets or accounts or make such payments
until the position expired or matured. These requirements might impair the
Fund's ability to sell a portfolio security or make an investment at a time when
it would otherwise be favorable to do so, or require that the Fund sell a
portfolio security at a disadvantageous time. The Fund's ability to close out a
position in a Derivative Instrument prior to expiration or maturity depends on
the existence of a liquid secondary market or, in the absence of such a market,
the ability and willingness of the other party to the transaction
("counterparty") to enter into a transaction closing out the position.
Therefore, there is no assurance that any position can be closed out at a time
and price that is favorable to the Fund.

COVER FOR DERIVATIVE INSTRUMENTS. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund will
not enter into any such transactions unless it owns either (1) an offsetting
("covered") position in securities, futures, options, currencies or forward
contracts or (2) cash and short-term liquid debt securities with a value
sufficient at all times to cover its potential obligations to the extent not
covered as provided in (1) above. The Fund will comply with SEC guidelines
regarding cover for Derivative Instruments and will, if the guidelines so
require, set aside cash, U.S. Government securities or other liquid, high-grade
debt securities in a segregated account with its custodian in the prescribed
amount.

B-10
<PAGE>

portion of the Fund's assets to cover or segregated accounts could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.

The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of the
underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised have
no value and the Fund would experience losses to the extent of premiums paid for
them.

B-11
<PAGE>

The Fund may purchase and sell both exchange-traded and over-the-counter
("OTC") options. Exchange-traded options in the United States are issued by a
clearing organization that, in effect, guarantees completion of every
exchange-traded option transaction. In contrast, OTC options are contracts
between the Fund and its counterparty (usually a securities dealer or a bank)
with no clearing organization guarantee. Thus, when the Fund purchases an OTC
option, it relies on the counterparty from whom it purchased the option to make
or take delivery of the underlying investment upon exercise of the option.
Failure by the counterparty to do so would result in the loss of any premium
paid by the Fund as well as the loss of any expected benefit of the transaction.
The Fund will enter into only those option contracts that are listed on a
national securities or commodities exchange or traded in the OTC market for
which there appears to be a liquid secondary market. The Fund will not purchase
put or call options that are traded on a national exchange in an amount
exceeding 5% of its net assets.

B-12
<PAGE>

The Fund may write only covered call options on securities. A call option
is covered if the Fund owns the underlying security or a call option on the same
security with a lower strike price.

Futures strategies also can be used to manage the average duration of the
Fund's fixed income portfolio. If Dreyfus wishes to shorten the average duration
of the Fund's fixed income portfolio, the Fund may sell an interest rate futures
contract or a call option thereon, or purchase a put option on that futures
contract. If Dreyfus wishes to lengthen the average duration of the Fund's fixed
income portfolio, the Fund may buy an interest rate futures contract or a call
option thereon, or sell a put option thereon.

B-13
<PAGE>

To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for BONA FIDE hedging purposes
(as defined by the CFTC), the aggregate initial margin and premiums required to
establish those positions (excluding the amount by which options are
"in-the-money" at the time of purchase) will not exceed 5% of the liquidation
value of the Fund's portfolio, after taking into account unrealized profits and

B-14
<PAGE>

unrealized losses on any contracts the Fund has entered into. This policy does
not limit to 5% the percentage of the Fund's assets that are at risk in futures
contracts and options on futures contracts.

FOREIGN CURRENCY TRANSACTIONS. The Fund may engage in currency exchange
transactions on a spot or forward basis. The Fund may exchange foreign currency
on a spot basis at the spot rate then prevailing for purchasing or selling
foreign currencies in the foreign exchange market.

The Fund may also enter into forward currency contracts for the purchase
or sale of a specified currency at a specified future date either with respect
to specific transactions or portfolio positions in order to minimize the risk to
the Fund from adverse changes in the relationship between the U.S. dollar and
foreign currencies. For example, when the Fund anticipates purchasing or selling
a security denominated in a foreign currency, the Fund may enter into a forward
contract in order to set the exchange rate at which the transaction will be
made. The Fund may also enter into a forward contract to sell an amount of
foreign currency approximating the value of some or all of the Fund's securities
positions denominated in that currency.

Foreign Currency Strategies - Special Considerations. The Fund may use
Derivative Instruments on foreign currencies to hedge against movements in the
values of the foreign currencies in which the Fund's securities are denominated.
Such currency hedges can protect against price movements in a security that the
Fund owns or intends to acquire that are attributable to changes in the value of
the currency in which it is denominated. Such hedges do not, however, protect
against price movements in the securities that are attributable to other causes.

B-15
<PAGE>

FORWARD CONTRACTS. A forward foreign currency exchange contract ("forward
contract") is a contract to purchase or sell a currency at a future date. The
two parties to the contract set the number of days and the price. Forward
contracts are used as a hedge against future movements in foreign exchange
rates. The Fund may enter into forward contracts to purchase or sell foreign
currencies for a fixed amount of U.S. dollars or other foreign currency.

B-16
<PAGE>

event of insolvency of the counterparty, the Fund might be unable to close out a
forward contract at any time prior to maturity. In either event, the Fund would
continue to be subject to market risk with respect to the position, and would
continue to be required to maintain a position in the securities or currencies
that are the subject of the hedge or to maintain cash or securities in a
segregated account.

SWAPS, CAPS, COLLARS AND FLOORS. Swap agreements, including interest rate,
equity index and currency swaps, caps, collars and floors, may be individually
negotiated and structured to include exposure to a variety of different types of
investments or market factors. Swaps involve two parties exchanging a series of
cash flows at specified intervals. In the case of an interest rate swap, the
parties exchange interest payments based on an agreed upon principal amount
(referred to as the "notional principal amount"). Under the most basic scenario,
Party A would pay a fixed rate on the notional principal amount to Party B,
which would pay a floating rate on the same notional principal amount to Party
A. Depending on their structure, swap agreements may increase or decrease the
Fund's exposure to long or short-term interest rates (in the U.S. or abroad),
foreign currency values, mortgage securities, corporate borrowing rates, or
other factors. Swap agreements can take many different forms and are known by a
variety of names.

B-17
<PAGE>

The Fund understands that it is the position of the staff of the SEC that
assets involved in swap transactions are illiquid and, therefore, are subject to
the limitations on illiquid investments.

INVESTMENT RESTRICTIONS

B-18
<PAGE>

to investments in domestic banks, including U.S. branches of foreign banks and
foreign branches of U.S. banks).

7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.

1. The Fund shall not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amounts to the securities sold
short, and provided that transactions in futures contracts and options are not
deemed to constitute selling short.

B-19
<PAGE>

3. The Fund shall not purchase oil, gas or mineral leases.

6. The Fund will invest no more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements with remaining maturities
in excess of seven days, time deposits with maturities in excess of seven days
and other securities which are not readily marketable. For purposes of this
limitation, illiquid securities shall not include Section 4(2) Paper and
securities which may be resold under Rule 144A under the Securities Act of 1933,
provided that the Board of Directors, or its delegate, determines that such
securities are liquid based upon the trading markets for the specific security.

8. The Fund shall not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.

10. The Fund will not purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate investment
in such classes of securities will exceed 5% of its total assets except that:
(a) this limitation shall not apply to standby commitments, and (b) this
limitation shall not apply to the Fund's transactions in futures contracts and
related options.

B-20
<PAGE>

MANAGEMENT OF THE FUND

FEDERAL LAW AFFECTING MELLON BANK

The Glass-Steagall Act of 1933 prohibits national banks from engaging in
the business of underwriting, selling or distributing securities and prohibits a
member bank of the Federal Reserve System from having certain affiliations with
an entity engaged principally in that business. The activities of Mellon Bank in
informing its customers of, and performing, investment and redemption services
in connection with the Fund, and in providing services to the Fund as custodian,
as well as Dreyfus' investment advisory activities, may raise issues under these
provisions. Mellon Bank has been advised by counsel that the activities
contemplated under these arrangements are consistent with its statutory and
regulatory obligations.

Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of such
future statutes and regulations, could prevent Mellon Bank or Dreyfus from
continuing to perform all or a part of the above services for its customers
and/or the Fund. If Mellon Bank or Dreyfus were prohibited from serving the Fund
in any of its present capacities, the Board of Directors would seek an
alternative provider(s) of such services.

DIRECTORS AND OFFICERS

B-21
<PAGE>

Mellon Bank.......................................Custodian for the Fund

DIRECTORS OF THE COMPANY

o*J. TOMLINSON
FORT. Director of the Company; Partner, Reed, Smith, Shaw & McClay (law
firm). Age: 70 years old. Address: 204 Woodcock Drive, Pittsburgh,
Pennsylvania 15215.

B-22
<PAGE>

Place Gourmet, Inc.; Managing Partner, Franklin Federal Partners. Age: 52
years old. Address: 625 Madison Avenue, New York, New York 10022.

o+STEPHEN J. LOCKWOOD. Director of the Company; President and CEO, LDG
Management Company Inc.; CEO, LDG Reinsurance Underwriters, SRRF Management
Inc. and Medical Reinsurance Underwriters Inc. Age: 51 years old. Address:
401 Edgewater Place, Wakefield, Massachusetts 01880.

o+JOHN J. SCIULLO. Director of the Company; Dean Emeritus and Professor of
Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh; Member of Advisory Committee, Decedents Estates
Laws of Pennsylvania. Age: 67 years old. Address: 321 Gross Street,
Pittsburgh, Pennsylvania 15224.

o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc.; Director, American Express Centurion Bank; Director, Harvard/Pilgrim
Community Health Plan, Inc.; Director, Massachusetts Electric Company;
Director, the Hyams Foundation, Inc. Age: 49 years old. Address: 25
Braddock Park, Boston, Massachusetts 02116-5816.

o+BENAREE PRATT WILEY. Director of the Company; President and
CEO of The Partnership, an organization dedicated to increasing the
representation of African Americans in positions of leadership, influence
and decision-making in Boston, MA; Trustee, Boston College; Trustee, WGBH
Educational Foundation; Trustee, Children's Hospital; Director, The Greater
Boston Chamber of Commerce; Director, The First Albany Companies, Inc.;
from April 1995 to March 1998, Director, TBC, an affiliate of Dreyfus. Age:
52 years old. Address: 334 Boylston Street, Suite 400, Boston,
Massachusetts.
--------------------------------
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.

OFFICERS OF THE COMPANY

#MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior
Vice President and General Counsel of Funds Distributor, Inc. From August
1996 to March 1998, she was Vice President and Assistant General Counsel
for Loomis, Sayles & Company, L.P. From January 1986 to July 1996, she was
an associate with the law firm of Ropes & Gray. Age: 39 years old.

#MARIEE. CONNOLLY. President and Treasurer of the Company. President, Chief
Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which is
Boston Institutional Group, Inc. Age: 41 years old.

B-23
<PAGE>

#CHRISTOPHER J. KELLEY. Vice President and Assistant Secretary of the
Company. Vice President and Senior Associate General Counsel of Funds
Distributor, Inc. From April 1994 to July 1996, Mr. Kelley was Assistant
Counsel at Forum Financial Group. From October 1992 to March 1994, Mr.
Kelley was employed by Putnam Investments in legal and compliance
capacities. Age: 34 years old.

#KATHLEEN K. MORRISEY. Vice President and Assistant Secretary of the
Company. Manager of Treasury Services Administration of Funds Distributor,
Inc. From July 1994 to November 1995, she was a Fund Accountant for
Investors Bank & Trust Company. Age: 26 years old.

#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. From
September 1989 to July 1994, she was an Assistant Vice President and Client
Manager for TBC. Age: 34 years old.

#STEPHANIE PIERCE. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President and Client Development Manager of
Funds Distributor, Inc. From April 1997 to March 1998, she was employed as
a Relationship Manager with Citibank, N.A. From August 1995 to April 1997,
she was an Assistant Vice President with Hudson Valley Bank, and from
September 1990 to August 1995, she was a Second Vice President with Chase
Manhattan Bank. Age: 30 years old.

#GEORGE A. RIO. Vice President and Assistant Treasurer of the Company.
Executive Vice President and Client Service Director of Funds Distributor,
Inc. From June 1995 to March 1998, he was Senior Vice President and Senior
Key Account Manager for Putnam Mutual Funds. From May 1994 to June 1995, he
was Director of Business Development for First Data Corporation. From
September 1983 to May 1994, he was Senior Vice President and Manager of
Client Services and Director of Internal Audit at TBC. Age: 44 years old.

#JOSEPH F. TOWER, III. Vice President and Assistant Treasurer of the
Company. Senior Vice President, Treasurer, Chief Financial Officer and a
Director of the Distributor and Funds Distributor, Inc. From 1988 to August
1994, he was employed by TBC where he held various management positions in
the Corporate Finance and Treasury areas. Age: 37 years old.

B-24
<PAGE>

#ELBA VASQUEZ. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. From March 1990 to May
1996, she was employed by U.S. Trust Company of New York, where she held
various sales and marketing positions. Age: 37 years old.
- --------------------------------
# Officer also serves as an officer for other investment companies advised by
Dreyfus, including The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel
Tax-Free Municipal Funds.

The address of each officer of the Company is 200 Park Avenue, New York,
New York 10166.

B-25
<PAGE>

member for the year ended December 31, 1998, pursuant to the Former Compensation
Structure for the period from November 1, 1997 through June 30, 1998 and the
Current Compensation Structure for the period from July 1, 1998 through October
31, 1998, were as follows:

Total Compensation
Aggregate From the Company
Name of Board Compensation and Fund Complex
MEMBER FROM THE COMPANY# PAID TO BOARD MEMBER****

Joseph S. DiMartino*

James M. Fitzgibbons

J. Tomlinson Fort** none none

Arthur L. Goeschel

Kenneth A. Himmel

Stephen J. Lockwood

John J. Sciullo

Roslyn M. Watson

Benaree Pratt Wiley***
- ----------------------------
# 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. Amount does not include reimbursed expenses for
attending Board meetings, which amounted to $[ ] for the Company.
* Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
** J.Tomlinson Fort is paid directly by Dreyfus for serving as a Board member
of the Company and the funds in the Dreyfus/Laurel Funds and separately by
the Dreyfus High Yield Strategies Fund. For the fiscal year ended October
31, 1998, the aggregate amount of fees and expenses received by J.
Tomlinson Fort from Dreyfus for serving as a Board member of the Company
was ______________. For the year ended December 31, 1998, the aggregate
amount of fees and expenses received by Mr. Fort for serving as a Board
member of all funds in the Dreyfus/Laurel Funds (including the Company) and
Dreyfus High Yield Strategies Fund (for which payment is made directly by
the fund) was ______________________. In addition, Dreyfus reimbursed Mr.
Fort a total of $__________________ for expenses attributable to the
Company's Board meetings which is not included in the $__________________
amount in note # above.
*** Payments to Ms. Wiley were for the period from April 23, 1998 (the date she
was elected as a Board member) through October 31, 1998.
****The Dreyfus Family of Funds consists of ___ mutual funds.

B-26
<PAGE>

The officers and Directors of the Company as a group owned beneficially
less than 1% of the total shares of the Fund outstanding as of November __,
1998.

PRINCIPAL SHAREHOLDERS. As of January 31, 1999, the following
shareholder(s) owned of record 5% or more of Class A, Class B, Class C or Class
R of the Fund: _________.

MANAGEMENT ARRANGEMENTS

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN THE FUND'S PROSPECTUS ENTITLED "EXPENSES" AND "MANAGEMENT."

The Management Agreement will continue from year to year provided that a
majority of the Directors who are not "interested persons" of the Company and
either a majority of all Directors or a majority (as defined in the 1940 Act) of
the shareholders of the Fund approve its continuance. The Management Agreement
was last approved by the Board of Directors on ______________, 1999 to continue
until ________________, 2000. The Company may terminate the Management Agreement
upon the vote of a majority of the Board of Directors or upon the vote of a
majority of the Fund's outstanding voting securities on 60 days' written notice
to Dreyfus. Dreyfus may terminate the Management Agreement upon 60 days' written
notice to the Company. The Management Agreement will terminate immediately and
automatically upon its assignment.

B-27
<PAGE>

David Officer, Vice Chairman and a director; William T. Sandalls, Jr., Executive
Vice President; Mark N. Jacobs, Vice President, General Counsel and Secretary;
Patrice M. Kozlowski, Vice President-Corporate Communications; Mary Beth Leibig,
Vice President-Human Resources; Andrew S. Wasser, Vice-President-Information
Systems; Theodore A. Schachar, Vice President; Wendy Strutt, Vice President;
Richard Terres, Vice President; William H. Maresca, Controller; James Bitetto,
Assistant Secretary; Steven F. Newman, Assistant Secretary; and Mandell L.
Berman, Burton C. Borgelt, Frank V. Cahouet and Richard F. Syron, directors.

EXPENSES. Under the Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 1.25% of the value of the Fund's
average daily net assets. Dreyfus pays all of the Fund's expenses, except
brokerage fees, taxes, interest, fees and expenses of the non-interested
directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and expenses
of the non-interested Directors (including counsel fees), Dreyfus is
contractually required to reduce its investment management fee by an amount
equal to the Fund's allocable share of such fees and expenses. From time to
time, Dreyfus may voluntarily waive a portion of the investment management fees
payable by the Fund, which would have the effect of lowering the expense ratio
of the Fund and increasing return to investors. Expenses attributable to the
Fund are charged against the Fund's assets; other expenses of the Company are
allocated among its funds on the basis determined by the Board, including, but
not limited to, proportionately in relation to the net assets of each fund.

For the last three years, the Fund had the following expenses:

For the Fiscal Year Ended October 31,
1998 1997 1996

Management fees $____ $2,337,782 $1,035,858

THE DISTRIBUTOR. Premier Mutual Fund Services, Inc. (the "Distributor"),
located at 60 State Street, Boston, Massachusetts 02109, serves as the Fund's
distributor on a best efforts basis pursuant to an agreement which is renewable
annually. Dreyfus may pay the Distributor for shareholder services from Dreyfus'
own assets, including past profits but not including the management fee paid by
the Fund. The Distributor may use part or all of such payments to pay certain
banks, securities brokers or dealers and other financial institutions ("Agents")
for these services. The Distributor also acts as sub-administrator for the Fund
and as distributor for the other funds in the Dreyfus Family of Funds.

PURCHASE OF SHARES

B-28
<PAGE>

Class R shares are sold primarily to bank trust departments (including
Mellon Bank and its affiliates) acting on behalf of customers having a qualified
trust or investment account or relationship at such institution, or to customers
who have received and hold shares of the Fund distributed to them by virtue of
such an account or relationship. In addition, holders of Restricted shares of
the Fund as of January 15, 1998 may continue to purchase Class R shares of the
Fund whether or not they would otherwise be eligible to do so. Class R shares
may be purchased for a retirement plan only by a custodian, trustee, investment
manager or other entity authorized to act on behalf of such a plan. Institutions
effecting transactions in Class R shares for the accounts of their clients may
charge their clients direct fees in connection with such transactions.

B-29
<PAGE>

qualified or non-qualified employee benefit plans or other programs where
contributions or account information can be transmitted in a manner and form
acceptable to the Fund. The Fund reserves the right to vary further the initial
and subsequent investment minimum requirements at any time.

Fund shares are sold on a continuous basis. NAV per share is determined as
of the close of trading on the floor of the New York Stock Exchange ("NYSE")
(currently 4:00 p.m., New York time), on each day the NYSE is open for business.
For purposes of determining NAV, options and futures contracts will be valued 15
minutes after the close of trading on the floor of the NYSE. NAV per share of
each class is computed by dividing the value of the Fund's net assets
represented by such class (i.e., the value of its assets less liabilities) by
the total number of shares of such class outstanding. For further information
regarding the methods employed in valuing the Fund's investments, see
"Determination of Net Asset Value".

If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the NYSE (currently 4:00 p.m., New York time) on a
business day, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, Fund shares will be purchased at the public offering price determined
as of the close of trading on the floor of the NYSE on the next business day,
except where shares are purchased through a dealer as provided below.

Orders for the purchase of Fund shares received by dealers by the close of
trading on the floor of the NYSE on any business day and transmitted to the
Distributor or its designee by the close of its business day (normally 5:15
p.m., New York time) will be based on the public offering price per share
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, the orders will be based on the next determined NAV. It is the
dealers' responsibility to transmit orders so that they will be received by the
Distributor or its designee before the close of its business day. For certain
institutions that have entered into agreements with the Distributor, payment for
the purchase of Fund shares may be transmitted, and must be received by the
Transfer Agent, within three business days after the order is placed. If such
payment is not received within three business days after the order is placed,
the order may be canceled and the institution could be held liable for resulting
fees and/or losses.

B-30
<PAGE>

Fund's Prospectus, and, to the extent permitted by applicable regulatory
authority, may charge their clients direct fees which would be in addition to
any amounts which might be received under the Distribution and Service Plans.
Each Agent has agreed to transmit to its clients a schedule of such fees. You
should consult your Agent in this regard.

The Distributor may pay dealers a fee of up to 0.5% of the amount invested
through such dealers in Fund shares by employees participating in qualified or
non-qualified employee benefit plans or other programs where (i) the employers
or affiliated employers maintaining such plans or programs have a minimum of 250
employees eligible for participation in such plans or programs or (ii) such
plan's or program's aggregate investment in the Dreyfus Family of Funds or
certain other products made available by the Distributor to such plans or
programs exceeds $1,000,000 ("Eligible Benefit Plans"). Shares of funds in the
Dreyfus Family of Funds then held by Eligible Benefit Plans will be aggregated
to determine the fee payable. The Distributor reserves the right to cease paying
these fees at any time. The Distributor will pay such fees from its own funds,
other than amounts received from the Fund, including past profits or any other
source available to it.

Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund could subject
you to a $50 penalty imposed by the Internal Revenue Service.

CLASS A SHARES. The public offering price for Class A shares is the NAV
per share of that Class, plus, except for shareholders owning Class A shares of
the Fund on November 30, 1996, a sales load as shown below:

Total Sales Load as a % Dealers' Reallowance
AMOUNT OF TRANSACTION OF OFFERING PRICE PER AS A % OF OFFERING
SHARE PRICE
Less than $50,000............. 5.75 5.00
$50,000 to less than $100,000. 4.50 3.75
$100,000 to less than $250,000 3.50 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more............ 0 0

For shareholders who opened Fund accounts after December 19, 1994, but who
beneficially owned Class A shares on November 30, 1996, the public offering
price for Class A shares is the NAV per share of that Class plus a sales load as
shown below:

B-31
<PAGE>

Total Sales Load as a % Dealers' Reallowance
AMOUNT OF TRANSACTION OF OFFERING PRICE PER AS A % OF OFFERING
SHARE PRICE
Less than $50,000............... 4.50 4.25
$50,000 to less than $100,000. 4.00 3.75
$100,000 to less than $250,000 3.00 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more.............. 0 0

SALES LOADS -- CLASS A. The scale of sales loads applies to purchases of
Class A shares made by any "purchaser," which term includes an individual and/or
spouse purchasing securities for his, her or their own account or for the
account of any minor children, or a trustee or other fiduciary purchasing
securities for a single trust estate or a single fiduciary account (including a
pension, profit-sharing or other employee benefit trust created pursuant to a
plan qualified under Section 401 of the Internal Revenue Code of 1986, as
amended (the "Code")) although more than one beneficiary is involved; or a group
of accounts established by or on behalf of the employees of an employer or
affiliated employers pursuant to an employee benefit plan or other program
(including accounts established pursuant to Sections 403(b), 408(k) and 457 of
the Code); or an organized group which has been in existence for more than six
months, provided that it is not organized for the purpose of buying redeemable
securities of a registered investment company and provided that the purchases
are made through a central administration or a single dealer, or by other means
which result in economy of sales effort or expense.

Set forth below is an example of the method of computing the offering
price of the Fund's Class A shares. The example assumes a purchase of Class A
shares of the Fund aggregating less than $50,000 subject to the schedule of
sales charges set forth in the Fund's Prospectus at a price based upon the NAV
of a Class A share at the close of business on October 31, 1998:

.......NAV per share $_____

.......Per Share Sales Charge - 5.75%* of offering price
....... (6.10% of NAV per share) $_____

.......Per Share Offering Price to Public $_____

- ------------------------------------------

* Class A shares purchased by shareholders beneficially owning Class A
shares on November 30, 1996, but who opened their accounts after December
19, 1994, are subject to a different sales load schedule as described
above.

Holders of Class A accounts of the Fund as of December 19, 1994 may
continue to purchase Class A shares of the Fund at NAV. However, investments by
such holders in other funds advised by Dreyfus will be subject to any applicable
front-end sales load.

B-32
<PAGE>

There is no initial sale charge on purchases of $1,000,000 or more of
Class A shares. However, if you purchase Class A shares without an initial sales
charge as part of an investment of at least $1,000,000 and redeem all or a
portion of those shares within one year of purchase, a contingent deferred sales
charge ("CDSC") of 1.00% will be assessed at the time of redemption. The
Distributor may pay Agents an amount up to 1% of the NAV of Class A shares
purchased by their clients that are subject to a CDSC. The terms contained below
under "Redemption of Shares - Contingent Deferred Sales Charge - Class B Shares"
(other than the amount of the CDSC and time periods) and "Redemption of Shares -
Waiver of CDSC" are applicable to the Class A shares subject to a CDSC. Letter
of Intent and Right of Accumulation apply to such purchases of Class A shares.

Full-time employees of NASD member firms and full-time employees of other
financial institutions which have entered into an agreement with the Distributor
pertaining to the sale of Fund shares (or which otherwise have a brokerage
related or clearing arrangement with an NASD member firm or financial
institution with respect to sales of Fund shares) may purchase Class A shares
for themselves directly or pursuant to an employee benefit plan or other
program, or for their spouses or minor children at NAV, provided that they have
furnished the Distributor with such information as it may request from time to
time in order to verify eligibility for this privilege. This privilege also
applies to full-time employees of financial institutions affiliated with NASD
member firms whose full-time employees are eligible to purchase Class A shares
at NAV. In addition, Class A shares are offered at NAV to full-time or part-time
employees of Dreyfus or any of its affiliates or subsidiaries, directors of
Dreyfus, Board members of a fund advised by Dreyfus, including members of the
Company's Board, or the spouse or minor child of any of the foregoing.

B-33
<PAGE>

investment company not managed by Dreyfus or its affiliates. The purchase of
Class A shares of the Fund must be made within 60 days of such redemption and
the shareholder must have either (i) paid an initial sales charge or a CDSC or
(ii) been obligated to pay at any time during the holding period, but did not
actually pay on redemption, a deferred sales charge with respect to such
redeemed shares.

CLASS B SHARES. The public offering price for Class B shares is the NAV
per share of that Class. No initial sales charge is imposed at the time of
purchase. A CDSC is imposed, however, on certain redemptions of Class B shares
as described in the Fund's Prospectus. The Distributor compensates certain
Agents for selling Class B shares at the time of purchase from the Distributor's
own assets. The proceeds of the CDSC and the distribution fee, in part, are used
to defray these expenses.

CLASS C SHARES. The public offering price for Class C shares is the NAV
per share of that Class. No initial sales charge is imposed at the time of
purchase. A CDSC is imposed, however, on redemptions of Class C shares made
within the first year of purchase. See "Class B Shares" above and "How to
Redeem Shares."

CLASS R SHARES. The public offering for Class R shares is the NAV per share
of that Class.

B-34
<PAGE>

"purchaser" as defined above, where the aggregate investment, including such
purchase, is $50,000 or more. If, for example, you previously purchased and
still hold Class A shares of the Fund, or shares of any other Eligible Fund or
combination thereof, with an aggregate current market value of $40,000 and
subsequently purchase Class A shares of the Fund or shares of an Eligible Fund
having a current value of $20,000, the sales load applicable to the subsequent
purchase would be reduced to 4.5% of the offering price. All present holdings of
Eligible Funds may be combined to determine the current offering price of the
aggregate investment in ascertaining the sales load applicable to each
subsequent purchase. Class A shares purchased by shareholders beneficially
owning Fund shares on November 30, 1996, but who opened their Fund accounts
after December 19, 1994, are subject to a different sales loan structure, as
described above.

To qualify for reduced sales loads, at the time of purchase you or your
Agent must notify the Distributor if orders are made by wire, or the transfer
Agent if orders are made by mail. The reduced sales load is subject to
confirmation of your holdings through a check of appropriate records.

TELETRANSFER PRIVILEGE. You may purchase Fund shares by telephone through
the TELETRANSFER Privilege if you have checked the appropriate box and supplied
the necessary information on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. The proceeds will be transferred between
the bank account designated in one of these documents and your Fund account.
Only a bank account maintained in a domestic financial institution that is an
Automated Clearing House ("ACH") member may be so designated. TELETRANSFER
purchase orders may be made at the Transfer Agent any time. Purchase orders
received by 4:00 p.m., New York time, on any business day that the Transfer
Agent and the NYSE are open for business will be credited to the shareholder's
Fund account on the next bank business day following such purchase order.
Purchase orders made after 4:00 p.m., New York time, on any business day the
Transfer Agent and the NYSE are open for business, or orders made on Saturday,
Sunday or any Fund holiday (e.g., when the NYSE is not open for business), will
be credited to the shareholder's Fund account on the second bank business day
following such purchase order. To qualify to use the TELETRANSFER Privilege, the
initial payment for purchase of Fund shares must be drawn on, and redemption
proceeds paid to, the same bank and account as are designated on the Account
Application or Shareholder Services Form on file. If the proceeds of a
particular redemption are to be wired to an account at any other bank, the
request must be in writing and signature-guaranteed. See "Redemption of Shares -
TELETRANSFER Privilege." The Fund may modify or terminate this Privilege at any
time or charge a service fee upon notice to shareholders. No such fee currently
is contemplated.

B-35
<PAGE>

The basis of the exchange will depend upon the relative NAVs of the shares
purchased and securities exchanged. Securities accepted by the Fund will be
valued in the same manner as the Fund values its assets. Any interest earned on
the securities following their delivery to the Fund and prior to the exchange
will be considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities become the property of
the Fund, along with the securities. For further information about "in-kind"
purchases, call 1-800-645-6561.

SHARE CERTIFICATES. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.

DISTRIBUTION AND SERVICE PLANS

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "YOUR INVESTMENT."

Class A, Class B and Class C shares are subject to annual fees for
distribution and shareholder services.

DISTRIBUTION PLAN--CLASS A SHARES. The Company has adopted a Distribution
Plan pursuant to the Rule with respect to the Class A shares of the Fund ("Class
A Plan"), whereby Class A shares of the Fund may spend annually up to 0.25% of
the average of its net assets to compensate Dreyfus Service Corporation, an
affiliate of Dreyfus, for shareholder servicing activities and the Distributor
for shareholder servicing activities and expenses primarily intended to result
in the sale of Class A shares of the Fund. The Class A Plan allows the
Distributor to make payments from the Rule 12b-1 fees it collects from the Fund
to compensate Agents that have entered into Selling Agreements
("Agreements") with the Distributor. Under the Agreements, the Agents are
obligated to provide distribution related services with regard to the Fund
and/or shareholder services to the Agent's clients that own Class A shares of
the Fund.

B-36
<PAGE>

indirect financial interest in the operation of the Class A Plan, cast in person
at a meeting called for the purpose of considering such amendments. The Class A
Plan is subject to annual approval by the entire Board of Directors and by the
Directors who are neither interested persons nor have any direct or indirect
financial interest in the operation of the Class A Plan, by vote cast in person
at a meeting called for the purpose of voting on the Class A Plan. The Class A
Plan was so approved by the Directors at a meeting held on _________________ .
The Class A Plan is terminable, as to the Fund's Class A shares, at any time by
vote of a majority of the Directors who are not interested persons and have no
direct or indirect financial interest in the operation of the Class A Plan or by
vote of the holders of a majority of the outstanding shares of such class of the
Fund.

DISTRIBUTION AND SERVICE PLANS -- CLASS B AND CLASS C SHARES. In addition
to the above described current Class A Plan for Class A shares, the Board of
Directors has adopted a Service Plan (the "Service Plan") under the Rule for
Class B and Class C shares, pursuant to which the Fund pays the Distributor and
Dreyfus Service Corporation a fee at the annual rate of 0.25% of the value of
the average daily net assets of Class B and Class C shares for the provision of
certain services to the holders of Class B and Class C shares. The services
provided may include personal services relating to shareholder accounts, such as
answering shareholder inquiries regarding the Fund and providing reports and
other information, and providing services related to the maintenance of such
shareholder accounts. With regard to such services, each Agent is required to
disclose to its clients any compensation payable to it by the Fund and any other
compensation payable by its clients in connection with the investment of their
assets in Class B and Class C shares. The Distributor may pay one or more Agents
in respect of services for these Classes of shares. The Distributor determines
the amounts, if any, to be paid to Agents under the Service Plan and the basis
on which such payments are made. The Company's Board of Directors has also
adopted a Distribution Plan pursuant to the Rule with respect to Class B and
Class C shares (the "Distribution Plan") pursuant to which the Fund pays the
Distributor for distributing the Fund's Class B and Class C shares at an
aggregate annual rate of 0.75% of the value of the average daily net assets of
Class B and Class C shares. The Company's Board of Directors believes that there
is a reasonable likelihood that the Distribution and Service Plans (the "Plans")
will benefit the Fund and the holders of Class B shares and Class C shares.

A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may not be
amended to increase materially the cost which holders of Class B or Class C
shares may bear pursuant to the Plan without the approval of the holders of such
Classes and that other material amendments of the Plan must be approved by the
Board of Directors and by the Directors who are not interested persons of the
Fund and have no direct or indirect financial interest in the operation of the
Plan or in any agreements entered into in connection with the Plan, by vote cast
in person at a meeting called for the purpose of considering such amendments.
Each Plan is subject to annual approval by such vote of the Directors cast in
person at a meeting called for the purpose of voting on the Plan. Each Plan was
so approved by the Directors at a meeting held on . Each Plan may be terminated
at any time by vote of a majority of the Directors who are not interested

B-37
<PAGE>

persons and have no direct or indirect financial interest in the operation of
the Plan or in any agreements entered into in connection with the Plan or by
vote of the holders of a majority of Class B shares and Class C shares.

An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one Class of
shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under the Distribution and Service Plans are payable
without regard to actual expenses incurred. The Fund and the Distributor may
suspend or reduce payments under the Distribution and Service Plans at any time,
and payments are subject to the continuation of the Fund's Plans and the
Agreements described above. From time to time, the Agents, the Distributor and
the Fund may voluntarily agree to reduce the maximum fees payable under the
Plans.

REDEMPTION OF SHARES

The Fund imposes no charges (other than any applicable CDSC) when shares
are redeemed. Agents may charge their clients a nominal fee for effecting
redemptions of Fund shares. Any certificates representing Fund shares being
redeemed must be submitted with the redemption request. The value of the shares
redeemed may be more or less than their original cost, depending upon the Fund's
then-current NAV.

B-38
<PAGE>

for clients of certain Agents and institutions. The Fund makes available to
certain large institutions the ability to issue redemption instructions through
compatible computer facilities. The Fund reserves the right to refuse any
request made by telephone, including requests made shortly after a change of
address, and may limit the amount involved or the number of such requests. The
Fund may modify or terminate any redemption privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is contemplated.
Shares held under Keogh Plans, IRAs, or other retirement plans, and shares for
which certificates have been issued, are not eligible for the TELETRANSFER
Privilege.

You may redeem Fund shares by telephone if you have checked the
appropriate box on the Account Application or have filed a Shareholder Services
Form with the Transfer Agent. If you select the TeleTransfer redemption
privilege or telephone exchange privilege, which is granted automatically unless
you refuse it, you authorize the Transfer Agent to act on telephone instructions
(including over The Dreyfus Touch(R) automated telephone system) froM any person
representing himself or herself to be you, or a representative of your Agent,
and reasonably believed by the Transfer Agent to be genuine. The Fund will
require the Transfer Agent to employ reasonable procedures, such as requiring a
form of personal identification, to confirm that instructions are genuine and,
if it does not follow such procedures, the Fund or the Transfer Agent may be
liable for any losses due to unauthorized or fraudulent instructions. Neither
the Fund nor the Transfer Agent will be liable for following telephone
instructions reasonably believed to be genuine.

REDEMPTION THROUGH A SELECTED DEALER. Customers of Selected Dealers may
make redemption requests to their Selected Dealer. If the Selected Dealer
transmits the redemption request so that it is received by the Transfer Agent
prior to the close of trading on the floor of the NYSE (currently 4:00 p.m., New
York time), the redemption request will be effective on that day. If a
redemption request is received by the Transfer Agent after the close of trading
on the floor of the NYSE, the redemption request will be effective on the next
business day. It is the responsibility of the Selected Dealer to transmit a
request so that it is received in a timely manner. The proceeds of the
redemption are credited to your account with the Selected Dealer.

B-39
<PAGE>

The Selected Dealer may charge the shareholder a fee for executing the order.
This repurchase arrangement is discretionary and may be withdrawn at any time.

STOCK CERTIFICATES; SIGNATURES. Any certificates representing Fund shares
to be redeemed must be submitted with the redemption request. Written redemption
requests must be signed by each shareholder, including each holder of a joint
account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations,
as well as from participants in the NYSE Medallion Signature Program, the
Securities Transfer Agents Medallion Program ("STAMP") and the Stock Exchanges
Medallion Program. Guarantees must be signed by an authorized signatory of the
guarantor and "Signature-Guaranteed" must appear with the signature. The
Transfer Agent may request additional documentation from corporations,
executors, administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular verification.
For more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.

REDEMPTION COMMITMENT. The Company has committed itself to pay in cash all
redemption requests by any shareholder of record of the Fund, limited in amount
during any 90 day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the SEC. In the case of requests for
redemptions in excess of such amount, the Company's Board reserves the right to
make payments in whole or in part in securities or other assets in case of an
emergency or any time a cash distribution would impair the liquidity of the Fund

B-40
<PAGE>

to the detriment of the existing shareholders. In such event, the securities
would be valued in the same manner as the Fund's portfolio is valued. If the
recipient sold such securities, brokerage charges might be incurred.

SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or the
date of payment postponed (a) during any period when the NYSE is closed (other
than customary weekend and holiday closings), (b) when trading in the markets
the Fund ordinarily utilizes is restricted, or when an emergency exists as
determined by the SEC so that disposal of the Fund's investments or
determination of its NAV is not reasonably practicable, or (c) for such other
periods as the SEC by order may permit to protect the Fund's shareholders.

If the aggregate value of the Class B shares redeemed has declined below
their original cost as a result of the Fund's performance, a CDSC may be applied
to the then-current NAV rather than the purchase price.

In circumstances where the CDSC is imposed, the amount of the charge will
depend on the number of years from the time you purchased the Class B shares
until the time of redemption of such shares. Solely for purposes of determining
the number of years from the time of any payment for the purchase of Class B
shares, all payments during a month will be aggregated and deemed to have been
made on the first day of the month.

In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible rate.
It will be assumed that the redemption is made first of amounts representing
shares acquired pursuant to the reinvestment of dividends and distributions;
then of amounts representing the increase in NAV of Class B shares above the
total amount of payments for the purchase of Class B shares made during the
preceding six years; then of amounts representing the cost of shares purchased
six years prior to the redemption; and finally, of amounts representing the cost
of shares held for the longest period of time within the applicable six-year
period.

B-41
<PAGE>

which represents appreciation ($260). Therefore, $240 of the $500 redemption
proceeds ($500 minus $260) would be charged at a rate of 4% (the applicable rate
in the second year after purchase) for a total CDSC of $9.60.

For purposes of determining the applicable CDSC payable with respect to
redemption of Class B shares of the Fund where such shares were acquired through
exchange of Class B shares of another fund advised by Dreyfus, the year since
purchase payment was made is based on the date of purchase of the original Class
B shares of the fund exchanged.

CONTINGENT DEFERRED SALES CHARGE - CLASS C SHARES. A CDSC of 1% payable to
the Distributor is imposed on any redemption of Class C shares within one year
of the date of purchase. The basis for calculating the payment of any such CDSC
will be the method used in calculating the CDSC for Class B shares. See
"Contingent Deferred Sales Charge - Class B Shares" above.

WAIVER OF CDSC. - The CDSC will be waived in connection with (a)
redemptions made within one year after the death or disability, as defined in
Section 72(m)(7) of the Code, of the shareholder, (b) redemptions by employees
participating in Eligible Benefit Plans, (c) redemptions as a result of a
combination of any investment company with the Fund by merger, acquisition of
assets or otherwise, (d) a distribution following retirement under a
tax-deferred retirement plan or upon attaining age 70 1/2 in the case of an IRA
or Keogh plAN or custodial account pursuant to Section 403(b) of the Code, and
(e) redemptions pursuant to the Automatic Withdrawal Plan, as described below.
If the Company's Board determines to discontinue the waiver of the CDSC, the
disclosure herein will be revised appropriately. Any Fund shares subject to a
CDSC which were purchased prior to the termination of such waiver will have the
CDSC waived as provided in the Prospectus or this Statement of Additional
Information at the time of the purchase of such shares.

SHAREHOLDER SERVICES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES" AND
"SERVICES FOR FUND INVESTORS."

FUND EXCHANGES. Shares of any Class of the Fund may be exchanged for
shares of the respective Class of certain other funds advised or administered by
Dreyfus. Shares of the same Class of such other funds purchased by exchange will
be purchased on the basis of relative NAV per share as follows:

A. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.

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<PAGE>

B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the applicable
sales load will be deducted.

C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a sales
load.

E. Shares of funds subject to a CDSC that are exchanged for shares
of another fund will be subject to the higher applicable CDSC of the
two funds and, for purposes of calculating CDSC rates and conversion
periods, if any, will be deemed to have been held since the date the
shares being exchanged were initially purchased.

To request an exchange, an investor or an investor's Agent acting on the
investor's behalf must give exchange instructions to the Transfer Agent in
writing or by telephone. The ability to issue exchange instructions by telephone
is given to all Fund shareholders automatically unless the investor checks the
applicable "No" box on the Account Application, indicating that the investor
specifically refuses this privilege. The Telephone Exchange Privilege may be
established for an existing account by written request signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-554-4611, or by oral request from any of the
authorized signatories on the account, also by calling 1-800-554-4611. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent to
act on telephonic instructions (including over The Dreyfus Touch(R) automated
telephone system) from any person representinG himself or herself to be the
investor or a representative of the investor's Agent, and reasonably believed by
the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange. No fees currently are charged shareholders directly in connection with
exchanges, although the Fund reserves the right, upon not less than 60 days'
written notice, to charge shareholders a nominal fee in accordance with rules
promulgated by the SEC.

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<PAGE>

Exchanges of Class R shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such investor's
Retirement Plan account in another fund.

DREYFUS AUTO-EXCHANGE PRIVILEGE. The Dreyfus Auto-Exchange Privilege
permits an investor to regularly purchase (on a semi-monthly, monthly, quarterly
or annual basis), in exchange for shares of the Fund, shares of the same Class
of certain other funds in the Dreyfus Premier Family of Funds or the Dreyfus
Family of Funds of which the investor is a shareholder. The amount the investor
designates, which can be expressed either in terms of a specific dollar or share
amount ($100 minimum), will be exchanged automatically on the first and/or
fifteenth day of the month according to the schedule the investor has selected.
This Privilege is available only for existing accounts. With respect to Class R
shares held by a Retirement Plan, exchanges may be made only between the
investor's Retirement Plan account in one fund and such investor's Retirement
Plan account in another fund. Shares will be exchanged on the basis of relative
NAV as described above under "Fund Exchanges." Enrollment in or modification or
cancellation of this Privilege is effective three business days following
notification by the investor. An investor will be notified if the investor's
account falls below the amount designated to be exchanged under this Privilege.
In this case, an investor's account will fall to zero unless additional
investments are made in excess of the designated amount prior to the next
Auto-Exchange transaction. Shares held under IRAs and other retirement plans are
eligible for this Privilege. Exchanges of IRA shares may be made between IRA
accounts and from regular accounts to IRA accounts, but not from IRA accounts to
regular accounts. With respect to all other retirement accounts, exchanges may
be made only among those accounts.

The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to Dreyfus Premier Small
Company Stock Fund Family of Funds, P.O. Box 6587, Providence, Rhode Island
02940-9671. The Fund may charge a service fee for the use of this Privilege. No
such fee currently is contemplated. for more invomration concerning this
Privilege and the funds in the Dreyfus Premier Family of funds or the Dreyfus
Family of Funds elegible to participate in this privilege, or to obtain a
Dreyfus Auto-Exchange Authorization Form, please call toll free 1-800 554-4611.

Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-554-4611. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund Exchange service or the Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.

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<PAGE>

in this Privilege or change the amount of purchase at any time by mailing
written notification to Dreyfus Premier Small Company Stock Fund, P.O. Box 6587,
Providence, Rhode Island 02940-6587 and the notification will be effective three
business days following receipt. The Fund may modify or terminate this Privilege
at any time or charge a service fee. No such fee currently is contemplated.

AUTOMATIC WITHDRAWAL PLAN. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends and shares
distributions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by filing an Automatic
Withdrawal Plan application with the Transfer Agent or by oral request from any
of the authorized signatories on the account by calling 1-800-554-4611.
Automatic Withdrawal may be terminated at any time by the investor, the Fund or
the Transfer Agent. Shares for which certificates have been issued may not be
redeemed through the Automatic Withdrawal Plan.

DIVIDEND OPTIONS. Dreyfus Dividend Sweep allows investors to invest
automatically their dividends or dividends and other distributions, if any, from
the Fund in shares of the same Class of certain other funds in the Dreyfus
Premier Family of Funds or the Dreyfus Family of Funds of which the investor is
a shareholder. Shares of the same Class of other funds purchased pursuant to
this Privilege will be purchased on the basis of relative NAV per share as
follows:

A. Dividends and other distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that are
offered without a sales load.

B-45
<PAGE>

B. Dividends and other distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds sold
with a sales load, and the applicable sales load will be deducted.

D. Dividends and other distributions paid by a fund may be invested
in shares of other funds that impose a CDSC and the applicable CDSC,
if any, will be imposed upon redemption of such shares.

For more information concerning these Privileges, or to request a Dreyfus
Dividend Options Form, please call toll free 1-800-554-4611. You may cancel
these Privileges by mailing a written notification to Dreyfus Premier Small
Company Stock Fund, P.O. Box 6587, Providence Rhode Island, 02940-6587. To
select a new fund after cancellation, you must submit a new Dividend Options
Form. Enrollment in or cancellation of these privileges is effective three
business days following receipt. These privileges are available only for
existing accounts and may not be used to open new accounts. Minimum subsequent
investments do not apply for Dreyfus Dividend Sweep. The Fund may modify or
terminate these privileges at any time or charge a service fee. No such fee
currently is contemplated. Shares held under Keogh Plans, IRAs or other
retirement plans are not eligible for Dreyfus Dividend Sweep.

DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social Security or
certain veterans', military or other payments from the Federal government
automatically deposited into your Fund account. You may deposit as much of such
payments as you elect. You should consider whether Direct Deposit of your entire
payment into a fund with fluctuating NAV, such as the Fund, may be appropriate
for you. To enroll in Dreyfus Government Direct Deposit, you must file with the
Transfer Agent a completed Direct Deposit Sign-Up Form for each type of payment
that you desire to include in this Privilege. The appropriate form may be
obtained from your Agent or by calling 1-800-554-4611. Death or legal incapacity
will terminate your participation in this Privilege. You may elect at any time
to terminate your participation by notifying in writing the appropriate Federal
agency. Further, the Fund may terminate your participation upon 30 days' notice
to you.

B-46
<PAGE>

The Transfer Agent will hold in escrow 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if you do not purchase the
full amount indicated in the Letter of Intent. The escrow will be released when
you fulfill the terms of the Letter of Intent by purchasing the specified
amount. If your purchases qualify for a further sales load reduction, the sales
load will be adjusted to reflect your total purchase at the end of 13 months. If
total purchases are less than the amount specified, you will be requested to
remit an amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If such
remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will redeem an
appropriate number of Class A shares of the Fund held in escrow to realize the
difference. Signing a Letter of Intent does not bind you to purchase, or the
Fund to sell, the full amount indicated at the sales load in effect at the time
of signing, but you must complete the intended purchase to obtain the reduced
sales load. At the time you purchase Class A shares, you must indicate your
intention to do so under a Letter of Intent. Purchases pursuant to a Letter of
Intent will be made at the then-current NAV plus the applicable sales load in
effect at the time such Letter of Intent was executed.

RETIREMENT PLANS. The Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs and
Education IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support
services also are available. You can obtain details on the various plans by
calling the following numbers toll free: for Keogh Plans, please call
1-800-358-5566; for IRAs and IRA "Rollover Accounts," please call
1-800-554-4611; for SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans,
please call 1-800-322-7880.

Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.

B-47
<PAGE>

SHARES MAY BE PURCHASED IN CONNECTION WITH THESE PLANS ONLY BY DIRECT
REMITTANCE TO THE ENTITY ACTING AS CUSTODIAN. PURCHASES FOR THESE PLANS MAY NOT
BE MADE IN ADVANCE OF RECEIPT OF FUNDS.

ADDITIONAL INFORMATION ABOUT PURCHASES, EXCHANGES AND REDEMPTIONS

The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculation on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to the
Fund's performance and its shareholders. Accordingly, if the Fund's management
determines that an investor is engaged in excessive trading, the Fund, with or
without prior notice, may temporarily or permanently terminate the availability
of Fund Exchanges, or reject in whole or part any purchase or exchange request,
with respect to such investor's account. Such investors also may be barred from
purchasing other funds in the Dreyfus Family of Funds. Generally, an investor
who makes more than four exchanges out of the Fund during any calendar year or
who makes exchanges that appear to coincide with an active market-timing
strategy may be deemed to be engaged in excessive trading. Accounts under common
ownership or control will be considered as one account for purposes of
determining a pattern of excessive trading. In addition, the Fund may refuse or
restrict purchase or exchange requests by any person or group if, in the
judgment of the Fund's management, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies or could
otherwise be adversely affected or if the Fund receives or anticipates receiving
simultaneous orders that may significantly affect the Fund (e.g., amounts equal
to 1% or more of the Fund's total assets). If an exchange request is refused,
the Fund will take no other action with respect to the shares until it receives
further instructions from the investor. The Fund may delay forwarding redemption
proceeds for up to seven days if the investor redeeming shares is engaged in
excessive trading or if the amount of the redemption request otherwise would be
disruptive to efficient portfolio management or would adversely affect the Fund.
The Fund's policy on excessive trading applies to investors who invest in the
Fund directly or through financial intermediaries, but does not apply to the

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<PAGE>

Dreyfus Auto-Exchange Privilege, to any automatic investment or withdrawal
privilege described herein, or to participants in employer-sponsored retirement
plans.

DETERMINATION OF NET ASSET VALUE

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES."

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<PAGE>

public market exists usually will be valued at market value less the same
percentage discount at which purchased. This discount will be revised
periodically by the Board of Directors if it believes that the discount no
longer reflects the value of the restricted securities. Restricted securities
not of the same class as securities for which a public market exists usually
will be valued initially at cost. Any subsequent adjustment from cost will be
based upon considerations deemed relevant by the Board of Directors.

DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "DISTRIBUTIONS AND TAXES."

GENERAL. The Fund ordinarily declares and pays dividends from its net
investment income, if any, four times yearly, and distributes net realized
capital gains, if any, once a year, but it may make distributions on a more
frequent basis to comply with the distribution requirements of the Code, in all
events in a manner consistent with the provisions of the 1940 Act. The Fund will
not make distributions from net realized capital gains unless all capital loss
carryovers, if any, have been utilized or have expired. Investors other than
qualified retirement plans may choose whether to receive dividends and other
distributions in cash, to receive dividends in cash and reinvest other
distributions in additional Fund shares at NAV, or to reinvest both dividends
and other distributions in additional Fund shares at NAV; dividends and other
distributions paid to qualified retirement plans are reinvested automatically in
additional Fund shares at NAV. All expenses are accrued daily and deducted
before declaration of dividends to investors. Dividends and other distributions
paid by each Class are calculated at the same time and in the same manner and
will be in the same amount, except that the expenses attributable solely to a
particular Class are borne exclusively by that Class. Class B and Class C shares
will receive lower per share dividends than Class A shares, which will in turn
receive lower per share dividends than Class R shares, because of the higher
expenses borne by the relevant Classes.

It is expected that the Fund will qualify for treatment as a regulated
investment company ("RIC") under the Internal Revenue Code of 1986, as amended
("Code") so long as such qualification is in the best interests of its
shareholders. Such qualification will relieve the Fund of any liability for
Federal income tax to the extent its earnings and realized gains are distributed
in accordance with applicable provisions of the Code. To qualify for treatment
as a RIC under the Code, the Fund -- which is treated as a separate corporation
for federal tax purposes -- (1) must distribute to its shareholders each year at
least 90% of its investment company taxable income (generally consisting of net
investment income, net short-term capital gains and net gains from certain
foreign currency transactions) (the "Distribution Requirement"), (2) must derive
at least 90% of its annual gross income from specified sources (the "Income
Requirement"), and (3) must meet certain asset diversification and other
requirements. The term "regulated investment company" does not imply the
supervision of management or investment practices or policies by any government
agency.

B-50
<PAGE>

Dividends derived from net investment income, together with distributions
from net realized short-term capital gains and all or a portion of any gains
realized from the sale or other disposition of certain market discount bonds
(collectively, "dividend distributions"), paid by the Fund will be taxable to
U.S. shareholders, including certain non-qualified retirement plans, as ordinary
income to the extent of the Fund's earnings and profits, whether received in
cash or reinvested in additional Fund shares. Distributions from net capital
gain (the excess net of long-term capital gain over net short-term capital loss)
will be taxable to such shareholders as long-term capital gains regardless of
how long the shareholders have held their Fund shares and whether such
distributions are received in cash or reinvested in additional Fund shares.

Dividend distributions paid by the Fund to a non-resident foreign investor
generally are subjected to U.S. withholding tax at the rate of 30%, unless the
foreign investor claims the benefit of a lower rate specified in a tax treaty.
Distributions from net capital gain paid by the Fund to a non-resident foreign
investor, as well as the proceeds of any redemptions by such an investor,
regardless of the extent to which gain or loss may be realized, generally are
not subject to U.S. withholding tax. However, such distributions may be subject
to backup withholding, as described below, unless the foreign investor certifies
his or her non-U.S. residency status.

Notice as to the tax status of your dividends and other distributions will
be mailed to you annually. You also will receive periodic summaries of your
account that will include information as to dividends and distributions from net
capital gain, if any, paid during the year. The annual tax notice and periodic
account summaries you will receive designate the portions of capital gain
distributions that are subject to (1) the 20% maximum rate of tax (10% for
investors in the 15% marginal tax bracket) enacted by the Taxpayer Relief Act of
1997 ("Tax Act"), which applies to non-corporate taxpayers' net capital gain on
securities and other capital assets held for more than 18 months, and (2) the
28% maximum tax rate, applicable to such gain on capital assets held for more
than one year and up to 18 months (which, prior to enactment of the Tax Act,
applied to all such gain on capital assets held for more than one year).

The Code provides for the "carryover" of some or all of the sales load
imposed on Class A shares if (1) a shareholder redeems those shares or exchanges
those shares for shares of another fund advised or administered by Dreyfus
within 90 days of purchase and (2) in the case of a redemption, acquires other
Fund Class A shares through exercise of the Reinvestment Privilege or, in the
case of an exchange, such other fund reduces or eliminates its otherwise
applicable sales load for the purpose of the exchange. In these cases, the
amount of the sales load charged on the purchase of the original Class A shares,
up to the amount of the reduction of sales load pursuant to the Reinvestment
Privilege or on the exchange, as the case may be, is not included in the basis
of such shares for purposes of computing gain or loss on the redemption or the

B-51
<PAGE>

exchange and instead is added to the basis of the shares acquired pursuant to
the Reinvestment Privilege or the exchange.

Dividends and other distributions paid by the Fund to qualified retirement
plans ordinarily will not be subject to taxation until the proceeds are
distributed from the retirement plans. The Fund will not report to the IRS
distributions paid to such plans. Generally, distributions from qualified
retirement plans, except those representing returns of non-deductible
contributions thereto, will be taxable as ordinary income and, if made prior to
the time the participant reaches age 59 1/2, generally will be subject to aN
additional tax equal to 10% of the taxable portion of the distribution. If the
distribution from such a retirement plan (other than certain governmental or
church plans) for any taxable year following the year in which the participant
reaches age 70 1/2 is lesS than the "minimum required distribution" for that
taxable year, an excise tax equal to 50% of the deficiency may be imposed by the
IRS. The administrator, trustee or custodian of such a retirement plan will be
responsible for reporting distributions from such plans to the IRS. Moreover,
certain contributions to a qualified retirement plan in excess of the amounts
permitted by law may be subject to an excise tax. If a distributee of an
"eligible rollover distribution" from a qualified retirement plan does not elect
to have the eligible rollover distribution paid directly from the plan to an
eligible retirement plan in a "direct rollover," the eligible rollover
distribution will be subject to a 20% income tax withholding.

The Fund must withhold and remit to the U.S. treasury ("backup
withholding") 31% of dividends, capital gain distributions and redemption
proceeds, regardless of the extent to which gain or loss may be realized, paid
to an individual or certain other non-corporate shareholder if such shareholder
fails to certify that the TIN furnished to the Fund is correct. Backup
withholding at that rate also is required from dividends and capital gain
distributions payable to such a shareholder if (1) that shareholder fails to
certify that he or she has not received notice from the IRS of being subject to
backup withholding as a result of a failure properly to report taxable dividend
or interest income on a Federal income tax return or (2) the IRS notifies the
Fund to institute backup withholding because the IRS determines that the
shareholder's TIN is incorrect or that the shareholder has failed properly to
report such income.

The Fund may be subject to a non-deductible 4% excise tax, measured with
respect to certain undistributed amounts of taxable income and capital gains.

Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares below
the cost of his or her investment. Such a dividend or other distribution would
be a return on investment in an economic sense, although taxable as stated in
the Fund's Prospectus. In addition, if a shareholder sells shares of the Fund
held for six months or less and receives a capital gain distribution with
respect to those shares, any loss incurred on the sale of those shares will be

B-52
<PAGE>

treated as a long-term capital loss to the extent of the capital gain
distribution received.

Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a date
in any of those months are deemed to have been paid by the Fund and received by
the shareholders on December 31 of that year if the distributions are paid by
the Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.

FOREIGN TAXES. Dividends and interest received by the Fund may be subject
to income, withholding or other taxes imposed by foreign countries and U.S.
possessions that would reduce the yield on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate these
foreign taxes, however, and many foreign countries do not impose taxes on
capital gains in respect of investments by foreign investors. If more than 50%
of the value of the Fund's total assets at the close of its taxable year
consists of securities of foreign corporations, it will be eligible to, and may,
file an election ("Election") with the Internal Revenue Service that will enable
its shareholders, in effect, to receive the benefit of the foreign tax credit
with respect to any foreign or U.S. possessions' income taxes paid by it.
Pursuant to the Election, the Fund would treat those taxes as dividends paid to
its shareholders and each shareholder would be required to (1) include in gross
income, and treat as paid by him or her, his or her proportionate share of those
taxes, (2) treat his or her share of those taxes and of any dividend paid by the
Fund that represents income from foreign or U.S. possession sources as his or
her own income from those sources and (3) either deduct the taxes deemed paid by
him or her in computing his or her taxable income or, alternatively, use the
foregoing information in calculating the foreign tax credit against his or her
federal income tax. No deduction for foreign taxes may be claimed by a
shareholder who does not itemize deductions. Generally, a credit for foreign
taxes may not exceed the shareholder's federal income tax attributable to his
total foreign source taxable income. The Fund will report to its shareholders
shortly after each taxable year their respective shares of the income from
sources within, and taxes paid to, foreign countries and U.S. possessions if it
makes the Election.

FOREIGN CURRENCY, FUTURES, FORWARD AND HEDGING TRANSACTIONS. Gains from
the sale or other disposition of foreign currencies (except certain gains
therefrom that may be excluded by future regulations), and gains from options,
futures and forward contracts derived by the Fund with respect to its business
of investing in securities or foreign currencies, will qualify as permissible
income under the Income Requirement. However, income from the disposition of
options and futures contracts (other than those on foreign currencies) will be
subject to the Short-Short Limitation if they are held for less than three
months. Income from the disposition of foreign currencies, and options, futures

B-53
<PAGE>

and forward contracts thereon, that are not directly related to the Fund's
principal business of investing in securities (or options and futures with
respect to securities) also will be subject to the Short-Short Limitation if
they are held for less than three months.

If the Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether the Fund satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of that limitation. The Fund
will consider whether it should seek to qualify for this treatment for its
hedging transactions. To the extent the Fund does not so qualify, it may be
forced to defer the closing out of certain options, futures, forward contracts
and foreign currency positions beyond the time when it otherwise would be
advantageous to do so, in order for the Fund to qualify as a RIC.

Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gain and loss. However, a portion of the gain or loss from
the disposition of foreign currencies and certain foreign-currency-denominated
instruments (including debt instruments and financial forward, futures and
option contracts) may be treated as ordinary income or loss under Section 988 of
the Code. In addition, all or a portion of any gain realized from the sale or
other disposition of certain market discount bonds will be treated as ordinary
income. Moreover, all or a portion of the gain realized from engaging in
"conversion transactions" that otherwise would be valued as capital gain may be
treated as ordinary income under Section 1258 of the Code. "Conversion
transactions" are defined to include certain forward, futures, option and
straddle transactions, transactions marketed or sold as producing capital gains
and transactions described in Treasury regulations to be issued in the future.

Offsetting positions held by the Fund involving certain contracts or
options may constitute "straddles," which are defined to include "offsetting
positions" in actively traded personal property. The tax treatment of straddles
is governed by Sections 1092 and, to the extent noted above, 1258 of the Code
which in certain circumstances override or modify Sections 1256 and 988. As a
result, all or a portion of any capital gain from certain straddle transactions
may be recharacterized to ordinary income. If the Fund were treated as entering
into straddles by reason of its engaging in certain forward contracts or options
transactions, such straddles would be characterized as "mixed straddles" if the
forward contracts or options transactions comprising a part of such straddles
were governed by Section 1256. The Fund may make one or more elections with
respect to mixed straddles. Depending on which election is made, if any, the

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<PAGE>

results to the Fund may differ. If no election is made, then to the extent the
straddle and conversion transactions rules apply to positions established by the
Fund, losses realized by the Fund will be deferred to the extent of unrealized
gain in the offsetting position. Moreover, as a result of the straddle rules,
short-term capital loss on straddle positions may be recharacterized as
long-term capital loss, and long-term capital gains may be treated as short-term
capital gains or ordinary income.

PASSIVE FOREIGN INVESTMENT COMPANIES. The Fund may invest in the stock of
"passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation that, in general, meets either of the following tests: (1) at least
75% of its gross income is passive or (2) an average of at least 50% of its
assets produce, or are held for the production of, passive income. Under certain
circumstances, the Fund will be subject to federal income tax on a portion of
any "excess distribution" received on the stock of a PFIC or of any gain on
disposition of the stock (collectively "PFIC income"), plus interest thereon,
even if the Fund distributes the PFIC income as a taxable dividend to its
shareholders. The balance of the PFIC income will be included in the Fund's
investment company taxable income and, accordingly, will not be taxable to it to
the extent that income is distributed to its shareholders. If the Fund invests
in a PFIC and elects to treat the PFIC as "qualified electing fund," then in
lieu of the foregoing tax and interest obligation, the Fund would be required to
include in income each year its pro rata share of the qualified electing fund's
annual ordinary earnings and net capital gain (the excess of net long-term
capital gain over net short-term capital loss) -- which probably would have to
be distributed to satisfy the Distribution Requirement and avoid imposition of
the 4% excise tax referred to in the Fund's Prospectus under "Dividends, Other
Distributions and Taxes" -- even if those earnings and gain were not received by
the Fund.

Pursuant to proposed regulations, open-end RICs, such as the Fund, would
be entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).

STATE AND LOCAL TAXES. Depending upon the extent of the Fund's activities
in states and localities in which it is deemed to be conducting business, the

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<PAGE>

Fund may be subject to the tax laws thereof. Shareholders are advised to consult
their tax advisers concerning the application of state and local taxes.

FOREIGN SHAREHOLDERS - U.S. FEDERAL INCOME TAXATION. U.S. federal income
taxation of a shareholder who, as to the United States, is a non-resident alien
individual, a foreign trust or estate, a foreign corporation or a foreign
partnership (a "foreign shareholder"), depends on whether the income from the
Fund is "effectively connected" with a U.S. trade or business carried on by the
shareholder, as discussed generally below. Special U.S. federal income tax rules
that differ from those described below may apply to certain foreign persons who
invest in the Fund, such as a foreign shareholder entitled to claim the benefits
of an applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in the Fund.

FOREIGN SHAREHOLDERS - INCOME NOT EFFECTIVELY CONNECTED. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the foreign
shareholder generally will be subject to a U.S. federal withholding tax of 30%
(or lower treaty rate). Capital gains realized by foreign shareholders on the
sale of Fund shares and distributions to them of net capital gain (the excess of
net long-term capital gain over net short-term capital loss) generally will not
be subject to U.S. federal income tax unless the foreign shareholder is a
non-resident alien individual and is physically present in the United States for
more than 182 days during the taxable year. In the case of certain foreign
shareholders, the Fund may be required to withhold U.S. federal income tax at a
rate of 31% of capital gain distributions and of the gross proceeds from a
redemption of Fund shares unless the shareholder furnishes the Fund with a
certificate regarding the shareholder's foreign status.

FOREIGN SHAREHOLDERS - EFFECTIVELY CONNECTED INCOME. If a foreign
shareholder's ownership of Fund shares is effectively connected with a U.S.
trade or business carried on by a foreign shareholder, then all distributions to
that shareholder and any gains realized by that shareholder on the disposition
of the Fund shares will be subject to U.S. federal income tax at the graduated
rates applicable to U.S. citizens and domestic corporations, as the case may be.
Foreign shareholders also may be subject to the branch profits tax.

B-56
<PAGE>

PORTFOLIO TRANSACTIONS

B-57
<PAGE>

brokerage firms for similar services. During the fiscal years ended October 31,
1998, 1997 and 1996, the Fund paid brokerage commissions of $______, $ and
$_____, respectively, to affiliates of Dreyfus or Mellon Bank. The amount paid
to affiliated brokerage firms during the fiscal years ended October 31, 1998,
1997 and 1996, was approximately ____%, ____% and ____%, respectively, of the
aggregate brokerage commissions paid by the Fund, for transactions involving
approximately ____%, ____% and ____%, respectively, of the aggregate dollar
volume of transactions for which the Fund paid brokerage commissions. The
difference in these percentages was due to the lower commissions paid to
affiliates of Dreyfus.

When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated in
accordance with a formula considered by Dreyfus to be equitable to each account.
In some cases this system could have a detrimental effect on the price or volume
of the investment instrument as far as the Fund is concerned. In other cases,
however, the ability of the Fund to participate in volume transactions will
produce better executions for the Fund. While the Directors will continue to
review simultaneous transactions, it is their present opinion that the
desirability of retaining Dreyfus as investment manager to the Fund outweighs
any disadvantages that may be said to exist from exposure to simultaneous
transactions.

For the fiscal years ended October 31, 1998, 1997 and 1996, the Fund paid
brokerage commissions amounting to $______, $347,777 and $179,990, respectively.

PORTFOLIO TURNOVER. Under normal market conditions, the Fund's portfolio
turnover rate is expected to be less than 100%. A portfolio turnover rate of
100% would occur, for example, if all the securities held by the Fund were
replaced once in a period of one year. A higher rate of portfolio turnover
involves correspondingly greater brokerage commissions and other expenses that
must be borne directly by the Fund and, thus, indirectly by its shareholders. In
addition, a higher rate of portfolio turnover may result in the realization of
larger amounts of short-term capital gains that, when distributed to the Fund's
shareholders, are taxable to them as ordinary income. Nevertheless, securities
transactions for the Fund will be based only upon investment considerations and
will not be limited by any other considerations when Dreyfus deems its
appropriate to make changes in the Fund's assets. The portfolio turnover rate
for the Fund is calculated by dividing the lesser of the Fund's annual sales or
purchases of portfolio securities (exclusive of purchases and sales of

B-58
<PAGE>

securities whose maturities at the time of acquisition were one year or less) by
the monthly average value of securities in the Fund during the year. Portfolio
turnover may vary from year to year as well as within a year. The portfolio
turnover rates for the fiscal years ended October 31, 1997 and 1998 were
and , respectively.

PERFORMANCE INFORMATION

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "PAST PERFORMANCE."

Average annual total returns (expressed as a percentage) for Class A
shares, Class B shares, Class C shares and Class R shares of the Fund for the
periods noted were:

AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIODS ENDED OCTOBER 31, 1998
1 YEAR INCEPTION
Class A shares _____% _____% (9/2/94)
Class B shares _____% _____% (12/19/94)
Class C shares _____% _____% (12/19/94)
Class R shares _____% _____% (9/2/94)

Inception date appears in parentheses following the average annual total return
since inception.

The foregoing chart assumes, where applicable, deduction of the maximum
sales load from the hypothetical initial investment at the time of purchase and
the assessment of the maximum CDSC.

Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at NAV (maximum offering price in
the case of Class A) per share with a hypothetical $1,000 payment made at the
beginning of the period (assuming the reinvestment of dividends and other
distributions), dividing by the amount of the initial investment, taking the
"n"th root of the quotient (where "n" is the number of years in the period) and
subtracting 1 from the result. The average annual total return figures for a
Class calculated in accordance with such formula assume that, in the case of
Class A, the maximum sales load has been deducted from the hypothetical initial
investment at the time of purchase or, in the case of Class B or Class C, the
maximum applicable CDSC has been paid upon redemption at the end of the period.

The Fund's total return for the period September 2, 1994 (commencement of
operations) to October 31, 1998 for Class R was ____%. The Fund's total return
for Class A for the period September 2, 1994 (commencement of operations) to
October 31, 1998 was ____%. Based on NAV per share, the total return for Class A
was ____% for this period. The Fund's total return for Class B and Class C for
the period from December 19, 1994 (inception date of Class B and Class C)
through October 31, 1998 was ____% and ____%, respectively. Without giving
effect to the applicable CDSC, total return for Class B and Class C was ____%
and ____%, respectively.

B-59
<PAGE>

Total return is calculated by subtracting the amount of the Fund's NAV
(maximum offering price in the case of Class A) per share at the beginning of a
stated period from the NAV (maximum offering price in the case of Class A) per
share at the end of the period (after giving effect to the reinvestment of
dividends and other distributions during the period and any applicable CDSC),
and dividing the result by the NAV (maximum offering price in the case of Class
A) per share at the beginning of the period. Total return also may be calculated
based on the NAV per share at the beginning of the period instead of the maximum
offering price per share at the beginning of the period for Class A shares or
without giving effect to any applicable CDSC at the end of the period for Class
B or Class C shares. In such cases, the calculation would not reflect the
deduction of the sales load with respect to Class A shares or any applicable
CDSC with respect to Class B or Class C shares, which, if reflected would reduce
the performance quoted.

From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market. From time to
time, advertising materials for the Fund may refer to Morningstar ratings and
related analyses supporting the rating.

INFORMATION ABOUT THE FUND

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "THE FUND."

The Company has an authorized capitalization of 25 billion shares of $0.001
per value stock.

B-60
<PAGE>

meeting of shareholders for the purpose of electing Board members if, at any
time, less than a majority of the Board members then holding office have been
elected by shareholders.

The Fund will send annual and semi-annual financial statements to all of
its shareholders.

TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS

Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Company,
Dreyfus Transfer, Inc. arranges for the maintenance of shareholder account
records for the Fund, the handling of certain communications between
shareholders and the Fund, and the payment of dividends and distributions
payable by the Fund. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses.

____________________, 1800 Massachusetts Avenue, N.W., Second Floor,
Washington, D.C. 20036-1800, has passed upon the legality of the shares offered
by the Prospectus and this Statement of Additional Information.

B-61
<PAGE>

FINANCIAL STATEMENTS

The financial statements for the fiscal year ended October 31, 1998,
including notes to the financial statements and supplementary information, and
the Independent Auditors' Report are included in the Annual Report to
shareholders. A copy of the Annual Report accompanies this Statement of
Additional Information. The financial statements included in the Annual Report,
and the Independent Auditors' Report thereon contained therein, and related
notes, are incorporated herein by reference.

B-62
<PAGE>

APPENDIX

DESCRIPTION OF STANDARD AND POOR'S, MOODY'S, FITCH IBCA
AND DUFF RATINGS

STANDARD & POOR'S ("S&P")

BOND RATINGS

AAA An obligation rated 'AAA' has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.

AA An obligation rated 'AA' differs from the highest rated issues only
in small degree. The obligors capacity to meet its financial
commitment on the obligation is very strong.

B-63
<PAGE>

CC An obligation rated 'CC' is currently highly vulnerable to
nonpayment.

C The 'C' rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.

The ratings from 'AA' to 'CCC' may be modified by the addition of a plus
(+) or a minus (-) sign to show relative standing within the major rating
categories

NOTE RATINGS

SP-1 Strong capacity to pay principal and interest. An issue determined
to possess a very strong capacity to pay debt service is given a
plus (+) designation.

SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the term
of the notes.

SP-3 Speculative capacity to pay principal and interest.

B-63A
<PAGE>

COMMERCIAL PAPER RATINGS

An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than 365 days.

A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high
as for issuers designated 'A-1.'

B Issues rated 'B' are regarded as having only speculative capacity
for timely payment.

C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.

MOODY'S

BOND RATINGS

B-64
<PAGE>

amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.

Caa Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect
to principal or interest.

Ca Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked short-comings.

C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.

NOTES AND OTHER SHORT-TERM OBLIGATIONS

B-65
<PAGE>

MIG-2/
MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.

B-66
<PAGE>

COMMERCIAL PAPER RATING

Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated issuers:

o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
o Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
o Well-established access to a range of financial markets
and assured sources of alternate liquidity.

B-67
<PAGE>

may require relatively high financial leverage. Adequate alternative
liquidity is maintained.

FITCH IBCA

BOND RATINGS

CCC,CC,C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained,
favorable business or economic developments. A 'CC' rating indicates
that default of some kind appears probable. 'C' ratings signal
imminent default.

B-68
<PAGE>

DDD, DD,
and D Default. Securities are not meeting current obligations and are
extremely speculative. 'DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For U.S.
corporates, for example, 'DD' indicates expected recovery of 50% - 90
of such outstandings, and 'D' the lowest recovery potential, i.e.
below 50%.

SHORT-TERM AND COMMERCIAL PAPER RATINGS

F-1+ Highest credit quality. Indicates the strongest capacity for timely
payment of financial commitments; may have an added "+" to denote
any exceptionally strong credit feature.

F-2 Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as
in the case of the higher ratings.

F-3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could
result in a reduction to non-investment grade.

B Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in
financial and economic conditions.

C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.

D Default. Denotes actual or imminent payment default.

B-69
<PAGE>

DUFF & PHELPS INC. ("DUFF & PHELPS")

LONG-TERM RATINGS

AAA Highest credit quality. The risks factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.

AA+ High credit quality. Protection factors are strong. Risk is modest
but AA may vary slightly from time to time because of economic
conditions.
AA-

A+ Protections factors are average but adequate. However, risk factors
are A more variable and greater in periods of economic stress.
A-

BBB+ Below-average protection factors but still considered sufficient
for prudent BBB investment. Considerable variability in risk during
economic cycles.
BBB-

DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.

SHORT-TERM AND COMMERCIAL PAPER RATINGS

B-70
<PAGE>

D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk
factors are minor.

D-1- High certainly of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are
very small.

D-3 Satisfactory liquidity and other protection factors qualify issues
as to investment grade. Risk factors are larger and subject to more
variation. Nevertheless, timely payment is expected.

D-4 Speculative investment characteristics. Liquidity is not sufficient
to insure against disruption in debt service. Operating factors and
market access may be subject to a high degree of variation.

D-5 Issuer failed to meet scheduled principal and/or interest payments.

B-71
<PAGE>
Dreyfus Premier Midcap Stock Fund

Investing in midcap stocks for investment returns that exceed the S&P 400

PROSPECTUS March 1, 1999

(reg.tm)

<PAGE>

The Fund

Dreyfus Premier Midcap Stock Fund
---------------------------------

Ticker Symbols CLASS A: XXXXX

CLASS B: XXXXX

CLASS C: XXXXX

CLASS R: XXXXX

Contents

The Fund
- --------------------------------------------------------------------------------

Goal/Approach INSIDE COVER

Main Risks 1

Past Performance 1

Expenses 2

Management 3

Financial Highlights 4

Your Investment
- --------------------------------------------------------------------------------

Account Policies 6

Distributions and Taxes 8

Services for Fund Investors 9

Instructions for Regular Accounts 10

Instructions for IRAs 11

For More Information
- --------------------------------------------------------------------------------

INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.

GOAL/APPROACH

The fund seeks investment returns (consisting of capital appreciation and
income) that are consistently superior to the Standard & Poor's 400 Midcap
Index((reg.tm)) (S&P 400). This objective may be changed without shareholder
approval. To pursue its goal, the fund invests at least 65% of total assets in a
blended portfolio of growth and value stocks of medium-size companies, those
whose market values range between $200 million and $5 billion. Stocks are chosen
through a disciplined process combining computer modelling techniques,
fundamental analysis and risk management. Consistency of returns and stability
of the fund's share price compared to the S&P 400 are primary goals of the
process.

Dreyfus uses a computer model to identify and rank stocks within an industry or
sector based on:

.. VALUE, or how a stock is priced relative to its perceived intrinsic
worth

.. GROWTH, in this case the sustainability or growth of earnings

.. FINANCIAL PROFILE, which measures the financial health of the company

Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities, drawing on information technology as well as Wall Street
sources and company management.

Then Dreyfus manages risk by diversifying across companies and industries,
limiting the potential adverse impact from any one stock or industry. The fund
is structured so that its sector weightings and risk characteristics, such as
growth, size, quality and yield, are similar to those of the S&P 400.

Concepts to understand

MIDCAP COMPANIES: established companies that may not be well known. Midcap
companies have the potential to grow faster than large-cap companies, but may
lack the resources to weather economic shifts, and are more volatile than large
companies.

COMPUTER MODEL: a proprietary computer model that evaluates and ranks a universe
of 2,000 stocks. Dreyfus reviews each of the screens on a regular basis. Dreyfus
also maintains the flexibility to adapt the screening criteria to changes in
market and economic conditions.

INSIDE COVER

<PAGE>

MAIN RISKS

Midsize companies carry additional risks because their earnings tend to be less
predictable, their share prices more volatile and their securities less liquid
than larger, more established companies. Some of the fund's investments will
rise and fall based on investor perception rather than economics.

Although the fund seeks to manage risk by broadly diversifying among industries
and by maintaining a risk profile very similar to the S&P 400 Index, the fund is
expected to hold fewer securities than the index. Owning fewer securities and
the ability to purchase companies not listed in the index can cause the fund to
underperform the index.

By investing in a mix of growth and value companies, the fund assumes the risks
of both and may achieve more modest gains than funds that use only one
investment style. Because the stock prices of growth companies are based in part
on future expectations, they may fall sharply if earnings expectations are not
met or investors believe the prospects for a stock, industry or the economy in
general are weak. Growth stocks also typically lack the dividend yield that
could cushion stock prices in market downturns. With value stocks, there is the
risk that they may never reach what the manager believes is their full market
value, or that their intrinsic values may fall. While investments in value
stocks may limit downside risk over time, they may produce smaller gains than
riskier stocks.

Other potential risks

The fund may invest in options and futures to hedge the fund's portfolio and
also to increase returns. There is the risk that such practices may reduce
returns or increase volatility.

PAST PERFORMANCE

The first table shows how the performance of the fund's Class R shares has
varied from year to year. The second table compares the performance of each
share class over time to that of the S&P 400, a widely recognized unmanaged
index of midcap stock performance. These returns reflect any applicable sales
loads. Both tables assume the reinvestment of dividends and distributions. As
with all mutual funds, the past is not a prediction of the future.
- --------------------------------------------------------------------------------

Year-by-year total return AS OF 12/31 EACH YEAR (%)

BEST QUARTER: QX 'XX X.XX%

WORST QUARTER: QX 'XX X.XX%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

Average annual total return AS OF 12/31/98
<CAPTION>
<S> <C> <C> <C> <C>

Inception date 1 Year 5 Years Life of fund
- ------------------------------------------------------------------------------------------------------------------------------------

CLASS A (4/6/94) X.XX% -- --

CLASS B (1/16/98) -- -- --

CLASS C (1/16/98) -- -- --

CLASS R (11/12/93) X.XX% X.XX% X.XX%

S&P 400
MIDCAP INDEX X.XX% X.XX% X.XX%*

</TABLE>

* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 10/31/93 IS USED AS THE
BEGINNING VALUE ON 11/12/93.

What this fund is -- and isn't

The Fund 1
<PAGE>

EXPENSES

As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
<TABLE>
<CAPTION>

<S> <C> <C> <C> <C>
Fee table

CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------------------------------------------

SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)

Maximum sales charge on purchases

AS A % OF OFFERING PRICE 5.75 NONE NONE NONE

Maximum deferred sales charge (CDSC)

ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)

% OF AVERAGE DAILY NET ASSETS

Management fees 1.10 1.10 1.10 1.10

12b-1 fee .25 1.00 1.00 NONE

Other expenses .00 .00 .00 .00
- ------------------------------------------------------------------------------------------------------------------------------------

TOTAL 1.35 2.10 2.10 1.10

* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1
MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF REDEEMED WITHIN ONE YEAR.

Expense example

1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------

CLASS A $0,000 $0,000 $0,000 $0,000

CLASS B
WITH REDEMPTION $0,000 $0,000 $0,000 $0,000**
WITHOUT REDEMPTION $0,000 $0,000 $0,000 $0,000**

CLASS C
WITH REDEMPTION $0,000 $0,000 $0,000 $0,000
WITHOUT REDEMPTION $0,000 $0,000 $0,000 $0,000

CLASS R $0,000 $0,000 $0,000 $0,000
</TABLE>

** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.

This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. Because actual
return and expenses will be different, the example is for comparison only.

Concepts to understand

<PAGE>

MANAGEMENT

The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages one of the nation's
leading mutual fund complexes, with more than $112 billion in more than 160
mutual fund portfolios. Dreyfus is the mutual fund business of Mellon Bank
Corporation, a broad-based financial services company with a bank at its core.
With more than $350 billion of assets under management and $1.7 trillion of
assets under administration and custody, Mellon provides a full range of
banking, investment and trust products and services to individuals, businesses
and institutions. Its mutual fund companies place Mellon as the leading bank
manager of mutual funds. Mellon is headquartered in Pittsburgh, Pennsylvania.

Management philosophy

Portfolio manager

John O'Toole has managed the fund since its inception and has been employed by
Dreyfus as a portfolio manager since October 1994. Mr. O'Toole is a senior vice
president and a portfolio manager for Mellon Equity Associates. He has been
employed by Mellon Bank since 1979.

Concepts to understand

Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.

The Fund 3

<PAGE>

FINANCIAL HIGHLIGHTS

The following tables describe the performance of each share class 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
independently audited by_____________, whose report, along with the fund's
financial statements, is included in the annual report.

YEAR ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C>

CLASS A 1998 1997 1996 1995 1994(1)
- ------------------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period 14.36 11.92 9.75 10.00

Investment operations: Investment income (loss) -- net .02 .04 .09 .05

Net realized and unrealized gain (loss) on investments 4.79 2.98 2.17 (.26)

Total from investment operations 4.81 3.02 2.26 (.21)

Distributions: Dividends from investment income -- net (.01) (.05) (.09) (.04)

Dividends from net realized gain on investments (2.14) (.53) -- --

Total distributions (2.15) (.58) (.09) (.04)

Net asset value, end of period 17.02 14.36 11.92 9.75

Total return (%)(2) 38.40 26.29 23.39 (2.06)(3)
- ------------------------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) 1.35 1.35 1.35 .80(3)

Ratio of net investment income (loss) to average net assets (%) .16 .28 .86 .42(3)

Portfolio turnover rate (%) 81.87 90.93 71.00 83.00(3)
- ------------------------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 6,847 3,205 1,417 54

(1) FOR THE PERIOD FROM APRIL 6, 1994 THROUGH OCTOBER 31, 1994.

(2) EXCLUSIVE OF SALES LOAD.(

(3) NOT ANNUALIZED.

PERIOD ENDED
OCTOBER 31,
CLASS B 1998(1)
- ------------------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period

Investment operations: Investment income (loss) -- net

Net realized and unrealized gain (loss) on investments

Total from investment operations

Net asset value, end of period

Total return (%)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%)

Ratio of net investment income (loss) to average net assets (%)

Portfolio turnover rate (%)
- --------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000)

(1) FOR THE PERIOD FROM JANUARY 16, 1998 THROUGH OCTOBER 31, 1998.

(2) NOT ANNUALIZED.

(3) EXCLUSIVE OF SALES LOAD.

4A
<PAGE>

PERIOD ENDED
OCTOBER 31,
CLASS C 1998(1)
- --------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period

Investment operations: Investment income (loss) -- net

Net realized and unrealized gain (loss) on investments

Total from investment operations

Net asset value, end of period

Total return (%)
<TABLE>
<CAPTION>

- ------------------------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%)

Ratio of net investment income (loss) to average net assets (%)

Portfolio turnover rate (%)
- --------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000)

(1) FOR THE PERIOD FROM JANUARY 16, 1998 THROUGH OCTOBER 31, 1998.

(2) NOT ANNUALIZED.

(3) EXCLUSIVE OF SALES LOAD.

YEAR ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C>

CLASS R 1998 1997 1996 1995 1994(1)
- ------------------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period 14.36 11.92 9.76 10.00

Investment operations: Investment income -- net .05 .07 .12 .09(2)

Net realized and unrealized gain (loss)
on investments 4.80 2.98 2.16 (.27)

Total from investment operations 4.85 3.05 2.28 (.18)

Distributions: Dividends from investment income -- net (.04) (.08) (.12) (.06)

Dividends from net realized gain on investments (2.14) (.53) -- --

Total distributions (2.18) (.61) (.12) (.06)

Net asset value, end of period 17.03 14.36 11.92 9.76

Total return (%) 38.88 26.61 23.57 (1.77)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) 1.10 1.10 1.10 1.13(3,4)

Ratio of net investment income to average net assets (%) .42 .57 1.11 .95(3)

Portfolio turnover rate (%) 81.87 90.93 71.00 83.00(3)
- ------------------------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 31,769 15,644 12,129 18,169

(1) FOR THE PERIOD FROM NOVEMBER 12, 1993 THROUGH OCTOBER 31, 1994.

(2) NET INVESTMENT INCOME BEFORE REIMBURSEMENT OF EXPENSES BY THE INVESTMENT ADVISER FOR THE PERIOD ENDED OCTOBER 31, 1994 WAS
$0.06.

(3) NOT ANNUALIZED.

(4) ANNUALIZED EXPENSE RATIO BEFORE VOLUNTARY REIMBURSEMENT OF EXPENSES BY THE INVESTMENT ADVISER FOR THE PERIOD ENDED OCTOBER 31,
1994 WAS 1.48%.
</TABLE>

The Fund

<PAGE>
Your Investment

ACCOUNT POLICIES

.. Class A shares can be the most cost-effective choice, if you are
investing for the long term, especially if you are investing
$50,000 or more.

.. Class B shares can make sense if you have a long time horizon and are
investing less than $50,000.

.. Class C shares may be appropriate if you have a shorter or less certain
time horizon and are investing less than $50,000.

.. Class R shares are designed for eligible institutions on behalf of
their clients. Individuals may not purchase these shares directly.

Share class charges

EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay a sales charge to buy or sell shares. Contact your financial representative
or the SAI to see if this may apply to you. Shareholders owning Class A shares
on January 15, 1998 are not subject to any front-end sales loads.
- --------------------------------------------------------------------------------

Sales charges

CLASS A -- CHARGED WHEN YOU BUY SHARES

Sales charge Sales charge as
deducted as a % a % of your
Your investment of offering price net investment
- --------------------------------------------------------------------------------

Up to $49,999 5.75% 6.10%

$50,000 -- $99,999 4.50% 4.70%

$100,000 -- $249,999 3.50% 3.60%

$250,000 -- $499,999 2.50% 2.60%

$500,000 -- $999,999 2.00% 2.00%

$1 million or more* 0.00% 0.00%

* A 1.00% contingent deferred sales charge may be charged on any shares sold
within one year of purchase (except shares bought through reinvestment).

6
<PAGE>

Class A shares also carry an annual Rule 12b-1 fee of 0.25% of the class's
average net assets.
- --------------------------------------------------------------------------------

CLASS B -- CHARGED WHEN YOU SELL SHARES

Up to 2 years 4.00%

2 -- 4 years 3.00%

4 -- 5 years 2.00%

5 -- 6 years 1.00%

More than 6 years Shares will automatically
convert to Class A

Class B shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------

CLASS C -- CHARGED WHEN YOU SELL SHARES

CLASS R -- NO SALES LOAD OR RULE 12B-1 FEES

Reduced Class A sales charge

LETTER OF INTENT: lets you purchase Class A shares over a 13-month period and
receive the same sales charge as if all shares had been purchased at once.

RIGHT OF ACCUMULATION: lets you add the value of any Class A shares you already
own to the amount of your next Class A investment for purposes of calculating
the sales charge.

CONSULT THE STATEMENT OF ADDITIONAL INFORMATION (SAI) OR YOUR FINANCIAL
REPRESENTATIVE FOR MORE DETAILS.

<PAGE>

Buying shares

Minimum investments

Initial Additional
- --------------------------------------------------------------------------------

REGULAR ACCOUNTS $1,000 $100; $500 FOR
TELETRANSFER INVESTMENTS

TRADITIONAL IRAS $750 NO MINIMUM

SPOUSAL IRAS $750 NO MINIMUM

ROTH IRAS $750 NO MINIMUM

EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST YEAR

DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS

All investments must be in U.S. dollars. Third-party checks cannot be accepted.
You may be charged a fee for any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.

Concepts to understand

Selling shares

7
<PAGE>

Written sell orders

Some circumstances require written sell orders along with signature guarantees.
These include:

.. amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days

.. requests to send the proceeds to a different payee or address

Written sell orders of $100,000 or more must also be signature guaranteed.

Your Investment
7A

<PAGE>

ACCOUNT POLICIES (CONTINUED)

General policies

IF YOUR ACCOUNT FALLS BELOW $500, the fund may ask you to increase your balance.
If it is still below $500 after 45 days, the fund may close your account and
send you the proceeds.

UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.

THE FUND RESERVES THE RIGHT TO:

.. refuse any purchase or exchange request that could adversely affect the
fund or its operations, including those from any individual or group who,
in the fund's view, is likely to engage in excessive trading (usually
defined as more than four exchanges out of the fund within a calendar year)

.. refuse any purchase or exchange request in excess of 1% of the fund's
total assets

.. change or discontinue its exchange privilege, or temporarily suspend
this privilege during unusual market conditions

.. change its minimum investment amounts

.. delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or
during unusual market conditions)

DISTRIBUTIONS AND TAXES

THE FUND GENERALLY PAYS ITS SHAREHOLDERS dividends from its net investment
income, and distributes any net capital gains that it has realized once a year.
Each share class will generate a different dividend because each has different
expenses. Your distributions will be reinvested in the fund unless you instruct
the fund otherwise. There are no fees or sales charges on reinvestments.

Taxability of distributions

Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------

INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE

SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE

LONG-TERM
CAPITAL GAINS 10% 20%

Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.

Taxes on transactions

Except between tax-deferred accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.

<PAGE>

SERVICES FOR FUND INVESTORS

Automatic services

For investing

DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.

DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.

DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
- --------------------------------------------------------------------------------

For exchanging shares

DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
- --------------------------------------------------------------------------------

For selling shares

DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds. There will be no CDSC
on Class B shares, as long as the amounts
withdrawn do not exceed 12% annually
of the account value at the time the
shareholder elects to participate in the
plan.

Exchange privilege

YOU CAN EXCHANGE SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one class of the fund into the same class of another Dreyfus Premier fund.
You can request your exchange by contacting your financial representative. Be
sure to read the current prospectus for any fund into which you are exchanging
before investing. Any new account established through an exchange will have the
same privileges as your original account (as long as they are available). There
is currently no fee for exchanges, although you may be charged a sales load when
exchanging into any fund that has a higher one.

TeleTransfer privilege

Reinvestment privilege

Account statements

EVERY FUND INVESTOR automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.

Your Investment

9
<PAGE>

INSTRUCTIONS FOR REGULAR ACCOUNTS

TO OPEN AN ACCOUNT

In Writing

Complete the application.

Mail your application and a check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing

TO ADD TO AN ACCOUNT

Fill out an investment slip, and write your account number on your check.

Mail the slip and the check to:
Name of Fund
P.O. Box 6587
Providence, RI 02940-6587
Attn: Institutional Processing

By Telephone

WIRE Have your bank send your
investment to Boston Safe Deposit & Trust Co., with these instructions:

* ABA# 011001234

* DDA# 044210

* the fund name

* the share class

* your Social Security or tax ID number

* name(s) of investor(s)

* dealer number if applicable

Call us to obtain an account number. Return your application with the account
number on the application.

WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:

* ABA# 011001234

* DDA# 044210

* the fund name

* the share class

* your account number

* name(s) of investor(s)

* dealer number if applicable

ELECTRONIC CHECK Same as wire, but before your account number insert "4040" for
Class A, "4700" for Class B, "4710" for Class C, "4030" for Class R

TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.

Automatically

WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.

10
<PAGE>

TO SELL SHARES

Write a letter of instruction that includes:

* your name(s) and signature(s)

* your account number

* the fund name

* the dollar amount you want to sell

* how and where to send the proceeds

Obtain a signature guarantee or other documentation, if required (see page 9).

Mail your request to:
The Dreyfus Family of Funds
P.O. Box 6587
Providence, RI 02940-6587
Attn: Institutional Processing

WIRE Call us or your financial representative to request your transaction. Be
sure the fund has your bank account information on file. Proceeds will be wired
to your bank.

TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.

CHECK Call us or your financial representative to request your transaction. A
check will be sent to the address of record.

AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative to request a
form to add the plan. Complete the form, specifying the amount and frequency of
withdrawals you would like.

Be sure to maintain an account balance of $5,000 or more.

Concepts to understand

10A

<PAGE>

INSTRUCTIONS FOR IRAS

TO OPEN AN ACCOUNT

In Writing

Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.

Mail your application and a check to:
The Dreyfus Trust Company, custodian
P.O. Box 6427
Providence, RI 02940-6427
Attn: Institutional Processing

TO ADD TO AN ACCOUNT

Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.

Mail in the slip and the check to:
The Dreyfus Trust Company
P.O. Box 6427
Providence, RI 02940-6427
Attn: Institutional Processing

By Telephone
------------

WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:

* ABA# 011001234

* DDA# 044210

* the fund name

* the share class

* your account number

* name of investor

* the contribution year

* dealer number if applicable

ELECTRONIC CHECK Same as wire, but before your account number insert "4040" for
Class A, "4700" for Class B, "4710" for Class C, "4030" for Class R

Automatically
-------------

TO SELL SHARES

Write a letter of instruction that includes:

* your name and signature

* your account number and fund name

* the dollar amount you want to sell

* how and where to send the proceeds

* whether the distribution is qualified or premature

* whether the 10% TEFRA should be withheld

11
<PAGE>

Obtain a signature guarantee or other documentation, if required (see page 9).

Mail in your request to:
The Dreyfus Trust Company
P.O. Box 6427
Providence, RI 02940-6427
Attn: Institutional Processing

------------------------

SYSTEMATIC WITHDRAWAL PLAN Call us to request instructions to establish the
plan.

For information and assistance, contact your financial representative or call
toll free in the U.S. 1-800-554-4611. Make checks payable to: THE DREYFUS TRUST
COMPANY, CUSTODIAN

Your Investment

<PAGE>

For More Information

Dreyfus Premier Midcap Stock Fund
- --------------------------------------

SEC file number: 811-5270

More information on this fund is available free upon request, including the
following:

Annual/Semiannual Report

Describes the fund's performance, lists portfolio holdings and contains a letter
from the fund's manager discussing recent market conditions, economic trends
and fund strategies that significantly affected the fund's performance during
the last fiscal year.

Statement of Additional Information (SAI)

Provides more details about the fund and its policies. A current SAI is on file
with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).

To obtain information:

BY TELEPHONE Call your financial representative or 1-800-554-4611

BY MAIL Write to: The Dreyfus Premier Family of Funds
144 Glenn Curtiss
Boulevard Uniondale, NY 11556-0144

ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from http://www.sec.gov

(COPYRIGHT) 1999, Dreyfus Service Corporation
330/730P0399

<PAGE>

[Application p 1 here]

<PAGE>

[Application p 2 here]

<PAGE>
DREYFUS PREMIER MIDCAP STOCK FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 1999

________________________________________________________________________________

This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of the
Dreyfus Premier Midcap Stock Fund (the "Fund"), dated March 1, 1999, as it may
be revised from time to time. The Fund is a separate, diversified portfolio of
The Dreyfus/Laurel Funds, Inc., an open-end management investment company (the
"Company"), known as a mutual fund. To obtain a copy of the Fund's Prospectus,
please write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York
11556-0144, or call one of the following numbers:

Call Toll Free 1-800-554-4611
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452

TABLE OF CONTENTS
Page

Description of the Fund........................................... B-2
Management of the Fund............................................ B-17
Management Arrangements........................................... B-23
Purchase of Shares................................................ B-24
Distribution and Service Plans.................................... B-32
Redemption of Shares.............................................. B-34
Shareholder Services.............................................. B-39
Additional Information About Purchases, Exchanges and Redemptions. B-45
Determination of Net Asset Value.................................. B-46
Dividends, Other Distributions and Taxes.......................... B-47
Portfolio Transactions............................................ B-53
Performance Information........................................... B-56
Information About the Fund........................................ B-58
Transfer and Dividend Disbursing
Agent, Custodian, Counsel and Independent Auditors.............. B-59
Financial Statements.............................................. B-59
Appendix.......................................................... B-60

<PAGE>

DESCRIPTION OF THE FUND

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS OF THE FUND'S PROSPECTUS ENTITLED "GOAL/APPROACH" AND "MAIN
RISKS."

The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.

The Fund seeks investment returns that exceed those of the Standard &
Poor's 400 MidCap Index(R) ("S&P 400" Rating Services, a division of McGraw-Hill
Companies, Inc.) ("Standard & Poor's"). The S&P 400 is composed of 400 domestic
common stocks chosen by Standard & Poor's Rating Services, a division of
McGraw-Hill Companies, Inc. ("Standard & Poor's") for market size, liquidity and
industry group representation. It is a market-weighted index (stock price times
shares outstanding), with each stock affecting the S&P 400 in proportion to its
market value. The inclusion of a stock in the S&P 400 does not imply that
Standard & Poor's believes the stock to be an attractive or appropriate
investment, nor is Standard & Poor's in any way affiliated with the Fund. The
S&P 400 was created by Standard & Poor's to capture the performance of the
stocks that fall in the medium-capitalization range. The medium-capitalization
range of stocks was defined, at the original time of screening, as between $200
million and $5 billion in market value. Any medium-capitalization stocks already
included in the Standard & Poor's 500 Composite Stock Price Index (REGISTERED
TRADEMARK) ("S&P 500") were excluded from candidacy for the S&P 400. After
removal of the 500 stocks, the S&P 400 candidate population was reduced to 1,200
stocks. Standard & Poor's then subjected this smaller population to a variety of
screens and eventually the sample size was reduced to the final 400 stocks.
Standard & Poor's screened the candidate population using the following
criteria: level of trading activity, or liquidity; market value; industry group
representation; and the level of controlling interest. A limited percentage of
the S&P 400 may include Canadian securities. No other foreign securities are
eligible for inclusion.

CERTAIN PORTFOLIO SECURITIES

The following information regarding the securities that the Fund may
purchase supplements that found in the Fund's prospectus.

AMERICAN DEPOSITORY RECEIPTS ("ADRs"). The Fund may invest in U.S.
dollar-denominated ADRs. ADRs typically are issued by an American bank or trust
company and evidence ownership of underlying securities issued by foreign
companies. ADRs are traded in the United States on national securities exchanges
or in the over-the-counter market. Investment in securities of foreign issuers
presents certain risks. See "Foreign Securities."

B-2
<PAGE>

In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are supported by any of the following: (a) the full faith
and credit of the U.S. Treasury, (b) the right of the issuer to borrow an amount
limited to a specific line of credit from the U.S. Treasury, (c) the
discretionary authority of the U.S. Treasury to lend to such Government agency
or instrumentality, or (d) the credit of the instrumentality. (Examples of
agencies and instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Central Bank for Cooperatives, Federal Intermediate Credit Banks,
Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory Board,
Inter-American Development Bank, Asian-American Development Bank, Student Loan
Marketing Association, International Bank for Reconstruction and Development and
Fannie Mae). No assurance can be given that the U.S. Government will provide
financial support to the agencies or instrumentalities described in (b), (c) and
(d) in the future, other than as set forth above, since it is not obligated to
do so by law.

B-3
<PAGE>

entry transfer to the account of the Custodian. If the seller defaults, the Fund
might incur a loss if the value of the collateral securing the repurchase
agreement declines and might incur disposition costs in connection with
liquidating the collateral. In addition, if bankruptcy proceedings are commenced
with respect to the seller of a security which is the subject of a repurchase
agreement, realization upon the collateral by the Fund may be delayed or
limited. The Fund seeks to minimize the risk of loss through repurchase
agreements by analyzing the creditworthiness of the obligors under repurchase
agreements, in accordance with the Fund's credit guidelines.

B-4
<PAGE>

COMMERCIAL PAPER. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from two to 270 days. Each instrument may be backed only
by the credit of the issuer or may be backed by some form of credit enhancement,
typically in the form of a guarantee by a commercial bank. Commercial paper
backed by guarantees of foreign banks may involve additional risk due to the
difficulty of obtaining and enforcing judgments against such banks and the
generally less restrictive regulations to which such banks are subject. The Fund
will only invest in commercial paper of U.S. and foreign companies rated at the
time of purchase at least A-1 by Standard & Poor's, Prime-1 by Moody's, F-1 by
Fitch Investors Service, LLP, Duff 1 by Phoenix Duff & Phelps, Corp., or A1 by
IBCA, Inc.

BANK INSTRUMENTS. The Fund may purchase bankers' acceptances, certificates
of deposit, time deposits, and other short-term obligations issued by domestic
banks, foreign subsidiaries or foreign branches of domestic banks, domestic and
foreign branches of foreign banks, domestic savings and loan associations and
other banking institutions. Included among such obligations are Eurodollar
certificates of deposit ("ECDs"), Eurodollar time deposits ("ETDs") and Yankee
Dollar certificates of deposit ("Yankee CDs"). ECDs are U.S. dollar-denominated
certificates of deposit issued by foreign branches of domestic banks. ETDs are
U.S. dollar-denominated time deposits in a foreign branch of a U.S. bank or a
foreign bank. Yankee CDs are certificates of deposit issued by a U.S. branch of
a foreign bank denominated in U.S. dollars and held in the United States. The
Fund may also invest in Eurodollar bonds and notes, which are obligations that
pay principal and interest in U.S. dollars held in banks outside the United
States, primarily in Europe. All of these obligations are subject to somewhat
different risks than are the obligations of domestic banks or issuers in the
United States. See "Foreign Securities."

B-5
<PAGE>

this limitation (irrespective of any legal or contractual restrictions on
resale.) The Fund may invest in commercial obligations issued in reliance on the
so-called "private placement" exemption from registration afforded by Section
4(2) of the Securities Act of 1933, as amended ("Section 4(2) paper"). The Fund
may also purchase securities that are not registered under the Securities Act of
1933, as amended, but that can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities"). Liquidity
determinations with respect to Section 4(2) paper and Rule 144A securities will
be made by the Board of Directors or by Dreyfus pursuant to guidelines
established by the Board of Directors. The Board or Dreyfus will consider
availability of reliable price information and other relevant information in
making such determinations. Section 4(2) paper is restricted as to disposition
under the federal securities laws, and generally is sold to institutional
investors, such as the Fund, that agree that they are purchasing the paper for
investment and not with a view to public distribution. Any resale by the
purchaser must be pursuant to registration or an exemption therefrom. Section
4(2) paper normally is resold to other institutional investors like the Fund
through or with the assistance of the issuer or investment dealers who make a
market in the Section 4(2) paper, thus providing liquidity. Rule 144A securities
generally must be sold to other qualified institutional buyers. If a particular
investment in Section 4(2) paper or Rule 144A securities is not determined to be
liquid, that investment will be included within the percentage limitation on
investment in illiquid securities. The ability to sell Rule 144A securities to
qualified institutional buyers is a recent development and it is not possible to
predict how this market will mature. Investing in Rule 144A securities could
have the effect of increasing the level of Fund illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in purchasing
these securities from the Fund or other holder.

INVESTMENT TECHNIQUES

BORROWING. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.

B-6
<PAGE>

B-6A
<PAGE>

payable on the loaned securities, which affords the Fund an opportunity to earn
interest on the amount of the loan and on the loaned securities' collateral.
Loans of portfolio securities may not exceed 33-1/3% of the value of the Fund's
total assets and the Fund will receive collateral consisting of cash, U.S.
Government securities or irrevocable letters of credit which will be maintained
at all times in an amount equal to at least 100% of the current market value of
the loaned securities. These loans are terminable by the Fund at any time upon
specified notice. The Fund might experience loss if the institution to which it
has lent its securities fails financially or breaches its agreement with the
Fund. In addition, it is anticipated that the Fund may share with the borrower
some of the income received on the collateral for the loan or that it will be
paid a premium for the loan. In determining whether to lend securities, the Fund
considers all relevant factors and circumstances including the creditworthiness
of the borrower.

FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS. The Fund may purchase
and sell various financial instruments ("Derivative Instruments"), including
financial futures contracts (such as index futures contracts) and options (such
as options on U.S. and foreign securities or indices of such securities). The
index Derivative Instruments the Fund may use may be based on indices of U.S. or
foreign equity or debt securities. These Derivative Instruments may be used, for
example, to preserve a return or spread or to facilitate or substitute for the
sale or purchase of securities.

B-7
<PAGE>

to acquire. If the Fund does not complete the hedge by purchasing the security
it anticipated purchasing, the effect on the Fund's portfolio is the same as if
the transaction were entered into for speculative purposes.

B-8
<PAGE>

B-9
<PAGE>

(5) The purchase and sale of Derivative Instruments could result in a
loss if the counterparty to the transaction does not perform as expected and may
increase portfolio turnover rates, which results in correspondingly greater
commission expenses and transaction costs, and may result in certain tax
consequences.

COVER FOR DERIVATIVE INSTRUMENTS. Transactions using Derivative
Instruments may expose the Fund to an obligation to another party. The Fund will
not enter into any such transactions unless it owns either (1) an offsetting
("covered") position in securities, futures or options or (2) cash and
short-term liquid debt securities with a value sufficient at all times to cover
its potential obligations to the extent not covered as provided in (1) above.
The Fund will comply with SEC guidelines regarding cover for Derivative
Instruments and will, if the guidelines so require, set aside cash, U.S.
Government securities or other liquid, high-grade debt securities in a
segregated account with its custodian in the prescribed amount.

Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open, unless
they are replaced with other appropriate assets. As a result, the commitment of
a large portion of the Fund's assets to cover or segregated accounts could
impede portfolio management or the Fund's ability to meet redemption requests or
other current obligations.

OPTIONS. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser the
right to sell, and obligates the writer to buy, the underlying investment at the
agreed upon exercise price during the option period. A purchaser of an option
pays an amount, known as the premium, to the option writer in exchange for
rights under the option contract.

B-10
<PAGE>

Writing put options can serve as a limited long hedge because increases
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the investment depreciates
to a price lower than the exercise price of the put option, it can be expected
that the put option will be exercised and the Fund will be obligated to purchase
the investment at more than its market value.

The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of the
underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised have
no value and the Fund would experience losses to the extent of premiums paid for
them.

The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing purchase
transaction. Conversely, the Fund may terminate a position in a put or call
option it had purchased by writing an identical put or call option; this is
known as a closing sale transaction. Closing transactions permit the Fund to
realize profits or limit losses on an option position prior to its exercise or
expiration.

The Fund may purchase and sell both exchange-traded and over-the-counter
("OTC") options. Exchange-traded options in the United States are issued by a
clearing organization that, in effect, guarantees completion of every
exchange-traded option transaction. In contrast, OTC options are contracts
between the Fund and its counterparty (usually a securities dealer or a bank)
with no clearing organization guarantee. Thus, when the Fund purchases an OTC
option, it relies on the counterparty from whom it purchased the option to make
or take delivery of the underlying investment upon exercise of the option.
Failure by the counterparty to do so would result in the loss of any premium
paid by the Fund as well as the loss of any expected benefit of the transaction.
The Fund will enter into only those option contracts that are listed on a
national securities or commodities exchange or traded in the OTC market for
which there appears to be a liquid secondary market. The Fund will not purchase
put or call options that are traded on a national exchange in an amount
exceeding 5% of its net assets.

B-11
<PAGE>

formula price that is generally based on a multiple of the premium received for
the option plus the amount by which the option is "in-the-money."

The Fund's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. However,
there can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating directly
with the counterparty, or by a transaction in the secondary market if any such
market exists. Although the Fund will enter into OTC options only with major
dealers in unlisted options, there is no assurance that the Fund will in fact be
able to close out an OTC option position at a favorable price prior to
expiration. In the event of insolvency of the counterparty, the Fund might be
unable to close out an OTC option position at any time prior to its expiration.

The Fund may write only covered call options on securities. A call
option is covered if the Fund owns the underlying security or a call option on
the same security with a lower strike price.

B-12
<PAGE>

Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit is
reached, no trades may be made that day at a price beyond the limit. Daily price
limits do not limit potential losses because prices could move to the daily
limit for several consecutive days with little or no trading, thereby preventing
liquidation of unfavorable positions.

B-13
<PAGE>

To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for BONA FIDE hedging purposes
(as defined by the CFTC), the aggregate initial margin and premiums required to
establish those positions (excluding the amount by which options are
"in-the-money" at the time of purchase) will not exceed 5% of the liquidation
value of the Fund's portfolio, after taking into account unrealized profits and
unrealized losses on any contracts the Fund has entered into. This policy does
not limit to 5%, the percentage of the Fund's assets that are at risk in futures
contracts and options on futures contracts.

The Fund will not enter into futures contracts to the extent that its
outstanding obligations under these contracts would exceed 25% of the Fund's
total assets.

CERTAIN INVESTMENTS. From time to time, to the extent consistent with
its investment objective, policies and restrictions, the Fund may invest in
securities of companies with which Mellon Bank, N.A.
("Mellon Bank"), an affiliate of Dreyfus, has a lending relationship.

INVESTMENT RESTRICTIONS

FUNDAMENTAL. The following limitations have been adopted by the Fund.
The Fund may not change any of these fundamental investment limitations without
the consent of: (a) 67% or more of the shares present at a meeting of
shareholders duly called if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy; or (b) more than 50% of
the outstanding shares of the Fund, whichever is less. The Fund may not:

1. Purchase any securities which would cause more than 25% of the value
of the Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities, and
state or municipal governments and their political subdivisions are not
considered members of any industry. In addition, this limitation does not apply
to investments in domestic banks, including U.S. branches of foreign banks and
foreign branches of U.S. banks).

B-14
<PAGE>

6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such securities
in accordance with the Fund's investment program may be deemed an underwriting.

7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.

2. The Fund shall not purchase securities on margin, except that the
Fund may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with futures
contracts and options on futures contracts shall not constitute purchasing
securities on margin.

B-15
<PAGE>

3. The Fund shall not purchase oil, gas or mineral leases.

5. The Fund will not purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign governments or political
subdivisions thereof), including their predecessors, that have been in operation
for less than three years, if by reason thereof, the value of the Fund's
investment in securities would exceed 5% of the Fund's total assets. For
purposes of this limitation, sponsors, general partners, guarantors and
originators of underlying assets may be treated as the issuer of a security.

6. The Fund will invest no more than 15% of the value of its net assets
in illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, time deposits with maturities in excess of
seven days and other securities which are not readily marketable. For purposes
of this limitation, illiquid securities shall not include Section 4(2) Paper and
securities which may be resold under Rule 144A under the Securities Act of 1933,
provided that the Board of Directors, or its delegate, determines that such
securities are liquid based upon the trading markets for the specific security.

8. The Fund shall not purchase any security while borrowings
representing more than 5% of the Fund's total assets are outstanding.

B-16
<PAGE>

approval. Notice will be given to shareholders if this policy is changed by the
Board.

If a percentage restriction is adhered to at the time of an investment,
a later increase or decrease in such percentage resulting from a change in the
values of assets will not constitute a violation of such restriction, except as
otherwise required by the 1940 Act.

MANAGEMENT OF THE FUND

FEDERAL LAW AFFECTING MELLON BANK

The Glass-Steagall Act of 1933 prohibits national banks from engaging in
the business of underwriting, selling or distributing securities and prohibits a
member bank of the Federal Reserve System from having certain affiliations with
an entity engaged principally in that business. The activities of Mellon Bank in
informing its customers of, and performing, investment and redemption services
in connection with the Fund, and in providing services to the Fund as custodian,
as well as Dreyfus' investment advisory activities, may raise issues under these
provisions. Mellon Bank has been advised by counsel that the activities
contemplated under these arrangements are consistent with its statutory and
regulatory obligations.

Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of such
future statutes and regulations, could prevent Mellon Bank or Dreyfus from
continuing to perform all or a part of the above services for its customers
and/or the Fund. If Mellon Bank or Dreyfus were prohibited from serving the Fund
in any of its present capacities, the Board of Directors would seek an
alternative provider(s) of such services.

DIRECTORS AND OFFICERS

The Dreyfus Corporation.......................................Investment Adviser
Premier Mutual Fund Services, Inc....................................Distributor
Dreyfus Transfer, Inc.............................................Transfer Agent
Mellon Bank...............................................Custodian for the Fund

B-17
<PAGE>

DIRECTORS OF THE COMPANY

o+JOSEPH S. DIMARTINO, Chairman of the Board of the Company. Since January 1995,
Mr. DiMartino has served as Chairman of the Board for various funds in
the Dreyfus Family of Funds. He is also a Director of The Noel Group,
Inc., a venture capital company (for which from February 1995 until
November 1997, he was Chairman of the Board), The Muscular Dystrophy
Association, HealthPlan Services Corporation, a provider of marketing,
administrative and risk management services to health and other benefit
programs, Carlyle Industries, Inc. (formerly Belding Heminway Company, )
a button packager and distributor; Century Business Services, Inc.
(formerly, International Alliance Services, Inc.), a provider of various
outservicing functions for small and medium sized companies, and Career
Blazers, Inc (formerly Staffing Resources) a temporary placement agency,
Mr. DiMartino is also a Board member of 152 other funds in the Dreyfus
Family of Funds. For more than five years prior to January 1995, he was
President, a director and, until August 24, 1994, Chief Operating
Officer of Dreyfus and Executive Vice President and a director of
Dreyfus Service Corporation, a wholly-owned subsidiary of Dreyfus. From
August 1994 to December 31, 1994, he was a director of Mellon Bank
Corporation. Age: 55 years old. Address: 200 Park Avenue, New York, New
York 10166.

o*J.TOMLINSON FORT. Director of the Company; Partner, Reed, Smith, Shaw & McClay
(law firm). Age: 70 years old. Address: 204 Woodcock Drive, Pittsburgh,
Pennsylvania 15215.

o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; former Chairman of the Board
and Director, Rexene Corporation. Age: 77 years old. Address: Way Hallow
Road and Woodland Road, Sewickley, Pennsylvania 15143.

o+KENNETH A. HIMMEL. Director of the Company; former Director, The Boston
Company, Inc. ("TBC") and Boston Safe Deposit and Trust Company;
President and Chief Executive Officer, Himmel & Co., Inc.; Vice
Chairman, Sutton Place Gourmet, Inc.; Managing Partner, Franklin Federal

B-18
<PAGE>

Partners. Age: 52 years old. Address: 625 Madison Avenue, New York, New
York 10022.

o+JOHN J. SCIULLO. Director of the Company; Dean Emeritus and Professor of Law,
Duquesne University Law School; Director, Urban Redevelopment Authority
of Pittsburgh; Member of Advisory Committee, Decedents Estates Laws of
Pennsylvania. Age: 67 years old. Address: 321 Gross Street, Pittsburgh,
Pennsylvania 15224.

o+BENAREE PRATT WILEY. Director of the Company; President and CEO of The
Partnership, an organization dedicated to increasing the representation
of African Americans in positions of leadership, influence and
decision-making in Boston, MA; Trustee, Boston College; Trustee, WGBH
Educational Foundation; Trustee, Children's Hospital; Director, The
Greater Boston Chamber of Commerce; Director, The First Albany
Companies, Inc.; from April 1995 to March 1998, Director, TBC, an
affiliate of Dreyfus. Age: 52 years old. Address: 334 Boylston Street,
Suite 400, Boston, Massachusetts.

- --------------------------------
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.

OFFICERS OF THE COMPANY

#MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior Vice
President and General Counsel of Funds Distributor, Inc. From August
1996 to March 1998, she was Vice President and Assistant General Counsel
for Loomis, Sayles & Company, L.P. From January 1986 to July 1996, she
was an associate with the law firm of Ropes & Gray. Age: 39 years old.

B-19
<PAGE>

#CHRISTOPHER J. KELLEY. Vice President and Assistant Secretary of the Company.
Vice President and Senior Associate General Counsel of Funds
Distributor, Inc. From April 1994 to July 1996, Mr. Kelley was Assistant
Counsel at Forum Financial Group. From October 1992 to March 1994, Mr.
Kelley was employed by Putnam Investments in legal and compliance
capacities. Age: 34 years old.

#MICHAEL S. PETRUCELLI. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Senior Vice President and director of
Strategic Client Initiatives of Funds Distributor, Inc. From December
1989 through November, 1996, he was employed by GE Investment Services
where he held various financial, business development and compliance
positions. He also served as Treasurer of the GE Funds and as Director
of GE Investment Services. Age: 37 years old.

#GEORGE A. RIO. Vice President and Assistant Treasurer of the Company. Executive
Vice President and Client Service Director of Funds Distributor, Inc.
From June 1995 to March 1998, he was Senior Vice President and Senior
Key Account Manager for Putnam Mutual Funds. From May 1994 to June 1995,
he was Director of Business Development for First Data Corporation. From
September 1983 to May 1994, he was Senior Vice President and Manager of
Client Services and Director of Internal Audit at TBC. Age: 44 years
old.

B-20
<PAGE>

he was employed by TBC where he held various management positions in the
Corporate Finance and Treasury areas. Age: 37 years old.

--------------------------------

# Officer also serves as an officer for other investment companies advised by
Dreyfus, including The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel
Tax-Free Municipal Funds.

The address of each officer of the Company is 200 Park Avenue, New York,
New York 10166.

No officer or employee of the Distributor (or of any parent, subsidiary
or affiliate thereof) receives any compensation from the Company for serving as
an officer or Director of the Company. In addition, no officer or employee of
Dreyfus (or of any parent, subsidiary or affiliate thereof) serves as an officer
or Director of the Company. Effective July 1, 1998, the Dreyfus/Laurel Funds pay
each Director/Trustee who is not an "interested person" of the Company (as
defined in the 1940 Act) $40,000 per annum, plus $5,000 per joint Dreyfus/Laurel
Funds Board meeting attended, $2,000 for separate committee meetings attended
which are not held in conjunction with a regularly scheduled Board meeting and
$500 for Board meetings and separate committee meetings attended that are
conducted by telephone. The Dreyfus/Laurel Funds also reimburse each
Director/Trustee who is not an "interested person" of the Company (as defined in
the 1940 Act) for travel and out-of-pocket expenses. The Chairman of the Board
receives an additional 25% of such compensation (with the exception of
reimbursable amounts). In the event that there is a joint committee meeting of
the Dreyfus/Laurel Funds and the Dreyfus High Yield Strategies Fund, the $2,000
fee will be allocated between the Dreyfus/Laurel Funds and the Dreyfus High
Yield Strategies Fund. The compensation structure described in this paragraph is
referred to hereinafter as the "Current Compensation Structure."

Prior to July 1, 1998, the Dreyfus/Laurel Funds paid each
Director/Trustee who was not an "interested person" of the Company (as defined
in the 1940 Act) $27,000 per annum (and an additional $25,000 for the Chairman
of the Board of Directors/Trustees of the Dreyfus/Laurel Funds) and $1,000 per
joint Dreyfus/Laurel Funds Board meeting attended, plus $750 per joint
Dreyfus/Laurel Funds Audit Committee meeting attended, and reimbursed each such
Director/Trustee for travel and out-of-pocket expenses (the "Former Compensation
Structure").

B-21
<PAGE>

<TABLE>
<CAPTION>
Total Compensation
Aggregate From the Company
Name of Board Compensation and Fund Complex
MEMBER FROM THE COMPANY# PAID TO BOARD MEMBER****
- ------------- ----------------- ------------------------
<S> <C> <C>

Joseph S. DiMartino*

James M. Fitzgibbons

J. Tomlinson Fort** none none

Arthur L. Goeschel

Kenneth A. Himmel

Stephen J. Lockwood

John J. Sciullo

Roslyn M. Watson

Benaree Pratt Wiley***
</TABLE>

- ----------------------------
# 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. Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $[ ] for the Company.
* Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999. ** J. Tomlinson Fort is paid directly by Dreyfus for serving
as a Board member of the Company and the funds in the Dreyfus/Laurel Funds and
separately by the Dreyfus High Yield Strategies Fund. For the fiscal year
ended October 31, 1998, the aggregate amount of fees and expenses received by
** J.Tomlinson Fort from Dreyfus for serving as a Board member of the Company
was ______________________. For the year ended December 31, 1998, the
aggregate amount of fees and expenses received by Mr. Fort for serving as a
Board member of all funds in the Dreyfus/Laurel Funds (including the Company)
and Dreyfus High Yield Strategies Fund (for which payment is made directly by
the fund) was ______________________. In addition, Dreyfus reimbursed Mr. Fort
a total of $__________________ for expenses attributable to the Company's
Board meetings which is not included in the $__________________ amount in note
# above.
*** Payments to Ms. Wiley were for the period from April 23, 1998 (the date she
was elected as a Board member) through October 31, 1998.
****The Dreyfus Family of Funds consists of ___ mutual funds.

B-22
<PAGE>

The officers and Directors of the Company as a group owned beneficially
less than 1% of the total shares of the Fund outstanding as of November __,
1998.

PRINCIPAL SHAREHOLDERS. As of January 31, 1999, the following
shareholder(s) owned of record 5% or more of Class A, Class B, Class C or Class
R of the Fund: _________.

MANAGEMENT ARRANGEMENTS

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN THE FUND'S PROSPECTUS ENTITLED "EXPENSES" AND "MANAGEMENT."

The Management Agreement will continue from year to year provided that
a majority of the Directors who are not "interested persons" of the Company and
either a majority of all Directors or a majority (as defined in the 1940 Act) of
the shareholders of the Fund approve its continuance. The Management Agreement
was last approved by the Board of Directors on , 1999 to continue until , 2000.
The Company may terminate the Management Agreement upon the vote of a majority
of the Board of Directors or upon the vote of a majority of the Fund's
outstanding voting securities on 60 days' written notice to Dreyfus. Dreyfus may
terminate the Management Agreement upon 60 days' written notice to the Company.
The Management Agreement will terminate immediately and automatically upon its
assignment.

B-23
<PAGE>

Vice President; Mark N. Jacobs, Vice President, General Counsel and Secretary;
Patrice M. Kozlowski, Vice President-Corporate Communications; Mary Beth Leibig,
Vice President-Human Resources; Andrew S. Wasser, Vice-President-Information
Systems; Theodore A. Schachar, Vice President; Wendy Strutt, Vice President;
Richard Terres, Vice President; William H. Maresca, Controller; James Bitetto,
Assistant Secretary; Steven F. Newman, Assistant Secretary; and Mandell L.
Berman, Burton C. Borgelt, Frank V. Cahouet and Richard F. Syron, directors.

EXPENSES. Under the Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 1.10% of the value of the Fund's
average daily net assets. Dreyfus pays all of the Fund's expenses, except
brokerage fees, taxes, interest, fees and expenses of the non-interested
directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and expenses
of the non-interested Directors (including counsel fees), Dreyfus is
contractually required to reduce its investment management fee by an amount
equal to the Fund's allocable share of such fees and expenses. From time to
time, Dreyfus may voluntarily waive a portion of the investment management fees
payable by the Fund, which would have the effect of lowering the expense ratio
of the Fund and increasing return to investors. Expenses attributable to the
Fund are charged against the Fund's assets; other expenses of the Company are
allocated among its funds on the basis determined by the Board, including, but
not limited to, proportionately in relation to the net assets of each fund.

For the last three years, the Fund had the following expenses:

For the Fiscal Year Ended October 31,
1998 1997 1996
---- ---- ----

Management fees $____ $____ $159,095

THE DISTRIBUTOR. Premier Mutual Fund Services, Inc. (the "Distributor"),
located at 60 State Street, Boston, Massachusetts 02109, serves as the Fund's
distributor on a best efforts basis pursuant to an agreement which is renewable
annually. Dreyfus may pay the Distributor for shareholder services from Dreyfus'
own assets, including past profits but not including the management fee paid by
the Fund. The Distributor may use part or all of such payments to pay certain
banks, securities brokers or dealers and other financial institutions ("Agents")
for these services. The Distributor also acts as sub-administrator for the
Fund and as distributor for the other funds in the Dreyfus Family of Funds.

PURCHASE OF SHARES

B-24
<PAGE>

service fees on Class B or Class C shares may exceed the accumulated
distribution fee and initial sales charge on Class A shares during the life of
the investment. Finally, you should consider the effect of the CDSC period and
any conversion rights of the Classes in the context of your own investment time
frame. For example, while Class C shares have a shorter CDSC period than Class B
shares, Class C shares do not have a conversion feature and, therefore, are
subject to ongoing distribution and service fees. Thus, Class B shares may be
more attractive than Class C shares to investors with longer term investment
outlooks. Generally, Class A shares may be more appropriate for investors who
invest $1,000,000 or more in Fund shares, but will not be appropriate for
investors who invest less than $50,000 in Fund shares. The Fund reserves the
right to reject any purchase order.

Class R shares are sold primarily to Banks acting on behalf of customers
having a qualified trust or investment account or relationship at such
institution, or to customers who have received and hold shares of the Fund
distributed to them by virtue of such an account or relationship. In addition,
holders of Restricted shares of the Fund as of January 15, 1998 may continue to
purchase Class R shares of the Fund whether or not they would otherwise be
eligible to do so. Class R shares may be purchased for a retirement plan only by
a custodian, trustee, investment manager or other entity authorized to act on
behalf of such a plan. Institutions effecting transactions in Class R shares for
the accounts of their clients may charge their clients direct fees in connection
with such transactions.

The minimum initial investment is $1,000. Subsequent investments must be
at least $100. The minimum initial investment is $750 for Dreyfus-sponsored
Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a non working
spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans with only one
participant and $500 for Dreyfus-sponsored Education IRAs, with no minimum on
subsequent purchases. The initial investment must be accompanied by the Fund's
Account Application. The Fund reserves the right to offer Fund shares without
regard to minimum purchase requirements to employees participating in certain
qualified or non-qualified employee benefit plans or other programs where
contributions or account information can be transmitted in a manner and form

B-25
<PAGE>

acceptable to the Fund. The Fund reserves the right to vary further the initial
and subsequent investment minimum requirements at any time.

The Internal Revenue Code of 1986, as amended (the "Code") imposes
various limitations on the amount that may be contributed annually to certain
qualified or non-qualified employee benefit plans or other programs, including
pension, profit-sharing and other deferred compensation plans, whether
established by corporations, partnerships, non-profit entities or state and
local governments ("Retirement Plans"). These limitations apply with respect to
participants at the plan level and, therefore, do not directly affect the amount
that may be invested in the Fund by a Retirement Plan. Participants and plan
sponsors should consult their tax advisers for details.

Fund shares are sold on a continuous basis. NAV per share is determined
as of the close of trading on the floor of the New York Stock Exchange ("NYSE")
(currently 4:00 p.m., New York time), on each day the NYSE is open for business.
For purposes of determining NAV, options and futures contracts will be valued 15
minutes after the close of trading on the floor of the NYSE. NAV per share of
each class is computed by dividing the value of the Fund's net assets
represented by such class (i.e., the value of its assets less liabilities) by
the total number of shares of such class outstanding. For further information
regarding the methods employed in valuing the Fund's investments, see
"Determination of Net Asset Value".

If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the NYSE (currently 4:00 p.m., New York time) on a
business day, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, Fund shares will be purchased at the public offering price determined
as of the close of trading on the floor of the NYSE on the next business day,
except where shares are purchased through a dealer as provided below.

Orders for the purchase of Fund shares received by dealers by the close
of trading on the floor of the NYSE on any business day and transmitted to the
Distributor or its designee by the close of its business day (normally 5:15
p.m., New York time) will be based on the public offering price per share
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, the orders will be based on the next determined NAV. It is the
dealers' responsibility to transmit orders so that they will be received by the
Distributor or its designee before the close of its business day. For certain
institutions that have entered into agreements with the Distributor, payment for
the purchase of Fund shares may be transmitted, and must be received by the
Transfer Agent, within three business days after the order is placed. If such
payment is not received within three business days after the order is placed,
the order may be canceled and the institution could be held liable for resulting
fees and/or losses.

Agents may receive different levels of compensation for selling
different Classes of shares. Management understands that some Agents may impose
certain conditions on their clients which are different from those described in
the Fund's Prospectus, and, to the extent permitted by applicable regulatory
authority, may charge their clients direct fees which would be in addition to
any amounts which might be received under the Distribution and Service Plans.

B-26
<PAGE>

Each Agent has agreed to transmit to its clients a schedule of such fees. You
should consult your Agent in this regard.

The Distributor may pay dealers a fee of up to 0.5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have a
minimum of 250 employees eligible for participation in such plans or programs or
(ii) such plan's or program's aggregate investment in the Dreyfus Family of
Funds or certain other products made available by the Distributor to such plans
or programs exceeds $1,000,000 ("Eligible Benefit Plans"). Shares of funds in
the Dreyfus Family of Funds then held by Eligible Benefit Plans will be
aggregated to determine the fee payable. The Distributor reserves the right to
cease paying these fees at any time. The Distributor will pay such fees from its
own funds, other than amounts received from the Fund, including past profits or
any other source available to it.

Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Fund's Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service.

CLASS A SHARES. The public offering price for Class A shares is the NAV
of that Class, plus, except for shareholders owning Investor shares of the Fund
on January 15, 1998, a sales load as shown below:

Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
----------------------- --------------------------- ------------------------
Less than $50,000 5.75 5.00
$50,000 to less than $100,000 4.50 3.75
$100,000 to less than $250,000 3.50 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more -0- -0-

SALES LOADS -- CLASS A. The scale of sales loads applies to purchases
of Class A shares made by any "purchaser," which term includes an individual
and/or spouse purchasing securities for his, her or their own account or for the
account of any minor children, or a trustee or other fiduciary purchasing
securities for a single trust estate or a single fiduciary account (including a
pension, profit-sharing or other employee benefit trust created pursuant to a
plan qualified under Section 401 of the Internal Revenue Code of 1986, as
amended (the "Code")) although more than one beneficiary is involved; or a group
of accounts established by or on behalf of the employees of an employer or
affiliated employers pursuant to an employee benefit plan or other program
(including accounts established pursuant to Sections 403(b), 408(k) and 457 of
the Code); or an organized group which has been in existence for more than six
months, provided that it is not organized for the purpose of buying redeemable
securities of a registered investment company and provided that the purchases
are made through a central administration or a single dealer, or by other means
which result in economy of sales effort or expense.

B-27
<PAGE>

Set forth below is an example of the method of computing the offering
price of the Fund's Class A shares. The example assumes a purchase of Class A
shares of the Fund aggregating less than $50,000 subject to the schedule of
sales charges set forth in the Fund's Prospectus at a price based upon the NAV
of a Class A (Investor) share at the close of business on October 31, 1998:

NAV per share $_____

Per Share Sales Charge - 5.75% of offering price
(6.10% of NAV per share) $_____

Per Share Offering Price to Public $_____

Holders of Investor shares of the Fund as of January 15, 1998 may
continue to purchase Class A shares of the Fund at NAV. However, investments by
such holders in other funds advised by Dreyfus will be subject to any applicable
front-end sales load. Omnibus accounts will be eligible to purchase Class A
shares without a front-end sales load only on behalf of their customers who held
Investor shares of the Fund through such omnibus account on January 15, 1998.

Full-time employees of NASD member firms and full-time employees of
other financial institutions which have entered into an agreement with the
Distributor pertaining to the sale of Fund shares (or which otherwise have a
brokerage related or clearing arrangement with an NASD member firm or financial
institution with respect to the sale of Fund shares) may purchase Class A shares
for themselves directly or pursuant to an employee benefit plan or other
program, or for their spouses or minor children at NAV, provided that they have
furnished the Distributor with such information as it may request from time to
time in order to verify eligibility for this privilege. This privilege also
applies to full-time employees of financial institutions affiliated with NASD
member firms whose full-time employees are eligible to purchase Class A shares
at NAV. In addition, Class A shares are offered at NAV to full-time or part-time
employees of Dreyfus or any of its affiliates or subsidiaries, directors of
Dreyfus, Board members of a fund advised by Dreyfus, including members of the
Company's Board, or the spouse or minor child of any of the foregoing.

B-28
<PAGE>

Class A shares may be purchased at NAV through certain broker-dealers
and other financial institutions which have entered into an agreement with the
Distributor, which includes a requirement that such shares be sold for the
benefit of clients participating in a "wrap account" or a similar program under
which such clients pay a fee to such broker-dealer or other financial
institution.

Class A shares also may be purchased at NAV, subject to appropriate
documentation, through a broker-dealer or other financial institution with the
proceeds from the redemption of shares of a registered open-end management
investment company not managed by Dreyfus or its affiliates. The purchase of
Class A shares of the Fund must be made within 60 days of such redemption and
the shareholder must have either (i) paid an initial sales charge or a CDSC or
(ii) been obligated to pay at any time during the holding period, but did not
actually pay on redemption, a deferred sales charge with respect to such
redeemed shares.

Class A shares also may be purchased at NAV, subject to appropriate
documentation, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or intrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000 or
more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 501(c)(3) of the Code).

CLASS B SHARES. The public offering price for Class B shares is the NAV
per share of that Class. No initial sales charge is imposed at the time of
purchase. A CDSC is imposed, however, on certain redemptions of Class B shares
as described in the Fund's Prospectus. The Distributor compensates certain
Agents for selling Class B shares at the time of purchase from the Distributor's
own assets. The proceeds of the CDSC and the distribution fee, in part, are used
to defray these expenses.

B-29
<PAGE>

CLASS C SHARES. The public offering price for Class C shares is the NAV
per share of that Class. No initial sales charge is imposed at the time of
purchase. A CDSC is imposed, however, on redemptions of Class C shares made
within the first year of purchase. See "Class B Shares" above and "How to Redeem
Shares."

CLASS R SHARES. The public offering for Class R shares is the NAV per
share of that Class.

RIGHT OF ACCUMULATION--CLASS A SHARES. Reduced sales loads apply to any
purchase of Class A shares, shares of other funds in the Dreyfus Premier Family
of Funds, shares of certain other funds advised by Dreyfus which are sold with a
sales load and shares acquired by a previous exchange of such shares
(hereinafter referred to as "Eligible Funds"), by you and any related
"purchaser" as defined above, where the aggregate investment, including such
purchase, is $50,000 or more. If, for example, you previously purchased and
still hold Class A shares of the Fund, or shares of any other Eligible Fund or
combination thereof, with an aggregate current market value of $40,000 and
subsequently purchase Class A shares of the Fund or shares of an Eligible Fund
having a current value of $20,000, the sales load applicable to the subsequent
purchase would be reduced to 4.5% of the offering price. All present holdings of
Eligible Funds may be combined to determine the current offering price of the
aggregate investment in ascertaining the sales load applicable to each
subsequent purchase.

B-30
<PAGE>

TELETRANSFER PRIVILEGE. You may purchase Fund shares by telephone
through the TELETRANSFER Privilege if you have checked the appropriate box and
supplied the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these documents and
your Fund account. Only a bank account maintained in a domestic financial
institution that is an Automated Clearing House ("ACH") member may be so
designated. TELETRANSFER purchase orders may be made at any time. Purchase
orders received by 4:00 p.m., New York time, on any business day that the
Transfer Agent and the NYSE are open for business will be credited to the
shareholder's Fund account on the next bank business day following such purchase
order. Purchase orders made after 4:00 p.m., New York time, on any business day
the Transfer Agent and the NYSE are open for business, or orders made on
Saturday, Sunday or any Fund holiday (e.g., when the NYSE is not open for
business), will be credited to the shareholder's Fund account on the second bank
business day following such purchase order. To qualify to use the TELETRANSFER
Privilege, the initial payment for purchase of Fund shares must be drawn on, and
redemption proceeds paid to, the same bank and account as are designated on the
Account Application or Shareholder Services Form on file. If the proceeds of a
particular redemption are to be wired to an account at any other bank, the
request must be in writing and signature-guaranteed. See "Redemption of Shares -
TELETRANSFER Privilege." The Fund may modify or terminate this Privilege at any
time or charge a service fee upon notice to shareholders. No such fee currently
is contemplated.

IN-KIND PURCHASES. If the following conditions are satisfied, the Fund
may at its discretion, permit the purchase of shares through an "in-kind"
exchange of securities. Any securities exchanged must meet the investment
objective, policies and limitations of the Fund, must have a readily
ascertainable market value, must be liquid and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus any
cash, must be at least equal to $25,000. Shares purchased in exchange for
securities generally cannot be redeemed for fifteen days following the exchange
in order to allow time for the transfer to settle.

SHARE CERTIFICATES. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.

B-31
<PAGE>

DISTRIBUTION AND SERVICE PLANS

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "YOUR INVESTMENT."

Class A, Class B and Class C shares are subject to annual fees for
distribution and shareholder services.

The SEC has adopted Rule 12b-1 under the 1940 Act (the "Rule")
regulating the circumstances under which investment companies such as the
Company may, directly or indirectly, bear the expenses of distributing their
shares. The Rule defines distribution expenses to include expenditures for "any
activity which is primarily intended to result in the sale of fund shares." The
Rule, among other things, provides that an investment company may bear such
expenses only pursuant to a plan adopted in accordance with the Rule.

DISTRIBUTION PLAN--CLASS A SHARES. The Company has adopted a
Distribution Plan pursuant to the Rule with respect to the Class A shares of the
Fund ("Class A Plan"), whereby Class A shares of the Fund may spend annually up
to 0.25% of the average of its net assets to compensate Dreyfus Service
Corporation, an affiliate of Dreyfus, for shareholder servicing activities and
the Distributor for shareholder servicing activities and expenses primarily
intended to result in the sale of Class A shares of the Fund. The Class A Plan
allows the Distributor to make payments from the Rule 12b-1 fees it collects
from the Fund to compensate Agents that have entered into Selling Agreements
("Agreements") with the Distributor. Under the Agreements, the Agents are
obligated to provide distribution related services with regard to the Fund
and/or shareholder services to the Agent's clients that own Class A shares of
the Fund.

The Class A Plan provides that a report of the amounts expended under
the Class A Plan, and the purposes for which such expenditures were incurred,
must be made to the Company's Directors for their review at least quarterly. In
addition, the Class A Plan provides that it may not be amended to increase
materially the costs which the Fund may bear for distribution pursuant to the
Class A Plan without approval of the Fund's shareholders, and that other
material amendments of the Class A Plan must be approved by the vote of a
majority of the Directors and of the Directors who are not "interested persons"
(as defined in the 1940 Act) of the Company or the Distributor and who do not
have any direct or indirect financial interest in the operation of the Class A
Plan, cast in person at a meeting called for the purpose of considering such
amendments. The Class A Plan is subject to annual approval by the entire Board
of Directors and by the Directors who are neither interested persons nor have
any direct or indirect financial interest in the operation of the Class A Plan,
by vote cast in person at a meeting called for the purpose of voting on the
Class A Plan. The Class A Plan was so approved by the Directors at a meeting
held on , 1999. The Class A Plan is terminable, as to the Fund's Class A shares,
at any time by vote of a majority of the Directors who are not interested
persons and have no direct or indirect financial interest in the operation of
the Class A Plan or by vote of the holders of a majority of the outstanding
shares of such class of the Fund.

B-32
<PAGE>

DISTRIBUTION AND SERVICE PLANS -- CLASS B AND CLASS C SHARES. In
addition to the above described current Class A Plan for Class A shares, the
Board of Directors has adopted a Service Plan (the "Service Plan") under the
Rule for Class B and Class C shares, pursuant to which the Fund pays the
Distributor and Dreyfus Service Corporation a fee at the annual rate of 0.25% of
the value of the average daily net assets of Class B and Class C shares for the
provision of certain services to the holders of Class B and Class C shares. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Fund and
providing reports and other information, and providing services related to the
maintenance of such shareholder accounts. With regard to such services, each
Agent is required to disclose to its clients any compensation payable to it by
the Fund and any other compensation payable by its clients in connection with
the investment of their assets in Class B and Class C shares. The Distributor
may pay one or more Agents in respect of services for these Classes of shares.
The Distributor determines the amounts, if any, to be paid to Agents under the
Service Plan and the basis on which such payments are made. The Company's Board
of Directors has also adopted a Distribution Plan pursuant to the Rule with
respect to Class B and Class C shares (the "Distribution Plan") pursuant to
which the Fund pays the Distributor for distributing the Fund's Class B and
Class C shares at an aggregate annual rate of 0.75% of the value of the average
daily net assets of Class B and Class C shares. The Company's Board of Directors
believes that there is a reasonable likelihood that the Distribution and Service
Plans (the "Plans") will benefit the Fund and the holders of Class B and Class C
shares.

A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may not be
amended to increase materially the cost which holders of Class B or Class C
shares may bear pursuant to the Plan without the approval of the holders of such
Classes and that other material amendments of the Plan must be approved by the
Board of Directors and by the Directors who are not interested persons of the
Fund and have no direct or indirect financial interest in the operation of the
Plan or in any agreements entered into in connection with the Plan, by vote cast
in person at a meeting called for the purpose of considering such amendments.
Each Plan is subject to annual approval by such vote of the Directors cast in
person at a meeting called for the purpose of voting on the Plan. Each Plan was
so approved by the Directors at a meeting held on _____, 1999. Each Plan
may be terminated at any time by vote of a majority of the Directors who
are not interested persons and have no direct or indirect financial interest
in the operation of the Plan or in any agreements entered into in connection
with the Plan or by vote of the holders of a majority of Class B and Class C
shares.

An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one Class of
shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under the Distribution and Service Plans are payable
without regard to actual expenses incurred. The Fund and the Distributor may
suspend or reduce payments under the Distribution and Service Plans at any time,
and payments are subject to the continuation of the Fund's Plans and the
Agreements described above. From time to time, the Agents, the Distributor and
the Fund may voluntarily agree to reduce the maximum fees payable under the
Plans.

B-33
<PAGE>

REDEMPTION OF SHARES

PROCEDURES. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or through the Telephone Redemption
Privilege, which is granted automatically unless you specifically refuse it by
checking the applicable "No" box on the Account Application. The Telephone
Redemption Privilege may be established for an existing account by a separate
signed Shareholder Services Form or by oral request from any of the authorized
signatories on the account by calling 1-800-554-4611. You also may redeem shares
through the Wire Redemption Privilege or the TELETRANSFER Privilege if you have
checked the appropriate box and supplied the necessary information on the
Account Application or have filed a Shareholders Services Form with the Transfer
Agent. If you are a client of certain Agents ("Selected Dealers"), you can also
redeem Fund shares through the Selected Dealer. Other redemption procedures may
be in effect for clients of certain Agents and institutions. The Fund makes
available to certain large institutions the ability to issue redemption
instructions through compatible computer facilities. The Fund reserves the right
to refuse any request made by telephone, including requests made shortly after a
change of address, and may limit the amount involved or the number of such
requests. The Fund may modify or terminate any redemption privilege at any time
or charge a service fee upon notice to shareholders. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs, or other retirement plans,

B-34
<PAGE>

and shares for which certificates have been issued, are not eligible for the
Wire Redemption, Telephone Redemption or TELETRANSFER Privilege.

The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including The
Dreyfus Touch(R) automated telephone system) from any person representing
himself or herself to be you, or a representative of your Agent, and reasonably
believed by the Transfer Agent to be genuine. The Fund will require the Transfer
Agent to employ reasonable procedures, such as requiring a form of personal
identification, to confirm that instructions are genuine and, if it does not
follow such procedures, the Fund or the Transfer Agent may be liable for any
losses due to unauthorized or fraudulent instructions. Neither the Fund nor the
Transfer Agent will be liable for following telephone instructions reasonably
believed to be genuine.

During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to request a
redemption or an exchange of Fund shares. In such cases, you should consider
using the other redemption procedures described herein. Use of these other
redemption procedures may result in your redemption request being processed at a
later time than it would have been if telephone redemption had been used. During
the delay, the Fund's NAV may fluctuate.

REDEMPTION THROUGH A SELECTED DEALER. Customers of Selected Dealers may
make redemption requests to their Selected Dealer. If the Selected Dealer
transmits the redemption request so that it is received by the Transfer Agent
prior to the close of trading on the floor of the NYSE (currently 4:00 p.m., New
York time), the redemption request will be effective on that day. If a
redemption request is received by the Transfer Agent after the close of trading
on the floor of the NYSE, the redemption request will be effective on the next
business day. It is the responsibility of the Selected Dealer to transmit a
request so that it is received in a timely manner. The proceeds of the
redemption are credited to your account with the Selected Dealer.

B-35
<PAGE>

paid upon redemption of the Class A or Class B shares reinvested. The
Reinvestment Privilege may be exercised only once.

WIRE REDEMPTION PRIVILEGE. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone, or letter redemption
instructions from any person representing himself or herself to be the investor,
or a representative of the investor's Agent, and reasonably believed by the
Transfer Agent to be genuine. Ordinarily, the Fund will initiate payment for
shares redeemed pursuant to this Privilege on the next business day after
receipt by the Transfer Agent of the redemption request in proper form.
Redemption proceeds ($1,000 minimum), will be transferred by Federal Reserve
wire only to the commercial bank account specified by the investor on the
Account Application or Shareholder Services Form, or a correspondent bank if the
investor's bank is not a member of the Federal Reserve System. Holders of
jointly registered Fund or bank accounts may have redemption proceeds of only up
to $250,000 wired within any 30-day period. Fees ordinarily are imposed by such
bank and usually are borne by the investor. Immediate notification by the
correspondent bank to the investor's bank is necessary to avoid a delay in
crediting the funds to the investor's bank account.

Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code which
may be used for domestic or overseas transmissions:

Transfer Agent's
Transmittal Code Answer Back Sign
---------------- ----------------

144295 144295 TSSG PREP

Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-654-7171,
toll free. Investors should advise the operator that the above transmittal code
must be used and should also inform the operator of the Transfer Agent's answer
back sign.

To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent. This
request must be signed by each shareholder, with each signature guaranteed as
described below under "Stock Certificates; Signatures."

B-36
<PAGE>

their bank account only up to $250,000 within any 30-day period. See "Purchase
of Shares--TELETRANSFER Privilege."

STOCK CERTIFICATES; SIGNATURES. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request. Written
redemption requests must be signed by each shareholder, including each holder of
a joint account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations,
as well as from participants in the NYSE Medallion Signature Program, the
Securities Transfer Agents Medallion Program ("STAMP") and the Stock Exchanges
Medallion Program. Guarantees must be signed by an authorized signatory of the
guarantor and "Signature-Guaranteed" must appear with the signature. The
Transfer Agent may request additional documentation from corporations,
executors, administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular verification.
For more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.

REDEMPTION COMMITMENT. The Company has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, limited in
amount during any 90 day period to the lesser of $250,000 or 1% of the value of
the Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the SEC. In the case of requests for
redemptions in excess of such amount, the Company's Board reserves the right to
make payments in whole or in part in securities or other assets in case of an
emergency or any time a cash distribution would impair the liquidity of the Fund
to the detriment of the existing shareholders. In such event, the securities
would be valued in the same manner as the Fund's portfolio is valued. If the
recipient sold such securities, brokerage charges might be incurred.

SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE is closed
(other than customary weekend and holiday closings), (b) when trading in the
markets the Fund ordinarily utilizes is restricted, or when an emergency exists
as determined by the SEC so that disposal of the Fund's investments or
determination of its NAV is not reasonably practicable, or (c) for such other
periods as the SEC by order may permit to protect the Fund's shareholders.

B-37
<PAGE>

In circumstances where the CDSC is imposed, the amount of the charge
will depend on the number of years from the time you purchased the Class B
shares until the time of redemption of such shares. Solely for purposes of
determining the number of years from the time of any payment for the purchase of
Class B shares, all payments during a month will be aggregated and deemed to
have been made on the first day of the month.

In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible rate.
It will be assumed that the redemption is made first of amounts representing
shares acquired pursuant to the reinvestment of dividends and distributions;
then of amounts representing the increase in NAV of Class B shares above the
total amount of payments for the purchase of Class B shares made during the
preceding six years; then of amounts representing the cost of shares purchased
six years prior to the redemption; and finally, of amounts representing the cost
of shares held for the longest period of time within the applicable six-year
period.

For example, assume an investor purchased 100 shares at $10 per share
for a cost of $1,000. Subsequently, the shareholder acquired five additional
shares through dividend reinvestment. During the second year after the purchase
the investor decided to redeem $500 of his or her investment. Assuming at the
time of the redemption the NAV has appreciated to $12 per share, the value of
the investor's shares would be $1,260 (105 shares at $12 per share). The CDSC
would not be applied to the value of the reinvested dividend shares and the
amount which represents appreciation ($260). Therefore, $240 of the $500
redemption proceeds ($500 minus $260) would be charged at a rate of 4% (the
applicable rate in the second year after purchase) for a total CDSC of $9.60.

CONTINGENT DEFERRED SALES CHARGE - CLASS C SHARES. A CDSC of 1% payable
to the Distributor is imposed on any redemption of Class C shares within one
year of the date of purchase. The basis for calculating the payment of any such
CDSC will be the method used in calculating the CDSC for Class B shares. See
"Contingent Deferred Sales Charge - Class B Shares" above.

B-38
<PAGE>

tax-deferred retirement plan or upon attaining age 70 1/2 in the case of an IRA
or Keogh plan or custodial account pursuant to Section 403(b) of the Code, and
(e) redemptions pursuant to the Automatic Withdrawal Plan, as described below.
If the Company's Board determines to discontinue the waiver of the CDSC, the
disclosure herein will be revised appropriately. Any Fund shares subject to a
CDSC which were purchased prior to the termination of such waiver will have the
CDSC waived as provided in the Prospectus or this Statement of Additional
Information at the time of the purchase of such shares.

SHAREHOLDER SERVICES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES" AND
"SERVICES FOR FUND INVESTORS."

A. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.

B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and
the applicable sales load will be deducted.

C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.

D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a
sales load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect
to any reduced loads, the difference will be deducted.

E. Shares of funds subject to a CDSC that are exchanged for
shares of another fund will be subject to the higher applicable
CDSC of the two funds and, for purposes of calculating CDSC rates
and conversion periods, if any, will be deemed to have been held

B-39
<PAGE>

since the date the shares being exchanged were initially
purchased.

You also may exchange your Fund shares that are subject to a CDSC for
shares of Dreyfus Worldwide Dollar Money Market Fund, Inc. The shares so
purchased will be held in a special account created solely for this purpose
("Exchange Account"). Exchanges of shares from an Exchange Account only can be
made into certain other funds managed or administered by Dreyfus. No CDSC is
charged when an investor exchanges into an Exchange Account; however, the
applicable CDSC will be imposed when shares are redeemed from an Exchange
Account or other applicable Fund account. Upon redemption, the applicable CDSC
will be calculated without regard to the time such shares were held in an
Exchange Account. See "Redemption of Shares." Redemption proceeds for Exchange
Account shares are paid by Federal wire or check only. Exchange Account shares
also are eligible for the Auto-Exchange Privilege, Dividend Sweep and the
Automatic Withdrawal Plan.

To request an exchange, an investor or an investor's Agent acting on the
investor's behalf must give exchange instructions to the Transfer Agent in
writing or by telephone. The ability to issue exchange instructions by telephone
is given to all Fund shareholders automatically unless the investor checks the
applicable "No" box on the Account Application, indicating that the investor
specifically refuses this privilege. The Telephone Exchange Privilege may be
established for an existing account by written request signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-554-4611, or by oral request from any of the
authorized signatories on the account, also by calling 1-800-554-4611. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent to
act on telephonic instructions (including over The Dreyfus Touch(R) automated
telephone system) from any person representing himself or herself to be the
investor or a representative of the investor's Agent, and reasonably believed by
the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange. No fees currently are charged shareholders directly in connection with
exchanges, although the Fund reserves the right, upon not less than 60 days'
written notice, to charge shareholders a nominal fee in accordance with rules
promulgated by the SEC.

Exchanges of Class R shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such investor's
Retirement Plan account in another fund.

B-40
<PAGE>

DREYFUS AUTO-EXCHANGE PRIVILEGE. The Dreyfus Auto-Exchange Privilege
permits an investor to regularly purchase (on a semi-monthly, monthly, quarterly
or annual basis), in exchange for shares of the Fund, shares of the same Class
of certain other funds in the Dreyfus Premier Family of Funds or the Dreyfus
Family of Funds of which the investor is a shareholder. The amount the investor
designates, which can be expressed either in terms of a specific dollar or share
amount ($100 minimum), will be exchanged automatically on the first and/or
fifteenth day of the month according to the schedule the investor has selected.
This Privilege is available only for existing accounts. With respect to Class R
shares held by a Retirement Plan, exchanges may be made only between the
investor's Retirement Plan account in one fund and such investor's Retirement
Plan account in another fund. Shares will be exchanged on the basis of relative
NAV as described above under "Fund Exchanges." Enrollment in or modification or
cancellation of this Privilege is effective three business days following
notification by the investor. An investor will be notified if the investor's
account falls below the amount designated to be exchanged under this Privilege.
In this case, an investor's account will fall to zero unless additional
investments are made in excess of the designated amount prior to the next
Auto-Exchange transaction. Shares held under IRAs and other retirement plans are
eligible for this Privilege. Exchanges of IRA shares may be made between IRA
accounts and from regular accounts to IRA accounts, but not from IRA accounts to
regular accounts. With respect to all other retirement accounts, exchanges may
be made only among those accounts.

The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to Dreyfus Premier Midcap
Stock Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. The Fund may
charge a service fee for the use of this Privilege. No such fee currently is
contemplated. For more information concerning this Privilege and the funds in
the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds eligible to
participate in this Privilege, or to obtain a Dreyfus Auto-Exchange
Authorization Form, please call toll free 1-800-554-4611.

DREYFUS-AUTOMATIC ASSET BUILDER(R). Dreyfus Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000 per
transaction) at regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. Only an account
maintained at a domestic financial institution which is an ACH member may be so
designated. To establish a Dreyfus-Automatic Asset Builder account, you must
file an authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-800-554-4611. You may cancel your participation
in this Privilege or change the amount of purchase at any time by mailing
written notification to Dreyfus Premier Midcap Stock Fund, P.O. Box 6587,
Providence, Rhode Island 02940-6587 and the notification will be effective three
business days following receipt. The Fund may modify or terminate this Privilege
at any time or charge a service fee. No such fee currently is contemplated.

B-41
<PAGE>

Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends andother
distributions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by filing an Automatic
Withdrawal Plan application with the Transfer Agent or by oral request from any
of the authorized signatories on the account by calling 1-800-554-4611.
Automatic Withdrawal may be terminated at any time by the investor, the Fund or
the Transfer Agent. Shares for which certificates have been issued may not be
redeemed through the Automatic Withdrawal Plan.

Particular Retirement Plans, including Dreyfus-sponsored Retirement
Plans, may permit certain participants to establish an automatic withdrawal plan
from such Retirement Plans. Participants should consult their Retirement Plan
sponsor and tax adviser for details. Such a withdrawal plan is different from
the Automatic Withdrawal Plan. The Automatic Withdrawal Plan may be ended at any
time by the shareholder, the Fund or the Transfer Agent. Shares for which
certificates have been issued may not be redeemed through the Automatic
Withdrawal Plan.

No CDSC with respect to Class B shares will be imposed on withdrawals
made under the Automatic Withdrawal Plan, provided that the amounts withdrawn
under the plan do not exceed on an annual basis 12% of the account value at the
time the shareholder elects to participate in the Automatic Withdrawal Plan.
Withdrawals with respect to Class B shares under the Automatic Withdrawal Plan
that exceed on an annual basis 12% of the value of the shareholder's account
will be subject to a CDSC on the amounts exceeding 12% of the initial account
value. Class C shares, and Class A shares to which a CDSC applies, that are
withdrawn pursuant to the Automatic Withdrawal Plan will be subject to any
applicable CDSC. Purchases of additional Class A shares where the sales load is
imposed concurrently with withdrawals of Class A shares generally are
undesirable.

A. Dividends and other distributions paid by a fund may be
invested without imposition of a sales load in shares of other
funds that are offered without a sales load.

B. Dividends and other distributions paid by a fund which does
not charge a sales load may be invested in shares of other funds
sold with a sales load, and the applicable sales load will be
deducted.

C. Dividends and other distributions paid by a fund which charges
a sales load may be invested in shares of other funds sold with a
sales load (referred to herein as "Offered Shares"), provided
that, if the sales load applicable to the Offered Shares exceeds
the maximum sales load charged by the fund from which dividends

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<PAGE>

or other distributions are being swept, without giving effect to
any reduced loads, the difference will be deducted.

D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a CDSC and the
applicable CDSC, if any, will be imposed upon redemption of such
shares.

For more information concerning these Privileges, or to request a
Dividend Options Form, please call toll free 1-800-554-4611. You may cancel
these Privileges by mailing written notification to Dreyfus Premier Midcap Stock
Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. To select a new fund
after cancellation, you must submit a new Dividend Options Form. Enrollment in
or cancellation of these privileges is effective three business days following
receipt. These privileges are available only for existing accounts and may not
be used to open new accounts. Minimum subsequent investments do not apply for
Dreyfus Dividend Sweep. The Fund may modify or terminate these privileges at any
time or charge a service fee. No such fee currently is contemplated. Shares held
under Keogh Plans, IRAs or other retirement plans are not eligible for Dreyfus
Dividend Sweep.

DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social Security or
certain veterans', military or other payments from the Federal government
automatically deposited into your Fund account. You may deposit as much of such
payments as you elect. You should consider whether Direct Deposit of your entire
payment into a fund with fluctuating NAV, such as the Fund, may be appropriate
for you. To enroll in Dreyfus Government Direct Deposit, you must file with the
Transfer Agent a completed Direct Deposit Sign-Up Form for each type of payment
that you desire to include in this Privilege. The appropriate form may be
obtained from your Agent or by calling 1-800-554-4611. Death or legal incapacity
will terminate your participation in this Privilege. You may elect at any time
to terminate your participation by notifying in writing the appropriate Federal
agency. Further, the Fund may terminate your participation upon 30 days' notice
to you.

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responsibility of your employer, not the Distributor, your Agent, Dreyfus, the
Fund, the Transfer Agent or any other person, to arrange for transactions under
the Dreyfus Payroll Savings Plan. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans are
not eligible for this Privilege.

DREYFUS STEP PROGRAM. Holders of the Fund's Investor shares prior to
January 16, 1998 who had enrolled in Dreyfus Step Program may continue to
purchase shares of the same class (currently designated Class A shares) without
regard to the Fund's minimum initial investment requirements through
Dreyfus-Automatic Asset Builder(R), Dreyfus Government Direct Deposit Privilege
or Dreyfus Payroll Savings Plan. Participation in this Program may be terminated
by the shareholder at any time by discontinuing participation in
Dreyfus-AUTOMATIC Asset Builder, Dreyfus Government Direct Deposit Privilege or
Dreyfus Payroll Savings Plan, as the case may be, as provided under the terms of
such Privilege(s).The Fund reserves the right to redeem your account if you have
terminated your participation in the Program and your account's NAV is $500 or
less. See "Account Policies-General Policies" in the Fund's Prospectus. The Fund
may modify or terminate this Program at any time. The Dreyfus Step Program is
not available to open new accounts in any Class of the Fund.

The Transfer Agent will hold in escrow 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if you do not purchase the
full amount indicated in the Letter of Intent. The escrow will be released when
you fulfill the terms of the Letter of Intent by purchasing the specified
amount. If your purchases qualify for a further sales load reduction, the sales
load will be adjusted to reflect your total purchase at the end of 13 months. If
total purchases are less than the amount specified, you will be requested to
remit an amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If such
remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will redeem an
appropriate number of Class A shares of the Fund held in escrow to realize the
difference. Signing a Letter of Intent does not bind you to purchase, or the
Fund to sell, the full amount indicated at the sales load in effect at the time
of signing, but you must complete the intended purchase to obtain the reduced
sales load. At the time you purchase Class A shares, you must indicate your
intention to do so under a Letter of Intent. Purchases pursuant to a Letter of
Intent will be made at the then-current NAV plus the applicable sales load in
effect at the time such Letter of Intent was executed.

RETIREMENT PLANS. The Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs and
Education IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support
services also are available. You can obtain details on the various plans by
calling the following numbers toll free: for Keogh Plans, please call
1-800-358-5566; for IRAs and IRA "Rollover Accounts," please call
1-800-554-4611; for SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans,
please call 1-800-322-7880.

Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.

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<PAGE>

SHARES MAY BE PURCHASED IN CONNECTION WITH THESE PLANS ONLY BY DIRECT
REMITTANCE TO THE ENTITY ACTING AS CUSTODIAN. PURCHASES FOR THESE PLANS MAY NOT
BE MADE IN ADVANCE OF RECEIPT OF FUNDS.

ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS

The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculation on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to the
Fund's performance and its shareholders. Accordingly, if the Fund's management
determines that an investor is engaged in excessive trading, the Fund, with or
without prior notice, may temporarily or permanently terminate the availability
of Fund Exchanges, or reject in whole or part any purchase or exchange request,
with respect to such investor's account. Such investors also may be barred from
purchasing other funds in the Dreyfus Family of Funds. Generally, an investor
who makes more than four exchanges out of the Fund during any calendar year or
who makes exchanges that appear to coincide with an active market-timing
strategy may be deemed to be engaged in excessive trading. Accounts under common
ownership or control will be considered as one account for purposes of
determining a pattern of excessive trading. In addition, the Fund may refuse or
restrict purchase or exchange requests by any person or group if, in the
judgment of the Fund's management, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies or could
otherwise be adversely affected or if the Fund receives or anticipates receiving
simultaneous orders that may significantly affect the Fund (e.g., amounts equal
to 1% or more of the Fund's total assets). If an exchange request is refused,
the Fund will take no other action with respect to the shares until it receives
further instructions from the investor. The Fund may delay forwarding redemption
proceeds for up to seven days if the investor redeeming shares is engaged in
excessive trading or if the amount of the redemption request otherwise would be
disruptive to efficient portfolio management or would adversely affect the Fund.
The Fund's policy on excessive trading applies to investors who invest in the
Fund directly or through financial intermediaries, but does not apply to the

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<PAGE>

Dreyfus Auto-Exchange Privilege, to any automatic investment or withdrawal
privilege described herein, or to non-IRA plan accounts.

DETERMINATION OF NET ASSET VALUE

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES."

VALUATION OF PORTFOLIO SECURITIES. The Fund's securities are valued at
the last sale price on the securities exchange or national securities market on
which such securities primarily are traded. Securities not listed on an exchange
or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked prices.
Bid price is used when no asked price is available. Where market quotations are
not readily available, the Fund's investments are valued based on fair value as
determined in good faith by the Company's Board. Debt securities may be valued
by an independent pricing service approved by the Company's Board and are valued
at fair value as determined by the pricing service. Any assets or liabilities
initially expressed in terms of foreign currency will be translated into U.S.
dollars at the midpoint of the New York interbank market spot exchange rate as
quoted on the day of such translation or, if no such rate is quoted on such
date, such other quoted market exchange rate as may be determined to be
appropriate by Dreyfus. If the Fund has to obtain prices as of the close of
trading on various exchanges throughout the world, the calculation of NAV may
not take place contemporaneously with the determination of prices of certain of
the Fund's securities. Short-term investments are carried at amortized cost,
which approximates value. Expenses and fees, including the management fee, are
accrued daily and taken into account for the purpose of determining the NAV of
the Fund's shares.

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<PAGE>

will be valued initially at cost. Any subsequent adjustment from cost will be
based upon considerations deemed relevant by the Board of Directors.

DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "DISTRIBUTIONS AND TAXES."

GENERAL. The Fund ordinarily declares and pays dividends from its net
investment income and distributes net realized capital gains, if any, once a
year, but it may make distributions on a more frequent basis to comply with the
distribution requirements of the Code, in all events in a manner consistent with
the provisions of the 1940 Act. The Fund will not make distributions from net
realized capital gains unless all capital loss carryovers, if any, have been
utilized or have expired. Investors other than qualified retirement plans may
choose whether to receive dividends and other distributions in cash, to receive
dividends in cash and reinvest other distributions in additional Fund shares at
NAV, or to reinvest both dividends and other distributions in additional Fund
shares at NAV; dividends and other distributions paid to qualified retirement
plans are reinvested automatically in additional Fund shares at NAV. All
expenses are accrued daily and deducted before declaration of dividends to
investors. Dividends and other distributions paid by each Class are calculated
at the same time and in the same manner and will be in the same amount, except
that the expenses attributable solely to a particular Class are borne
exclusively by that Class. Class B and Class C shares will receive lower per
share dividends than Class A shares, which will in turn receive lower per share
dividends than Class R shares, because of the higher expenses borne by the
relevant Classes.

If you elect to receive dividends and distributions in cash, and your
dividend or distribution check is returned to the Fund as undeliverable or

B-47
<PAGE>

remains uncashed for six months, the Fund reserves the right to reinvest such
dividends or distributions and all future dividends and distributions payable to
you in additional Fund shares at NAV. No interest will accrue on amounts
represented by uncashed distributions or redemptions checks.

Dividends derived from net investment income, together with
distributions from net realized short-term capital gains and all or a portion of
any gains realized from the sale or other disposition of certain market discount
bonds (collectively, "dividend distributions"), paid by the Fund will be taxable
to U.S. shareholders, including certain non-qualified retirement plans, as
ordinary income to the extent of the Fund's earnings and profits, whether
received in cash or reinvested in additional Fund shares. Distributions from net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) are taxable to such shareholders as long-term capital gains
regardless of how long the shareholders have held their Fund shares and whether
such distributions are received in cash or reinvested in additional Fund shares.

Notice as to the tax status of your dividends and other distributions
will be mailed to you annually. You also will receive periodic summaries of your
account that will include information as to dividends and distributions from net
capital gain, if any, paid during the year. The annual tax notice and periodic
account summaries you receive designate the portions of capital gain
distributions that are subject to (1) the 20% maximum rate of tax (10% for
investors in the 15% marginal tax bracket) enacted by the Taxpayer Relief Act of
1997 ("Tax Act"), which applies to non-corporate taxpayers' net capital gain on
securities and other capital assets held for more than 18 months, and (2) the
28% maximum tax rate, applicable to such gain on capital assets held for more
than one year and up to 18 months (which, prior to enactment of the Tax Act,
applied to all such gain on capital assets held for more than one year).

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<PAGE>

reaches age 70 1/2 is less than the "minimum required distribution" for that
taxable year, an excise tax equal to 50% of the deficiency may be imposed by the
IRS. The administrator, trustee or custodian of such a retirement plan will be
responsible for reporting distributions from such plans to the IRS. Moreover,
certain contributions to a qualified retirement plan in excess of the amounts
permitted by law may be subject to an excise tax. If a distributee of an
"eligible rollover distribution" from a qualified retirement plan does not elect
to have the eligible rollover distribution paid directly from the plan to an
eligible retirement plan in a "direct rollover," the eligible rollover
distribution is subject to a 20% income tax withholding.

The Fund is subject to a non-deductible 4% excise tax, measured with
respect to certain undistributed amounts of taxable investment income and
capital gains.

Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares below
the cost of his or her investment. Such a dividend or other distribution would
be a return on investment in an economic sense, although taxable as discussed
above. In addition, if a shareholder sells shares of the Fund held for six
months or less and receives a capital gain distribution with respect to those
shares, any loss incurred on the sale of those shares will be treated as a
long-term capital loss to the extent of the capital gain distribution received.

Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a date
in any of those months are deemed to have been paid by the Fund and received by
the shareholders on December 31 of that year if the distributions are paid by
the Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.

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<PAGE>

aggregate dividends received by the Fund from U.S. corporations. However,
dividends received by a corporate shareholder and deducted by it pursuant to the
dividends-received deduction are subject indirectly to the alternative minimum
tax.

FOREIGN TAXES. Dividends and interest received by the Fund, and gains
realized thereby, may be subject to income, withholding or other taxes imposed
by foreign countries and U.S. possessions ("foreign taxes") that would reduce
the yield and/or return on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of
the Fund's total assets at the close of its taxable year consists of securities
of foreign corporations, it will be eligible to, and may, file an election
("Election") with the Internal Revenue Service that would enable its
shareholders, in effect, to receive the benefit of the foreign tax credit with
respect to any foreign income taxes paid by it. Pursuant to the Election, the
Fund would treat those taxes as dividends paid to its shareholders and each
shareholder would be required to (1) include in gross income, and treat as paid
by him or her, his or her proportionate share of those taxes, (2) treat his or
her share of those taxes and of any dividend paid by the Fund that represents
income from foreign or U.S. possession sources as his or her own income from
those sources and (3) either deduct the taxes deemed paid by him or her in
computing his or her taxable income or, alternatively, use the foregoing
information in calculating the foreign tax credit against his or her federal
income tax. No deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions. Generally, a credit for foreign taxes may not
exceed portion of the shareholder's federal income tax attributable to his total
foreign source taxable income; however, pursuant to the Taxpayer Relief Act of
1997 (the "Tax Act"), individuals who have no more than $300 ($600 for married
persons filing jointly) of creditable foreign taxes included on Forms 1099 and
all of whose foreign source income is "qualified passive income" may elect each
year to be exempt from the extremely complicated foreign tax credit limitation
and will be able to claim a foreign tax credit without having to file the
detailed Form 1116 that otherwise is required. The Fund will report to its
shareholders shortly after each taxable year their respective shares of its
income from sources within foreign countries and U.S. possessions and foreign
taxes it paid if it makes the Election.

PASSIVE FOREIGN INVESTMENT COMPANIES. The Fund may invest in the stock
of "passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation other than a "controlled foreign corporation" (I.E., a foreign
corporation in which, on any day during its taxable year, more than 50% of the
total voting power of all voting stock therein or the total value of all stock
therein is owned, directly, indirectly, or constructively, by "U.S.
shareholders," defined as U.S. persons that individually own, directly,
indirectly, or constructively, at least 10% of that voting power) as to which
the Fund is a U.S. shareholder - that, in general, meets either of the following
tests: (1) at least 75% of its gross income is passive or (2) an average of at
least 50% of its assets produce, or are held for the production of, passive
income. Under certain circumstances, the Fund will be subject to federal income
tax on a portion of any "excess distribution" received on the stock of a PFIC or
of any gain on disposition of the stock (collectively "PFIC income"), plus
interest thereon, even if the Fund distributes the PFIC income as a dividend to

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<PAGE>

its shareholders. The balance of the PFIC income will be included in the Fund's
investment company taxable income and, accordingly, will not be taxable to it to
the extent that income is distributed to its shareholders.

If the Fund invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the foregoing tax and
interest obligation, the Fund would be required to include in income each year
its PRO RATA share of the QEF's annual ordinary earnings and net capital gain
(the excess of net long-term capital gain over net short-term capital loss)
which likely would have to be distributed by the Fund to satisfy the
Distribution Requirement and avoid imposition of the 4% excise tax mentioned in
the Prospectus under "Dividends, Other Distributions and Taxes" even if those
earnings and gain were not received by the Fund from the QEF. In most instances
it will be very difficult, if not impossible, to make this election because of
certain requirements thereof.

The Fund may elect to "mark to market" its stock in any PFIC.
"Marking-to-market," in this context, means including in ordinary income each
taxable year the excess, if any, of the fair market value of a PFIC's stock over
the Fund's adjusted basis therein as of the end of that year. Pursuant to the
election, the Fund also would be allowed to deduct (as an ordinary, not capital,
loss) the excess, if any, of its adjusted basis in PFIC stock over the fair
market value thereof as of the taxable year-end, but only to the extent of any
net mark-to-market gains with respect to that stock included by the Fund for
prior taxable years. The Fund's adjusted basis in each PFIC's stock with respect
to which it makes this election will be adjusted to reflect the amounts of
income included and deductions taken under the election. Regulations proposed in
1992 would provide a similar election with respect to the stock of certain
PFICs.

FOREIGN CURRENCY AND HEDGING TRANSACTIONS. Gains from the sale or other
disposition of foreign currencies (except certain gains therefrom that may be
excluded by future regulations), and gains from options, futures and forward
contracts derived by the Fund with respect to its business of investing in
securities or foreign currencies, will qualify as permissible income under the
Income Requirement.

Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gains and losses. However, a portion of the gains and
losses from the disposition of foreign currencies and certain
foreign-currency-denominated instruments (including debt instruments and
financial forward and futures contracts and options) may be treated as ordinary
income or loss under Section 988 of the Code. In addition, all or a portion of
any gain realized from the disposition of certain market discount bonds and from
engaging in "conversion transactions" that would otherwise be treated as capital
gain may be treated as ordinary income. "Conversion transactions" are defined to
include certain option and straddle investments.

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<PAGE>

as of the date of this Statement of Additional Information, whether the 60%
portion of that is treated as long-term capital gain will qualify for the
reduced maximum tax rates on net capital gain enacted by the Tax Act 20% (10%
for taxpayers in the 15% marginal tax bracket) on capital assets held for more
than 18 months instead of the 28% maximum rate in effect before that
legislation, which now applies to gain on capital assets held for more than one
year but not more than 18 months, although technical corrections legislation
passed by the House of Representatives would treat such 60% percent portion as
qualifying therefor.

Offsetting positions held by the Fund involving certain options, futures
or forward contracts may constitute "straddles", which are defined to include
"offsetting positions" in actively traded personal property. The tax treatment
of straddles is governed by Sections 1092 and to the extent noted above, 1258 of
the Code, which in certain circumstances override or modify Sections 1256 and
988. As a result, all or a portion of any capital gain from certain straddle
transactions may be recharacterized as ordinary income. If the Fund were treated
as entering into straddles by reason of its engaging in certain options, futures
or forward contract transactions, such straddles would be characterized as
"mixed straddles" if the transactions comprising a part of such straddles were
governed by Section 1256. The Fund may make one or more elections with respect
to mixed straddles; depending on which election is made, if any, the results to
the Fund may differ. If no election is made, then to the extent the straddle and
conversion transactions rules apply to positions established by the Fund, losses
realized by the Fund will be deferred to the extent of unrealized gain in the
offsetting position. Moreover, as a result of the straddle rules, short-term
capital loss on straddle positions may be recharacterized as long-term capital
loss, and long-term capital gains may be treated as short-term capital gains or
ordinary income.

Investment by the Fund in securities issued or acquired at a discount
(for example, zero coupon securities) could, under special tax rules, affect the
amount and timing of distributions to shareholders by causing the Fund to
recognize income prior to the receipt of cash payments. For example, the Fund
could be required to take into gross income annually a portion of the discount
(or deemed discount) at which the securities were issued and could need to
distribute such income to satisfy the Distribution Requirement and to avoid the
excise tax (the "Excise Tax"). In such case, the Fund may have to dispose of
securities it might otherwise have continued to hold in order to generate cash
to satisfy these requirements.

STATE AND LOCAL TAXES.......Depending upon the extent of the Fund's
activities in states and localities in which it is deemed to be conducting
business, the Fund may be subject to the tax laws thereof. Shareholders are also
advised to consult their tax advisers concerning the application of state and
local taxes to them.

FOREIGN SHAREHOLDERS - U.S. FEDERAL INCOME TAXATION. U.S. federal income
taxation of a shareholder who, as to the United States, is a non-resident alien
individual, a foreign trust or estate, a foreign corporation or a foreign
partnership (a "foreign shareholder") depends on whether the income from the
Fund is "effectively connected" with a U.S. trade or business carried on by the
shareholder, as discussed generally below. Special U.S. federal income tax rules
that differ from those described below may apply to certain foreign persons who
invest in the Fund, such as a foreign shareholder entitled to claim the benefits
of an applicable tax treaty. Foreign shareholders are advised to consult their

B-52
<PAGE>

own tax advisers with respect to the particular tax consequences to them of an
investment in the Fund.

FOREIGN SHAREHOLDERS - INCOME NOT EFFECTIVELY CONNECTED. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the foreign
shareholder generally will be subject to U.S. federal withholding tax of 30% (or
lower treaty rate). Capital gains realized by foreign shareholders on the sale
of Fund shares and distributions to them of net capital gain generally will not
be subject to U.S. federal income tax unless the foreign shareholder is a
non-resident alien individual and is physically present in the United States for
more than 182 days during the taxable year. In the case of certain foreign
shareholders, the Fund may be required to withhold U.S. federal income tax at a
rate of 31% of capital gain distributions and of the gross proceeds from a
redemption of Fund shares unless the shareholder furnishes the Fund with a
certificate regarding the shareholder's foreign status.

PORTFOLIO TRANSACTIONS

All portfolio transactions of the Fund are placed on behalf of the Fund
by Dreyfus. Debt securities purchased and sold by the Fund are generally traded
on a net basis (i.e., without commission) through dealers acting for their own
account and not as brokers, or otherwise involve transactions directly with the
issuer of the instrument. This means that a dealer (the securities firm or bank
dealing with the Fund) makes a market for securities by offering to buy at one
price and sell at a slightly higher price. The difference between the prices is
known as a spread. Other portfolio transactions may be executed through brokers
acting as agent. The Fund will pay a spread or commissions in connection with
such transactions. Dreyfus uses its best efforts to obtain execution of
portfolio transactions at prices which are advantageous to the Fund and at
spreads and commission rates, if any, which are reasonable in relation to the
benefits received. Dreyfus also places transactions for other accounts that it
provides with investment advice.

Brokers and dealers involved in the execution of portfolio transactions
on behalf of the Fund are selected on the basis of their professional capability

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<PAGE>

and the value and quality of their services. In selecting brokers or dealers,
Dreyfus will consider various relevant factors, including, but not limited to,
the size and type of the transaction; the nature and character of the markets
for the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer; the broker-dealer's
execution services rendered on a continuing basis; and the reasonableness of any
spreads (or commissions, if any). Any spread, commission, fee or other
remuneration paid to an affiliated broker-dealer is paid pursuant to the
Company's procedures adopted in accordance with Rule 17e-1 under the 1940 Act.

Dreyfus may use research services of and place brokerage transactions
with broker-dealers affiliated with it or Mellon Bank if the commissions are
reasonable, fair and comparable to commissions charged by non-affiliated
brokerage firms for similar services. During the fiscal years ended October 31,
1998, 1997 and 1996, the Fund paid brokerage commissions of $______, $___
and $_____, respectively, to affiliates of Dreyfus or Mellon Bank. The amount
paid to affiliated brokerage firms during the fiscal years ended October 31,
1998, 1997 and 1996, was approximately ____%, ____% and ____%, respectively,
of the aggregate brokerage commissions paid by the Fund, for transactions
involving approximately ____%, ____% and ____%, respectively, of the
aggregate dollar volume of transactions for which the Fund paid brokerage
commissions. The difference in these percentages was due to the lower
commissions paid to affiliates of Dreyfus.

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<PAGE>

more than one of the accounts managed by Dreyfus. Simultaneous transactions may
occur when several accounts are managed by the same investment manager,
particularly when the same investment instrument is suitable for the investment
objective of more than one account.

When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated in
accordance with a formula considered by Dreyfus to be equitable to each account.
In some cases this system could have a detrimental effect on the price or volume
of the investment instrument as far as the Fund is concerned. In other cases,
however, the ability of the Fund to participate in volume transactions will
produce better executions for the Fund. While the Directors will continue to
review simultaneous transactions, it is their present opinion that the
desirability of retaining Dreyfus as investment manager to the Fund outweighs
any disadvantages that may be said to exist from exposure to simultaneous
transactions.

For the fiscal years ended October 31, 1998, 1997 and 1996, the Fund
paid brokerage commissions amounting to $______, $_____ and $37,784,
respectively.

PORTFOLIO TURNOVER. While securities are purchased for the fund on the
basis of potential for high current income and possible capital appreciation and
not for short-term trading profits, the fund's portfolio turnover rate may
exceed 100%. A portfolio turnover rate of 100% would occur, for example, if all
the securities held by the Fund were replaced once in a period of one year. A
higher rate of portfolio turnover involves correspondingly greater brokerage
commissions and other expenses that must be borne directly by the Fund and,
thus, indirectly by its shareholders. In addition, a higher rate of portfolio
turnover may result in the realization of larger amounts of short-term and/or
long-term capital gains that, when distributed to the Fund's shareholders, are
taxable to them at the then current rate. Nevertheless, securities transactions
for the Fund will be based only upon investment considerations and will not be
limited by any other considerations when Dreyfus deems its appropriate to make
changes in the Fund's assets. The portfolio turnover rate for the Fund is
calculated by dividing the lesser of the Fund's annual sales or purchases of
portfolio securities (exclusive of purchases and sales of securities whose
maturities at the time of acquisition were one year or less) by the monthly
average value of securities in the Fund during the year. Portfolio turnover may
vary from year to year as well as within a year. The portfolio turnover rates
for the fiscal years ended October 31, 1998 and 1997 were _____and _____,
respectively.

B-55
<PAGE>

PERFORMANCE INFORMATION

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "PAST PERFORMANCE."

Average annual total returns (expressed as a percentage) for Class A
shares of the Fund for the periods noted were:

Average Annual Total Return for the
Periods Ended October 31, 1998
Fund: 1 Year Inception
- ----- ------ ---------

Class a Shares _____% _____%
- --------------
(4/6/94)

Inception date appears in parentheses following the average annual total return
since inception.

The foregoing chart assumes deduction of the maximum sales load from the
hypothetical initial investment at the time of purchase although no sales load
was applicable to Class A shares or its predecessor class until January 16,
1998.

The aggregate total return (expressed as a percentage) for Class B
shares of the Fund for the period beginning with the date of inception (January
16, 1998) and ending October 31, 1998 was _____% (assuming the assessment
of the maximum CDSC applicable to such shares at such time).

The aggregate total return (expressed as a percentage) for Class C
shares of the Fund for the period beginning with the date of inception (January
16, 1998) and ending October 31, 1998 was _____% (assuming the assessment
of the maximum CDSC applicable to such shares at such time).

Average annual total returns (expressed as a percentage) for Class R
shares of the Fund for the periods noted were:

Average Annual Total Return for the
Periods Ended October 31, 1998
------------------------------

Fund: 1 Year 5 Years Inception
- ---- ------ ------- ---------

Class R shares % % %
------ ------- ---------
(11/12/93)

Inception date appears in parentheses following the average annual total return
since inception.

The Fund's total return for Class R shares (formerly called Restricted
Shares) for the period from November 12, 1993 (the Fund's inception date) to
October 31, 1998 was _____%. The Fund's total return for Class A shares
(formerly called Investor shares) for the period from April 6, 1994 (inception

B-56
<PAGE>

date of Class A shares) to October 31, 1998 was ____% (assuming deduction of the
maximum sales load from the hypothetical initial investment at the time of
purchase, although no sales load was applicable to Class A shares or its
predecessor class until January 16, 1998). Without giving effect to the
applicable front-end sales load, the total return for Class A was ___% for this
period. The Fund's total return for Class B and Class C shares for the period
from January 16, 1998 (inception date of Class B and Class C shares) to October
31, 1998 was ____% and ____%, respectively (assuming deduction of the maximum
CDSC to each hypothetical investment). Without giving effect to the applicable
CDSC, the total return for Class B and class shares was ____% and ____%,
respectively, for this period. Total return is calculated by subtracting the
amount of the Fund's NAV (maximum offering price in the case of Class A) per
share at the beginning of a stated period from the NAV (maximum offering price
in the case of Class A) per share at the end of the period (after giving effect
to the reinvestment of dividends and other distributions during the period and
any applicable CDSC), and dividing the result by the NAV (maximum offering price
in the case of Class A) per share at the beginning of the period. Total return
also may be calculated based on the NAV per share at the beginning of the period
instead of the maximum offering price per share at the beginning of the period
for Class A shares or without giving effect to any applicable CDSC at the end of
the period for Class B or Class C shares. In such cases, the calculation would
not reflect the deduction of the sales load with respect to Class A shares or
any applicable CDSC with respect to Class B or C shares, which, if reflected
would reduce the performance quoted.

Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Standard & Poor's 500 Composite Stock Price Index, the Standard & Poor's 400
MidCap Index, the Dow Jones Industrial Average, or other appropriate unmanaged
domestic or foreign indices of performance of various types of investments so
that investors may compare the Fund's results with those of indices widely
regarded by investors as representative of the securities markets in general;
(ii) other groups of mutual funds tracked by Lipper Analytical Services, Inc., a
widely used independent research firm which ranks mutual funds by overall
performance, investment objectives and assets, or tracked by other services,
companies, publications, or persons who rank mutual funds on overall performance
or other criteria; (iii) the Consumer Price Index (a measure of inflation) to
assess the real rate of return from an investment in the Fund or the Fund's
performance against inflation to the performance of other instruments against
inflation; and (iv) products managed by a universe of money managers with
similar country allocation and performance objectives. Unmanaged indices may
assume the reinvestment of dividends but generally do not reflect deductions or
administrative and management costs and expenses. From time to time, advertising
materials for the Fund may refer to Morningstar ratings and related analyses
supporting the rating.

From time to time, advertising material for the Fund may include: (i)
biographical information relating to its portfolio manager and may refer to, or
include commentary by the Fund's portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors (ii)
information concerning retirement and investing for retirement, including
statistical data or general discussions about the growth and development of
Dreyfus Retirement Services (in terms of new customers, assets under management,
market share, etc.) and its presence in the defined contribution plan market;
(iii) the approximate number of then current Fund shareholders; (iv) references
to the Fund's quantitative, disciplined approach to stock market investing and
the number of stocks analyzed by Dreyfus; and (v) Lipper or Morningstar ratings
and related analysis supporting the ratings. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions or
administrative and management costs and expenses.

B-57
<PAGE>

INFORMATION ABOUT THE FUND

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "THE FUND."

The Company has an authorized capitalization of 25 billion shares of
$0.001 per value stock.

The Fund will send annual and semi-annual financial statements to all of
its shareholders.

B-58
<PAGE>

TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS

Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Company,
Dreyfus Transfer, Inc. arranges for the maintenance of shareholder account
records for the Fund, the handling of certain communications between
shareholders and the Fund, and the payment of dividends and distributions
payable by the Fund. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses.

___________________, was appointed by the Directors to serve as the
Fund's independent auditors for the year ending October 31, 1999, providing
audit services including (1) examination of the annual financial statements, (2)
assistance, review and consultation in connection with SEC filings and (3)
review of the annual federal income tax return filed on behalf of the Fund.

FINANCIAL STATEMENTS

The financial statements for the fiscal year ended October 31, 1998,
including notes to the financial statements and supplementary information, and
the Independent Auditors' Report are included in the Annual Report to
shareholders. A copy of the Annual Report accompanies this Statement of
Additional Information. The financial statements included in the Annual Report,
and the Independent Auditors' Report thereon contained therein, and related
notes, are incorporated herein by reference.

B-59
<PAGE>

APPENDIX

DESCRIPTION OF STANDARD AND POOR'S, MOODY'S, FITCH IBCA
AND DUFF RATINGS

STANDARD & POOR'S ("S&P")

BOND RATINGS

AAA An obligation rated `AAA' has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.

AA An obligation rated `AA' differs from the highest rated issues
only in small degree. The obligors capacity to meet its financial
commitment on the obligation is very strong.

A An obligation rated `A' is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories. However,
the obligor's capacity to meet its financial commitment on the
obligation is still strong.

BBB An obligation rated `BBB' exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of
the obligor to meet its financial commitment on the obligation.

Obligations rated `BB', `B', `CCC', `CC', and `C' are regarded as having
significant speculative characteristics. `BB' indicates the least degree
of speculation and `C' the highest. While such obligations will likely
have some quality and protective characteristics, these may be
outweighed by large uncertainties or major exposures to adverse
conditions.

BB An obligation rated `B' is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions, which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.

B An obligation rated `B' is more vulnerable to nonpayment than
obligations rated `BB', but the obligor currently has the
capacity to meet its financial commitment on the obligation.
Adverse business, financial, or economic conditions will likely
impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.

CCC An obligation rated `CCC' is currently vulnerable to nonpayment
and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on
the obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the
capacity to meet its financial commitment on the obligation.

CC An obligation rated `CC' is currently highly vulnerable to
nonpayment.

B-60
<PAGE>

C The `C' rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been
taken, but payments on this obligation are being continued.

D An obligation rated `D' is in payment default. The `D' rating
category is used when payments on a obligation are not made on
the date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period. The `D' rating also will be used upon the filing of
a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.

The ratings from `AA' to `CCC' may be modified by the addition of a plus
(+) or a minus (-) sign to show relative standing within the major
rating categories

NOTE RATINGS

SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt service
is given a plus (+) designation.

SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the
term of the notes.

SP-3 Speculative capacity to pay principal and interest.

COMMERCIAL PAPER RATINGS

An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than 365 days.

A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issuers designated `A-1.'

B Issues rated `B' are regarded as having only speculative capacity
for timely payment.

B-61
<PAGE>

C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.

D Debt rated `D' is in payment default. The `D' rating category is
used when interest payments of principal payments are not made on
the date due, even if the applicable grace period has not
expired, unless S&P believes such payments will be made during
such grace period.

MOODY'S

BOND RATINGS

Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally
are referred to as "gilt edge." Interest payments are protected
by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger
than in Aaa securities.

A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment some time in the future.

Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.

Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very
moderate, and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position characterizes
bonds in this class.

B-62
<PAGE>

B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.

Caa Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with
respect to principal or interest.

Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked short-comings.

C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.

Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through B.
The modifier 1 indicates a ranking for the security in the higher end of
a rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates a ranking in the lower end of a rating category.

NOTES AND OTHER SHORT-TERM OBLIGATIONS

There are four rating categories for short-term obligations that define
an investment grade situation. These are designated Moody's Investment Grade as
MIG 1 (best quality) through MIG 4 (adequate quality). Short-term obligations of
speculative quality are designated SG.

MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.

B-63
<PAGE>

MIG-2/

MIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.

MIG 3/

VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less
well established.

COMMERCIAL PAPER RATING

Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated issuers:

Prime-1 Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt
obligations. Prime-1 repayment ability will often be evidenced by
many of the following characteristics:

o Leading market positions in well-established industries. o High
rates of return on funds employed.
o Conservative capitalization structure with moderate reliance on
debt and ample asset protection
o Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
o Well-established access to a range of financial markets and
assured sources of alternate liquidity.

Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt

B-64
<PAGE>

protection measurements and may require relatively high financial
leverage. Adequate alternative liquidity is maintained.

FITCH IBCA

BOND RATINGS

AAA Highest credit quality. `AAA' ratings denote the lowest
expectation of credit risk. They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.

AA Very high credit quality. `AA' ratings denote a very low
expectation of credit risk. They indicate very strong capacity
for timely payment of financial commitments. This capacity is not
significantly vulnerable to foreseeable events.

A High credit quality. `A' ratings denote a low expectation of
credit risk. The capacity for timely payment of financial
commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or
in economic conditions than is the case for higher ratings.

BBB Good credit quality. `BBB' rating indicate that there is
currently a low expectation of credit risk. The capacity for
timely payment of financial commitments is considered adequate,
but adverse changes in circumstances and in economic conditions
are more likely to impair this capacity. This is the lowest
investment-grade category.

BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse
economic change over time; however, business or financial
alternatives may be available to allow financial commitments to
be met. Securities rated in this category are not investment
grade.

B Highly speculative. `B' ratings indicate that significant credit
risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity
for continued payment is contingent upon a sustained, favorable
business and economic environment.

CCC, CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained,
favorable business or economic developments. A `CC' rating
indicates that default of some kind appears probable. `C' ratings
signal imminent default.

B-65
<PAGE>

SHORT-TERM AND COMMERCIAL PAPER RATINGS

F-1+ Highest credit quality. Indicates the strongest capacity for
timely payment of financial commitments; may have an added "+" to
denote any exceptionally strong credit feature.

F-2 Good credit quality. A satisfactory capacity for timely payment
of financial commitments, but the margin of safety is not as
great as in the case of the higher ratings.

F-3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could
result in a reduction to non-investment grade.

B Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in
financial and economic conditions.

C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.

D Default. Denotes actual or imminent payment default.

"+"or "-" may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to the `AAA'
long-term rating category, to categories below `CCC', or to
short-term ratings other than `F-1'.

B-66
<PAGE>

DUFF & PHELPS INC. ("DUFF & PHELPS")

LONG-TERM RATINGS

AAA Highest credit quality. The risks factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.

AA+ High credit quality. Protection factors are strong. Risk is
AA modest but may vary slightly from time to time because of
AA- economic conditions.

A+ Protections factors are average but adequate. However, risk
A factors are more variable and greater in periods of economic
A- stress.

BBB+ Below-average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.

BB+ Below investments grade and possessing risk that obligations will
BB not be met when due. Financial protection factors will fluctuate
BB- widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the
rating within this category or into a higher or lower rating
grade.

CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be
substantial with unfavorable economic/industry conditions, and/or
with unfavorable company developments.

DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.

SHORT-TERM AND COMMERCIAL PAPER RATINGS

D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations.

B-67
<PAGE>

D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.

D-1- High certainly of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.

D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may
enlarge total financial requirements, access to capital markets
is good. Risk factors are small.

D-3 Satisfactory liquidity and other protection factors qualify
issues as to investment grade. Risk factors are larger and
subject to more variation. Nevertheless, timely payment is
expected.

D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.

D-5 Issuer failed to meet scheduled principal and/or interest
payments.

B-68
<PAGE>
Dreyfus Premier Large Company Stock Fund

Investing in large-cap stocks for investment returns that exceed the S&P
500((reg.tm))

PROSPECTUS March 1, 1999

(reg.tm)

<PAGE>

The Fund

Dreyfus Premier Large Company Stock Fund
---------------------------------

Ticker Symbols CLASS A: DRDEX

CLASS B: N/A

CLASS C: N/A

CLASS R: N/A

Contents

The Fund
- --------------------------------------------------------------------------------

Goal/Approach INSIDE COVER

Main Risks 1

Past Performance 1

Expenses 2

Management 3

Financial Highlights 4

Your Investment
- --------------------------------------------------------------------------------

Account Policies 6

Distributions and Taxes 8

Services for Fund Investors 9

Instructions for Regular Accounts 10

Instructions for IRAs 11

For More Information
- --------------------------------------------------------------------------------

INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.

GOAL/APPROACH

The fund seeks investment returns (consisting of capital appreciation and
income) that are consistently superior to the Standard & Poor's((reg.tm)) 500
Composite Stock Price Index (S&P 500). This objective may be changed without
shareholder approval. To pursue its goal, the fund invests at least 65% of total
assets in a blended portfolio of growth and value stocks chosen through a
disciplined investment process. Consistency of returns and stability of the
fund's share price compared to the S&P 500 are primary goals of the process.

Dreyfus uses a computer model to identify and rank stocks within an industry or
sector, based on:

.. VALUE, or how a stock is priced relative to its perceived intrinsic worth

.. GROWTH, in this case the sustainability or growth of earnings

.. FINANCIAL PROFILE, which measures the financial health of the company

Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities, drawing on information technology as well as Wall Street
sources and company management.

Concepts to understand

S&P 500: an unmanaged index of 500 common stocks chosen to reflect the
industries of the U.S. economy.

COMPUTER MODEL: a proprietary computer model that evaluates and ranks a universe
of 2,000 stocks, screening each stock for relative attractiveness within its
economic sector and industry. To ensure that the model remains effective,
Dreyfus reviews each of the screens on a regular basis, and maintains the
flexibility to adapt the screening criteria to changes in market and economic
conditions.

INSIDE COVER
<PAGE>

MAIN RISKS

Although the fund seeks to manage risk by broadly diversifying among industries
and by maintaining a risk profile very similar to the S&P 500, the fund is
expected to hold fewer securities than the index. Owning fewer securities and
the ability to purchase companies not listed in the index can cause the fund to
underperform the index.

By investing in a mix of growth and value companies, the fund assumes the risks
of both and may achieve more modest gains than funds that use only one
investment style. Because the stock prices of growth companies are based in part
on future expectations, they may fall sharply if earnings expectations are not
met or investors believe the prospects for a stock, industry or the economy in
general are weak. Growth stocks also typically lack the dividend yield that
could cushion stock prices in market downturns. With value stocks, there is the
risk that they may never reach what the manager believes is their full market
value, or that their intrinsic values may fall. While investments in value
stocks may limit downside risk over time, they may produce smaller gains than
riskier stocks.

PAST PERFORMANCE

The first table below shows how the performance of the fund's Class R shares has
varied from year to year. The second table compares the performance of each
share class over time to that of the S&P 500, a widely recognized unmanaged
index of stock performance. These returns reflect any applicable sales loads.
Both tables assume the reinvestment of dividends and distributions. As with all
mutual funds, the past is not a prediction of the future.
- --------------------------------------------------------------------------------

Year-by-year total return AS OF 12/31 EACH YEAR (%)

[BAR GRAPH]

BEST QUARTER: QX 'XX X.XX%

WORST QUARTER: QX 'XX X.XX%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

Average annual total return AS OF 12/31/98
<S> <C> <C> <C> <C>

Inception date 1 Year 3 Years Life of fund
- ------------------------------------------------------------------------------------------------------------------------------------

CLASS A (9/14/94) X.XX% X.XX% X.XX%

CLASS B (1/16/98) X.XX% -- --

CLASS C (1/16/98) X.XX% -- --

CLASS R (9/2/94) X.XX% X.XX% X.XX%

S&P 500 INDEX X.XX% X.XX% X.XX%*

* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON XX/XX/XX IS USED AS THE
BEGINNING VALUE ON XX/XX/XX.
</TABLE>

What this fund is -- and isn't

The Fund

1
<PAGE>

EXPENSES

As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.
<TABLE>
<CAPTION>

Fee table
<S> <C> <C> <C> <C>

CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------------------------------------------

SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)

Maximum sales charge on purchases

AS A % OF OFFERING PRICE 5.75 NONE NONE NONE

Maximum deferred sales charge (CDSC)

ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)

% OF AVERAGE DAILY NET ASSETS

Management fees .90 .90 .90 .90

12b-1 fee .25 1.00 1.00 NONE

Other expenses .00 .00 .00 .00
- ------------------------------------------------------------------------------------------------------------------------------------

TOTAL 1.15 1.90 1.90 .90

* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1
MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF REDEEMED WITHIN ONE YEAR.

Expense example

1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------

CLASS A $0,000 $0,000 $0,000 $0,000

CLASS B
WITH REDEMPTION $0,000 $0,000 $0,000 $0,000**
WITHOUT REDEMPTION $0,000 $0,000 $0,000 $0,000**

CLASS C
WITH REDEMPTION $0,000 $0,000 $0,000 $0,000
WITHOUT REDEMPTION $0,000 $0,000 $0,000 $0,000

CLASS R $0,000 $0,000 $0,000 $0,000

** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.
</TABLE>

This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. Because actual
return and expenses will be different, the example is for comparison only.

Concepts to understand

<PAGE>

MANAGEMENT

Management philosophy

Portfolio manager

Bert Mullins has managed the fund since its inception and has been employed by
Dreyfus as a portfolio manager since October 1994. Mr. Mullins has been employed
as a portfolio manager by Laurel Capital Advisors, an affiliate of Dreyfus since
October 1990. He is also a Vice President, portfolio manager and Senior
Securities Analyst for Mellon Bank, N.A.

Concepts to understand

Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.

The Fund

<PAGE>

FINANCIAL HIGHLIGHTS

The following tables describe the performance of each share class 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
independently audited by [ ], whose report, along with the
fund's financial statements, is included in the annual report.
<TABLE>
<CAPTION>

YEAR ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C>

CLASS A 1998 1997 1996 1995 1994(1)
- ------------------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period 14.49 12.00 9.95 10.00

Investment operations: Investment income -- net .20 .27 .22 .03

Net realized and unrealized gain (loss)
on investments 4.26 2.54 2.05 (.08)

Total from investment operations 4.46 2.81 2.27 (.05)

Distributions: Dividends from investment income -- net (.20) (.20) (.22) --

Dividends from net realized gain on investments (.52) (.12) -- --

Total distributions (.72) (.32) (.22) --

Net asset value, end of period 18.23 14.49 12.00 9.95

Total return (%)(2) 32.01 23.87 23.20 (.50)(3)
- ------------------------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) 1.15 1.15 1.15 .19(3)

Ratio of net investment income to average net assets (%) 1.23 1.81 2.32 .44(3)

Portfolio turnover rate (%) 37.17 44.33 37.57 5.00(3)
- ------------------------------------------------------------------------------------------------------------------------------------

Net Assets, end of period ($ x 1,000) 6,456 4,599 1,714 1

(1) FOR THE PERIOD FROM SEPTEMBER 14, 1994 THROUGH OCTOBER 31, 1994.

(2) EXCLUSIVE OF SALES LOAD.

(3) NOT ANNUALIZED.
</TABLE>

4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>

PERIOD ENDED
OCTOBER 31,
CLASS B 1998(1)
- ------------------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period

Investment operations: Investment income (loss) -- net

Net realized and unrealized gain (loss) on investments

Total from investment operations

Net asset value, end of period

Total return (%)(2) 3
- ------------------------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) 3

Ratio of net investment income (loss) to average net assets (%) 3

Portfolio turnover rate (%) 3
- ------------------------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000)

(1) FOR THE PERIOD FROM JANUARY 16, 1998 THROUGH OCTOBER 31, 1998.

(2) EXCLUSIVE OF SALES LOAD.

(3) NOT ANNUALIZED.

</TABLE>

PERIOD ENDED
OCTOBER 31,
CLASS C 1998(1)
- ------------------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period

Investment operations: Investment income (loss) -- net

Net realized and unrealized gain (loss) on investments

Total from investment operations

Net asset value, end of period

Total return (%)(2) 3
- ------------------------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) 3

Ratio of net investment income (loss) to average net assets (%) 3

Portfolio turnover rate (%) 3
- ------------------------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000)

(1) FOR THE PERIOD FROM JANUARY 16, 1998 THROUGH OCTOBER 31, 1998.

(2) EXCLUSIVE OF SALES LOAD.

(3) NOT ANNUALIZED.

YEAR ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C>

CLASS R 1998 1997 1996 1995 1994(1)
- ------------------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period 14.49 12.00 9.95 10.00

Investment operations: Investment income -- net .23 .21 .28 .05

Net realized and unrealized gain (loss) on investments 4.27 2.63 2.02 (.10)

Total from investment operations 4.50 2.84 2.30 (.05)

Distributions: Dividends from investment income -- net (.24) (.23) (.25) --

Dividends from net realized gain on investments (.52) (.12) -- --

Total distributions (.76) (.35) (.25) --

Net asset value, end of period 18.23 14.49 12.00 9.95

Total return (%) 32.25 24.18 23.48 (.50)(2)
- ------------------------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) .90 .90 .90 .15(2)

Ratio of net investment income to average net assets (%) 1.46 2.06 2.57 .48(2)

Portfolio turnover rate (%) 37.17 44.33 37.57 5.00(2)
- ------------------------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 28,224 13,387 4,509 5,005

(1) FOR THE PERIOD FROM SEPTEMBER 2, 1994 THROUGH OCTOBER 31, 1994.

(2) NOT ANNUALIZED.

</TABLE>

The Fund

<PAGE>

Your Investment

ACCOUNT POLICIES

.. Class A shares can be the most cost-effective choice, if you are investing
for the long term, especially if you are investing $50,000 or more.

.. Class B shares can make sense if you have a long time horizon and are
investing less than $50,000.

.. Class C shares may be appropriate if you have a shorter or less certain
time horizon and are investing less than $50,000.

.. Class R shares are designed for eligible institutions on behalf of their
clients. Individuals may not purchase these shares directly.

Share class charges

EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay a sales charge to buy or sell shares. Contact your financial representative
or the SAI to see if this may apply to you. Shareholders owning Class A shares
on January 15, 1998 are not subject to any front-end sales loads.
- --------------------------------------------------------------------------------

Sales charges

CLASS A -- CHARGED WHEN YOU BUY SHARES

Sales charge Sales charge as
deducted as a % a % of your
Your investment of offering price net investment
- --------------------------------------------------------------------------------

Up to $49,999 5.75% 6.10%

$50,000 -- $99,999 4.50% 4.70%

$100,000 -- $249,999 3.50% 3.60%

$250,000 -- $499,999 2.50% 2.60%

$500,000 -- $999,999 2.00% 2.00%

$1 million or more* 0.00% 0.00%

* A 1.00% contingent deferred sales charge may be charged on any shares sold
within one year of purchase (except shares bought through reinvestment).

Class A shares also carry an annual Rule 12b-1 fee of 0.25% of the class's
average net assets.
- --------------------------------------------------------------------------------

CLASS B -- CHARGED WHEN YOU SELL SHARES

Up to 2 years 4.00%

2 -- 4 years 3.00%

4 -- 5 years 2.00%

5 -- 6 years 1.00%

More than 6 years Shares will automatically
convert to Class A

6
<PAGE>

Class B shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------

CLASS C -- CHARGED WHEN YOU SELL SHARES

CLASS R -- NO SALES LOAD OR RULE 12B-1 FEES

Reduced Class A sales charge

LETTER OF INTENT: lets you purchase Class A shares over a 13-month period and
receive the same sales charge as if all shares had been purchased at once.

RIGHT OF ACCUMULATION: lets you add the value of any Class A shares you already
own to the amount of your next Class A investment for purposes of calculating
the sales charge.

CONSULT THE STATEMENT OF ADDITIONAL INFORMATION (SAI) OR YOUR FINANCIAL
REPRESENTATIVE FOR MORE DETAILS.

<PAGE>

Buying shares

ORDERS RECEIVED BY DEALERS by the close of trading on the NYSE and transmitted
to the distributor or its designee by the close of its business day (normally
5:15 p.m. Eastern time) will be based on the NAV determined as of the close of
trading on the NYSE that day.
- --------------------------------------------------------------------------------

Minimum investments

Initial Additional
- --------------------------------------------------------------------------------

REGULAR ACCOUNTS $1,000 $100; $500 FOR
TELETRANSFER INVESTMENTS

TRADITIONAL IRAS $750 NO MINIMUM

SPOUSAL IRAS $750 NO MINIMUM

ROTH IRAS $750 NO MINIMUM

EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST YEAR

DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS

All investments must be in U.S. dollars. Third-party checks cannot be accepted.
You may be charged a fee for any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.

Concepts to understand

Selling shares

7
<PAGE>

Written sell orders

Some circumstances require written sell orders along with signature guarantees.
These include:

(pound) amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days

(pound) requests to send the proceeds to a different payee or address

Written sell orders of $100,000 or more must also be signature guaranteed.

Your Investment
7A

<PAGE>

ACCOUNT POLICIES (CONTINUED)

General policies

IF YOUR ACCOUNT FALLS BELOW $500, the fund may ask you to increase your balance.
If it is still below $500 after 45 days, the fund may close your account and
send you the proceeds.

UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.

THE FUND RESERVES THE RIGHT TO:

.. refuse any purchase or exchange request that could adversely affect the
fund or its operations, including those from any individual or group who, in
the fund's view, is likely to engage in excessive trading (usually defined
as more than four exchanges out of the fund within a calendar year)

.. refuse any purchase or exchange request in excess of 1% of the fund's
total assets

.. change or discontinue its exchange privilege, or temporarily suspend
this privilege during unusual market conditions

.. change its minimum investment amounts

.. delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or during
unusual market conditions)

DISTRIBUTIONS AND TAXES

Taxability of distributions

Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------

INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE

SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE

LONG-TERM
CAPITAL GAINS 10% 20%

Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.

Taxes on transactions

Except between tax-deferred accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.

<PAGE>

SERVICES FOR FUND INVESTORS

Automatic services

For investing

DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.

DREYFUS PAYROLL For making automatic investments
SAVINGS PLAN through a payroll deduction.

DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.

DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
- --------------------------------------------------------------------------------

For exchanging shares

DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
- --------------------------------------------------------------------------------

For selling shares

Exchange privilege

YOU CAN EXCHANGE SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one class of the fund into the same class of another Dreyfus Premier fund.
You can request your exchange by contacting your financial representative. Be
sure to read the current prospectus for any fund into which you are exchanging
before investing. Any new account established through an exchange will have the
same privileges as your original account (as long as they are available). There
is currently no fee for exchanges, although you may be charged a sales load when
exchanging into any fund that has a higher one.

TeleTransfer privilege

Reinvestment privilege

Account statements

EVERY FUND INVESTOR automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.

Your Investment

<PAGE>

INSTRUCTIONS FOR REGULAR ACCOUNTS

TO OPEN AN ACCOUNT

In Writing

Complete the application.

Mail your application and a check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing

TO ADD TO AN ACCOUNT

Fill out an investment slip, and write your account number on your check.

Mail the slip and the check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing

By Telephone

WIRE Have your bank send your
investment to Boston Safe Deposit & Trust Co., with these instructions:

* ABA# 011001234

* DDA# 044210

* the fund name

* the share class

* your Social Security or tax ID number

* name(s) of investor(s)

* dealer number if applicable

Call us to obtain an account number. Return your application with the account
number on the application.

WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:

* ABA# 011001234

* DDA# 044210

* the fund name

* the share class

* your account number

* name(s) of investor(s)

* dealer number if applicable

ELECTRONIC CHECK Same as wire, but before your account number insert "4070" for
Class A, "4680" for Class B, "4690" for Class C, "4910" for Class R

TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.

Automatically

WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.

10
<PAGE>

TO SELL SHARES

Write a letter of instruction that includes:

* your name(s) and signature(s)

* your account number

* the fund name

* the dollar amount you want to sell

* how and where to send the proceeds

Obtain a signature guarantee or other documentation, if required (see page 9).

Mail your request to: The Dreyfus Family of Funds
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing

WIRE Call us or your financial representative to request your transaction. Be
sure the fund has your bank account information on file. Proceeds will be wired
to your bank.

TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.

CHECK Call us or your financial representative to request your transaction. A
check will be sent to the address of record.

AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative to request a
form to add the plan. Complete the form, specifying the amount and frequency of
withdrawals you would like.

Be sure to maintain an account balance of $5,000 or more.

Concepts to understand

10A

<PAGE>

INSTRUCTIONS FOR IRAS

TO OPEN AN ACCOUNT

In Writing

Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.

Mail your application and a check to:
The Dreyfus Trust Company, custodian
P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing

TO ADD TO AN ACCOUNT

Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.

Mail in the slip and the check to:
The Dreyfus Trust Company
P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing

By Telephone
------------

WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:

* ABA# 021000018

* DDA# 044210

* the fund name

* the share class

* your account number

* name of investor

* the contribution year

* dealer number if applicable

ELECTRONIC CHECK Same as wire, but before your account number insert "4070" for
Class A, "4680" for Class B, "4690" for Class C, "4910" for Class R

Automatically
-------------

TO SELL SHARES

Write a letter of instruction that includes:

* your name and signature

* your account number and fund name

* the dollar amount you want to sell

* how and where to send the proceeds

* whether the distribution is qualified or premature

* whether the 10% TEFRA should be withheld

11
<PAGE>

Obtain a signature guarantee or other documentation, if required (see page 9).

Mail in your request to:
The Dreyfus Trust Company
P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing

SYSTEMATIC WITHDRAWAL PLAN Call us to request instructions to establish the
plan.

For information and assistance, contact your financial representative or call
toll free in the U.S. 1-800-554-4611. Make checks payable to: THE DREYFUS TRUST
COMPANY, CUSTODIAN

Your Investment

11A

<PAGE>

For More Information

Dreyfus Premier Large Company Stock Fund
- --------------------------------------

SEC file number: 811-5270

More information on this fund is available free upon request, including the
following:

Annual/Semiannual Report

Describes the fund's performance, lists portfolio holdings and contains a letter
from the fund's manager discussing recent market conditions, economic trends
and fund strategies that significantly affected the fund's performance during
the last fiscal year.

Statement of Additional Information (SAI)

Provides more details about the fund and its policies. A current SAI is on file
with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).

To obtain information:

BY TELEPHONE
Call your financial representative or 1-800-554-4611

BY MAIL Write to:
The Dreyfus Premier Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144

ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from: http://www.sec.gov

<PAGE>

[Application p 1 here]

<PAGE>

[Application p 2 here]

<PAGE>
- --------------------------------------------------------------------------------
DREYFUS PREMIER LARGE COMPANY STOCK FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 1999
-------------------------------------------------------------------------------

This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of the
Dreyfus Premier Large Company Stock Fund (the "Fund"), dated March 1, 1999, as
it may be revised from time to time. The Fund is a separate, diversified
portfolio of The Dreyfus/Laurel Funds, Inc., an open-end management investment
company (the "Company"), known as a mutual fund. To obtain a copy of the Fund's
Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale,
New York 11556-0144, or call one of the following numbers:

Call Toll Free 1-800-554-4611
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452

TABLE OF CONTENTS Page

Description of the Fund................................................ B-2
Management of the Fund................................................. B-16
Management Arrangements................................................ B-22
Purchase of Shares..................................................... B-24
Distribution and Service Plans......................................... B-31
Redemption of Shares................................................... B-33
Shareholder Services................................................... B-38
Additional Information About Purchases, Exchanges and Redemptions...... B-45
Determination of Net Asset Value....................................... B-45
Dividends, Other Distributions and Taxes............................... B-46
Portfolio Transactions................................................. B-53
Performance Information................................................ B-55
Information About the Fund............................................. B-57
Transfer and Dividend Disbursing
Agent, Custodian, Counsel and Independent Auditors................... B-58
Financial Statements................................................... B-58
Appendix............................................................... B-59

<PAGE>

DESCRIPTION OF THE FUND

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS OF THE FUND'S PROSPECTUS ENTITLED "GOAL/APPROACH" AND "MAIN
RISKS."

The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.

The Fund seeks investment returns (consisting of capital appreciation
and income) that are consistently superior to the Standard & Poor's 500
Composite Stock Price Index ("S&P 500"). The S&P 500 is composed of 500 common
stocks, most of which are traded on the New York Stock Exchange ("NYSE"), chosen
to reflect the industries of the U.S. economy. The inclusion of a stock in the
S&P 500 does not imply that Standard and Poor's believes the stock to be an
attractive or appropriate investment, nor is Standard & Poor's affiliated with
the Company or the Fund. "S&P 500" is a trademark of Standard & Poor's.

Prior to ___________, the Fund's investment objective was
- -----------------.

CERTAIN PORTFOLIO SECURITIES

The following information regarding the securities that the Fund may
purchase supplements that are found in the Fund's prospectus.

AMERICAN DEPOSITORY RECEIPTS ("ADRS") AND NEW YORK SHARES. The Fund may
invest in U.S. dollar-denominated ADRs and New York Shares. ADRs typically are
issued by an American bank or trust company and evidence ownership of underlying
securities issued by foreign companies. New York Shares are securities of
foreign companies that are issued for trading in the United States. ADRs and New
York Shares are traded in the United States on national securities exchanges or
in the over-the-counter market. Investment in securities of foreign issuers
presents certain risks, including those resulting from adverse political and
economic developments and the imposition of foreign governmental laws or
restrictions. See "Foreign Securities."

GOVERNMENT OBLIGATIONS. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities and
times of issuance: (a) U.S. Treasury bills have a maturity of one year or less,
(b) U.S. Treasury notes have maturities of one to ten years, and (c) U.S.
Treasury bonds generally have maturities of greater than ten years.

B-2
<PAGE>

In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are supported by any of the following: (a) the full faith
and credit of the U.S. Treasury, (b) the right of the issuer to borrow an amount
limited to a specific line of credit from the U.S. Treasury, (c) the
discretionary authority of the U.S. Treasury to lend to such Government agency
or instrumentality, or (d) the credit of the instrumentality. (Examples of
agencies and instrumentalities are: Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Central Bank for Cooperatives, Federal Intermediate Credit Banks,
Federal Home Loan Banks, General Services Administration, Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory Board,
Inter-American Development Bank, Asian-American Development Bank, Student Loan
Marketing Association, International Bank for Reconstruction and Development,
Small Business Administration and Fannie Mae). No assurance can be given that
the U.S. Government will provide financial support to the agencies or
instrumentalities described in (b), (c) and (d) in the future, other than as set
forth above, since it is not obligated to do so by law.

REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements
with U.S. Government securities dealers recognized by the Federal Reserve Board,
with member banks of the Federal Reserve System, or with such other brokers or
dealers that meet the Fund's credit guidelines. This technique offers a method
of earning income on idle cash. In a repurchase agreement, the Fund buys a
security from a seller that has agreed to repurchase the same security at a
mutually agreed upon date and price. The Fund's resale price will be in excess
of the purchase price, reflecting an agreed upon interest rate. This interest
rate is effective for the period of time the Fund is invested in the agreement
and is not related to the coupon rate on the underlying security. Repurchase
agreements may also be viewed as a fully collateralized loan of money by the
Fund to the seller. The period of these repurchase agreements will usually be
short, from overnight to one week, and at no time will the Fund invest in
repurchase agreements for more than one year. The Fund will always receive as
collateral securities whose market value including accrued interest is, and
during the entire term of the agreement remains, at least equal to 100% of the
dollar amount invested by the Fund in each agreement, and the Fund will make
payment for such securities only upon physical delivery or upon evidence of book
entry transfer to the account of the custodian. If the seller defaults, the Fund
might incur a loss if the value of the collateral securing the repurchase
agreement declines and might incur disposition costs in connection with
liquidating the collateral. In addition, if bankruptcy proceedings are commenced
with respect to the seller of a security which is the subject of a repurchase
agreement, realization upon the collateral by the Fund may be delayed or
limited. The Fund seeks to minimize the risk of loss through repurchase
agreements by analyzing the creditworthiness of the obligors under repurchase
agreements, in accordance with the Fund's credit guidelines.

B-3
<PAGE>

backed by guarantees of foreign banks may involve additional risk due to the
difficulty of obtaining and enforcing judgments against such banks and the
generally less restrictive regulations to which such banks are subject. The Fund
will only invest in commercial paper of U.S. and foreign companies rated at the
time of purchase at least A-1 by Standard & Poor's, Prime-1 by Moody's Investors
Service, Inc., F-1 by Fitch Investors Service, LLP, Duff 1 by Phoenix Duff &
Phelps, Corp., or A1 by IBCA, Inc.

BANK INSTRUMENTS. The Fund may purchase bankers' acceptances,
certificates of deposit, time deposits, and other short-term obligations issued
by domestic banks, foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions. Included among such obligations are
Eurodollar certificates of deposit ("ECDs"), Eurodollar time deposits ("ETDs")
and Yankee Dollar certificates of deposit ("Yankee CDs"). ECDs are U.S.
dollar-denominated certificates of deposit issued by foreign branches of
domestic banks. ETDs are U.S. dollar-denominated time deposits in a foreign
branch of a U.S. bank or a foreign bank. Yankee CDs are certificates of deposit
issued by a U.S. branch of a foreign bank denominated in U.S. dollars and held
in the United States. The Fund may also invest in Eurodollar bonds and notes,
which are obligations that pay principal and interest in U.S. dollars held in
banks outside the United States, primarily in Europe. All of these obligations
are subject to somewhat different risks than are the obligations of domestic
banks or issuers in the United States. See "Foreign Securities."

B-4
<PAGE>

restricted as to disposition under the federal securities laws, and generally is
sold to institutional investors, such as the Fund, that agree that they are
purchasing the paper for investment and not with a view to public distribution.
Any resale by the purchaser must be pursuant to registration or an exemption
therefrom. Section 4(2) paper normally is resold to other institutional
investors like the Fund through or with the assistance of the issuer or
investment dealers who make a market in the Section 4(2) paper, thus providing
liquidity. Rule 144A securities generally must be sold to other qualified
institutional buyers. If a particular investment in Section 4(2) paper or Rule
144A securities is not determined to be liquid, that investment will be included
within the percentage limitation on investment in illiquid securities. The
ability to sell Rule 144A securities to qualified institutional buyers is a
recent development and it is not possible to predict how this market will
mature. Investing in Rule 144A securities could have the effect of increasing
the level of Fund illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing these securities from the Fund or
other holders.

INVESTMENT TECHNIQUES

In addition to the principal investment strategies discussed in the
Fund's Prospectus, the Fund also may engage in the investment techniques
described below. The Fund might not use, or may not have the ability to use, any
of these strategies and there can be no assurance that any strategy that is used
will succeed.

BORROWING. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.

B-5
<PAGE>

that the market value of the account will equal the amount of such commitments
by the Fund.

Securities purchased on a "when-issued" basis and the securities held
by the Fund are subject to changes in market value based upon the public's
perception of changes in the level of interest rates. Generally, the value of
such securities will fluctuate inversely to changes in interest rates i.e., they
will appreciate in value when interest rates decline and decrease in value when
interest rates rise. Therefore, if in order to achieve higher interest income
the Fund remains substantially fully invested at the same time that it has
purchased securities on a "when-issued" basis, there will be a greater
possibility of fluctuation in the Fund's net asset value ("NAV").

When payment for "when-issued" securities is due, the Fund will meet
its obligations from then-available cash flow, the sale of segregated
securities, the sale of other securities and/or, although it would not normally
expect to do so, from the sale of the "when-issued" securities themselves (which
may have a market value greater or less than the Fund's payment obligation). The
sale of securities to meet such obligations carries with it a greater potential
for the realization of capital gains, which are subject to federal income taxes.

LOANS OF FUND SECURITIES. The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to borrow
securities to complete certain transactions. The Fund continues to be entitled
to payments in amounts equal to the interest, dividends or other distributions
payable on the loaned securities, which affords the Fund an opportunity to earn
interest on the amount of the loan and on the loaned securities' collateral.
Loans of portfolio securities may not exceed 33-1/3% of the value of the Fund's
total assets and the Fund will receive collateral consisting of cash, U.S.
Government securities or irrevocable letters of credit which will be maintained
at all times in an amount equal to at least 100% of the current market value of
the loaned securities. These loans are terminable by the Fund at any time upon
specified notice. The Fund might experience loss if the institution to which it
has lent its securities fails financially or breaches its agreement with the
Fund. In addition, it is anticipated that the Fund may share with the borrower
some of the income received on the collateral for the loan or that it will be
paid a premium for the loan. In determining whether to lend securities, the Fund
considers all relevant factors and circumstances including the creditworthiness
of the borrower.

B-6
<PAGE>

REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse
repurchase agreements to meet redemption requests where the liquidation of Fund
securities is deemed by Dreyfus to be disadvantageous. Under a reverse
repurchase agreement, the Fund: (1) transfers possession of Fund securities to a
bank or broker-dealer in return for cash in an amount equal to a percentage of
the securities' market value; and (2) agrees to repurchase the securities at a
future date by repaying the cash with interest. The Fund retains record
ownership of the security involved including the right to receive interest and
principal payments. Cash or liquid high-grade debt securities held by the Fund
equal in value to the repurchase price including any accrued interest will be
maintained in a segregated account while a reverse repurchase agreement is in
effect.

FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS. The Fund may
purchase and sell various financial instruments ("Derivative Instruments"), such
as financial futures contracts (such as index futures contracts) and options
(such as options on U.S. and foreign securities or indices of such securities).
The index Derivative Instruments the Fund may use may be based on indices of
U.S. or foreign equity securities. These Derivative Instruments may be used, for
example, to preserve a return or spread or to facilitate or substitute for the
sale or purchase of securities. The Fund may invest in futures contracts and
options to a limited extent but does not currently intend to invest more than 5%
of its assets in such instruments.

Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative Instrument
intended partially or fully to offset potential declines in the value of one or
more investments held in the Fund's portfolio. Thus, in a short hedge the Fund
takes a position in a Derivative Instrument whose price is expected to move in
the opposite direction of the price of the investment being hedged.

Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that the Fund intends to acquire.
Thus, in a long hedge the Fund takes a position in a Derivative Instrument whose
price is expected to move in the same direction as the price of the prospective
investment being hedged. A long hedge is sometimes referred to as an
anticipatory hedge. In an anticipatory hedge transaction, the Fund does not own
a corresponding security and, therefore, the transaction does not relate to a
security the Fund owns. Rather, it relates to a security that the Fund intends
to acquire. If the Fund does not complete the hedge by purchasing the security
it anticipated purchasing, the effect on the Fund's portfolio is the same as if
the transaction were entered into for speculative purposes.

Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that the
Fund owns or intends to acquire. Derivative Instruments on indices, in contrast,
generally are used to attempt to hedge against price movements in market sectors
in which the Fund has invested or expects to invest.

B-7
<PAGE>

Commission ("CFTC") and various state regulatory authorities. In addition, the
Fund's ability to use Derivative Instruments may be limited by tax
considerations. See "Dividends, Other Distributions and Taxes."

In addition to the instruments, strategies and risks described below
and in the Prospectus, Dreyfus expects to discover additional opportunities in
connection with other Derivative Instruments. These new opportunities may become
available as Dreyfus develops new techniques, as regulatory authorities broaden
the range of permitted transactions and as new techniques are developed. Dreyfus
may utilize these opportunities to the extent that they are consistent with the
Fund's investment objective, and permitted by the Fund's investment policies and
applicable regulatory authorities.

(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of the
investments being hedged. For example, if the value of a Derivative Instrument
used in a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of correlation
might occur due to factors unrelated to the value of the investments being
hedged, such as speculative or other pressures on the markets in which
Derivative Instruments are traded. The effectiveness of hedges using Derivative
Instruments on indices will depend on the degree of correlation between price
movements in the index and price movements in the securities being hedged.

Because there are a limited number of types of exchange-traded options
and futures contracts, it is likely that the standardized contracts available
will not match the Fund's current or anticipated investments exactly. The Fund
may invest in options and futures contracts based on securities with different
issuers, maturities, or other characteristics from the securities in which it
typically invests, which involves a risk that the options or futures position
will not track the performance of the Fund's other investments.

B-8
<PAGE>

futures and securities are traded, or from imposition of daily price fluctuation
limits or trading halts. The Fund may purchase or sell options and futures
contracts with a greater or lesser value than the securities it wishes to hedge
or intends to purchase in order to attempt to compensate for differences in
volatility between the contract and the securities, although this may not be
successful in all cases. If price changes in the Fund's options or futures
positions are poorly correlated with its other investments, the positions may
fail to produce anticipated gains or result in losses that are not offset by
gains in other investments.

(3) If successful, the above-discussed strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable price
movements. However, such strategies can also reduce opportunity for gain by
offsetting the positive effect of favorable price movements. For example, if the
Fund entered into a short hedge because Dreyfus projected a decline in the price
of a security in the Fund's portfolio, and the price of that security increased
instead, the gain from that increase might be wholly or partially offset by a
decline in the price of the Derivative Instrument. Moreover, if the price of the
Derivative Instrument declined by more than the increase in the price of the
security, the Fund could suffer a loss. In either such case, the Fund would have
been in a better position had it not attempted to hedge at all.

(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it takes
positions in Derivative Instruments involving obligations to third parties
(I.E., Derivative Instruments other than purchased options). If the Fund were
unable to close out its positions in such Derivative Instruments, it might be
required to continue to maintain such assets or accounts or make such payments
until the position expired or matured. These requirements might impair the
Fund's ability to sell a portfolio security or make an investment at a time when
it would otherwise be favorable to do so, or require that the Fund sell a
portfolio security at a disadvantageous time. The Fund's ability to close out a
position in a Derivative Instrument prior to expiration or maturity depends on
the existence of a liquid secondary market or, in the absence of such a market,
the ability and willingness of the other party to the transaction
("counterparty") to enter into a transaction closing out the position.
Therefore, there is no assurance that any position can be closed out at a time
and price that is favorable to the Fund.

(5) The purchase and sale of Derivative Instruments could result in a
loss if the counterparty to the transaction does not perform as expected and may
increase portfolio turnover rates, which results in correspondingly greater
commission expenses and transaction costs, and may result in certain tax
consequences.

B-9
<PAGE>

Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open, unless
they are replaced with other appropriate assets. As a result, the commitment of
a large portion of the Fund's assets to cover or segregated accounts could
impede portfolio management or the Fund's ability to meet redemption requests or
other current obligations.

OPTIONS. A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise price during the option period. A put option gives the purchaser the
right to sell, and obligates the writer to buy, the underlying investment at the
agreed upon exercise price during the option period. A purchaser of an option
pays an amount, known as the premium, to the option writer in exchange for
rights under the option contract.

The purchase of call options can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing put or call options
can enable the Fund to enhance income or yield by reason of the premiums paid by
the purchasers of such options. However, if the market price of the security or
other instrument underlying a put option declines to less than the exercise
price on the option, minus the premium received, the Fund would expect to suffer
a loss.

Writing put options can serve as a limited long hedge because increases
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the investment depreciates
to a price lower than the exercise price of the put option, it can be expected
that the put option will be exercised and the Fund will be obligated to purchase
the investment at more than its market value.

The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of the
underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised have
no value and the Fund would experience losses to the extent of premiums paid for
them.

B-10
<PAGE>

purchasing an identical call or put option; this is known as a closing purchase
transaction. Conversely, the Fund may terminate a position in a put or call
option it had purchased by writing an identical put or call option; this is
known as a closing sale transaction. Closing transactions permit the Fund to
realize profits or limit losses on an option position prior to its exercise or
expiration.

The Fund may purchase and sell both exchange-traded and
over-the-counter ("OTC") options. Exchange-traded options in the United States
are issued by a clearing organization that, in effect, guarantees completion of
every exchange-traded option transaction. In contrast, OTC options are contracts
between the Fund and its counterparty (usually a securities dealer or a bank)
with no clearing organization guarantee. Thus, when the Fund purchases an OTC
option, it relies on the counterparty from whom it purchased the option to make
or take delivery of the underlying investment upon exercise of the option.
Failure by the counterparty to do so would result in the loss of any premium
paid by the Fund as well as the loss of any expected benefit of the transaction.
The Fund will enter into only those option contracts that are listed on a
national securities or commodities exchange or traded in the OTC market for
which there appears to be a liquid secondary market.

The Fund's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. However,
there can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating directly
with the counterparty, or by a transaction in the secondary market if any such
market exists. Although the Fund will enter into OTC options only with major
dealers in unlisted options, there is no assurance that the Fund will in fact be
able to close out an OTC option position at a favorable price prior to
expiration. In the event of insolvency of the counterparty, the Fund might be
unable to close out an OTC option position at any time prior to its expiration.

B-11
<PAGE>

option written by the Fund could cause material losses because the Fund would be
unable to sell the investment used as cover for the written option until the
option expires or is exercised.

The Fund may write only covered call options on securities. A call
option is covered if the Fund owns the underlying security or a call option on
the same security with a lower strike price.

B-12
<PAGE>

transaction costs is all that is at risk. In contrast, when the Fund purchases
or sells a futures contract or writes a call or put option thereon, it is
subject to daily variation margin calls that could be substantial in the event
of adverse price movements. If the Fund has insufficient cash to meet daily
variation margin requirements, it might need to sell securities at a time when
such sales are disadvantageous.

Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures or an option on a futures
contract can vary from the previous day's settlement price; once that limit is
reached, no trades may be made that day at a price beyond the limit. Daily price
limits do not limit potential losses because prices could move to the daily
limit for several consecutive days with little or no trading, thereby preventing
liquidation of unfavorable positions.

To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for BONA FIDE hedging purposes
(as defined by the CFTC), the aggregate initial margin and premiums required to
establish those positions (excluding the amount by which options are
"in-the-money" at the time of purchase) will not exceed 5% of the liquidation
value of the Fund's portfolio, after taking into account unrealized profits and
unrealized losses on any contracts the Fund has entered into. This policy does
not limit to 5%, the percentage of the Fund's assets that are at risk in futures
contracts and options on futures contracts.

CERTAIN INVESTMENTS. From time to time, to the extent consistent with
its investment objective, policies and restrictions, the Fund may invest in
securities of companies with which Mellon Bank, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.

B-13
<PAGE>

substantially the same investment policies and restrictions as those applicable
to the Fund. Shareholders of the Fund will be given at least 30 days' prior
notice of any such investment. Such investment would be made only if the
Company's Board of Directors determines it to be in the best interest of the
Fund and its shareholders. In making that determination, the Company's Board of
Directors will consider, among other things, the benefits to shareholders and/or
the opportunity to reduce costs and achieve operational efficiency. Although the
Fund believes that the Company's Board of Directors will not approve an
arrangement that is likely to result in higher costs, no assurance is given that
costs will be materially reduced if this option is implemented.

INVESTMENT RESTRICTIONS

FUNDAMENTAL. The following limitations have been adopted by the Fund.
The Fund may not change any of these fundamental investment limitations without
the consent of: (a) 67% or more of the shares present at a meeting of
shareholders duly called if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy; or (b) more than 50% of
the outstanding shares of the Fund, whichever is less. The Fund may not:

1. Purchase any securities which would cause more than 25% of the value
of the Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities, and
state or municipal governments and their political subdivisions are not
considered members of any industry. In addition, this limitation does not apply
to investments in domestic banks, including U.S. branches of foreign banks and
foreign branches of U.S. banks).

3. Purchase with respect to 75% of the Fund's total assets securities
of any one issuer (other than securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) if, as a result, (a) more than 5%
of the Fund's total assets would be invested in the securities of that issuer,
or (b) the Fund would hold more than 10% of the outstanding voting securities of
that issuer.

5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real estate,
including mortgage loans, or securities of companies that engage in real estate
business or invest or deal in real estate or interests therein).

B-14
<PAGE>

6. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and later disposition of such securities
in accordance with the Fund's investment program may be deemed an underwriting.

7. Purchase or sell commodities except that the Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.

2. The Fund shall not purchase securities on margin, except that the
Fund may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with futures
contracts and options shall not constitute purchasing securities on margin.

3. The Fund shall not purchase oil, gas or mineral leases.

5. The Fund will not purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign governments or political
subdivisions thereof), including their predecessors, that have been in operation
for less than three years, if by reason thereof, the value of the Fund's
investment in securities would exceed 5% of the Fund's total assets. For
purposes of this limitation, sponsors, general partners, guarantors and
originators of underlying assets may be treated as the issuer of a security.

B-15
<PAGE>

provided that the Board of Directors, or its delegate, determines that such
securities are liquid based upon the trading markets for the specific security.

8. The Fund shall not purchase any security while borrowings
representing more than 5% of the Fund's total assets are outstanding.

If a percentage restriction is adhered to at the time of an investment,
a later increase or decrease in such percentage resulting from a change in the
values of assets will not constitute a violation of such restriction, except as
otherwise required by the 1940 Act.

If the Fund's investment objective, policies, restrictions, practices
or procedures change, shareholders should consider whether the Fund remains an
appropriate investment in light of the shareholder's then-current position and
needs.

MANAGEMENT OF THE FUND

FEDERAL LAW AFFECTING MELLON BANK

B-16
<PAGE>

redemption services in connection with the Fund, and in providing services to
the Fund as custodian, as well as Dreyfus' investment advisory activities, may
raise issues under these provisions. Mellon Bank has been advised by counsel
that the activities contemplated under these arrangements are consistent with
its statutory and regulatory obligations.

Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of such
future statutes and regulations, could prevent Mellon Bank or Dreyfus from
continuing to perform all or a part of the above services for its customers
and/or the Fund. If Mellon Bank or Dreyfus were prohibited from serving the Fund
in any of its present capacities, the Board of Directors would seek an
alternative provider(s) of such services.

DIRECTORS AND OFFICERS

The Company's Board is responsible for the management and supervision
of the Fund. The Board approves all significant agreements between the Company,
on behalf of the Fund, and those companies that furnish services to the Fund.
These companies are as follows:

The Dreyfus Corporation..............................Investment Adviser
Premier Mutual Fund Services, Inc...........................Distributor
Dreyfus Transfer, Inc....................................Transfer Agent
Mellon Bank......................................Custodian for the Fund

DIRECTORS OF THE COMPANY

B-17
<PAGE>

than five years prior to January 1995, he was President, a director and,
until August 24, 1994, Chief Operating Officer of Dreyfus and Executive
Vice President and a director of Dreyfus Service Corporation, a
wholly-owned subsidiary of Dreyfus. From August 1994 to December 31, 1994,
he was a director of Mellon Bank Corporation. Age: 55 years old. Address:
200 Park Avenue, New York, New York 10166.

o*J. TOMLINSON FORT. Director of the Company; Partner, Reed, Smith, Shaw &
McClay (law firm). Age: 70 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.

B-18
<PAGE>

Educational Foundation; Trustee, Children's Hospital; Director, The
Greater Boston Chamber of Commerce; Director, The First Albany Companies,
Inc.; from April 1995 to March 1998, Director, TBC, an affiliate of
Dreyfus. Age: 52 years old. Address: 334 Boylston Street, Suite 400,
Boston, Massachusetts.

- --------------------------------
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.

OFFICERS OF THE COMPANY

# MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior
Vice President and General Counsel of Funds Distributor, Inc. From August
1996 to March 1998, she was Vice President and Assistant General Counsel
for Loomis, Sayles & Company, L.P. From January 1986 to July 1996, she was
an associate with the law firm of Ropes & Gray. Age: 39 years old.

#DOUGLAS C. CONROY. Vice President and Assistant Secretary of the Company.
Assistant Vice President of Funds Distributor, Inc. From April 1993 to

B-19
<PAGE>

The address of each officer of the Company is 200 Park Avenue, New
York, New York 10166.

B-20
<PAGE>

the 1940 Act) for travel and out-of-pocket expenses. The Chairman of the Board
receives an additional 25% of such compensation (with the exception of
reimbursable amounts). In the event that there is a joint committee meeting of
the Dreyfus/Laurel Funds and the Dreyfus High Yield Strategies Fund, the $2,000
fee will be allocated between the Dreyfus/Laurel Funds and the Dreyfus High
Yield Strategies Fund. The compensation structure described in this paragraph is
referred to hereinafter as the "Current Compensation Structure."

Prior to July 1, 1998, the Dreyfus/Laurel Funds paid each
Director/Trustee who was not an "interested person" of the Company (as defined
in the 1940 Act) $27,000 per annum (and an additional $25,000 for the Chairman
of the Board of Directors/Trustees of the Dreyfus/Laurel Funds) and $1,000 per
joint Dreyfus/Laurel Funds Board meeting attended, plus $750 per joint
Dreyfus/Laurel Funds Audit Committee meeting attended, and reimbursed each such
Director/Trustee for travel and out-of-pocket expenses (the "Former Compensation
Structure").

Total Compensation
Aggregate From the Company
Name of Board Compensation and Fund Complex
Member From the Company# Paid to Board Member****
- ------------- ----------------- ------------------------

Joseph S. DiMartino*

James M. Fitzgibbons

J. Tomlinson Fort** none none

Arthur L. Goeschel

Kenneth A. Himmel.

Stephen J. Lockwood

John J. Sciullo

Roslyn M. Watson

B-21
<PAGE>

Benaree Pratt Wiley***

- ----------------------------
# 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. Amount does not include reimbursed expenses for
attending Board meetings, which amounted to $[ ] for the Company.
* Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds on
January 1, 1999.
** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board member
of the Company and the funds in the Dreyfus/Laurel Funds and separately by
the Dreyfus High Yield Strategies Fund. For the fiscal year ended October 31,
1998, the aggregate amount of fees and expenses received by J. Tomlinson Fort
from Dreyfus for serving as a Board member of the Company was
______________________. For the year ended December 31, 1998, the aggregate
amount of fees and expenses received by Mr. Fort for serving as a Board
member of all funds in the Dreyfus/Laurel Funds (including the Company) and
Dreyfus High Yield Strategies Fund (for which payment is made directly by the
fund) was ______________________. In addition, Dreyfus reimbursed Mr. Fort a
total of $__________________ for expenses attributable to the Company's Board
meetings which is not included in the $__________________ amount in note #
above.
***Payments to Ms. Wiley were for the period from April 23, 1998 (the date she
was elected as a Board member) through October 31, 1998.
****The Dreyfus Family of Funds consists of ___ mutual funds.

The officers and Directors of the Company as a group owned beneficially
less than 1% of the total shares of the Fund outstanding as of November __,
1998.

PRINCIPAL SHAREHOLDERS. As of January 31, 1999, the following
shareholder(s) owned of record 5% or more of Class A, Class B, Class C or Class
R of the Fund: _________.

MANAGEMENT ARRANGEMENTS

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN THE FUND'S PROSPECTUS ENTITLED "EXPENSES" AND "MANAGEMENT."

B-22
<PAGE>

provides, or arranges for one or more third parties to provide, investment
advisory, administrative, custody, fund accounting and transfer agency services
to the Fund. As investment manager, Dreyfus manages the Fund by making
investment decisions based on the Fund's investment objective, policies and
restrictions. The Management Agreement is subject to review and approval at
least annually by the Board of Directors.

The Management Agreement will continue from year to year provided that
a majority of the Directors who are not "interested persons" of the Company and
either a majority of all Directors or a majority (as defined in the 1940 Act) of
the shareholders of the Fund approve its continuance. The Management Agreement
was last approved by the Board of Directors on ____________, 1999 to continue
until __________, 2000. The Company may terminate the Management Agreement upon
the vote of a majority of the Board of Directors or upon the vote of a majority
of the Fund's outstanding voting securities on 60 days' written notice to
Dreyfus. Dreyfus may terminate the Management Agreement upon 60 days' written
notice to the Company. The Management Agreement will terminate immediately and
automatically upon its assignment.

The following persons are officers and/or directors of Dreyfus: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E. Canter,
Vice Chairman, Chief Investment Officer and a director; Lawrence S. Kash, Vice
Chairman-Distribution and a director; Ronald P. O'Hanley III, Vice Chairman; J.
David Officer, Vice Chairman and a director; William T. Sandalls, Jr., Executive
Vice President; Mark N. Jacobs, Vice President, General Counsel and Secretary;
Patrice M. Kozlowski, Vice President-Corporate Communications; Mary Beth Leibig,
Vice President-Human Resources; Andrew S. Wasser, Vice-President-Information
Systems; Theodore A. Schachar, Vice President; Wendy Strutt, Vice President;
Richard Terres, Vice President; William H. Maresca, Controller; James Bitetto,
Assistant Secretary; Steven F. Newman, Assistant Secretary; and Mandell L.
Berman, Burton C. Borgelt, Frank V. Cahouet and Richard F. Syron, directors.

EXPENSES. Under the Management Agreement, the Fund has agreed to pay
Dreyfus a monthly fee at the annual rate of 0.90% of the value of the Fund's
average daily net assets. Dreyfus pays all of the Fund's expenses, except
brokerage fees, taxes, interest, fees and expenses of the non-interested
directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and expenses
of the non-interested Directors (including counsel fees), Dreyfus is
contractually required to reduce its investment management fee by an amount
equal to the Fund's allocable share of such fees and expenses. From time to
time, Dreyfus may voluntarily waive a portion of the investment management fees
payable by the Fund, which would have the effect of lowering the expense ratio
of the Fund and increasing return to investors. Expenses attributable to the
Fund are charged against the Fund's assets; other expenses of the Company are
allocated among its funds on the basis determined by the Board, including, but
not limited to, proportionately in relation to the net assets of each fund.

B-23
<PAGE>

For the last three years, the Fund had the following expenses:

For the Fiscal Year Ended October 31,

1998 1997 1996
---- ---- ----

Management fees $____ $229,763 $94,844

THE DISTRIBUTOR. Premier Mutual Fund Services, Inc. (the
"Distributor"), located at 60 State Street, Boston, Massachusetts 02109, serves
as the Fund's distributor on a best efforts basis pursuant to an agreement which
is renewable annually. Dreyfus may pay the Distributor for shareholder services
from Dreyfus' own assets, including past profits but not including the
management fee paid by the Fund. The Distributor may use part or all of such
payments to pay certain banks, securities brokers or dealers and other financial
institutions ("Agents") for these services. The Distributor also acts as
sub-administrator for the Fund and as distributor for the other funds in the
Dreyfus Family of Funds.

PURCHASE OF SHARES

Class A shares, Class B shares and Class C shares may be purchased only
by clients of Agents, except that full-time or part-time employees of Dreyfus or

B-24
<PAGE>

any of its affiliates or subsidiaries, directors of Dreyfus, Board members of a
fund advised by Dreyfus, including members of the Company's Board, or the spouse
or minor child of any of the foregoing may purchase Class A shares directly
through the Distributor. In addition, holders of Investor shares of the Fund as
of January 15, 1998 may continue to purchase Class A shares of the Fund at NAV.
Subsequent purchases may be sent directly to the Transfer Agent or your Agent.

Class R shares are sold only to holders of Restricted shares of the
Fund as of November 30, 1997. Such shareholders were primarily bank trust
departments and other financial service providers (including Mellon Bank and its
affiliates) acting on behalf of customers having a qualified trust or investment
account or relationship at such institution, customers who received and held
shares of the Fund distributed to them by virtue of such an account or
relationship, or other persons acquiring Restricted shares when they were
generally available to the public.

The minimum initial investment is $1,000. Subsequent investments must
be at least $100. The minimum initial investment is $750 for Dreyfus-sponsored
Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a non working
spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans with only one
participant and $500 for Dreyfus-sponsored Education IRAs, with no minimum on
subsequent purchases. The initial investment must be accompanied by the Fund's
Account Application. The Fund reserves the right to offer Fund shares without
regard to minimum purchase requirements to employees participating in certain
qualified or non-qualified employee benefit plans or other programs where
contributions or account information can be transmitted in a manner and form
acceptable to the Fund. The Fund reserves the right to vary further the initial
and subsequent investment minimum requirements at any time.

The Internal Revenue Code of 1986, as amended (the "Code") imposes
various limitations on the amount that may be contributed annually to certain
qualified or non-qualified employee benefit plans or other programs, including
pension, profit-sharing and other deferred compensation plans, whether
established by corporations, partnerships, non-profit entities or state and
local governments ("Retirement Plans"). These limitations apply with respect to
participants at the plan level and, therefore, do not directly affect the amount
that may be invested in the Fund by a Retirement Plan. Participants and plan
sponsors should consult their tax advisers for details.

Fund shares are sold on a continuous basis. NAV per share is determined
as of the close of trading on the floor of the New York Stock Exchange ("NYSE")
(currently 4:00 p.m., New York time), on each day the NYSE is open for business.
For purposes of determining NAV, options and futures contracts will be valued 15
minutes after the close of trading on the floor of the NYSE. NAV per share of
each class is computed by dividing the value of the Fund's net assets
represented by such class (i.e., the value of its assets less liabilities) by
the total number of shares of such class outstanding. For further information
regarding the methods employed in valuing the Fund's investments, see
"Determination of Net Asset Value".

B-25
<PAGE>

determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, Fund shares will be purchased at the public offering price determined
as of the close of trading on the floor of the NYSE on the next business day,
except where shares are purchased through a dealer as provided below.

Orders for the purchase of Fund shares received by dealers by the close
of trading on the floor of the NYSE on any business day and transmitted to the
Distributor or its designee by the close of its business day (normally 5:15
p.m., New York time) will be based on the public offering price per share
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, the orders will be based on the next determined public offering
price. It is the dealers' responsibility to transmit orders so that they will be
received by the Distributor or its designee before the close of its business
day. For certain institutions that have entered into agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted, and
must be received by the Transfer Agent, within three business days after the
order is placed. If such payment is not received within three business days
after the order is placed, the order may be canceled and the institution could
be held liable for resulting fees and/or losses.

Agents may receive different levels of compensation for selling
different Classes of shares. Management understands that some Agents may impose
certain conditions on their clients which are different from those described in
the Fund's Prospectus, and, to the extent permitted by applicable regulatory
authority, may charge their clients direct fees which would be in addition to
any amounts which might be received under the Distribution and Service Plans.
Each Agent has agreed to transmit to its clients a schedule of such fees. You
should consult your Agent in this regard.

The Distributor may pay dealers a fee of up to 0.5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have a
minimum of 250 employees eligible for participation in such plans or programs or
(ii) such plan's or program's aggregate investment in the Dreyfus Family of
Funds or certain other products made available by the Distributor to such plans
or programs exceeds $1,000,000 ("Eligible Benefit Plans"). Shares of funds in
the Dreyfus Family of Funds then held by Eligible Benefit Plans will be
aggregated to determine the fee payable. The Distributor reserves the right to
cease paying these fees at any time. The Distributor will pay such fees from its
own funds, other than amounts received from the Fund, including past profits or
any other source available to it.

Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Fund's Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service.

CLASS A SHARES. The public offering price for Class A shares is the NAV
per share of that Class, plus, except for shareholders owning Investor shares of
the Fund on January 15, 1998, a sales load as shown below:

B-26
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>

Total Sales Load as a % Dealers' Reallowance
Amount of Transaction of Offering Price Per Share as a % of Offering Price
--------------------- --------------------------- ------------------------
Less than $50,000 5.75 5.00
$50,000 to less than $100,000 4.50 3.75
$100,000 to less than $250,000 3.50 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more -0- -0-

</TABLE>

SALES LOADS -- CLASS A. The scale of sales loads applies to purchases
of Class A shares made by any "purchaser," which term includes an individual
and/or spouse purchasing securities for his, her or their own account or for the
account of any minor children, or a trustee or other fiduciary purchasing
securities for a single trust estate or a single fiduciary account (including a
pension, profit-sharing or other employee benefit trust created pursuant to a
plan qualified under Section 401 of the Internal Revenue Code of 1986, as
amended (the "Code")) although more than one beneficiary is involved; or a group
of accounts established by or on behalf of the employees of an employer or
affiliated employers pursuant to an employee benefit plan or other program
(including accounts established pursuant to Sections 403(b), 408(k) and 457 of
the Code); or an organized group which has been in existence for more than six
months, provided that it is not organized for the purpose of buying redeemable
securities of a registered investment company and provided that the purchases
are made through a central administration or a single dealer, or by other means
which result in economy of sales effort or expense.

Set forth below is an example of the method of computing the offering
price of the Fund's Class A shares. The example assumes a purchase of Class A
shares of the Fund aggregating less than $50,000 subject to the schedule of
sales charges set forth in the Fund's Prospectus at a price based upon the NAV
of a Class A (Investor) share at the close of business on October 31, 1998:

NAV per share $_____

Per Share Sales Charge - 5.75% of offering price
(6.10% of NAV per share) $_____

Per Share Offering Price to Public $_____

B-27
<PAGE>

charge ("CDSC") of 1.00% will be assessed at the time of redemption. The
Distributor may pay Agents an amount up to 1% of the NAV of Class A shares
purchased by their clients that are subject to a CDSC. The terms contained below
under "Redemption of Shares - Contingent Deferred Sales Charge - Class B Shares"
(other than the amount of the CDSC and time periods) and "Redemption of Shares
Waiver of CDSC" are applicable to the Class A shares subject to a CDSC. Letter
of Intent and Right of Accumulation apply to such purchases of Class A shares.

Full-time employees of NASD member firms and full-time employees of
other financial institutions which have entered into an agreement with the
Distributor pertaining to the sale of Fund shares (or which otherwise have a
brokerage related or clearing arrangement with an NASD member firm or financial
institution with respect to the sale of Fund shares) may purchase Class A shares
for themselves directly or pursuant to an employee benefit plan or other
program, or for their spouses or minor children at NAV, provided that they have
furnished the Distributor with such information as it may request from time to
time in order to verify eligibility for this privilege. This privilege also
applies to full-time employees of financial institutions affiliated with NASD
member firms whose full-time employees are eligible to purchase Class A shares
at NAV. In addition, Class A shares are offered at NAV to full-time or part-time
employees of Dreyfus or any of its affiliates or subsidiaries, directors of
Dreyfus, Board members of a fund advised by Dreyfus, including members of the
Company's Board, or the spouse or minor child of any of the foregoing.

Class A shares may be purchased at NAV through certain broker-dealers
and other financial institutions which have entered into an agreement with the
Distributor, which includes a requirement that such shares be sold for the
benefit of clients participating in a "wrap account" or a similar program under
which such clients pay a fee to such broker-dealer or other financial
institution.

Class A shares also may be purchased at NAV, subject to appropriate
documentation, through a broker-dealer or other financial institution with the
proceeds from the redemption of shares of a registered open-end management
investment company not managed by Dreyfus or its affiliates. The purchase of
Class A shares of the Fund must be made within 60 days of such redemption and
the shareholder must have either (i) paid an initial sales charge or a CDSC or

B-28
<PAGE>

(ii) been obligated to pay at any time during the holding period, but did not
actually pay on redemption, a deferred sales charge with respect to such
redeemed shares.

Class A shares also may be purchased at NAV, subject to appropriate
documentation, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or intrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000 or
more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 501(c)(3) of the Code).

CLASS B SHARES. The public offering price for Class B shares is the NAV
per share of that Class. No initial sales charge is imposed at the time of
purchase. A CDSC is imposed, however, on certain redemptions of Class B shares
as described in the Fund's Prospectus. The Distributor compensates certain
Agents for selling Class B shares at the time of purchase from the Distributor's
own assets. The proceeds of the CDSC and the distribution fee, in part, are used
to defray these expenses.

CLASS C SHARES. The public offering price for Class C shares is the NAV
per share of that Class. No initial sales charge is imposed at the time of
purchase. A CDSC is imposed, however, on redemptions of Class C shares made
within the first year of purchase. See "Class B Shares" above and "How to Redeem
Shares."

CLASS R SHARES. The public offering for Class R shares is the NAV per
share of that Class.

B-29
<PAGE>

combination thereof, with an aggregate current market value of $40,000 and
subsequently purchase Class A shares of the Fund or shares of an Eligible Fund
having a current value of $20,000, the sales load applicable to the subsequent
purchase would be reduced to 4.5% of the offering price. All present holdings of
Eligible Funds may be combined to determine the current offering price of the
aggregate investment in ascertaining the sales load applicable to each
subsequent purchase.

TELETRANSFER PRIVILEGE. You may purchase Fund shares by telephone
through the TeleTransfer Privilege if you have checked the appropriate box and
supplied the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these documents and
your Fund account. Only a bank account maintained in a domestic financial
institution that is an Automated Clearing House ("ACH") member may be so
designated. TeleTransfer purchase orders may be made at any time. Purchase
orders received by 4:00 p.m., New York time, on any business day that the
Transfer Agent and the NYSE are open for business will be credited to the
shareholder's Fund account on the next bank business day following such purchase
order. Purchase orders made after 4:00 p.m., New York time, on any business day
the Transfer Agent and the NYSE are open for business, or orders made on
Saturday, Sunday or any Fund holiday (e.g., when the NYSE is not open for
business), will be credited to the shareholder's Fund account on the second bank
business day following such purchase order. To qualify to use the TeleTransfer
Privilege, the initial payment for purchase of Fund shares must be drawn on, and
redemption proceeds paid to, the same bank and account as are designated on the
Account Application or Shareholder Services Form on file. If the proceeds of a
particular redemption are to be wired to an account at any other bank, the
request must be in writing and signature-guaranteed. See "Redemption of Shares -
TeleTransfer Privilege." The Fund may modify or terminate this Privilege at any
time or charge a service fee upon notice to shareholders. No such fee currently
is contemplated.

B-30
<PAGE>

IN-KIND PURCHASES. If the following conditions are satisfied, the Fund
may at its discretion, permit the purchase of shares through an "in-kind"
exchange of securities. Any securities exchanged must meet the investment
objective, policies and limitations of the Fund, must have a readily
ascertainable market value, must be liquid and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus any
cash, must be at least equal to $25,000. Shares purchased in exchange for
securities generally cannot be redeemed for fifteen days following the exchange
in order to allow time for the transfer to settle.

The basis of the exchange will depend upon the relative net asset
values of the shares purchased and securities exchanged. Securities accepted by
the Fund will be valued in the same manner as the Fund values its assets. Any
interest earned on the securities following their delivery to the Fund and prior
to the exchange will be considered in valuing the securities. All interest,
dividends, subscription or other rights attached to the securities become the
property of the Fund, along with the securities. For further information about
"in-kind" purchases, call 1-800-554-4611.

SHARE CERTIFICATES. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.

DISTRIBUTION AND SERVICE PLANS

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "YOUR INVESTMENT."

Class A, Class B and Class C shares are subject to annual fees for
distribution and shareholder services.

The SEC has adopted Rule 12b-1 under the 1940 Act (the "Rule")
regulating the circumstances under which investment companies such as the
Company may, directly or indirectly, bear the expenses of distributing their
shares. The Rule defines distribution expenses to include expenditures for "any
activity which is primarily intended to result in the sale of fund shares." The
Rule, among other things, provides that an investment company may bear such
expenses only pursuant to a plan adopted in accordance with the Rule.

B-31
<PAGE>

intended to result in the sale of Class A shares of the Fund. The Class A Plan
allows the Distributor to make payments from the Rule 12b-1 fees it collects
from the Fund to compensate Agents that have entered into Selling Agreements
("Agreements") with the Distributor. Under the Agreements, the Agents are
obligated to provide distribution related services with regard to the Fund
and/or shareholder services to the Agent's clients that own Class A shares of
the Fund.

DISTRIBUTION AND SERVICE PLANS -- CLASS B AND CLASS C SHARES. In
addition to the above described current Class A Plan for Class A shares, the
Board of Directors has adopted a Service Plan (the "Service Plan") under the
Rule for Class B and Class C shares, pursuant to which the Fund pays the
Distributor and Dreyfus Service Corporation a fee at the annual rate of 0.25% of
the value of the average daily net assets of Class B and Class C shares for the
provision of certain services to the holders of Class B and Class C shares. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Fund and
providing reports and other information, and providing services related to the
maintenance of such shareholder accounts. With regard to such services, each
Agent is required to disclose to its clients any compensation payable to it by
the Fund and any other compensation payable by its clients in connection with
the investment of their assets in Class B and Class C shares. The Distributor
may pay one or more Agents in respect of services for these Classes of shares.
The Distributor determines the amounts, if any, to be paid to Agents under the
Service Plan and the basis on which such payments are made. The Company's Board
of Directors has also adopted a Distribution Plan pursuant to the Rule with
respect to Class B and Class C shares (the "Distribution Plan") pursuant to
which the Fund pays the Distributor for distributing the Fund's Class B and
Class C shares at an aggregate annual rate of 0.75% of the value of the average
daily net assets of Class B and Class C shares. The Company's Board of Directors
believes that there is a reasonable likelihood that the Distribution and Service
Plans (the "Plans") will benefit the Fund and the holders of Class B and Class C
shares.

B-32
<PAGE>

A quarterly report of the amounts expended under each Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, each Plan provides that it may not be
amended to increase materially the cost which holders of Class B or Class C
shares may bear pursuant to the Plan without the approval of the holders of such
Classes and that other material amendments of the Plan must be approved by the
Board of Directors and by the Directors who are not interested persons of the
Fund and have no direct or indirect financial interest in the operation of the
Plan or in any agreements entered into in connection with the Plan, by vote cast
in person at a meeting called for the purpose of considering such amendments.
Each Plan is subject to annual approval by such vote of the Directors cast in
person at a meeting called for the purpose of voting on the Plan. Each Plan was
so approved by the Directors at a meeting held on , 1999. Each Plan may be
terminated at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Plan or in any agreements entered into in connection with the
Plan or by vote of the holders of a majority of Class B and Class C shares.

An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one Class of
shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under the Distribution and Service Plans are payable
without regard to actual expenses incurred. The Fund and the Distributor may
suspend or reduce payments under the Distribution and Service Plans at any time,
and payments are subject to the continuation of the Fund's Plans and the
Agreements described above. From time to time, the Agents, the Distributor and
the Fund may voluntarily agree to reduce the maximum fees payable under the
Plans.

REDEMPTION OF SHARES

GENERAL. If you hold Fund shares of more than one Class, any request
for redemption must specify the Class of shares being redeemed. If you fail to
specify the Class of shares to be redeemed or if you own fewer shares of the
Class than specified to be redeemed, the redemption request may be delayed until
the Transfer Agent receives further instructions from you or your Agent.

B-33
<PAGE>

The Fund imposes no charges (other than any applicable CDSC) when
shares are redeemed. Agents may charge their clients a nominal fee for effecting
redemptions of Fund shares. Any certificates representing Fund shares being
redeemed must be submitted with the redemption request. The value of the shares
redeemed may be more or less than their original cost, depending upon the Fund's
then-current NAV.

PROCEDURES. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or through the Telephone Redemption
Privilege, which is granted automatically unless you specifically refuse it by
checking the applicable "No" box on the Account Application. The Telephone
Redemption Privilege may be established for an existing account by a separate
signed Shareholder Services Form or by oral request from any of the authorized
signatories on the account by calling 1-800-554-4611. You also may redeem shares
through the Wire Redemption Privilege or the TeleTransfer Privilege if you have
checked the appropriate box and supplied the necessary information on the
Account Application or have filed a Shareholders Services Form with the Transfer
Agent. If you are a client of certain Agents ("Selected Dealers"), you can also
redeem Fund shares through the Selected Dealer. Other redemption procedures may
be in effect for clients of certain Agents and institutions. The Fund makes
available to certain large institutions the ability to issue redemption
instructions through compatible computer facilities. The Fund reserves the right
to refuse any request made by telephone, including requests made shortly after a
change of address, and may limit the amount involved or the number of such
requests. The Fund may modify or terminate any redemption privilege at any time
or charge a service fee upon notice to shareholders. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs, or other retirement plans,
and shares for which certificates have been issued, are not eligible for the
Wire Redemption, Telephone Redemption or TeleTransfer Privilege.

During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to request a
redemption or an exchange of Fund shares. In such cases, you should consider
using the other redemption procedures described herein. Use of these other
redemption procedures may result in your redemption request being processed at a
later time than it would have been if telephone redemption had been used. During
the delay, the Fund's NAV may fluctuate.

B-34
<PAGE>

REDEMPTION THROUGH A SELECTED DEALER. Customers of Selected Dealers may
make redemption requests to their Selected Dealer. If the Selected Dealer
transmits the redemption request so that it is received by the Transfer Agent
prior to the close of trading on the floor of the NYSE (currently 4:00 p.m., New
York time), the redemption request will be effective on that day. If a
redemption request is received by the Transfer Agent after the close of trading
on the floor of the NYSE, the redemption request will be effective on the next
business day. It is the responsibility of the Selected Dealer to transmit a
request so that it is received in a timely manner. The proceeds of the
redemption are credited to your account with the Selected Dealer.

REINVESTMENT PRIVILEGE. Upon written request, you may reinvest up to
the number of Class A or Class B shares you have redeemed, within 45 days of
redemption, at the then-prevailing NAV without a sales load, or reinstate your
account for the purpose of exercising Fund Exchanges. Upon reinstatement, with
respect to Class B shares, or Class A shares if such shares were subject to a
CDSC, your account will be credited with an amount equal to the CDSC previously
paid upon redemption of the Class A or Class B shares reinvested. The
Reinvestment Privilege may be exercised only once.

WIRE REDEMPTION PRIVILEGE. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone, or letter redemption
instructions from any person representing himself or herself to be the investor,
or a representative of the investor's Agent, and reasonably believed by the
Transfer Agent to be genuine. Ordinarily, the Fund will initiate payment for
shares redeemed pursuant to this Privilege on the next business day after
receipt by the Transfer Agent of the redemption request in proper form.
Redemption proceeds ($1,000 minimum), will be transferred by Federal Reserve
wire only to the commercial bank account specified by the investor on the
Account Application or Shareholder Services Form, or a correspondent bank if the
investor's bank is not a member of the Federal Reserve System. Holders of
jointly registered Fund or bank accounts may have redemption proceeds of only up
to $250,000 wired within any 30-day period. Fees ordinarily are imposed by such
bank and usually are borne by the investor. Immediate notification by the
correspondent bank to the investor's bank is necessary to avoid a delay in
crediting the funds to the investor's bank account.

Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code which
may be used for domestic or overseas transmissions:

B-35
<PAGE>

Transfer Agent's
Transmittal Code Answer Back Sign
---------------- ----------------

144295 144295 TSSG PREP

Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-654-7171,
toll free. Investors should advise the operator that the above transmittal code
must be used and should also inform the operator of the Transfer Agent's answer
back sign.

To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent. This
request must be signed by each shareholder, with each signature guaranteed as
described below under "Stock Certificates; Signatures."

TELETRANSFER PRIVILEGE. You may request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only a bank account maintained in a domestic financial
institution which is an ACH member may be designated. Redemption proceeds will
be on deposit in your account at an ACH member bank ordinarily two days after
receipt of the redemption request. Investors should be aware that if they have
selected the TeleTransfer Privilege, any request for a TeleTransfer transaction
will be effected through the ACH system unless more prompt transmittal
specifically is requested. Holders of jointly registered Fund or bank accounts
may redeem through the TeleTransfer Privilege for transfer to their bank account
only up to $250,000 within any 30-day period. See "Purchase of
Shares--TeleTransfer Privilege."

STOCK CERTIFICATES; SIGNATURES. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request. Written
redemption requests must be signed by each shareholder, including each holder of
a joint account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations,
as well as from participants in the NYSE Medallion Signature Program, the
Securities Transfer Agents Medallion Program ("STAMP") and the Stock Exchanges
Medallion Program. Guarantees must be signed by an authorized signatory of the
guarantor and "Signature-Guaranteed" must appear with the signature. The
Transfer Agent may request additional documentation from corporations,
executors, administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular verification.
For more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.

B-36
<PAGE>

the Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the SEC. In the case of requests for
redemptions in excess of such amount, the Company's Board reserves the right to
make payments in whole or in part in securities or other assets in case of an
emergency or any time a cash distribution would impair the liquidity of the Fund
to the detriment of the existing shareholders. In such event, the securities
would be valued in the same manner as the Fund's portfolio is valued. If the
recipient sold such securities, brokerage charges might be incurred.

SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the NYSE is closed
(other than customary weekend and holiday closings), (b) when trading in the
markets the Fund ordinarily utilizes is restricted, or when an emergency exists
as determined by the SEC so that disposal of the Fund's investments or
determination of its NAV is not reasonably practicable, or (c) for such other
periods as the SEC by order may permit to protect the Fund's shareholders.

CONTINGENT DEFERRED SALES CHARGE - CLASS B SHARES. A CDSC payable to
the Distributor is imposed on any redemption of Class B shares which reduces the
current NAV of your Class B shares to an amount which is lower than the dollar
amount of all payments by you for the purchase of Class B shares of the Fund
held by you at the time of redemption. No CDSC will be imposed to the extent
that the NAV of the Class B shares redeemed does not exceed (i) the current NAV
of Class B shares acquired through reinvestment of dividends or other
distributions, plus (ii) increases in the NAV of Class B shares above the dollar
amount of all your payments for the purchase of Class B shares of the Fund held
by you at the time of redemption.

If the aggregate value of the Class B shares redeemed has declined
below their original cost as a result of the Fund's performance, a CDSC may be
applied to the then-current NAV rather than the purchase price.

In circumstances where the CDSC is imposed, the amount of the charge
will depend on the number of years from the time you purchased the Class B
shares until the time of redemption of such shares. Solely for purposes of
determining the number of years from the time of any payment for the purchase of
Class B shares, all payments during a month will be aggregated and deemed to
have been made on the first day of the month.

In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible rate.
It will be assumed that the redemption is made first of amounts representing
shares acquired pursuant to the reinvestment of dividends and distributions;
then of amounts representing the increase in NAV of Class B shares above the
total amount of payments for the purchase of Class B shares made during the
preceding six years; then of amounts representing the cost of shares purchased
six years prior to the redemption; and finally, of amounts representing the cost
of shares held for the longest period of time within the applicable six-year
period.

For example, assume an investor purchased 100 shares at $10 per share
for a cost of $1,000. Subsequently, the shareholder acquired five additional

B-37
<PAGE>

shares through dividend reinvestment. During the second year after the purchase
the investor decided to redeem $500 of his or her investment. Assuming at the
time of the redemption the NAV has appreciated to $12 per share, the value of
the investor's shares would be $1,260 (105 shares at $12 per share). The CDSC
would not be applied to the value of the reinvested dividend shares and the
amount which represents appreciation ($260). Therefore, $240 of the $500
redemption proceeds ($500 minus $260) would be charged at a rate of 4% (the
applicable rate in the second year after purchase) for a total CDSC of $9.60.

CONTINGENT DEFERRED SALES CHARGE - CLASS C SHARES. A CDSC of 1% payable
to the Distributor is imposed on any redemption of Class C shares within one
year of the date of purchase. The basis for calculating the payment of any such
CDSC will be the method used in calculating the CDSC for Class B shares. See
"Contingent Deferred Sales Charge - Class B Shares" above.

WAIVER OF CDSC. The CDSC will be waived in connection with (a)
redemptions made within one year after the death or disability, as defined in
Section 72(m)(7) of the Code, of the shareholder, (b) redemptions by employees
participating in Eligible Benefit Plans, (c) redemptions as a result of a
combination of any investment company with the Fund by merger, acquisition of
assets or otherwise, (d) a distribution following retirement under a
tax-deferred retirement plan or upon attaining age 70 1/2 in the case of an IRA
or Keogh plan or custodial account pursuant to Section 403(b) of the Code, and
(e) redemptions pursuant to the Automatic Withdrawal Plan, as described below.
If the Company's Board determines to discontinue the waiver of the CDSC, the
disclosure herein will be revised appropriately. Any Fund shares subject to a
CDSC which were purchased prior to the termination of such waiver will have the
CDSC waived as provided in the Prospectus or this Statement of Additional
Information at the time of the purchase of such shares.

SHAREHOLDER SERVICES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES" AND
"SERVICES FOR FUND INVESTORS."

B-38
<PAGE>

A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.

B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load,
and the applicable sales load will be deducted.

C. Shares of funds purchased with a sales load may be
exchanged without a sales load for shares of other funds sold
without a sales load.

D. Shares of funds purchased with a sales load, shares of
funds acquired by a previous exchange from shares purchased
with a sales load and additional shares acquired through
reinvestment of dividends or other distributions of any such
funds (collectively referred to herein as "Purchased Shares")
may be exchanged for shares of other funds sold with a sales
load (referred to herein as "Offered Shares"), provided that,
if the sales load applicable to the Offered Shares exceeds the
maximum sales load that could have been imposed in connection
with the Purchased Shares (at the time the Purchased Shares
were acquired), without giving effect to any reduced loads,
the difference will be deducted.

E. Shares of funds subject to a CDSC that are exchanged for
shares of another fund will be subject to the higher
applicable CDSC of the two funds and, for purposes of
calculating CDSC rates and conversion periods, if any, will be
deemed to have been held since the date the shares being
exchanged were initially purchased.

B-39
<PAGE>

To request an exchange, an investor or an investor's Agent acting on
the investor's behalf must give exchange instructions to the Transfer Agent in
writing or by telephone. The ability to issue exchange instructions by telephone
is given to all Fund shareholders automatically unless the investor checks the
applicable "No" box on the Account Application, indicating that the investor
specifically refuses this privilege. The Telephone Exchange Privilege may be
established for an existing account by written request signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-554-4611, or by oral request from any of the
authorized signatories on the account, also by calling 1-800-554-4611. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent to
act on telephonic instructions (including over The Dreyfus Touch(R) automated
telephone system) from any person representing himself or herself to be the
investor or a representative of the investor's Agent, and reasonably believed by
the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange. No fees currently are charged shareholders directly in connection with
exchanges, although the Fund reserves the right, upon not less than 60 days'
written notice, to charge shareholders a nominal fee in accordance with rules
promulgated by the SEC.

Exchanges of Class R shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such investor's
Retirement Plan account in another fund.

DREYFUS AUTO-EXCHANGE PRIVILEGE. The Dreyfus Auto-Exchange Privilege
permits an investor to regularly purchase (on a semi-monthly, monthly, quarterly
or annual basis), in exchange for shares of the Fund, shares of the same Class
of certain other funds in the Dreyfus Premier Family of Funds or the Dreyfus
Family of Funds of which the investor is a shareholder. The amount the investor
designates, which can be expressed either in terms of a specific dollar or share
amount ($100 minimum), will be exchanged automatically on the first and/or
fifteenth day of the month according to the schedule the investor has selected.
This Privilege is available only for existing accounts. With respect to Class R
shares held by a Retirement Plan, exchanges may be made only between the
investor's Retirement Plan account in one fund and such investor's Retirement
Plan account in another fund. Shares will be exchanged on the basis of relative
NAV as described above under "Fund Exchanges." Enrollment in or modification or
cancellation of this Privilege is effective three business days following
notification by the investor. An investor will be notified if the investor's
account falls below the amount designated to be exchanged under this Privilege.
In this case, an investor's account will fall to zero unless additional
investments are made in excess of the designated amount prior to the next
Auto-Exchange transaction. Shares held under IRAs and other retirement plans are
eligible for this Privilege. Exchanges of IRA shares may be made between IRA
accounts and from regular accounts to IRA accounts, but not from IRA accounts to
regular accounts. With respect to all other retirement accounts, exchanges may
be made only among those accounts.

B-40
<PAGE>

The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to Dreyfus Premier Large
Company Stock Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. The Fund
may charge a service fee for the use of this Privilege. No such fee currently is
contemplated. For more information concerning this Privilege and the funds in
the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds eligible to
participate in this Privilege, or to obtain a Dreyfus Automatic Exchange
Authorization Form, please call toll free 1-800-554-4611.

DREYFUS-AUTOMATIC ASSET BUILDER(REGISTERED). Dreyfus Automatic Asset
Builder permits you to purchase Fund shares (minimum of $100 and maximum of
$150,000 per transaction) at regular intervals selected by you. Fund shares are
purchased by transferring funds from the bank account designated by you. Only an
account maintained at a domestic financial institution which is an ACH member
may be so designated. To establish a Dreyfus-Automatic Asset Builder account,
you must file an authorization form with the Transfer Agent. You may obtain the
necessary authorization form by calling 1-800-554-4611. You may cancel your
participation in this Privilege or change the amount of purchase at any time by
mailing written notification to Dreyfus Premier Large Company Stock Fund, P.O.
Box 6587, Providence, Rhode Island 02940-6587 and the notification will be
effective three business days following receipt. The Fund may modify or
terminate this Privilege at any time or charge a service fee. No such fee
currently is contemplated.

AUTOMATIC WITHDRAWAL PLAN. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends and other
distributions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by filing an Automatic
Withdrawal Plan application with the Transfer Agent or by oral request from any
of the authorized signatories on the account by calling 1-800-554-4611.
Automatic Withdrawal may be terminated at any time by the investor, the Fund or
the Transfer Agent. Shares for which certificates have been issued may not be
redeemed through the Automatic Withdrawal Plan.

B-41
<PAGE>

time the shareholder elects to participate in the Automatic Withdrawal Plan.
Withdrawals with respect to Class B shares under the Automatic Withdrawal Plan
that exceed on an annual basis 12% of the value of the shareholder's account
will be subject to a CDSC on the amounts exceeding 12% of the initial account
value. Class C shares, and Class A shares to which a CDSC applies, that are
withdrawn pursuant to the Automatic Withdrawal Plan will be subject to any
applicable CDSC. Purchases of additional Class A shares where the sales load is
imposed concurrently with withdrawals of Class A shares generally are
undesirable.

A. Dividends and other distributions paid by a fund may be
invested without imposition of a sales load in shares of other
funds that are offered without a sales load.

B. Dividends and other distributions paid by a fund which does
not charge a sales load may be invested in shares of other
funds sold with a sales load, and the applicable sales load
will be deducted.

C. Dividends and other distributions paid by a fund which
charges a sales load may be invested in shares of other funds
sold with a sales load (referred to herein as "Offered
Shares"), provided that, if the sales load applicable to the
Offered Shares exceeds the maximum sales load charged by the
fund from which dividends or other distributions are being
swept, without giving effect to any reduced loads, the
difference will be deducted.

D. Dividends and other distributions paid by a fund may be
invested in shares of other funds that impose a CDSC and the
applicable CDSC, if any, will be imposed upon redemption of
such shares.

Dreyfus Dividend ACH permits you to transfer electronically dividends
or dividends and capital gain distributions, if any, from the Fund to a
designated bank account. Only an account maintained at a domestic financial
institution which is an ACH member may be so designated. Banks may charge a fee
for this service.

B-42
<PAGE>

investments do not apply for Dreyfus Dividend Sweep. The Fund may modify or
terminate these privileges at any time or charge a service fee. No such fee
currently is contemplated. Shares held under Keogh Plans, IRAs or other
retirement plans are not eligible for Dreyfus Dividend Sweep.

DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social Security or
certain veterans', military or other payments from the Federal government
automatically deposited into your Fund account. You may deposit as much of such
payments as you elect. You should consider whether Direct Deposit of your entire
payment into a fund with fluctuating NAV, such as the Fund, may be appropriate
for you. To enroll in Dreyfus Government Direct Deposit, you must file with the
Transfer Agent a completed Direct Deposit Sign-Up Form for each type of payment
that you desire to include in this Privilege. The appropriate form may be
obtained from your Agent or by calling 1-800-554-4611. Death or legal incapacity
will terminate your participation in this Privilege. You may elect at any time
to terminate your participation by notifying in writing the appropriate Federal
agency. Further, the Fund may terminate your participation upon 30 days' notice
to you.

DREYFUS PAYROLL SAVINGS PLAN. Dreyfus Payroll Savings Plan permits you
to purchase Fund shares (minimum $100 per transaction) automatically on a
regular basis. Depending upon your employer's direct deposit program, you may
have part or all of your paycheck transferred to your existing Dreyfus account
electronically through the ACH system at each pay period. To establish a Dreyfus
Payroll Savings Plan account, you must file an authorization form with your
employer's payroll department. Your employer must complete the reverse side of
the form and return it to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. You may obtain the necessary authorization
form by calling 1-800-554-4611. You may change the amount of purchase or cancel
the authorization only by written notification to your employer. It is the sole
responsibility of your employer, not the Distributor, your Agent, Dreyfus, the
Fund, the Transfer Agent or any other person, to arrange for transactions under
the Dreyfus Payroll Savings Plan. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans are
not eligible for this Privilege.

DREYFUS STEP PROGRAM. Holders of the Fund's Investor shares prior to
January 16, 1998 who had enrolled in Dreyfus Step Program may continue to
purchase shares of the same class (currently designated Class A shares) without
regard to the Fund's minimum initial investment requirements through
Dreyfus-Automatic Asset Builder(REGISTERED), Dreyfus Government Direct Deposit
Privilege or Dreyfus Payroll Savings Plan. Participation in this Program may be
terminated by the shareholder at any time by discontinuing participation in
Dreyfus-Automatic Asset Builder, Dreyfus Government Direct Deposit Privilege or
Dreyfus Payroll Savings Plan, as the case may be, as provided under the terms of
such Privilege(s).The Fund reserves the right to redeem your account if you have
terminated your participation in the Program and your account's NAV is $500 or
less. See "Account Policies-General Policies" in the Fund's Prospectus. The Fund
may modify or terminate this Program at any time. The Dreyfus Step Program is
not available to open new accounts in any Class of the Fund.

B-43
<PAGE>

amount. If your purchases qualify for a further sales load reduction, the sales
load will be adjusted to reflect your total purchase at the end of 13 months. If
total purchases are less than the amount specified, you will be requested to
remit an amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If such
remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will redeem an
appropriate number of Class A shares of the Fund held in escrow to realize the
difference. Signing a Letter of Intent does not bind you to purchase, or the
Fund to sell, the full amount indicated at the sales load in effect at the time
of signing, but you must complete the intended purchase to obtain the reduced
sales load. At the time you purchase Class A shares, you must indicate your
intention to do so under a Letter of Intent. Purchases pursuant to a Letter of
Intent will be made at the then-current NAV plus the applicable sales load in
effect at the time such Letter of Intent was executed.

RETIREMENT PLANS. The Fund makes available a variety of pension and
profit-sharing plans, including Keogh Plans, IRAs (including regular IRAs,
spousal IRAs for a non-working spouse, Roth IRAs, SEP-IRAs, rollover IRAs and
Education IRAs), 401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support
services also are available. You can obtain details on the various plans by
calling the following numbers toll free: for Keogh Plans, please call
1-800-358-5566; for IRAs and IRA "Rollover Accounts," please call
1-800-554-4611; for SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans,
please call 1-800-322-7880.

Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.

SHARES MAY BE PURCHASED IN CONNECTION WITH THESE PLANS ONLY BY DIRECT
REMITTANCE TO THE ENTITY ACTING AS CUSTODIAN. PURCHASES FOR THESE PLANS MAY NOT
BE MADE IN ADVANCE OF RECEIPT OF FUNDS.

B-44
<PAGE>

ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS

The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculation on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to the
Fund's performance and its shareholders. Accordingly, if the Fund's management
determines that an investor is engaged in excessive trading, the Fund, with or
without prior notice, may temporarily or permanently terminate the availability
of Fund Exchanges, or reject in whole or part any purchase or exchange request,
with respect to such investor's account. Such investors also may be barred from
purchasing other funds in the Dreyfus Family of Funds. Generally, an investor
who makes more than four exchanges out of the Fund during any calendar year (for
calendar year 1998 beginning on January 15th) or who makes exchanges that appear
to coincide with an active market-timing strategy may be deemed to be engaged in
excessive trading. Accounts under common ownership or control will be considered
as one account for purposes of determining a pattern of excessive trading. In
addition, the Fund may refuse or restrict purchase or exchange requests by any
person or group if, in the judgment of the Fund's management, the Fund would be
unable to invest the money effectively in accordance with its investment
objective and policies or could otherwise be adversely affected or if the Fund
receives or anticipates receiving simultaneous orders that may significantly
affect the Fund (e.g., amounts equal to 1% or more of the Fund's total assets).
If an exchange request is refused, the Fund will take no other action with
respect to the shares until it receives further instructions from the investor.
The Fund may delay forwarding redemption proceeds for up to seven days if the
investor redeeming shares is engaged in excessive trading or if the amount of
the redemption request otherwise would be disruptive to efficient portfolio
management or would adversely affect the Fund. The Fund's policy on excessive
trading applies to investors who invest in the Fund directly or through
financial intermediaries, but does not apply to the Dreyfus Auto-Exchange
Privilege, to any automatic investment or withdrawal privilege described herein,
or to non-IRA plan accounts.

DETERMINATION OF NET ASSET VALUE

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES."

B-45
<PAGE>

VALUATION OF PORTFOLIO SECURITIES. The Fund's securities are valued at
the last sale price on the securities exchange or national securities market on
which such securities primarily are traded. Securities not listed on an exchange
or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked prices.
Bid price is used when no asked price is available. Where market quotations are
not readily available, the Fund's investments are valued based on fair value as
determined in good faith by the Company's Board. Debt securities may be valued
by an independent pricing service approved by the Company's Board and are valued
at fair value as determined by the pricing service. Any assets or liabilities
initially expressed in terms of foreign currency will be translated into U.S.
dollars at the midpoint of the New York interbank market spot exchange rate as
quoted on the day of such translation or, if no such rate is quoted on such
date, such other quoted market exchange rate as may be determined to be
appropriate by Dreyfus. If the Fund has to obtain prices as of the close of
trading on various exchanges throughout the world, the calculation of NAV may
not take place contemporaneously with the determination of prices of certain of
the Fund's securities. Short-term investments are carried at amortized cost,
which approximates value. Expenses and fees, including the management fee, are
accrued daily and taken into account for the purpose of determining the NAV of
the Fund's shares.

NYSE CLOSINGS. The holidays (as observed) on which the NYSE is
currently scheduled to be closed are: New Year's Day, Dr. Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.

DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "DISTRIBUTIONS AND TAXES."

GENERAL. The Fund declares and pays dividends from its net investment
income, if any, four times yearly, and distributes net realized capital gains,
if any, once a year, but it may make distributions on a more frequent basis to
comply with the distribution requirements of the Code, in all events in a manner
consistent with the provisions of the 1940 Act. The Fund will not make

B-46
<PAGE>

distributions from net realized capital gains unless all capital loss
carryovers, if any, have been utilized or have expired. Investors other than
qualified retirement plans may choose whether to receive dividends and other
distributions in cash, to receive dividends in cash and reinvest other
distributions in additional Fund shares at NAV, or to reinvest both dividends
and other distributions in additional Fund shares at NAV; dividends and other
distributions paid to qualified retirement plans are reinvested automatically in
additional Fund shares at NAV. All expenses are accrued daily and deducted
before declaration of dividends to investors. Dividends and other distributions
paid by each Class are calculated at the same time and in the same manner and
will be in the same amount, except that the expenses attributable solely to a
particular Class are borne exclusively by that Class. Class B and Class C shares
will receive lower per share dividends than Class A shares, which will in turn
receive lower per share dividends than Class R shares, because of the higher
expenses borne by the relevant Classes.

Dividends derived from net investment income, together with
distributions from net realized short-term capital gains and all or a portion of
any gains realized from the sale or other disposition of certain market discount
bonds (collectively, "dividend distributions"), paid by the Fund will be taxable
to U.S. shareholders, including certain non-qualified retirement plans, as
ordinary income to the extent of the Fund's earnings and profits, whether
received in cash or reinvested in additional Fund shares. Distributions from net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) are taxable to such shareholders as long-term capital gains
regardless of how long the shareholders have held their Fund shares and whether
such distributions are received in cash or reinvested in additional Fund shares.
Dividends and other distributions also may be subject to state and local taxes.

Dividend distributions paid by the Fund to a non-resident foreign
investor generally are subject to U.S. withholding tax at the rate of 30%,unless

B-47
<PAGE>

the foreign investor claims the benefit of a lower rate specified in a tax
treaty. Distributions from net capital gain paid by the Fund to a non-resident
foreign investor, as well as the proceeds of any redemptions by such an
investor, regardless of the extent to which gain or loss may be realized,
generally are not subject to U.S. withholding tax. However, such distributions
may be subject to backup withholding, as described below, unless the foreign
investor certifies his or her non-U.S. residency status.

Notice as to the tax status of your dividends and other distributions
will be mailed to you annually. You also will receive periodic summaries of your
account that will include information as to dividends and distributions from net
capital gain, if any, paid during the year. The annual tax notice and periodic
account summaries you receive designate the portions of capital gain
distributions that are subject to (1) the 20% maximum rate of tax (10% for
investors in the 15% marginal tax bracket) enacted by the Taxpayer Relief Act of
1997 ("Tax Act"), which applies to non-corporate taxpayers' net capital gain on
securities and other capital assets held for more than 18 months, and (2) the
28% maximum tax rate, applicable to such gain on capital assets held for more
than one year and up to 18 months (which, prior to enactment of the Tax Act,
applied to all such gain on capital assets held for more than one year).

Dividends and other distributions paid by the Fund to qualified
retirement plans ordinarily will not be subject to taxation until the proceeds
are distributed from the retirement plans. The Fund will not report to the IRS
distributions paid to such plans. Generally, distributions from qualified
retirement plans, except those representing returns of non-deductible
contributions thereto, will be taxable as ordinary income and, if made prior to
the time the participant reaches age 59 1/2, generally will be subject to an
additional tax equal to 10% of the taxable portion of the distribution. If the
distribution from such a retirement plan (other than certain governmental or
church plans) for any taxable year following the year in which the participant
reaches age 70 1/2 is less than the "minimum required distribution" for that
taxable year, an excise tax equal to 50% of the deficiency may be imposed by the
IRS. The administrator, trustee or custodian of such a retirement plan will be
responsible for reporting distributions from such plans to the IRS. Moreover,
certain contributions to a qualified retirement plan in excess of the amounts
permitted by law may be subject to an excise tax. If a distributee of an
"eligible rollover distribution" from a qualified retirement plan does not elect
to have the eligible rollover distribution paid directly from the plan to an
eligible retirement plan in a "direct rollover," the eligible rollover
distribution is subject to a 20% income tax withholding.

B-48
<PAGE>

The Fund is subject to a non-deductible 4% excise tax, measured with
respect to certain undistributed amounts of taxable investment income and
capital gains.

Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares below
the cost of his or her investment. Such a dividend or other distribution would
be a return on investment in an economic sense, although taxable as discussed
above. In addition, if a shareholder sells shares of the Fund held for six
months or less and receives a capital gain distribution with respect to those
shares, any loss incurred on the sale of those shares will be treated as a
long-term capital loss to the extent of the capital gain distribution received.

Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a date
in any of those months are deemed to have been paid by the Fund and received by
the shareholders on December 31 of that year if the distributions are paid by
the Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.

A portion of the dividends paid by the Fund, whether received in cash
or reinvested in additional Fund shares, may be eligible for the
dividends-received deduction allowed to corporations. The eligible portion may
not exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
alternative minimum tax.

B-49
<PAGE>

countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.

PASSIVE FOREIGN INVESTMENT COMPANIES. The Fund may invest in the stock
of "passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation other than a "controlled foreign corporation" (i.e., a foreign
corporation in which, on any day during its taxable year, more than 50% of the
total voting power of all voting stock therein or the total value of all stock
therein is owned, directly, indirectly, or constructively, by "U.S.
shareholders," defined as U.S. persons that individually own, directly,
indirectly, or constructively, at least 10% of that voting power) as to which
the Fund is a U.S. shareholder - that, in general, meets either of the following
tests: (1) at least 75% of its gross income is passive or (2) an average of at
least 50% of its assets produce, or are held for the production of, passive
income. Under certain circumstances, the Fund will be subject to federal income
tax on a portion of any "excess distribution" received on the stock of a PFIC or
of any gain on disposition of the stock (collectively "PFIC income"), plus
interest thereon, even if the Fund distributes the PFIC income as a dividend to
its shareholders. The balance of the PFIC income will be included in the Fund's
investment company taxable income and, accordingly, will not be taxable to it to
the extent that income is distributed to its shareholders.

If the Fund invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the foregoing tax and
interest obligation, the Fund would be required to include in income each year
its pro rata share of the QEF's annual ordinary earnings and net capital gain
(the excess of net long-term capital gain over net short-term capital loss)
which likely would have to be distributed by the Fund to satisfy the
Distribution Requirement and avoid imposition of the 4% excise tax mentioned in
the Prospectus under "Dividends, Other Distributions and Taxes" even if those
earnings and gain were not received by the Fund from the QEF. In most instances
it will be very difficult, if not impossible, to make this election because of
certain requirements thereof.

B-50
<PAGE>

contracts derived by the Fund with respect to its business of investing in
securities or foreign currencies, will qualify as permissible income under the
Income Requirement.

Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gains and losses. However, a portion of the gains and
losses from the disposition of foreign currencies and certain
foreign-currency-denominated instruments (including debt instruments and
financial forward and futures contracts and options) may be treated as ordinary
income or loss under Section 988 of the Code. In addition, all or a portion of
any gain realized from the disposition of certain market discount bonds and from
engaging in "conversion transactions" that would otherwise be treated as capital
gain may be treated as ordinary income. "Conversion transactions" are defined to
include certain option and straddle investments.

Under Section 1256 of the Code, any gain or loss realized by the Fund
on the exercise or lapse of, or closing transactions respecting, certain
options, futures and forward contracts (the "Section 1256 Contracts") may be
treated as 60% long-term capital gain or loss and 40% short-term capital gain or
loss. In addition, any Section 1256 Contracts remaining unexercised at the end
of the Fund's taxable year will be treated as sold for their then fair market
value (a process known as "marking-to-market"), resulting in additional gain or
loss to the Fund characterized in the manner described above. It is not entirely
clear, as of the date of this Statement of Additional Information, whether the
60% portion of that is treated as long-term capital gain will qualify for the
reduced maximum tax rates on net capital gain enacted by the Tax Act 20% (10%
for taxpayers in the 15% marginal tax bracket) on capital assets held for more
than 18 months instead of the 28% maximum rate in effect before that
legislation, which now applies to gain on capital assets held for more than one
year but not more than 18 months, although technical corrections legislation
passed by the House of Representatives would treat such 60% portion as
qualifying therefor.

Offsetting positions held by the Fund involving certain options,
futures or forward contracts may constitute "straddles", which are defined to
include "offsetting positions" in actively traded personal property. The tax
treatment of straddles is governed by Sections 1092 and to the extent noted
above, 1258 of the Code, which in certain circumstances override or modify
Sections 1256 and 988. As a result, all or a portion of any capital gain from
certain straddle transactions may be recharacterized as ordinary income. If the
Fund were treated as entering into straddles by reason of its engaging in
certain options, futures or forward contract transactions, such straddles would
be characterized as "mixed straddles" if the transactions comprising a part of
such straddles were governed by Section 1256. The Fund may make one or more
elections with respect to mixed straddles; depending on which election is made,
if any, the results to the Fund may differ. If no election is made, then to the
extent the straddle and conversion transactions rules apply to positions
established by the Fund, losses realized by the Fund will be deferred to the
extent of unrealized gain in the offsetting position. Moreover, as a result of
the straddle rules, short-term capital loss on straddle positions may be
recharacterized as long-term capital loss, and long-term capital gains may be
treated as short-term capital gains or ordinary income.

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Investment by the Fund in securities issued or acquired at a discount
(for example, zero coupon securities) could, under special tax rules, affect the
amount and timing of distributions to shareholders by causing the Fund to
recognize income prior to the receipt of cash payments. For example, the Fund
could be required to take into gross income annually a portion of the discount
(or deemed discount) at which the securities were issued and could need to
distribute such income to satisfy the Distribution Requirement and to avoid the
excise tax (the "Excise Tax"). In such case, the Fund may have to dispose of
securities it might otherwise have continued to hold in order to generate cash
to satisfy these requirements.

STATE AND LOCAL TAXES. Depending upon the extent of the Fund's
activities in states and localities in which it is deemed to be conducting
business, the Fund may be subject to the tax laws thereof. Shareholders are also
advised to consult their tax advisers concerning the application of state and
local taxes to them.

FOREIGN SHAREHOLDERS - U.S. FEDERAL INCOME TAXATION. U.S. federal
income taxation of a shareholder who, as to the United States, is a non-resident
alien individual, a foreign trust or estate, a foreign corporation or a foreign
partnership (a "foreign shareholder") depends on whether the income from the
Fund is "effectively connected" with a U.S. trade or business carried on by the
shareholder, as discussed generally below. Special U.S. federal income tax rules
that differ from those described below may apply to certain foreign persons who
invest in the Fund, such as a foreign shareholder entitled to claim the benefits
of an applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in the Fund.

FOREIGN SHAREHOLDERS - INCOME NOT EFFECTIVELY CONNECTED. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the foreign
shareholder generally will be subject to U.S. federal withholding tax of 30% (or
lower treaty rate). Capital gains realized by foreign shareholders on the sale
of Fund shares and distributions to them of net capital gain generally will not
be subject to U.S. federal income tax unless the foreign shareholder is a
non-resident alien individual and is physically present in the United States for
more than 182 days during the taxable year. In the case of certain foreign
shareholders, the Fund may be required to withhold U.S. federal income tax at a
rate of 31% of capital gain distributions and of the gross proceeds from a
redemption of Fund shares unless the shareholder furnishes the Fund with a
certificate regarding the shareholder's foreign status.

FOREIGN SHAREHOLDERS - ESTATE TAX. Foreign individuals generally are
subject to federal estate tax on their U.S. situs property, such as shares of

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the Fund, that they own at the time of their death. Certain credits against that
tax and relief under applicable tax treaties may be available.

PORTFOLIO TRANSACTIONS

All portfolio transactions of the Fund are placed on behalf of the Fund
by Dreyfus. Debt securities purchased and sold by the Fund are generally traded
on a net basis (i.e., without commission) through dealers acting for their own
account and not as brokers, or otherwise involve transactions directly with the
issuer of the instrument. This means that a dealer (the securities firm or bank
dealing with the Fund) makes a market for securities by offering to buy at one
price and sell at a slightly higher price. The difference between the prices is
known as a spread. Other portfolio transactions may be executed through brokers
acting as agent. The Fund will pay a spread or commissions in connection with
such transactions. Dreyfus uses its best efforts to obtain execution of
portfolio transactions at prices which are advantageous to the Fund and at
spreads and commission rates, if any, which are reasonable in relation to the
benefits received. Dreyfus also places transactions for other accounts that it
provides with investment advice.

Brokers and dealers involved in the execution of portfolio transactions
on behalf of the Fund are selected on the basis of their professional capability
and the value and quality of their services. In selecting brokers or dealers,
Dreyfus will consider various relevant factors, including, but not limited to,
the size and type of the transaction; the nature and character of the markets
for the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer; the broker-dealer's
execution services rendered on a continuing basis; and the reasonableness of any
spreads (or commissions, if any). Any spread, commission, fee or other
remuneration paid to an affiliated broker-dealer is paid pursuant to the
Company's procedures adopted in accordance with Rule 17e-1 under the 1940 Act.

Brokers or dealers may be selected who provide brokerage and/or
research services to the Fund and/or other accounts over which Dreyfus or its
affiliates exercise investment discretion. Such services may include advice
concerning the value of securities; the advisability of investing in, purchasing
or selling securities; the availability of securities or the purchasers or
sellers of securities; furnishing analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy and
performance of accounts; and effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement).

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Dreyfus may use research services of and place brokerage transactions
with broker-dealers affiliated with it or Mellon Bank if the commissions are
reasonable, fair and comparable to commissions charged by non-affiliated
brokerage firms for similar services. During the fiscal years ended October 31,
1998, 1997 and 1996, the Fund paid brokerage commissions of $_________ and
$_____, respectively, to affiliates of Dreyfus or Mellon Bank. The amount paid
to affiliated brokerage firms during the fiscal years ended October 31, 1998,
1997 and 1996, was approximately ____%, ____% and ____%, respectively, of the
aggregate brokerage commissions paid by the Fund, for transactions involving
approximately ____%, ____% and ____%, respectively, of the aggregate dollar
volume of transactions for which the Fund paid brokerage commissions. The
difference in these percentages was due to the lower commissions paid to
affiliates of Dreyfus.

When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated in
accordance with a formula considered by Dreyfus to be equitable to each account.
In some cases this system could have a detrimental effect on the price or volume
of the investment instrument as far as the Fund is concerned. In other cases,
however, the ability of the Fund to participate in volume transactions will
produce better executions for the Fund. While the Directors will continue to
review simultaneous transactions, it is their present opinion that the
desirability of retaining Dreyfus as investment manager to the Fund outweighs
any disadvantages that may be said to exist from exposure to simultaneous
transactions.

For the fiscal years ended October 31, 1998, 1997 and 1996, the Fund
paid brokerage commissions amounting to $______, $________ and $_______,
respectively.

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turnover may result in the realization of larger amounts of short-term capital
gains that, when distributed to the Fund's shareholders, are taxable to them as
ordinary income. Nevertheless, securities transactions for the Fund will be
based only upon investment considerations and will not be limited by any other
considerations when Dreyfus deems its appropriate to make changes in the Fund's
assets. The portfolio turnover rate for the Fund is calculated by dividing the
lesser of the Fund's annual sales or purchases of portfolio securities
(exclusive of purchases and sales of securities whose maturities at the time of
acquisition were one year or less) by the monthly average value of securities in
the Fund during the year. Portfolio turnover may vary from year to year as well
as within a year. The portfolio turnover rates for the fiscal years ended
October 31, 1998 and 1997 were_____% and 37.17%, respectively.

PERFORMANCE INFORMATION

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "PAST PERFORMANCE."

Average annual total returns (expressed as a percentage) for Class A
shares and Class R shares of the Fund for the periods noted were:

Average Annual Total Return for the
Periods Ended October 31, 1998
1 Year Inception
------ ---------
Class A shares _____% _____% (9/14/94)
Class R shares _____% _____% (9/2/94)

Inception date appears in parentheses following the average annual total return
since inception.

The foregoing chart assumes, where applicable, deduction of the maximum
sales load from the hypothetical initial investment at the time of purchase and
the assessment of the maximum CDSC.

The Fund's total return for Class A shares (formerly called Investor
shares) for the period from September 14, 1994 (inception date of Class A
shares) to October 31, 1998 was ____% (assuming deduction of the maximum sales

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<PAGE>

load from the hypothetical initial investment at the time of purchase, although
no sales load was applicable to Class A shares or its predecessor class until
January 16, 1998). Without giving effect to the applicable front-end sales load,
the total return for Class A was ___% for this period. The Fund's total return
for Class R shares (formerly called Restricted shares) for the period September
2, 1994 to October 31, 1998 was ____% for this period. Total return is
calculated by subtracting the amount of the Fund's NAV (maximum offering price
in the case of Class A) per share at the beginning of a stated period from the
NAV (maximum offering price in the case of Class A) per share at the end of the
period (after giving effect to the reinvestment of dividends and other
distributions during the period and any applicable CDSC), and dividing the
result by the NAV (maximum offering price in the case of Class A) per share at
the beginning of the period. Total return also may be calculated based on the
NAV per share at the beginning of the period instead of the maximum offering
price per share at the beginning of the period for Class A shares or without
giving effect to any applicable CDSC at the end of the period for Class B or
Class C shares. In such cases, the calculation would not reflect the deduction
of the sales load with respect to Class A shares or any applicable CDSC with
respect to Class B or C shares, which, if reflected would reduce the performance
quoted.

The aggregate total return (expressed as a percentage) for Class B
shares and Class C shares of the Fund for the period from inception of each
class (January 16, 1998) to October 31, 1998 was _____% and _____%, respectively
(assuming, where applicable, assessment of the maximum CDSC).

Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Standard & Poor's 500 Composite Stock Price Index, the Dow Jones Industrial
Average, or other appropriate unmanaged domestic or foreign indices of
performance of various types of investments so that investors may compare the
Fund's results with those of indices widely regarded by investors as
representative of the securities markets in general; (ii) other groups of mutual
funds tracked by Lipper Analytical Services, Inc., a widely used independent
research firm which ranks mutual funds by overall performance, investment
objectives and assets, or tracked by other services, companies, publications, or
persons who rank mutual funds on overall performance or other criteria; (iii)
the Consumer Price Index (a measure of inflation) to assess the real rate of
return from an investment in the Fund or the Fund's performance against
inflation to the performance of other instruments against inflation; and (iv)
products managed by a universe of money managers with similar performance
objectives. Unmanaged indices may assume the reinvestment of dividends but
generally do not reflect deductions or administrative and management costs and
expenses. From time to time, advertising materials for the Fund may refer to
Morningstar ratings and related analyses supporting the rating.

From time to time, advertising material for the Fund may include: (i)
biographical information relating to its portfolio manager, including honors and
awards and may refer to, or include commentary by the Fund's portfolio manager
relating to investment strategy, asset growth, current or past business,
political, economic or financial conditions and other matters of general
interest to investors; (ii) statistical data or general discussions about the
growth and development of Dreyfus Retirement Services (in terms of new
customers, assets under management, market share, etc.) and its presence in the
defined contribution plan market; (iii) the approximate number of then current

B-56
<PAGE>

Fund shareholders; (iv) references to the Fund's quantitative, disciplined
approach to stock market investing and the number of stocks analyzed by Dreyfus;
and (v) Lipper or Morningstar ratings and related analysis supporting the
ratings. Unmanaged indices may assume the reinvestment of dividends but
generally do not reflect deductions or administrative and management costs and
expenses.

INFORMATION ABOUT THE FUND

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "THE FUND."

The Company has an authorized capitalization of 25 billion shares of
$0.001 per value stock.

Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable. The
Fund is one of nineteen portfolios of the Company. Fund shares have no
preemptive, subscription or conversion rights and are freely transferable.

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<PAGE>

The Fund will send annual and semi-annual financial statements to all
of its shareholders.

TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS

Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Company,
Dreyfus Transfer, Inc. arranges for the maintenance of shareholder account
records for the Fund, the handling of certain communications between
shareholders and the Fund, and the payment of dividends and distributions
payable by the Fund. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses.

______________________, 1800 Massachusetts Avenue, N.W., Second Floor,
Washington, D.C. 20036-1800, has passed upon the legality of the shares offered
by the Prospectus and this Statement of Additional Information.

______________________, was appointed by the Directors to serve as the
Fund's independent auditors for the year ending October 31, 1999, providing
audit services including (1) examination of the annual financial statements, (2)
assistance, review and consultation in connection with SEC filings and (3)
review of the annual federal income tax return filed on behalf of the Fund.

FINANCIAL STATEMENTS

The financial statements for the fiscal year ended October 31, 1998,
including notes to the financial statements and supplementary information, and
the Independent Auditors' Report are included in the Annual Report to
shareholders. A copy of the Annual Report accompanies this Statement of
Additional Information. The financial statements included in the Annual Report,
and the Independent Auditors' Report thereon contained therein, and related
notes, are incorporated herein by reference.

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APPENDIX

DESCRIPTION OF STANDARD AND POOR'S, MOODY'S, FITCH IBCA
AND DUFF RATINGS

STANDARD & POOR'S ("S&P")

BOND RATINGS

AAA An obligation rated `AAA' has the highest rating assigned by
S&P. The obligor's capacity to meet its financial commitment
on the obligation is extremely strong.

AA An obligation rated `AA' differs from the highest rated issues
only in small degree. The obligors capacity to meet its
financial commitment on the obligation is very strong.

A An obligation rated `A' is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories.
However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.

BBB An obligation rated `BBB' exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity
of the obligor to meet its financial commitment on the
obligation.

Obligations rated `BB', `B', `CCC', `CC', and `C' are regarded as
having significant speculative characteristics. `BB' indicates the
least degree of speculation and `C' the highest. While such obligations
will likely have some quality and protective characteristics, these may
be outweighed by large uncertainties or major exposures to adverse
conditions.

BB An obligation rated `B' is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions, which could lead to the obligor's
inadequate capacity to meet its financial commitment on the
obligation.

B An obligation rated `B' is more vulnerable to nonpayment than
obligations rated `BB', but the obligor currently has the
capacity to meet its financial commitment on the obligation.
Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet
its financial commitment on the obligation.

CCC An obligation rated `CCC' is currently vulnerable to
nonpayment and is dependent upon favorable business, financial
and economic conditions for the obligor to meet its financial
commitment on the obligation. In the event of adverse
business, financial, or economic conditions, the obligor is
not likely to have the capacity to meet its financial
commitment on the obligation.

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<PAGE>

CC An obligation rated `CC' is currently highly vulnerable to
nonpayment.

C The `C' rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been
taken, but payments on this obligation are being continued.

D An obligation rated `D' is in payment default. The `D' rating
category is used when payments on a obligation are not made on
the date due even if the applicable grace period has not
expired, unless S&P believes that such payments will be made
during such grace period. The `D' rating also will be used
upon the filing of a bankruptcy petition or the taking of a
similar action if payments on an obligation are jeopardized.

The ratings from `AA' to `CCC' may be modified by the addition of a
plus (+) or a minus (-) sign to show relative standing within the major
rating categories

NOTE RATINGS

SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt
service is given a plus (+) designation.

SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the
term of the notes.

SP-3 Speculative capacity to pay principal and interest.

COMMERCIAL PAPER RATINGS

An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days.

A-2 Capacity for timely payment on issues with this designation
is satisfactory. However, the relative degree of safety is not
as high as for issuers designated `A-1.'

A-3 Issues carrying this designation have an adequate capacity for
timely payment. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations
carrying the higher designations.

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B Issues rated `B' are regarded as having only speculative
capacity for timely payment.

C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.

D Debt rated `D' is in payment default. The `D' rating category
is used when interest payments of principal payments are not
made on the date due, even if the applicable grace period has
not expired, unless S&P believes such payments will be made
during such grace period.

MOODY'S

BOND RATINGS

Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
generally are referred to as "gilt edge." Interest payments
are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of
such issues.

Aa Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what
generally are known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be
as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear
somewhat larger than in Aaa securities.

A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment some time in the
future.

Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor
poorly secured). Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.

Ba Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may be
very moderate, and thereby not well safeguarded during both

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good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.

Caa Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger
with respect to principal or interest.

Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default
or have other marked short-comings.

C Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.

Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within each generic rating classification from Aa through B.
The modifier 1 indicates a ranking for the security in the higher end
of a rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates a ranking in the lower end of a rating
category.

NOTES AND OTHER SHORT-TERM OBLIGATIONS

There are four rating categories for short-term obligations that define
an investment grade situation. These are designated Moody's Investment Grade as
MIG 1 (best quality) through MIG 4 (adequate quality). Short-term obligations of
speculative quality are designated SG.

In the case of variable rate demand obligations (VRDOs), a two
component rating is assigned. The first element represents an evaluation of the
degree of risk associated with scheduled principal and interest payments, and
the other represents an evaluation of the degree of risk associated with the
demand feature. The short-term rating assigned to the demand feature of VRDOs is
designated as VMIG. When either the long- or short-term aspect of a VRDO is not
rated, that piece is designated NR, e.g., Aaa/NR or NR/VMIG 1.

MIG 1/
VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity
support or demonstrated broad-based access to the market for
refinancing.

MIG-2/
MIG 2 This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.

MIG 3/

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VMIG 3 This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is
likely to be less well established.

COMMERCIAL PAPER RATING

Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated issuers:

Prime-1 Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt
obligations. Prime-1 repayment ability will often be evidenced
by many of the following characteristics:

Prime-2 Issuers rated Prime-2 (or supporting institutions) have a
strong ability for repayment of senior short-term debt
obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser agree. Earnings
trends and coverage ratios, while sound, may be more subject
to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions.
Ample alternate liquidity is maintained.

Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings
and profitability may result in changes in the level of debt
protection measurements and may require relatively high
financial leverage. Adequate alternative liquidity is
maintained.

FITCH IBCA

BOND RATINGS

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AAA Highest credit quality. `AAA' ratings denote the lowest
expectation of credit risk. They are assigned only in case of
exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.

AA Very high credit quality. `AA' ratings denote a very low
expectation of credit risk. They indicate very strong capacity
for timely payment of financial commitments. This capacity is
not significantly vulnerable to foreseeable events.

A High credit quality. `A' ratings denote a low expectation of
credit risk. The capacity for timely payment of financial
commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to changes in circumstances
or in economic conditions than is the case for higher ratings.

BBB Good credit quality. `BBB' rating indicate that there is
currently a low expectation of credit risk. The capacity for
timely payment of financial commitments is considered
adequate, but adverse changes in circumstances and in economic
conditions are more likely to impair this capacity. This is
the lowest investment-grade category.

BB Speculative. `BB' ratings indicate that there is a possibility
of credit risk developing, particularly as the result of
adverse economic change over time; however, business or
financial alternatives may be available to allow financial
commitments to be met. Securities rated in this category are
not investment grade.

B Highly speculative. `B' ratings indicate that significant
credit risk is present, but a limited margin of safety
remains. Financial commitments are currently being met;
however, capacity for continued payment is contingent upon a
sustained, favorable business and economic environment.

CCC, CC, C High default risk. Default is a real possibility.
Capacity for meeting financial commitments is solely reliant
upon sustained, favorable business or economic developments. A
`CC' rating indicates that default of some kind appears
probable. `C' ratings signal imminent default.

DDD, DD,
and D Default. Securities are not meeting current obligations and
are extremely speculative. `DDD' designates the highest
potential for recovery of amounts outstanding on any
securities involved. For U.S. corporates, for example, `DD'
indicates expected recovery of 50% - 90% of such outstandings,
and `D' the lowest recovery potential, i.e. below 50%.

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SHORT-TERM AND COMMERCIAL PAPER RATINGS

F-1+ Highest credit quality. Indicates the strongest capacity for
timely payment of financial commitments; may have an added "+"
to denote any exceptionally strong credit feature.

F-2 Good credit quality. A satisfactory capacity for timely
payment of financial commitments, but the margin of safety is
not as great as in the case of the higher ratings.

F-3 Fair credit quality. The capacity for timely payment of
financial commitments is adequate; however, near-term adverse
changes could result in a reduction to non-investment grade.

B Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes
in financial and economic conditions.

C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a
sustained, favorable business and economic environment.

D Default. Denotes actual or imminent payment default.

"+" or "-" may be appended to a rating to denote relative status
within major rating categories. Such suffixes are not added to
the `AAA' long-term rating category, to categories below
`CCC', or to short-term ratings other than `F-1'.
DUFF & PHELPS INC. ("DUFF & PHELPS")

LONG-TERM RATINGS

AAA Highest credit quality. The risks factors are negligible,
being only slightly more than for risk-free U.S. Treasury
debt.

AA+ High credit quality. Protection factors are strong. Risk is
AA modest but may vary slightly from time to time because of
AA- economic conditions.

A+ Protections factors are average but adequate. However, risk
A factors are A more variable and greater in periods of economic
A- stress.

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BBB+ Below-average protection factors but still considered
BBB sufficient for prudent investment. Considerable variability in
BBB- risk during economic cycles.

BB+ Below investments grade but deemed likely to meet obligations
BB when due. Present or prospective financial protection factors
BB- fluctuate according to industry conditions or company
fortunes. Overall quality may move up or down frequently
within this category.

B+ Below investment grade and possessing risk that obligations
B will not be met when due. Financial protection factors will
B- fluctuate widely according to economic cycles, industry
conditions and/or company fortunes. Potential exists for
frequent changes in the rating within this category or into a
higher or lower rating grade.

CCC Well below investment-grade securities. Considerable
uncertainty exists as to timely payment of principal, interest
or preferred dividends. Protection factors are narrow and risk
can be substantial with unfavorable economic/industry
conditions, and/or with unfavorable company developments.

DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.

SHORT-TERM AND COMMERCIAL PAPER RATINGS

D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is
just below risk-free U.S. Treasury short-term obligations.

D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection
factors. Risk factors are minor.

D-1- High certainly of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.

D-2 Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs
may enlarge total financial requirements, access to capital
markets is good. Risk factors are small.

D-3 Satisfactory liquidity and other protection factors qualify
issues as to investment grade. Risk factors are larger and
subject to more variation. Nevertheless, timely payment is
expected.

B-66
<PAGE>

D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high
degree of variation.

D-5 Issuer failed to meet scheduled principal and/or interest
payments.

B-67
<PAGE>

Dreyfus Premier Small Cap Value Fund

Investing in small-cap value stocks for investment returns that exceed the
Russell 2000((REGISTERED)) Value Index

PROSPECTUS March 1, 1999

(REGISTERED)

<PAGE>

The Fund

Dreyfus Premier Small Cap Value Fund
---------------------------------
Ticker Symbols CLASS A: XXXXX
CLASS B: XXXXX
CLASS C: XXXXX
CLASS R: XXXXX

Contents

The Fund
- --------------------------------------------------------------------------------

Goal/Approach 2

Main Risks 3

Past Performance 3

Expenses 4

Management 5

Financial Highlights 6

Your Investment
- --------------------------------------------------------------------------------

Account Policies 8

Distributions and Taxes 10

Services for Fund Investors 11

Instructions for Regular Accounts 12

Instructions for IRAs 13

For More Information
- --------------------------------------------------------------------------------

INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.

GOAL/APPROACH
- -------------------

The fund seeks investment returns (consisting of capital appreciation and
income) that are consistently superior to the Russell 2000(REGISTERED) Value
Index. This objective may be changed without shareholder approval. To pursue its
goal, the fund normally invests at least 80% of total assets in stocks of small-
and mid-capitalization companies (those whose market value is between $100
million and $3 billion) that are publicly traded in the United States. Dreyfus
uses a disciplined process that combines computer modeling techniques,
fundamental analysis and risk management to select under valued stocks for the
fund.

Dreyfus uses a computer model to identify and rank undervalued stocks.
Undervalued stocks are normally characterized by relatively low
price-to-earnings and low price-to-book ratios. The model analyzes how a stock
is priced relative to its perceived intrinsic value.

Next, Dreyfus uses fundamental analysis to select the most attractive of the
top-ranked securities, drawing on information technology as well as Wall Street
sources and company management.

Then, the portfolio is constructed so that its sector weightings and risk
characteristics are similar to those of the Russell 2000 Value Index.

Concepts to understand

SMALL COMPANIES: new and often entreprenurial companies. Small companies tend to
grow faster than large-cap companies, but are also more volatile and have a
higher failure rate.

COMPUTER MODEL: evaluates and ranks a universe of 2,000 stocks. Dreyfus reviews
each of the screens on a regular basis and maintains the flexibility to adapt
the screening criteria to changes in market and economic conditions.

RUSSELL 2000 VALUE INDEX: an unmanaged index of small-cap value stock
performance.

<PAGE>

MAIN RISKS
- -------------------

Small companies carry additional risks because their earnings are less
predictable, their share prices more volatile and their securities less liquid
than larger, more established companies. Some of the fund's investments will
rise and fall based on investor perception rather than economics.

The fund's investments in value stocks are subject to the risk that their
intrinsic values may never be realized by the market, or their prices may go
down. While the fund's investments in value stocks may limit the overall
downside risk of the fund over time, the fund may produce more modest gains than
riskier stock funds as a trade-off for this potentially lower risk.

Although the fund seeks to manage risk by broadly diversifying among industries
and by maintaining a risk profile similar to the Russell 2000 Value Index, the
fund is expected to hold fewer securities than the index. Owning fewer
securities and the ability to purchase companies not listed in the index can
cause the fund to underperform the index.

Under adverse market conditions, the fund could invest some or all of its assets
in money market securities. Although the fund would do this only in seeking to
avoid losses, it could reduce the benefit from any upswing in the market.

Other potential risks

The fund may invest some assets in options and futures. These practices are used
to hedge the fund's portfolio or to increase returns. There is the risk that
such practices may reduce returns or increase volatility.

At times, the fund may engage in short-term trading, which could produce higher
brokerage costs and taxable distributions.

The fund may invest in securities of foreign issuers which carry additional
risks such as less liquidity, changes in currency exchange rates, a lack of
adequate company information and political instability.

PAST PERFORMANCE
- -------------------

Since the fund has less than one calendar year of performance, past performance
information is not included in this prospectus. For fund performance information
as of the end of its fiscal year, please refer to the Statement of Additional
Information (SAI).

What this fund is -- and isn't

The Fund 3

<PAGE>

EXPENSES
- -------------------

As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Fee table
CLASS A CLASS B CLASS C CLASS R
- ------------------------------------------------------------------------------------------------------------------------------------

SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)

Maximum sales charge on purchases

AS A % OF OFFERING PRICE 5.75 NONE NONE NONE

Maximum deferred sales charge (CDSC)

ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)

% OF AVERAGE DAILY NET ASSETS

Management fees 1.25 1.25 1.25 1.25

12b-1 fee .25 1.00 1.00 NONE

Other expenses .00 .00 .00 .00
- ------------------------------------------------------------------------------------------------------------------------------------

TOTAL 1.50 2.25 2.25 1.25
</TABLE>

* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1
MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF REDEEMED WITHIN ONE YEAR.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Expense example

1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------

CLASS A $0,000 $0,000 $0,000 $0,000

CLASS B
WITH REDEMPTION $0,000 $0,000 $0,000 $0,000**

WITHOUT REDEMPTION $0,000 $0,000 $0,000 $0,000**

CLASS C
WITH REDEMPTION $0,000 $0,000 $0,000 $0,000
WITHOUT REDEMPTION $0,000 $0,000 $0,000 $0,000

CLASS R $0,000 $0,000 $0,000 $0,000
</TABLE>

** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.

This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. Because actual
return and expenses will be different, the example is for comparison only.

Concepts to understand

<PAGE>

MANAGEMENT
- -------------------

The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, NY 10166. Founded in 1947, Dreyfus manages one of the nation's leading
mutual fund complexes, with more than $110 billion in more than 160 mutual fund
portfolios. Dreyfus is the mutual fund business of Mellon Bank Corporation, a
broad-based financial services company with a bank at its core. With more than
$350 billion of assets under management and $1.7 trillion of assets under
administration and custody, Mellon provides a full range of banking, investment
and trust products and services to individuals, businesses and institutions. Its
mutual fund companies place Mellon as the leading bank man-ager of mutual funds.
Mellon is headquartered in Pittsburgh, Pennsylvania.

Management philosophy

Portfolio manager

William Rydell has managed the fund since its inception. He is a portfolio
manager for Dreyfus and is also President and Chief Executive Officer of Mellon
Equity Associates. He has been with Mellon Bank since 1973.

Concepts to understand

Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.

The Fund 5

<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------

The following tables describe the performance of each share class for the fiscal
period indicated. "Total return" shows how much your investment in the fund
would have increased (or decreased) during the period, assuming you had
reinvested all dividends and distributions. These figures have been
independently audited by [ ], whose report, along with the fund's financial
statements, is included in the annual report.

PERIOD ENDED
OCTOBER 31,
CLASS A 1998(1)
- --------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period

Investment operations: Investment income (loss) -- net

Net realized and unrealized gain (loss) on investments

Total from investment operations

Net asset value, end of period

Total return (%)(2)
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%)

Ratio of net investment income (loss) to average net assets (%)

Portfolio turnover rate (%)
- --------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000)

(1)FOR THE PERIOD FROM APRIL 1, 1998 THROUGH OCTOBER 31, 1998.

(2)EXCLUSIVE OF SALES LOAD.

PERIOD ENDED
OCTOBER 31,
CLASS B 1998(1)
- --------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period

Investment operations: Investment income (loss) -- net

Net realized and unrealized gain (loss) on investments

Total from investment operations

Net asset value, end of period

Total return (%)(2)
- --------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%)

Ratio of net investment income (loss) to average net assets (%)

Portfolio turnover rate (%)
- --------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000)

(1)FOR THE PERIOD FROM APRIL 1, 1998 THROUGH OCTOBER 31, 1998.

(2)EXCLUSIVE OF SALES LOAD.

<PAGE>

PERIOD ENDED
OCTOBER 31,
CLASS C 1998(1)
- --------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period

Investment operations: Investment income (loss) -- net

Net realized and unrealized gain (loss) on investments

Total from investment operations

Net asset value, end of period

Total return (%)(2)
- --------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%)

Ratio of net investment income (loss) to average net assets (%)

Portfolio turnover rate (%)
- --------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000)

(1)FOR THE PERIOD FROM APRIL 1, 1998 THROUGH OCTOBER 31, 1998.

(2)EXCLUSIVE OF SALES LOAD.

PERIOD ENDED
OCTOBER 31,
CLASS R 1998(1)
- --------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period

Investment operations: Investment income (loss) -- net

Net realized and unrealized gain (loss) on investments

Total from investment operations

Net asset value, end of period

Total return (%)
- --------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%)

Ratio of net investment income (loss) to average net assets (%)

Portfolio turnover rate (%)
- --------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000)

(1)FOR THE PERIOD FROM APRIL 1, 1998 THROUGH OCTOBER 31, 1998.

The Fund 7

<PAGE>

YOUR INVESTMENT

ACCOUNT POLICIES
- -------------------

o Class A shares can be the most cost-effective choice, if you are investing for
the long term, especially if you are investing $50,000 or more.

o Class B shares can make sense if you have a long time horizon and are
investing less than $50,000.

o Class C shares may be appropriate if you have a shorter or less certain time
horizon and are investing less than $50,000.

o Class R shares are designed for eligible institutions on behalf of their
clients. Individuals may not purchase these shares directly.

Reduced Class A sales charge

LETTER OF INTENT: lets you purchase Class A shares over a 13-month period and
receive the same sales charge as if all shares had been purchased at once.

RIGHT OF ACCUMULATION: lets you add the value of any Class A shares you already
own to the amount of your next Class A investment for purposes of calculating
the sales charge.

CONSULT THE SAI OR YOUR FINANCIAL REPRESENTATIVE FOR MORE DETAILS.

Share class charges

Sales charges

CLASS A -- CHARGED WHEN YOU BUY SHARES

Sales charge Sales charge as
deducted as a % a % of your
Your investment of offering price net investment
- --------------------------------------------------------------------------------

Up to $49,999 5.75% 6.10%

$50,000 -- $99,999 4.50% 4.70%

$100,000 -- $249,999 3.50% 3.60%

$250,000 -- $499,999 2.50% 2.60%

$500,000 -- $999,999 2.00% 2.00%

$1 million or more* 0.00% 0.00%

* A 1.00% contingent deferred sales charge may be charged on any shares sold
within one year of purchase (except shares bought through reinvestment).

Class A shares also carry an annual Rule 12b-1 fee of 0.25% of the class's
average net assets.
- --------------------------------------------------------------------------------

CLASS B -- CHARGED WHEN YOU SELL SHARES

Up to 2 years 4.00%

2 -- 4 years 3.00%

4 -- 5 years 2.00%

5 -- 6 years 1.00%

More than 6 years Shares will automatically
convert to Class A

Class B shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------

CLASS C -- CHARGED WHEN YOU SELL SHARES

CLASS R -- NO SALES LOAD OR 12B-1 FEES

<PAGE>

Buying shares

THE NET ASSET VALUE (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the NAV next
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. The fund's investments
are valued based on market value or, where market quotations are not readily
available, based on fair value as determined in good faith by the fund's board.

- --------------------------------------------------------------------------------

Minimum investments

Initial Additional
- --------------------------------------------------------------------------------

REGULAR ACCOUNTS $1,000 $100; $500 FOR
TELETRANSFER INVESTMENTS

TRADITIONAL IRAS $750 NO MINIMUM

SPOUSAL IRAS $750 NO MINIMUM

ROTH IRAS $750 NO MINIMUM

EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST YEAR

DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS

All investments must be in U.S. dollars. Third-party checks cannot be accepted.
You may be charged a fee for any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.

Concepts to understand

Selling shares

Written sell orders

Some circumstances require written sell orders along with signature guarantees.
These include:

o amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days

o requests to send the proceeds to a different payee or address

Written sell orders of $100,000 or more must also be signature guaranteed.

Your Investment 9

<PAGE>

ACCOUNT POLICIES (CONTINUED)

General policies

IF YOUR ACCOUNT FALLS BELOW $500, the fund may ask you to increase your balance.
If it is still below $500 after 30 days, the fund may close your account and
send you the proceeds.

UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.

THE FUND RESERVES THE RIGHT TO:

o refuse any purchase or exchange request that could adversely affect the fund
or its operations, including those from any individual or group who, in the
fund's view, is likely to engage in excessive trading (usually defined as more
than four exchanges out of the fund within a calendar year)

o refuse any purchase or exchange request in excess of 1% of the fund's total
assets

o change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions

o change its minimum investment amounts

o delay sending out redemption proceeds for up to seven days (generally
applies only in cases of very large redemptions, excessive trading or during
unusual market conditions)

DISTRIBUTIONS AND TAXES
- -----------------------

THE FUND GENERALLY PAYS ITS SHAREHOLDERS dividends from its net investment
income, and distributes any net capital gains that it has realized, once a year.
Each share class will generate a different dividend because each has different
expenses. Your distributions will be reinvested in the fund unless you instruct
the fund otherwise. There are no fees or sales charges on reinvestments.

Taxability of distributions

Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------

INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE

SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE

LONG-TERM
CAPITAL GAINS 10% 20%

Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.

Taxes on transactions

Except between tax-deferred accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.

<PAGE>

SERVICES FOR FUND INVESTORS
- ---------------------------

Automatic services

For investing

DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((REGISTERED)) from a designated bank account.

DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.

DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
- --------------------------------------------------------------------------------

For exchanging shares

DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
- --------------------------------------------------------------------------------

For selling shares

DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds. There will
be no CDSC on Class B shares, as
long as the amounts withdrawn do
not exceed 12% annually of the
account value at the time the
shareholder elects to participate
in the plan.

Exchange privilege

TeleTransfer privilege

Reinvestment privilege

Account statements

EVERY FUND INVESTOR automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.

Your Investment 11

<PAGE>

INSTRUCTIONS FOR REGULAR ACCOUNTS

TO OPEN AN ACCOUNT

In Writing----------------------------------------------------------------------

Complete the application.

Mail your application and a check to:
Name of Fund
P.O. Box 6587, Providence, RI 02940-6587
Attn: Institutional Processing

TO ADD TO AN ACCOUNT

Fill out an investment slip, and write your account number on your check.

Mail the slip and the check to: Name of Fund P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing

By Telephone--------------------------------------------------------------------

WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.
with these instructions:

* ABA# 0110012304

* DDA# 044350

* the fund name

* the share class

* your Social Security or tax ID number

* name(s) of investor(s)

* dealer number if applicable

Call us to obtain an account number. Return your application with the account
number on the application.

WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.
with these instructions:

* ABA# 011001234
* DDA# 044350
* the fund name
* the share class
* your account number
* name(s) of investor(s)
* dealer number if applicable

ELECTRONIC CHECK Same as wire, but before your account number insert "4620" for
Class A, "4630" for Class B, "4650" for Class C, "4660" for Class R

TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.

Automatically-------------------------------------------------------------------

WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.

TO SELL SHARES

Write a letter of instruction that includes:

* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds

Obtain a signature guarantee or other documentation, if required (see Page 9)

Mail your request to: The Dreyfus Family of Funds P.O. Box 6587, Providence, RI
02940-6587 Attn: Institutional Processing

TELETRANSFER Call us or your financial representative to request your
transaction. Be sure the fund has your bank account information on file.
Proceeds will be sent to your bank by electronic check.

AUTOMATIC WITHDRAWAL PLAN Call us or your financial representative to request a
form to add the plan. Complete the form, specifying the amount and frequency of
withdrawals you would like.

Be sure to maintain an account balance of $5,000 or more.

Concepts to understand

<PAGE>

INSTRUCTIONS FOR IRAS

TO OPEN AN ACCOUNT

In Writing----------------------------------------------------------------------

Complete an IRA application, making sure to specify the fund name and to
indicate the year the contribution is for.

Mail your application and a check to:
The Dreyfus Trust Company, custodian P.O. Box 6427, Providence, RI 02940-6427
Attn: Institutional Processing

TO ADD TO AN ACCOUNT

Fill out an investment slip, and write your account number on your check.
Indicate the year the contribution is for.

Mail in the slip and the check to: The Dreyfus Trust Company P.O. Box 6427,
Providence, RI 02940-6427 Attn: Institutional Processing

TO SELL SHARES

Write a letter of instruction that includes:

Obtain a signature guarantee or other documentation, if required (see Page 9).

Mail in your request to: The Dreyfus Trust Company P.O. Box 6427, Providence,
RI 02940-6427

By Telephone--------------------------------------------------------------------

__________

WIRE Have your bank send your investment to Boston Safe Deposit & Trust Co.,
with these instructions:

* ABA# 011001234
* DDA# 044350
* the fund name
* the share class * your account number
* name of investor
* the contribution year
* dealer number if applicable

ELECTRONIC CHECK Same as wire, but before your account number insert "4620" for
Class A, "4630" for Class B, "4650" for Class C, "4660" for Class R

__________

Automatically-------------------------------------------------------------------

SYSTEMATIC WITHDRAWAL PLAN Call us to request instructions to establish the
plan.

For information and assistance, contact your financial representative or call
toll free in the U.S. 1-800-554-4611. Make checks payable to: THE DREYFUS TRUST
COMPANY, CUSTODIAN

Your Investment 13

<PAGE>

FOR MORE INFORMATION

Dreyfus Premier Small Cap Value Fund
A series of The Dreyfus/Laurel Funds, Inc.
- --------------------------------------
SEC file number: 811-5270

More information on this fund is available free upon request, including the
following:

Annual/Semiannual Report

Describes the fund's performance, lists portfolio holdings and contains a letter
from the fund's manager discussing recent market conditions, economic trends and
fund strategies that significantly affected the fund's performance during the
last fiscal year.

Statement of Additional Information (SAI)

Provides more details about the fund and its policies. A current SAI is on file
with the Securities and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this prospectus).

To obtain information:

BY TELEPHONE Call your financial representative or 1-800-554-4611

BY MAIL Write to: The Dreyfus Premier Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144

ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from:
http://www.sec.gov

<PAGE>

[Application p 1 here]

<PAGE>

[Application p 2 here]

<PAGE>
DREYFUS PREMIER SMALL CAP VALUE FUND
CLASS A, CLASS B, CLASS C AND CLASS R SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 1, 1999

This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
the Dreyfus Premier Small Cap Value Fund (the "Fund"), dated March 1, 1999,as
it may be revised from time to time. The Fund is a separate, diversified
portfolio of The Dreyfus/Laurel Funds, Inc., an open-end management investment
company (the "Company"), known as a mutual fund. To obtain a copy of the
Fund's Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call one of the following numbers:

Call Toll Free 1-800-554-4611
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452

TABLE OF CONTENTS
Page

Description of the Fund........................................... B-2
Management of the Fund............................................ B-17
Management Arrangements........................................... B-23
Purchase of Shares................................................ B-24
Distribution and Service Plans.................................... B-31
Redemption of Shares.............................................. B-33
Shareholder Services.............................................. B-37
Additional Information about Purchases, Exchanges and Redemptions. B-43
Determination of Net Asset Value.................................. B-44
Dividends, Other Distributions and Taxes.......................... B-45
Portfolio Transactions............................................ B-52
Performance Information........................................... B-54
Information About the Fund........................................ B-55
Transfer and Dividend Disbursing
Agent, Custodian, Counsel and Independent Auditors.............. B-56
Financial Statements.............................................. B-57
Appendix.......................................................... B-58

<PAGE>

DESCRIPTION OF THE FUND

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS OF THE FUND'S PROSPECTUS ENTITLED "GOAL/APPROACH" AND "MAIN
RISKS."

The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.

The Fund seeks investment returns that exceed those of the Russell 2000
Value Index. The Russell 2000 Value Index is an unmanaged index of those
companies in the Russell 2000(R) Index with lower price-to-book ratios and
lower forecasted growth values. The Russell 2000(R) Index measures the
performance of the 2,000 smallest companies in the Russell 3000(R) Index,
which in turn measures the performance of the 3,000 largest publicly traded
U.S.companies based on total market capitalization.

CERTAIN PORTFOLIO SECURITIES

The following information regarding the securities that the Fund may
purchase supplements that found in the Fund's prospectus.

AMERICAN DEPOSITORY RECEIPTS ("ADRS") AND NEW YORK SHARES. The Fund may
invest in U.S. dollar-denominated ADRs and "New York Shares." ADRs typically are
issued by an American bank or trust company and evidence ownership of underlying
securities issued by foreign companies. New York Shares are securities of
foreign companies that are issued for trading in the United States. ADRs and New
York Shares are traded in the United States on national securities exchanges or
in the over-the-counter market. Investment in securities of foreign issuers
presents certain risks, including those resulting from adverse political and
economic developments and the imposition of foreign governmental laws or
restrictions. See "Foreign Securities."

B-2
<PAGE>

a prudent and orderly fashion of bonds whose ratings drop below these minimum
ratings.

GOVERNMENT OBLIGATIONS. The Fund may invest in a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities
and times of issuance: (a) U.S. Treasury bills have a maturity of one year or
less, (b) U.S. Treasury notes have maturities of one to ten years, and (c)
U.S. Treasury bonds generally have maturities of greater than ten years.

In addition to U.S. Treasury obligations, the Fund may invest in
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are supported by any of the following: (a) the full faith
and credit of the U.S. Treasury, (b) the right of the issuer to borrow an amount
limited to a specific line of credit from the U.S. Treasury, (c) the
discretionary authority of the U.S. Government agency or instrumentality, or (d)
the credit of the instrumentality. (Examples of agencies and instrumentalities
are: Federal Land Banks, Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Central Bank for
Cooperatives, Federal Intermediate Credit Banks, Federal Home Loan Banks,
General Services Administration, Maritime Administration, Tennessee Valley
Authority, District of Columbia Armory Board, Inter-American Development Bank,
Asian-American Development Bank, Student Loan Marketing Association,
International Bank for Reconstruction and Development and Fannie Mae.) No
assurance can be given that the U.S. Government will provide financial support
to the agencies or instrumentalities described in (b), (c) and (d) in the
future, other than as set forth above, since it is not obligated to do so by
law.

REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
U.S. Government securities dealers recognized by the Federal Reserve Board, with
member banks of the Federal Reserve System, or with such other brokers or
dealers that meet the Fund's credit guidelines. This technique offers a method
of earning income on idle cash. In a repurchase agreement, the Fund buys a
security from a seller that has agreed to repurchase the same security at a
mutually agreed upon date and price. The Fund's resale price will be in excess
of the purchase price, reflecting an agreed upon interest rate. This interest
rate is effective for the period of time the Fund is invested in the agreement
and is not related to the coupon rate on the underlying security. Repurchase
agreements may also be viewed as a fully collateralized loan of money by the
Fund to the seller. The period of these repurchase agreements will usually be
short, from overnight to one week, and at no time will the Fund invest in
repurchase agreements for more than one year. The Fund will always receive as
collateral securities whose market value including accrued interest is, and
during the entire term of the agreement remains, at least equal to 100% of the
dollar amount invested by the Fund in each agreement, and the Fund will make
payment for such securities only upon physical delivery or upon evidence of book
entry transfer to the account of the Custodian. If the seller defaults, the Fund
might incur a loss if the value of the collateral securing the repurchase
agreement declines and might incur disposition costs in connection with
liquidating the collateral. In addition, if bankruptcy proceedings are commenced
with respect to the seller of a security which is the subject of a repurchase
agreement, realization upon the collateral by the Fund may be delayed or
limited. The Fund seeks to minimize the risk of loss through repurchase
agreements by analyzing the creditworthiness of the obligors under repurchase
agreements, in accordance with the Fund's credit guidelines.

B-3
<PAGE>

COMMERCIAL PAPER. The Fund may invest in commercial paper. These
instruments are short-term obligations issued by banks and corporations that
have maturities ranging from two to 270 days. Each instrument may be backed only
by the credit of the issuer or may be backed by some form of credit enhancement,
typically in the form of a guarantee by a commercial bank. Commercial paper
backed by guarantees of foreign banks may involve additional risk due to the
difficulty of obtaining and enforcing judgments against such banks and the
generally less restrictive regulations to which such banks are subject. The Fund
will only invest in commercial paper of U.S. and foreign companies rated at the
time of purchase at least A-1 by Standard & Poor's, Prime-1 by Moody's, F-1 by
Fitch Investors Service, LLP, Duff 1 by Phoenix Duff & Phelps, Corp., or A1 by
IBCA, Inc.

BANK INSTRUMENTS. The Fund may purchase bankers' acceptances, certificates
of deposit, time deposits, and other short-term obligations issued by domestic
banks, foreign subsidiaries or foreign branches of domestic banks, domestic and
foreign banks, domestic savings and loan associations and other banking
institutions. Included among such obligations are Eurodollar certificates of
deposit ("ECDs"), Eurodollar time deposits ("ETDs") and Yankee Dollar
certificates of deposit ("Yankee CDs"). ECDs are U.S. dollar-denominated
certificates of deposit issued by foreign branches of domestic banks. ETDs are
U.S. dollar-denominated time deposits in a foreign branch of a U.S. bank or a
foreign bank. Yankee CDs are certificates of deposit issued by a U.S. branch of
a foreign bank denominated in U.S. dollars and held in the United States. The
Fund may also invest in Eurodollar bonds and notes, which are obligations that
pay principal and interest in U.S. dollars held in banks outside the United
States, primarily in Europe. All of these obligations are subject to somewhat
different risks than are the obligations of domestic banks or issuers in the
United States. See "Foreign Securities."

B-4
<PAGE>

1933, as amended, but that can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities"). Liquidity
determinations with respect to Section 4(2) paper and Rule 144A securities will
be made by the Board of Directors or by Dreyfus pursuant to guidelines
established by the Board of Directors. The Board or Dreyfus will consider
availability of reliable price information and other relevant information in
making such determinations. Section 4(2) paper is restricted as to disposition
under the federal securities laws, and generally is sold to institutional
investors, such as the Fund, that agree that they are purchasing the paper for
investment and not with a view to public distribution. Any resale by the
purchaser must be pursuant to registration or an exemption therefrom. Section
4(2) paper normally is resold to other institutional investors like the Fund
through or with the assistance of the issuer or investment dealers who make a
market in the Section 4(2) paper, thus providing liquidity. Rule 144A securities
generally must be sold to other qualified institutional buyers. If a particular
investment in Section 4(2) paper or Rule 144A securities is not determined to be
liquid, that investment will be included within the percentage limitation on
investment in illiquid securities. The ability to sell Rule 144A securities to
qualified institutional buyers is a recent development and it is not possible to
predict how this market will mature. Investing in Rule 144A securities could
have the effect of increasing the level of Fund illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in purchasing
these securities from the Fund or other holders.

WARRANTS. A warrant is an instrument issued by a corporation which gives
the holder the right to subscribe to a specified amount of the corporation's
capital stock at a set price for a specified period of time. The Fund may invest
up to 5% of its net assets in warrants, except that this limitation does not
apply to warrants purchased by the Fund that are sold in units with, or attached
to, other securities.

CONVERTIBLE SECURITIES. The Fund may purchase convertible securities,
which are fixed-income securities such as bonds or preferred stock that may be
converted into or exchanged for a specified number of shares of common stock of
the same or a different issuer within a specified period of time and at a
specified price or formula. Convertible securities are senior to common stock in
a corporation's capital structure, but may be subordinated to non-convertible
debt securities. Before conversion, convertible securities ordinarily provide a
stable stream of income with yields generally higher than those on common stock,
but lower than those on non-convertible debt securities of similar quality. In
general, the market value of a convertible security is the higher of its
"investment value" (I.E., its value as a fixed-income security) or its
"conversion value" (I.E., the value of the underlying shares of common stock if
the security is converted). As a fixed-income security, the market value of a
convertible security generally increases when interest rates decline and
generally decreases when interest rates rise. However, the price of a
convertible security also is influenced by the market value of the security's
underlying common stock. Thus, the price of a convertible security generally
increases as the market value of the underlying stock rises, and generally
decreases as the market value of the underlying stock declines. Investments in
convertible securities generally entail less risk than investments in the common
stock of the same issuer.

B-5
<PAGE>

INVESTMENT TECHNIQUES

BORROWING. The Fund is authorized, within specified limits, to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings.

B-6
<PAGE>

interest rates rise. Therefore, if in order to achieve higher interest income
the Fund remains substantially fully invested at the same time that it has
purchased securities on a "when-issued" basis, there will be a greater
possibility of fluctuation in the Fund's net asset value ("NAV").

LOANS OF FUND SECURITIES. The Fund may lend securities from its portfolio
to brokers, dealers and other financial institutions needing to borrow
securities to complete certain transactions. The Fund continues to be entitled
to payments in amounts equal to the interest, dividends or other distributions
payable on the loaned securities, which affords the Fund an opportunity to earn
interest on the amount of the loan and on the loaned securities' collateral.
Loans of portfolio securities may not exceed one-third of the value of the
Fund's total assets and the Fund will receive collateral consisting of cash,
U.S. Government securities or irrevocable letters of credit which will be
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. These loans are terminable by the Fund at
any time upon specified notice. The Fund might experience loss if the
institution to which it has lent its securities fails financially or breaches
its agreement with the Fund. In addition, it is anticipated that the Fund may
share with the borrower some of the income received on the collateral for the
loan or that it will be paid a premium for the loan. In determining whether to
lend securities, the Fund considers all relevant factors and circumstances
including the creditworthiness of the borrower.

REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements to meet redemption requests where the liquidation of Fund securities
is deemed by Dreyfus to be disadvantageous. Under a reverse repurchase
agreement, the Fund: (1) transfers possession of Fund securities to a bank or
broker-dealer in return for cash in an amount equal to a percentage of the
securities' market value; and (2) agrees to repurchase the securities at a
future date by repaying the cash with interest. The Fund retains record
ownership of the securities involved including the right to receive interest and
principal payments. Cash or liquid high-grade debt securities held by the Fund

B-7
<PAGE>

equal in value to the repurchase price including any accrued interest will be
maintained in a segregated account while a reverse repurchase agreement is in
effect.

FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS. The Fund may purchase
and sell various financial instruments ("Derivative Instruments"), including
financial futures contracts (such as index futures contracts) and options (such
as options on U.S. and foreign securities or indices of such securities). The
index Derivative Instruments the Fund may use may be based on indices of U.S. or
foreign equity or debt securities. These Derivative Instruments may be used, for
example, to preserve a return or spread or to facilitate or substitute for the
sale or purchase of securities.

B-8
<PAGE>

the range of permitted transactions and as new techniques are developed. Dreyfus
may utilize these opportunities to the extent that they are consistent with the
Fund's investment objective, and permitted by the Fund's investment policies and
applicable regulatory authorities.

B-9
<PAGE>

fail to produce anticipated gains or result in losses that are not offset by
gains in other investments.

(4) As described below, the Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in Derivative Instruments involving obligations to third parties
(I.E., Derivative Instruments other than purchased options). If the Fund were
unable to close out its positions in such Derivative Instruments, it might be
required to continue to maintain such assets or accounts or make such payments
until the position expired or matured. These requirements might impair the
Fund's ability to sell a portfolio security or make an investment at a time when
it would otherwise be favorable to do so, or require that the Fund sell a
portfolio security at a disadvantageous time. The Fund's ability to close out a
position in a Derivative Instrument prior to expiration or maturity depends on
the existence of a liquid secondary market or, in the absence of such a market,
the ability and willingness of the other party to the transaction
("counterparty") to enter into a transaction closing out the position.
Therefore, there is no assurance that any position can be closed out at a time
and price that is favorable to the Fund.

B-10
<PAGE>

portfolio management or the Fund's ability to meet redemption requests or other
current obligations.

The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of the
underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised have
no value and the Fund would experience losses to the extent of premiums paid for
them.

B-11
<PAGE>

The Fund may purchase and sell both exchange-traded and over-the-counter
("OTC") options. Exchange-traded options in the United States are issued by a
clearing organization that, in effect, guarantees completion of every
exchange-traded option transaction. In contrast, OTC options are contracts
between the Fund and its counterparty (usually a securities dealer or a bank)
with no clearing organization guarantee. Thus, when the Fund purchases an OTC
option, it relies on the counterparty from whom it purchased the option to make
or take delivery of the underlying investment upon exercise of the option.
Failure by the counterparty to do so would result in the loss of any premium
paid by the Fund as well as the loss of any expected benefit of the transaction.
The Fund will enter into only those option contracts that are listed on a
national securities or commodities exchange or traded in the OTC market for
which there appears to be a liquid secondary market. The Fund will not purchase
put or call options that are traded on a national exchange in an amount
exceeding 5% of its net assets.

B-12
<PAGE>

The Fund may write only covered call options on securities. A call option
is covered if the Fund owns the underlying security or a call option on the same
security with a lower strike price.

B-13
<PAGE>

variation margin requirements, it might need to sell securities at a time when
such sales are disadvantageous.

To the extent that the Fund enters into futures contracts, options on
futures contracts, or options on foreign currencies traded on an exchange
regulated by the CFTC, in each case other than for BONA FIDE hedging purposes
(as defined by the CFTC), the aggregate initial margin and premiums required to
establish those positions (excluding the amount by which options are
"in-the-money" at the time of purchase) will not exceed 5% of the liquidation
value of the Fund's portfolio, after taking into account unrealized profits and
unrealized losses on any contracts the Fund has entered into. This policy does
not limit to 5%, the percentage of the Fund's assets that are at risk in futures
contracts and options on futures contracts.

The Fund will not enter into futures contracts to the extent that its
outstanding obligations under these contracts would exceed 25% of the Fund's
total assets.

CERTAIN INVESTMENTS. From time to time, to the extent consistent with
its investment objective, policies and restrictions, the Fund may invest in
securities of companies with which Mellon Bank, N.A. ("Mellon Bank"), an
affiliate of Dreyfus, has a lending relationship.

B-14
<PAGE>

to the Fund. Shareholders of the Fund will be given at least 30 days' prior
notice of any such investment. Such investment would be made only if the
Company's Board of Directors determines it to be in the best interest of the
Fund and its shareholders. In making that determination, the Company's Board of
Directors will consider, among other things, the benefits to shareholders and/or
the opportunity to reduce costs and achieve operational efficiency. Although the
Fund believes that the Company's Board of Directors will not approve an
arrangement that is likely to result in higher costs, no assurance is given that
costs will be materially reduced if this option is implemented.

INVESTMENT RESTRICTIONS

1. Purchase any securities which would cause 25% or more of the value of
the Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities and
state or municipal governments and their political subdivisions are not
considered members of any industry.)

2. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) the Fund may borrow money in an amount not exceeding one-third
of the Fund's total assets at the time of such borrowing, and (b) the Fund may
issue multiple classes of shares. The purchase or sale of options, forward
contracts, futures contracts, including those relating to indices, and options
on futures contracts or indices shall not be considered to involve the borrowing
of money or issuance of senior securities.

3. Purchase with respect to 75% of the Fund's total assets securities of
any issuer (other than securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities) if, as a result, (a) more than 5% of the
Fund's total assets would be invested in the securities of that issuer, or (b)
the Fund would hold more than 10% of the outstanding voting securities of that
issuer.

5. Purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent the Fund from
investing in securities or other instruments backed by real estate, including
mortgage loans, or securities of companies that engage in the real estate
business or invest or deal in real estate or interests therein).

B-15
<PAGE>

6. Underwrite securities issued by any other person, except to the extent
that the purchase of securities and the later disposition of such securities in
accordance with the Fund's investment program may be deemed an underwriting.

7. Purchase or sell commodities except that the Fund may enter into
options, forward contracts, and futures contracts, including those related to
indices, and options on futures contracts or indices.

1. The Fund will not invest more than 15% of the value of its net assets
in illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, time deposits with maturities in excess of
seven days, and other securities that are not readily marketable. For purposes
of this limitation, illiquid securities shall not include commercial paper
issued pursuant to Section 4(2) of the Securities Act of 1933, as amended, and
securities that may be resold under Rule 144A under that Act, provided that the
Board of Directors, or its delegate, determines that such securities are liquid,
based upon the trading markets for the specific security.

2. The Fund will not invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation or acquisition
of assets and except to the extent otherwise permitted by the 1940 Act.

3. The Fund will not purchase securities on margin, except that the Fund
may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with futures
contracts and options shall not constitute purchasing securities on margin.

4. The Fund will not sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities sold
short, and provided that transactions in futures contracts and options are not
deemed to constitute selling short.

5. The Fund will not purchase any security while borrowings representing
more than 5% of the Fund's total assets are outstanding.

B-16
<PAGE>

MANAGEMENT OF THE FUND

FEDERAL LAW AFFECTING MELLON BANK

The Glass-Steagall Act of 1933 prohibits national banks from engaging in
the business of underwriting, selling or distributing securities and prohibits a
member bank of the Federal Reserve System from having certain affiliations with
an entity engaged principally in that business. The activities of Mellon Bank in
informing its customers of, and performing, investment and redemption services
in connection with the Fund, and in providing services to the Fund as custodian,
as well as Dreyfus' investment advisory activities, may raise issues under these
provisions. Mellon Bank has been advised by counsel that the activities
contemplated under these arrangements are consistent with its statutory and
regulatory obligations.

Changes in either federal or state statutes and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as further judicial or administrative decisions or interpretations of such
future statutes and regulations, could prevent Mellon Bank or Dreyfus from
continuing to perform all or a part of the above services for its customers
and/or the Fund. If Mellon Bank or Dreyfus were prohibited from serving the Fund
in any of its present capacities, the Board of Directors would seek an
alternative provider(s) of such services.

DIRECTORS AND OFFICERS

The Dreyfus Corporation.................................Investment Adviser
Premier Mutual Fund Services, Inc..............................Distributor
Dreyfus Transfer, Inc.......................................Transfer Agent
Mellon Bank.........................................Custodian for the Fund

B-17
<PAGE>

DIRECTORS OF THE COMPANY

o+JAMES M. FITZGIBBONS. Director of the Company; Director, Lumber Mutual
Insurance Company; Director, Barrett Resources, Inc. Age: 64 years
old. Address: 40 Norfolk Road, Brookline, Massachusetts 02167.

o*J. TOMLINSON FORT. Director of the Company; Partner, Reed, Smith, Shaw &
McClay (law firm). Age: 70 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.

o+ARTHUR L. GOESCHEL. Director of the Company; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; former Chairman of the Board
and Director, Rexene Corporation. Age: 77 years old. Address: Way
Hallow Road and Woodland Road, Sewickley, Pennsylvania 15143.

o+KENNETH A. HIMMEL. Director of the Company; former Director, The Boston
Company, Inc. ("TBC") and Boston Safe Deposit and Trust Company;
President and Chief Executive Officer, Himmel & Co., Inc.; Vice Chairman,
Sutton Place Gourmet, Inc.; Managing Partner, Franklin Federal Partners.
Age: 52 years old. Address: 625 Madison Avenue, New York, New York 10022.

B-18
<PAGE>

o+JOHN J. SCIULLO. Director of the Company; Dean Emeritus and Professor of
Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh; Member of Advisory Committee, Decedents Estates
Laws of Pennsylvania. Age: 67 years old. Address: 321 Gross Street,
Pittsburgh, Pennsylvania 15224.

o+ROSLYN M. WATSON. Director of the Company; Principal, Watson Ventures,
Inc.; Director, American Express Centurion Bank; Director, Harvard/Pilgrim
Community Health Plan, Inc.; Director, Massachusetts Electric Company;
Director, the Hyams Foundation, Inc. Age: 49 years old. Address: 25
Braddock Park, Boston, Massachusetts 02116-5816.

____________________________
* "Interested person" of the Company, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.

OFFICERS OF THE COMPANY

# MARGARET W. CHAMBERS. Vice President and Secretary of the Company. Senior
Vice President and General Counsel of Funds Distributor, Inc. From August
1996 to March 1998, she was Vice President and Assistant General Counsel
for Loomis, Sayles & Company, L.P. From January 1986 to July 1996, she was
an associate with the law firm of Ropes & Gray. Age: 39 years old.

#MARIE E. CONNOLLY. President and Treasurer of the Company. President,
Chief Executive Officer, Chief Compliance Officer and a director of the
Distributor and Funds Distributor, Inc., the ultimate parent of which is
Boston Institutional Group, Inc. Age: 41 years old.

#CHRISTOPHER J. KELLEY. Vice President and Assistant Secretary of the
Company. Vice President and Senior Associate General Counsel of Funds
Distributor, Inc. From April 1994 to July 1996, Mr. Kelley was Assistant
Counsel at Forum Financial Group. From October 1992 to March 1994, Mr.
Kelley was employed by Putnam Investments in legal and compliance
capacities. Age: 34 years old.

B-19
<PAGE>

#MARY A. NELSON. Vice President and Assistant Treasurer of the Company.
Vice President of the Distributor and Funds Distributor, Inc. From
September 1989 to July 1994, she was an Assistant Vice President and
Client Manager for TBC. Age: 34 years old.

#STEPHANIE PIERCE. Vice President, Assistant Treasurer and Assistant
Secretary of the Company. Vice President and Client Development Manager of
Funds Distributor, Inc. From April 1997 to March 1998, she was employed as
a Relationship Manager with Citibank, N.A. From August 1995 to April 1997,
she was an Assistant Vice President with Hudson Valley Bank, and from
September 1990 to August 1995, she was a Second Vice President with Chase
Manhattan Bank. Age: 30 years old.

#GEORGE A. RIO. Vice President and Assistant Treasurer of the Company.
Executive Vice President and Client Service Director of Funds Distributor,
Inc. From June 1995 to March 1998, he was Senior Vice President and Senior
Key Account Manager for Putnam Mutual Funds. From May 1994 to June 1995,
he was Director of Business Development for First Data Corporation. From
September 1983 to May 1994, he was Senior Vice President and Manager of
Client Services and Director of Internal Audit at TBC. Age: 44 years old.

#JOSEPH F. TOWER, III. Vice President and Assistant Treasurer of the
Company. Senior Vice President, Treasurer, Chief Financial Officer and a
Director of the Distributor and Funds Distributor, Inc. From 1988 to
August 1994, he was employed by TBC where he held various management
positions in the Corporate Finance and Treasury areas. Age: 36 years old.

_________________________
# Officer also serves as an officer for other investment companies advised by
Dreyfus, including The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel
Tax-Free Municipal Funds.

B-20
<PAGE>

The address of each officer of the Company is 200 Park Avenue, New York,
New York 10166.

Total Compensation
Aggregate From the Company
Name of Board Compensation and Fund Complex
Member From the Company# Paid to Board Member****
- ------------- ----------------- ------------------------

Joseph S. DiMartino*

B-21
<PAGE>

James M. Fitzgibbons

J. Tomlinson Fort** none none

Arthur L. Goeschel

Kenneth A. Himmel

Stephen J. Lockwood

John J. Sciullo

Roslyn M. Watson

Benaree Pratt Wiley***
_________________________
# 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. Amount does not include reimbursed expenses for
attending Board meetings, which amounted to $[ ] for the Company.

* Mr. DiMartino became Chairman of the Board of the Dreyfus/Laurel Funds
on January 1, 1999.

** J. Tomlinson Fort is paid directly by Dreyfus for serving as a Board
member of the Company and the funds in the Dreyfus/Laurel Funds and
separately by the Dreyfus High Yield Strategies Fund. For the fiscal year
ended October 31, 1998, the aggregate amount of fees and expenses received
by J. Tomlinson Fort from Dreyfus for serving as a Board member of the
Company was ______________________. For the year ended December 31, 1998,
the aggregate amount of fees and expenses received by Mr. Fort for serving
as a Board member of all funds in the Dreyfus/Laurel Funds (including the
Company) and Dreyfus High Yield Strategies Fund (for which payment is made
directly by the fund) was ______________________. In addition, Dreyfus
reimbursed Mr. Fort a total of $__________________ for expenses
attributable to the Company's Board meetings which is not included in the
$__________________ amount in note # above.

*** Payments to Ms. Wiley were for the period from April 23, 1998 (the date
she was elected as a Board member) through October 31, 1998.

**** The Dreyfus Family of Funds consists of ___ mutual funds.

The officers and Directors of the Company as a group owned beneficially
less than 1% of the total shares of the Fund outstanding as of November __,
1998.

PRINCIPAL SHAREHOLDERS. As of January 31, 1999, the following
shareholder(s) owned of record 5% or more of Class A, Class B, Class C or Class
R of the Fund: _________.

B-22
<PAGE>

MANAGEMENT ARRANGEMENTS

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN THE FUND'S PROSPECTUS ENTITLED "EXPENSES" AND "Management."

The Management Agreement will continue from year to year provided that a
majority of the Directors who are not "interested persons" of the Company and
either a majority of all Directors or a majority (as defined in the 1940 Act) of
the shareholders of the Fund approve its continuance. The Management Agreement
was last approved by the Board of Directors on _________, 1999 to continue until
________, 2000. The Company may terminate the Management Agreement upon the vote
of a majority of the Board of Directors or upon the vote of a majority of the
Fund's outstanding voting securities on 60 days' written notice to Dreyfus.
Dreyfus may terminate the Management Agreement upon 60 days' written notice to
the Company. The Management Agreement will terminate immediately and
automatically upon its assignment.

B-23
<PAGE>

brokerage fees, taxes, interest, fees and expenses of the non-interested
directors (including counsel fees), Rule 12b-1 fees (if applicable) and
extraordinary expenses. Although Dreyfus does not pay for the fees and expenses
of the non-interested Directors (including counsel fees), Dreyfus is
contractually required to reduce its investment management fee by an amount
equal to the Fund's allocable share of such fees and expenses. From time to
time, Dreyfus may voluntarily waive a portion of the investment management fees
payable by the Fund, which would have the effect of lowering the expense ratio
of the Fund and increasing return to investors. Expenses attributable to the
Fund are charged against the Fund's assets; other expenses of the Company are
allocated among its funds on the basis determined by the Board, including, but
not limited to, proportionately in relation to the net assets of each fund.

For the last three years, the Fund had the following expenses:

For the Fiscal Year Ended October 31,
1998 1997 1996
---- ---- ----

Management fees $____ $____ $_____

THE DISTRIBUTOR. Premier Mutual Fund Services, Inc. (the "Distributor"),
located at 60 State Street, Boston, Massachusetts 02109, serves as the Fund's
distributor on a best efforts basis pursuant to an agreement which is renewable
annually. Dreyfus may pay the Distributor for shareholder services from Dreyfus'
own assets, including past profits but not including the management fee paid by
the Fund. The Distributor may use part or all of such payments to pay certain
banks, securities brokers or dealers and other financial institutions ("Agents")
for these services. The Distributor also acts as sub-administrator for the
Fund and as distributor for the other funds in the Dreyfus Family of Funds.

PURCHASE OF SHARES

B-24
<PAGE>

Class R shares are sold primarily to Banks acting on behalf of customers
having a qualified trust or investment account or relationship at such
institution, or to customers who have received or hold shares of the Fund
distributed to them by virtue of such an account or relationship. Class R shares
may be purchased for a retirement plan only by a custodian, trustee, investment
manager or other entity authorized to act on behalf of such a plan. Institutions
effecting transactions in Class R shares for the accounts of their clients may
charge their clients direct fees in connection with such transactions.

The minimum initial investment is $1,000. Subsequent investments must be
at least $100. The minimum initial investment is $750 for Dreyfus-sponsored
Keogh Plans, IRAs (including regular IRAs, spousal IRAs for a non working
spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7) Plans with only one
participant and $500 for Dreyfus-sponsored Education IRAs, with no minimum on
subsequent purchases. The initial investment must be accompanied by the Fund's
Account Application. The Fund reserves the right to offer Fund shares without
regard to minimum purchase requirements to employees participating in certain
qualified or non-qualified employee benefit plans or other programs where
contributions or account information can be transmitted in a manner and form
acceptable to the Fund. The Fund reserves the right to vary further the initial
and subsequent investment minimum requirements at any time.

B-25
<PAGE>

Fund shares are sold on a continuous basis. NAV per share is determined as
of the close of trading on the floor of the New York Stock Exchange ("NYSE")
(currently 4:00 p.m., New York time), on each day the NYSE is open for business.
For purposes of determining NAV, options and futures contracts will be valued 15
minutes after the close of trading on the floor of the NYSE. NAV per share of
each class is computed by dividing the value of the Fund's net assets
represented by such class (i.e., the value of its assets less liabilities) by
the total number of shares of such class outstanding. For further information
regarding the methods employed in valuing the Fund's investments, see
"Determination of Net Asset Value".

If an order is received in proper form by the Transfer Agent or other
entity authorized to receive orders on behalf of the Fund by the close of
trading on the floor of the NYSE (currently 4:00 p.m., New York time) on a
business day, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, Fund shares will be purchased at the public offering price determined
as of the close of trading on the floor of the NYSE on the next business day,
except where shares are purchased through a dealer as provided below.

Orders for the purchase of Fund shares received by dealers by the close of
trading on the floor of the NYSE on any business day and transmitted to the
Distributor or its designee by the close of its business day (normally 5:15
p.m., New York time) will be based on the public offering price per share
determined as of the close of trading on the floor of the NYSE on that day.
Otherwise, the orders will be based on the next determined NAV. It is the
dealers' responsibility to transmit orders so that they will be received by the
Distributor or its designee before the close of its business day. For certain
institutions that have entered into agreements with the Distributor, payment for
the purchase of Fund shares may be transmitted, and must be received by the
Transfer Agent, within three business days after the order is placed. If such
payment is not received within three business days after the order is placed,
the order may be canceled and the institution could be held liable for resulting
fees and/or losses.

Agents may receive different levels of compensation for selling different
Classes of shares. Management understands that some Agents may impose certain
conditions on their clients which are different from those described in the
Fund's Prospectus, and, to the extent permitted by applicable regulatory
authority, may charge their clients direct fees which would be in addition to
any amounts which might be received under the Distribution and Service Plans.
Each Agent has agreed to transmit to its clients a schedule of such fees. You
should consult your Agent in this regard.

B-26
<PAGE>

these fees at any time. The Distributor will pay such fees from its own funds,
other than amounts received from the Fund, including past profits or any other
source available to it.

Federal regulations require that you provide a certified taxpayer
identification number ("TIN") upon opening or reopening an account. See the
Fund's Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service.

The public offering price for Class A shares is the NAV of that Class,
plus a sales load as shown below:

Less than $50,000 5.75 5.00
$50,000 to less than $100,000 4.50 3.75
$100,000 to less than $250,000 3.50 2.75
$250,000 to less than $500,000 2.50 2.25
$500,000 to less than $1,000,000 2.00 1.75
$1,000,000 or more -0- -0-

</TABLE>

B-27
<PAGE>

NAV per share $_____

Per Share Sales Charge - 5.75% of offering price
(6.10% of NAV per share) $_____

Per Share Offering Price to Public $_____

B-28
<PAGE>

which such clients pay a fee to such broker-dealer or other financial
institution.

Class A shares also may be purchased at NAV, subject to appropriate
documentation, through a broker-dealer or other financial institution with the
proceeds from the redemption of shares of a registered open-end management
investment company not managed by Dreyfus or its affiliates. The purchase of
Class A shares of the Fund must be made within 60 days of such redemption and
the shareholder must have either (i) paid an initial sales charge or a CDSC or
(ii) been obligated to pay at any time during the holding period, but did not
actually pay on redemption, a deferred sales charge with respect to such
redeemed shares.

Class A shares also may be purchased at NAV, subject to appropriate
documentation, by (i) qualified separate accounts maintained by an insurance
company pursuant to the laws of any State or territory of the United States,
(ii) a State, county or city or intrumentality thereof, (iii) a charitable
organization (as defined in Section 501(c)(3) of the Code) investing $50,000 or
more in Fund shares, and (iv) a charitable remainder trust (as defined in
Section 501(c)(3) of the Code).

CLASS B SHARES. The public offering price for Class B shares is the NAV
per share of that Class. No initial sales charge is imposed at the time of
purchase. A CDSC is imposed, however, on certain redemptions of Class B shares
as described in the Fund's Prospectus. The Distributor compensates certain
Agents for selling Class B shares at the time of purchase from the Distributor's
own assets. The proceeds of the CDSC and the distribution fee, in part, are used
to defray these expenses.

CLASS C SHARES. The public offering price for Class C shares is the NAV
per share of that Class. No initial sales charge is imposed at the time of
purchase. A CDSC is imposed, however, on redemptions of Class C shares made
within the first year of purchase. See "Class B Shares" above and "How to Redeem
Shares."

CLASS R SHARES. The public offering for Class R shares is the NAV per
share of that Class.

B-29
<PAGE>

RIGHT OF ACCUMULATION--CLASS A SHARES. Reduced sales loads apply to any
purchase of Class A shares, shares of other funds in the Dreyfus Premier Family
of Funds, shares of certain other funds advised by Dreyfus which are sold with a
sales load and shares acquired by a previous exchange of such shares
(hereinafter referred to as "Eligible Funds"), by you and any related
"purchaser" as defined above, where the aggregate investment, including such
purchase, is $50,000 or more. If, for example, you previously purchased and
still hold Class A shares of the Fund, or shares of any other Eligible Fund or
combination thereof, with an aggregate current market value of $40,000 and
subsequently purchase Class A shares of the Fund or shares of an Eligible Fund
having a current value of $20,000, the sales load applicable to the subsequent
purchase would be reduced to 4.5% of the offering price. All present holdings of
Eligible Funds may be combined to determine the current offering price of the
aggregate investment in ascertaining the sales load applicable to each
subsequent purchase.

TELETRANSFER PRIVILEGE. You may purchase Fund shares by telephone through
the TELETRANSFER Privilege if you have checked the appropriate box and supplied
the necessary information on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. The proceeds will be transferred between
the bank account designated in one of these documents and your Fund account.
Only a bank account maintained in a domestic financial institution that is an
Automated Clearing House ("ACH") member may be so designated. TELETRANSFER
purchase orders may be made at any time. Purchase orders received by 4:00 p.m.,
New York time, on any business day that Dreyfus Transfer, Inc., the Fund's
transfer and dividend disbursing agent (the "Transfer Agent"), and the NYSE are
open for business will be credited to the shareholder's Fund account on the next
bank business day following such purchase order. Purchase orders made after 4:00
p.m., New York time, on any business day that the Transfer Agent and the NYSE
are open for business, or orders made on Saturday, Sunday or any Fund holiday
(e.g., when the NYSE is not open for business), will be credited to the
shareholder's Fund account on the second bank business day following such
purchase order. To qualify to use the TELETRANSFER Privilege, the initial
payment for purchase of Fund shares must be drawn on, and redemption proceeds
paid to, the same bank and account as are designated on the Account Application
or Shareholder Services Form on file. If the proceeds of a particular redemption
are to be wired to an account at any other bank, the request must be in writing
and signature-guaranteed. See "Redemption of Shares - TELETRANSFER Privilege."
The Fund may modify or terminate this Privilege at any time or charge a service
fee upon notice to shareholders.
No such fee currently is contemplated.

B-30
<PAGE>

SHARE CERTIFICATES. Share certificates are issued upon written request
only. No certificates are issued for fractional shares.

DISTRIBUTION AND SERVICE PLANS

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "YOUR INVESTMENT."

Class A, Class B and Class C shares are subject to annual fees for
distribution and shareholder services.

DISTRIBUTION PLAN--CLASS A SHARES. The Company has adopted a Distribution
Plan pursuant to the Rule with respect to the Class A shares of the Fund ("Class
A Plan"), whereby Class A shares of the Fund may spend annually up to 0.25% of
the average of its net assets to compensate Dreyfus Service Corporation, an
affiliate of Dreyfus, for shareholder servicing activities and the Distributor
for shareholder servicing activities and expenses primarily intended to result
in the sale of Class A shares of the Fund. The Class A Plan allows the
Distributor to make payments from the Rule 12b-1 fees it collects from the Fund
to compensate Agents that have entered into Selling Agreements ("Agreement")
with the Distributor. Under the Agreements, the Agents are obligated to provide
distribution related services with regard to the Fund and/or shareholder
services to the Agent's clients that own Class A shares of the Fund.

B-31
<PAGE>

The Class A Plan provides that a report of the amounts expended under the
Class A Plan, and the purposes for which such expenditures were incurred, must
be made to the Company's Directors for their review at least quarterly. In
addition, the Class A Plan provides that it may not be amended to increase
materially the costs which the Fund may bear for distribution pursuant to the
Class A Plan without approval of the Fund's shareholders, and that other
material amendments of the Class A Plan must be approved by the vote of a
majority of the Directors and of the Directors who are not "interested persons"
(as defined in the 1940 Act) of the Company or the Distributor and who do not
have any direct or indirect financial interest in the operation of the Class A
Plan, cast in person at a meeting called for the purpose of considering such
amendments. The Class A Plan is subject to annual approval by the entire Board
of Directors and by the Directors who are neither interested persons nor have
any direct or indirect financial interest in the operation of the Class A Plan,
by vote cast in person at a meeting called for the purpose of voting on the
Class A Plan. The Class A Plan was so approved by the Directors at a meeting
held on _____________, 1999. The Class A Plan is terminable, as to the Fund's
Class A shares, at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Class A Plan or by vote of the holders of a majority of the
outstanding shares of such class of the Fund.

B-32
<PAGE>

Plan or in any agreements entered into in connection with the Plan, by vote cast
in person at a meeting called for the purpose of considering such amendments.
Each Plan is subject to annual approval by such vote of the Directors cast in
person at a meeting called for the purpose of voting on the Plan. Each Plan was
so approved by the Directors at a meeting held on _________, 1999. Each Plan may
be terminated at any time by vote of a majority of the Directors who are not
interested persons and have no direct or indirect financial interest in the
operation of the Plan or in any agreements entered into in connection with the
Plan or by vote of the holders of a majority of Class B and Class C shares.

An Agent entitled to receive compensation for selling and servicing the
Fund's shares may receive different compensation with respect to one Class of
shares over another. Potential investors should read this Statement of
Additional Information in light of the terms governing Agreements with their
Agents. The fees payable under the Distribution and Service Plans are payable
without regard to actual expenses incurred. The Fund and the Distributor may
suspend or reduce payments under the Distribution and Service Plans at any time,
and payments are subject to the continuation of the Fund's Plans and the
Agreements described above. From time to time, the Agents, the Distributor and
the Fund may voluntarily agree to reduce the maximum fees payable under the
Plans.

REDEMPTION OF SHARES

B-33
<PAGE>

PROCEDURES. You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, or, if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent, through the
TELETRANSFER Privilege. If you are a client of a Selected Dealer, you may redeem
shares through the Selected Dealer. Other redemption procedures may be in effect
for clients of certain Agents and institutions. The Fund makes available to
certain large institutions the ability to issue redemption instructions through
compatible computer facilities. The Fund reserves the right to refuse any
request made by telephone, including requests made shortly after a change of
address, and may limit the amount involved or the number of such requests. The
Fund may modify or terminate any redemption privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is contemplated.
Shares held under Keogh Plans, IRAs, or other retirement plans, and shares for
which certificates have been issued, are not eligible for the TELETRANSFER
Privilege.

You may redeem Fund shares by telephone if you have checked the
appropriate box on the Account Application or have filed a Shareholder Services
Form with the Transfer Agent. If you select the TeleTransfer redemption
privilege or telephone exchange privilege, which is granted automatically unless
you refuse it, you authorize the Transfer Agent to act on telephone instructions
(including over The Dreyfus Touch(R) automateD telephone system) from any person
representing himself or herself to be you, or a representative of your Agent,
and reasonably believed by the Transfer Agent to be genuine. The Fund will
require the Transfer Agent to employ reasonable procedures, such as requiring a
form of personal identification, to confirm that instructions are genuine and,
if it does not follow such procedures, the Fund or the Transfer Agent may be
liable for any losses due to unauthorized or fraudulent instructions. Neither
the Fund nor the Transfer Agent will be liable for following telephone
instructions reasonably believed to be genuine.

REDEMPTION THROUGH A SELECTED DEALER. Customers of Selected Dealers may
make redemption requests to their Selected Dealer. If the Selected Dealer
transmits the redemption request so that it is received by the Transfer Agent
prior to the close of trading on the floor of the NYSE (currently 4:00 p.m., New
York time), the redemption request will be effective on that day. If a
redemption request is received by the Transfer Agent after the close of trading
on the floor of the NYSE, the redemption request will be effective on the next
business day. It is the responsibility of the Selected Dealer to transmit a
request so that it is received in a timely manner. The proceeds of the
redemption are credited to your account with the Selected Dealer.

B-34
<PAGE>

DREYFUS TELETRANSFER PRIVILEGE. You may request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an ACH member may be designated. Redemption
proceeds will be on deposit in your account at an ACH member bank ordinarily two
days after receipt of the redemption request, or at your request, paid by check
(maximum $150,000 per day) and mailed to your address. Holders of jointly
registered Fund or bank accounts may redeem through the TELETRANSFER Privilege
for transfer to their bank account only up to $250,000 within any 30-day period.
Investors should be aware that if they have selected the TELETRANSFER Privilege,
any request for a TELETRANSFER transaction will be effected through the ACH
system unless more prompt transmittal specifically is requested. See "Purchase
of Shares--Dreyfus TELETRANSFER Privilege."

STOCK CERTIFICATES; SIGNATURES. Any certificates representing Fund shares
to be redeemed must be submitted with the redemption request. Written redemption
requests must be signed by each shareholder, including each holder of a joint
account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations,
as well as from participants in the NYSE Medallion Signature Program, the
Securities Transfer Agents Medallion Program ("STAMP") and the Stock Exchanges
Medallion Program. Guarantees must be signed by an authorized signatory of the
guarantor and "Signature-Guaranteed" must appear with the signature. The
Transfer Agent may request additional documentation from corporations,
executors, administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular verification.
For more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.

B-35
<PAGE>

REDEMPTION COMMITMENT. The Company has committed itself to pay in cash all
redemption requests by any shareholder of record of the Fund, limited in amount
during any 90 day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the SEC. In the case of requests for
redemptions in excess of such amount, the Company's Board reserves the right to
make payments in whole or in part in securities or other assets in case of an
emergency or any time a cash distribution would impair the liquidity of the Fund
to the detriment of the existing shareholders. In such event, the securities
would be valued in the same manner as the Fund's portfolio is valued. If the
recipient sold such securities, brokerage charges might be incurred.

SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or the
date of payment postponed (a) during any period when the NYSE is closed (other
than customary weekend and holiday closings), (b) when trading in the markets
the Fund ordinarily utilizes is restricted, or when an emergency exists as
determined by the SEC so that disposal of the Fund's investments or
determination of its NAV is not reasonably practicable, or (c) for such other
periods as the SEC by order may permit to protect the Fund's shareholders.

In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible rate.
It will be assumed that the redemption is made first of amounts representing
shares acquired pursuant to the reinvestment of dividends and distributions;
then of amounts representing the increase in NAV of Class B shares above the
total amount of payments for the purchase of Class B shares made during the
preceding six years; then of amounts representing the cost of shares purchased
six years prior to the redemption; and finally, of amounts representing the cost
of shares held for the longest period of time within the applicable six-year
period.

B-36
<PAGE>

For example, assume an investor purchased 100 shares at $10 per share for
a cost of $1,000. Subsequently, the shareholder acquired five additional shares
through dividend reinvestment. During the second year after the purchase the
investor decided to redeem $500 of his or her investment. Assuming at the time
of the redemption the NAV has appreciated to $12 per share, the value of the
investor's shares would be $1,260 (105 shares at $12 per share). The CDSC would
not be applied to the value of the reinvested dividend shares and the amount
which represents appreciation ($260). Therefore, $240 of the $500 redemption
proceeds ($500 minus $260) would be charged at a rate of 4% (the applicable rate
in the second year after purchase) for a total CDSC of $9.60.

WAIVER OF CDSC - The CDSC will be waived in connection with (a)
redemptions made within one year after the death or disability, as defined in
Section 72(m)(7) of the Code, of the shareholder, (b) redemptions by employees
participating in Eligible Benefit Plans, (c) redemptions as a result of a
combination of any investment company with the Fund by merger, acquisition of
assets or otherwise, (d) a distribution following retirement under a
tax-deferred retirement plan or upon attaining age 70 1/2 in the case oF an IRA
or Keogh plan or custodial account pursuant to Section 403(b) of the Code, and
(e) redemptions pursuant to the Automatic Withdrawal Plan, as described below.
If the Company's Board determines to discontinue the waiver of the CDSC, the
disclosure herein will be revised appropriately. Any Fund shares subject to a
CDSC which were purchased prior to the termination of such waiver will have the
CDSC waived as provided in the Prospectus or this Statement of Additional
Information at the time of the purchase of such shares.

SHAREHOLDER SERVICES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTIONS IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES" AND
"SERVICES FOR FUND INVESTORS."

B-37
<PAGE>

be purchased on the basis of relative NAV per share as follows:

A. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.

B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the applicable
sales load will be deducted.

C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a sales
load.

B-38
<PAGE>

To request an exchange, an investor or an investor's Agent acting on the
investor's behalf must give exchange instructions to the Transfer Agent in
writing or by telephone. The ability to issue exchange instructions by telephone
is given to all Fund shareholders automatically unless the investor checks the
applicable "No" box on the Account Application, indicating that the investor
specifically refuses this privilege. The Telephone Exchange Privilege may be
established for an existing account by written request signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-554-4611, or by oral request from any of the
authorized signatories on the account, also by calling 1-800-554-4611. By using
the Telephone Exchange Privilege, the investor authorizes the Transfer Agent to
act on telephonic instructions (including over The Dreyfus Touch(R) automated
telephone system) from any person representing himself or herself to be the
investor or a representative of the investor's Agent, and reasonably believed by
the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange. No fees currently are charged shareholders directly in connection with
exchanges, although the Fund reserves the right, upon not less than 60 days'
written notice, to charge shareholders a nominal fee in accordance with rules
promulgated by the SEC.

Exchanges of Class R shares held by a Retirement Plan may be made only
between the investor's Retirement Plan account in one fund and such investor's
Retirement Plan account in another fund.

DREYFUS AUTO-EXCHANGE PRIVILEGE. The Dreyfus Auto-Exchange Privilege
permits an investor to regularly purchase (on a semi-monthly, monthly, quarterly
or annual basis), in exchange for shares of the Fund, shares of the same Class
of certain other funds in the Dreyfus Premier Family of Funds or the Dreyfus
Family of Funds of which the investor is a shareholder. The amount the investor
designates, which can be expressed either in terms of a specific dollar or share
amount $100 minimum), will be exchanged automatically on the first and/or
fifteenth day of the month according to the schedule the investor has selected.
This Privilege is available only for existing accounts. With respect to Class R
shares held by a Retirement Plan, exchanges may be made only between the
investor's Retirement Plan account in one fund and such investor's Retirement
Plan account in another fund. Shares will be exchanged on the basis of relative
NAV as described above under "Fund Exchanges." Enrollment in or modification or
cancellation of this Privilege is effective three business days following
notification by the investor. An investor will be notified if the investor's
account falls below the amount designated to be exchanged under this Privilege.
In this case, an investor's account will fall to zero unless additional
investments are made in excess of the designated amount prior to the next
Auto-Exchange transaction. Shares held under IRAs and other retirement plans are
eligible for this Privilege. Exchanges of IRA shares may be made between IRA
accounts and from regular accounts to IRA accounts, but not from IRA accounts to

B-39
<PAGE>

regular accounts. With respect to all other retirement accounts, exchanges may
be made only among those accounts.

The right to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to Dreyfus Premier Small
Cap Value Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. The Fund may
charge a service fee for the use of this Privilege. No such fee currently is
contemplated. For more information concerning this Privilege and the funds in
the Dreyfus Premier Family of Funds or the Dreyfus Family of Funds eligible to
participate in this Privilege, or to obtain a Dreyfus Auto-Exchange
Authorization Form, please call toll free 1-800-554-4611.

DREYFUS-AUTOMATIC ASSET BUILDER(R). Dreyfus Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000 per
transaction) at regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. Only an account
maintained at a domestic financial institution which is an ACH member may be so
designated. To establish a Dreyfus-Automatic Asset Builder account, you must
file an authorization form with the Transfer Agent. You may obtain the necessary
authorization form by calling 1-800-554-4611. You may cancel your participation
in this Privilege or change the amount of purchase at any time by mailing
written notification to Dreyfus Premier Midcap Stock Fund, P.O. Box 6587,
Providence, Rhode Island 02940-6587 and the notification will be effective three
business days following receipt. The Fund may modify or terminate this Privilege
at any time or charge a service fee. No such fee currently is contemplated.

AUTOMATIC WITHDRAWAL PLAN. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends and other
distributions, the investor's shares will be reduced and eventually may be
depleted. An Automatic Withdrawal Plan may be established by filing an Automatic
Withdrawal Plan application with the Transfer Agent or by oral request from any
of the authorized signatories on the account by calling 1-800-554-4611.
Automatic Withdrawal may be terminated at any time by the investor, the Fund or
the Transfer Agent. Shares for which certificates have been issued may not be
redeemed through the Automatic Withdrawal Plan.

B-40
<PAGE>

Withdrawals with respect to Class B shares under the Automatic Withdrawal Plan
that exceed on an annual basis 12% of the value of the shareholder's account
will be subject to a CDSC on the amounts exceeding 12% of the initial account
value. Class C shares, and Class A shares to which a CDSC applies, that are
withdrawn pursuant to the Automatic Withdrawal Plan will be subject to any
applicable CDSC. Purchases of additional Class A shares where the sales load is
imposed concurrently with withdrawals of Class A shares generally are
undesirable.

A. Dividends and other distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that are
offered without a sales load.

B. Dividends and other distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds sold
with a sales load, and the applicable sales load will be deducted.

D. Dividends and other distributions paid by a fund may be invested
in shares of other funds that impose a CDSC and the applicable CDSC,
if any, will be imposed upon redemption of such shares.

For more information concerning these Privileges, or to request a Dividend
Options Form, please call toll free 1-800-554-4611. You may cancel these
Privileges by mailing written notification to Dreyfus Premier Small Cap Value
Fund, P.O. Box 6587, Providence Rhode Island, 02940-6587. To select a new fund
after cancellation, you must submit a new Dividend Options Form. Enrollment in
or cancellation of these privileges is effective three business days following
receipt. These privileges are available only for existing accounts and may not
be used to open new accounts. Minimum subsequent investments do not apply for
Dreyfus Dividend Sweep. The Fund may modify or terminate these privileges at any

B-41
<PAGE>

time or charge a service fee. No such fee currently is contemplated. Shares held
under Keogh Plans, IRAs or other retirement plans are not eligible for Dreyfus
Dividend Sweep.

DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social Security or
certain veterans', military or other payments from the Federal government
automatically deposited into your Fund account. You may deposit as much of such
payments as you elect. You should consider whether Direct Deposit of your entire
payment into a fund with fluctuating NAV, such as the Fund, may be appropriate
for you. To enroll in Dreyfus Government Direct Deposit, you must file with the
Transfer Agent a completed Direct Deposit Sign-Up Form for each type of payment
that you desire to include in this Privilege. The appropriate form may be
obtained from your Agent or by calling 1-800-554-4611. Death or legal incapacity
will terminate your participation in this Privilege. You may elect at any time
to terminate your participation by notifying in writing the appropriate Federal
agency. Further, the Fund may terminate your participation upon 30 days' notice
to you.

The Transfer Agent will hold in escrow 5% of the amount indicated in the
Letter of Intent for payment of a higher sales load if you do not purchase the
full amount indicated in the Letter of Intent. The escrow will be released when
you fulfill the terms of the Letter of Intent by purchasing the specified
amount. If your purchases qualify for a further sales load reduction, the sales
load will be adjusted to reflect your total purchase at the end of 13 months. If
total purchases are less than the amount specified, you will be requested to
remit an amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If such
remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will redeem an
appropriate number of Class A shares of the Fund held in escrow to realize the
difference. Signing a Letter of Intent does not bind you to purchase, or the
Fund to sell, the full amount indicated at the sales load in effect at the time
of signing, but you must complete the intended purchase to obtain the reduced
sales load. At the time you purchase Class A shares, you must indicate your
intention to do so under a Letter of Intent. Purchases pursuant to a Letter of
Intent will be made at the then-current NAV plus the applicable sales load in
effect at the time such Letter of Intent was executed.

B-42
<PAGE>

services also are available. You can obtain details on the various plans by
calling the following numbers toll free: for Keogh Plans, please call
1-800-358-5566; for IRAs and IRA "Rollover Accounts," please call
1-800-554-4611; for SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans,
please call 1-800-322-7880.

Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request from the
Distributor forms for adoption of such plans.

SHARES MAY BE PURCHASED IN CONNECTION WITH THESE PLANS ONLY BY DIRECT
REMITTANCE TO THE ENTITY ACTING AS CUSTODIAN. PURCHASES FOR THESE PLANS MAY NOT
BE MADE IN ADVANCE OF RECEIPT OF FUNDS.

ADDITIONAL INFORMATION ABOUT PURCHASES,
EXCHANGES AND REDEMPTIONS.

B-43
<PAGE>

effectively in accordance with its investment objective and policies or could
otherwise be adversely affected or if the Fund receives or anticipated receiving
simultaneous orders that may significantly affect the Fund (e.g., amounts equal
to 1% or more of the Fund's total assets). If an exchange request is refused,
the Fund will take no other action with respect to the shares until it receives
further instructions from the investor. The Fund may delay forwarding redemption
proceeds for up to seven days if the investor redeeming shares is engaged in
excessive trading or if the amount of the redemption request otherwise would be
disruptive to efficient portfolio management or would adversely affect the Fund.
The Fund's policy on excessive trading applies to investors who invest in the
Fund directly or through financial intermediaries, but does not apply to the
Dreyfus Auto-Exchange Privilege, to any automatic investment or withdrawal
privilege described herein, or to non-IRA plan accounts.

DETERMINATION OF NET ASSET VALUE

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "ACCOUNT POLICIES."

B-44
<PAGE>

DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "DISTRIBUTIONS AND TAXES."

GENERAL. The Fund declares and pays dividends from its net investment
income, if any, and distributes net realized capital gains, if any, once a year,
but it may make distributions on a more frequent basis to comply with the
distribution requirements of the Code, in all events in a manner consistent with
the provisions of the 1940 Act. The Fund will not make distributions from net
realized capital gains unless all capital loss carryovers, if any, have been
utilized or have expired. All expenses are accrued daily and deducted before
declaration of dividends to investors. Dividends and other distributions paid by
each Class are calculated at the same time and in the same manner and will be in
the same amount, except that the expenses attributable solely to a particular
Class are borne exclusively by that Class. Class B and Class C shares will
receive lower per share dividends than Class A shares, which will in turn
receive lower per share dividends than Class R shares, because of the higher
expenses borne by the relevant Classes. See "Expenses in Prospectus."

Investors other than qualified retirement plans may choose whether to
receive dividends and other distributions in cash, to receive dividends in cash
and reinvest other distributions in additional Fund shares at NAV, or to
reinvest both dividends and other distributions in additional Fund shares at
NAV; dividends and other distributions paid to qualified retirement plans are
reinvested automatically in additional Fund shares at NAV.

B-45
<PAGE>

gains are distributed in accordance with applicable provisions of the Code. To
qualify for treatment as a RIC under the Code, the Fund -- which is treated as a
separate corporation for federal tax purposes -- (1) must distribute to its
shareholders each year at least 90% of its investment company taxable income
(generally consisting of net investment income, net short-term capital gains and
net gains from certain foreign currency transactions) (the "Distribution
Requirement"), (2) must derive at least 90% of its annual gross income from
specified sources (the "Income Requirement"), and (3) must meet certain asset
diversification and other requirements. The term "regulated investment company"
does not imply the supervision of management or investment practices or policies
by any government agency.

Dividends derived from net investment income, together with distributions
from net realized short-term capital gains and all or a portion of any gains
realized from the sale or other disposition of certain market discount bonds
(collectively, "dividend distributions"), paid by the Fund will be taxable to
U.S. shareholders, including certain non-qualified retirement plans, as ordinary
income to the extent of the Fund's earnings and profits, whether received in
cash or reinvested in additional Fund shares. Distributions from net capital
gain (the excess net of long-term capital gain over net short-term capital loss)
will be taxable to such shareholders as long-term capital gains regardless of
how long the shareholders have held their Fund shares and whether such
distributions are received in cash or reinvested in additional Fund shares.

Notice as to the tax status of your dividends and other distributions will
be mailed to you annually. You also will receive periodic summaries of your
account that will include information as to dividends and distributions from net
capital gain, if any, paid during the year. The annual tax notice and periodic
account summaries you will receive designate the portions of capital gain
distributions that are subject to (1) the 20% maximum rate of tax (10% for
investors in the 15% marginal tax bracket) enacted by the Taxpayer Relief Act of
1997 ("Tax Act"), which applies to non-corporate taxpayers' net capital gain on
securities and other capital assets held for more than 18 months, and (2) the
28% maximum tax rate, applicable to such gain on capital assets held for more
than one year and up to 18 months (which, prior to enactment of the Tax Act,
applied to all such gain on capital assets held for more than one year).

B-46
<PAGE>

The Code provides for the "carryover" of some or all of the sales load
imposed on Class A shares if (1) a shareholder redeems those shares or exchanges
those shares for shares of another fund advised or administered by Dreyfus
within 90 days of purchase and (2) in the case of a redemption, acquires other
Fund Class A shares through exercise of the Reinvestment Privilege or, in the
case of an exchange, such other fund reduces or eliminates its otherwise
applicable sales load for the purpose of the exchange. In these cases, the
amount of the sales load charged on the purchase of the original Class A shares,
up to the amount of the reduction of sales load pursuant to the Reinvestment
Privilege or on the exchange, as the case may be, is not included in the basis
of such shares for purposes of computing gain or loss on the redemption or the
exchange and instead is added to the basis of the shares acquired pursuant to
the Reinvestment Privilege or the exchange.

B-47
<PAGE>

The Fund may be subject to a non-deductible 4% excise tax, measured with
respect to certain undistributed amounts of taxable income and capital gains.

Any dividend or other distribution paid shortly after an investor's
purchase of shares may have the effect of reducing the NAV of the shares below
the cost of his or her investment. Such a dividend or other distribution would
be a return on investment in an economic sense, although taxable as stated
above. In addition, if a shareholder sells shares of the Fund held for six
months or less and receives a capital gain distribution with respect to those
shares, any loss incurred on the sale of those shares will be treated as a
long-term capital loss to the extent of the capital gain distribution received.

Dividends and other distributions declared by the Fund in October,
November or December of any year and payable to shareholders of record on a date
in any of those months are deemed to have been paid by the Fund and received by
the shareholders on December 31 of that year if the distributions are paid by
the Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.

PASSIVE FOREIGN INVESTMENT COMPANIES. The Fund may invest in the stock of
"passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation other than a "controlled foreign corporation" (I.E., a foreign
corporation in which, on any day during its taxable year, more than 50% of the
total voting power of all voting stock therein or the total value of all stock
therein is owned, directly, indirectly, or constructively, by "U.S.
shareholders," defined as U.S. persons that individually own, directly,
indirectly, or constructively, at least 10% of that voting power) as to which
the Fund is a U.S. shareholder - that, in general, meets either of the following
tests: (1) at least 75% of its gross income is passive or (2) an average of at
least 50% of its assets produce, or are held for the production of, passive
income. Under certain circumstances, the Fund will be subject to federal income
tax on a portion of any "excess distribution" received on the stock of a PFIC or
of any gain on disposition of the stock (collectively "PFIC income"), plus
interest thereon, even if the Fund distributes the PFIC income as a dividend to
its shareholders. The balance of the PFIC income will be included in the Fund's
investment company taxable income and, accordingly, will not be taxable to it to
the extent that income is distributed to its shareholders.

B-48
<PAGE>

If the Fund invests in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its PRO
RATA share of the QEF's annual ordinary earnings and net capital gain (the
excess of net long-term capital gain over net short-term capital loss) which
likely would have to be distributed by the Fund to satisfy the Distribution
Requirement and avoid imposition of the 4% excise tax mentioned in the
Prospectus under "Dividends, Other Distributions and Taxes" ("Excise Tax") even
if those earnings and gain were not received by the Fund from the QEF. In most
instances it will be very difficult, if not impossible, to make this election
because of certain requirements thereof.

Under Section 1256 of the Code, any gain or loss realized by the Fund on
the exercise or lapse of, or closing transactions respecting, certain options,
futures and forward contracts (the "Section 1256 Contracts") may be treated as
60% long-term capital gain or loss and 40% short-term capital gain or loss. In
addition, any Section 1256 Contracts remaining unexercised at the end of the
Fund's taxable year will be treated as sold for their then fair market value (a
process known as "marking-to-market"), resulting in additional gain or loss to
the Fund characterized in the manner described above. It is not entirely clear,
as of the date of this Statement of Additional Information, whether that 60%
portion will qualify for the reduced maximum tax rates on net capital gain
enacted by the Taxpayer Relief Act of 1997 ("Tax Act") 20% (10% for taxpayers in
the 15% marginal tax bracket) for gain recognized on capital assets held for
more than 18 months instead of the 28% rate in effect before that legislation,

B-49
<PAGE>

which now applies to gain on capital assets held for more than one year but not
more than 18 months, although technical corrections legislation passed by the
House of Representatives late in 1997 would treat it as qualifying therefor.

Offsetting positions held by the Fund involving certain options, futures
or forward contracts may constitute "straddles", which are defined to include
"offsetting positions" in actively traded personal property. All or a portion of
any capital gain from certain straddle transactions may be recharacterized as
ordinary income. If the Fund were treated as entering into straddles by reason
of its engaging in certain options, futures or forward contract transactions,
such straddles would be characterized as "mixed straddles" if the transactions
comprising a part of such straddles were governed by Section 1256. The Fund may
make one or more elections with respect to mixed straddles; depending on which
election is made, if any, the results to the Fund may differ. If no election is
made, then to the extent the straddle and conversion transactions rules apply to
positions established by the Fund, losses realized by the Fund will be deferred
to the extent of unrealized gain in the offsetting position. Moreover, as a
result of the straddle rules, short-term capital loss on straddle positions may
be recharacterized as long-term capital loss, and long-term capital gains may be
treated as short-term capital gains or ordinary income.

If the Fund has an "appreciated financial position" - generally, an
interest (including an interest through an option, futures or forward contract,
or short sale) with respect to any stock, debt instrument (other than "straight
debt"), or partnership interest the fair market value of which exceeds its
adjusted basis - and enters into a "constructive sale" of the same or
substantially similar property, the Fund will be treated as having made an
actual sale thereof, with the result that gain will be recognized at that time.
A constructive sale generally consists of a short sale, an offsetting notional
principal contract, or futures or forward contract entered into by the Fund or a
related person with respect to the same or substantially similar property. In
addition, if the appreciated financial position is itself a short sale or such a
contract, acquisition of the underlying property or substantially similar
property will be deemed a constructive sale.

Investment by the Fund in securities issued or acquired at a discount (for
example, zero coupon securities) could, under special tax rules, affect the
amount and timing of distributions to shareholders by causing the Fund to
recognize income prior to the receipt of cash payments. For example, the Fund
could be required to take into gross income annually a portion of the discount
(or deemed discount) at which the securities were issued and could need to
distribute such income to satisfy the Distribution Requirement and to avoid the
excise tax Excise Tax. In such case, the Fund may have to dispose of securities
it might otherwise have continued to hold in order to generate cash to satisfy
these requirements.

B-50
<PAGE>

FOREIGN SHAREHOLDERS - U.S. FEDERAL INCOME TAXATION. U.S. federal income
taxation of a shareholder who, as to the United States, is a non-resident alien
individual, a foreign trust or estate, a foreign corporation or a foreign
partnership (a "foreign shareholder") depends on whether the income from the
Fund is "effectively connected" with a U.S. trade or business carried on by the
shareholder, as discussed generally below. Special U.S. federal income tax rules
that differ from those described below may apply to certain foreign persons who
invest in the Fund, such as a foreign shareholder entitled to claim the benefits
of an applicable tax treaty. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them of an
investment in the Fund.

FOREIGN SHAREHOLDERS - INCOME NOT EFFECTIVELY CONNECTED. Dividends
distributed to a foreign shareholder whose ownership of Fund shares is not
effectively connected with a U.S. trade or business carried on by the foreign
shareholder generally will be subject to U.S. federal withholding tax of 30% (or
lower treaty rate). Capital gains realized by foreign shareholders on the sale
of Fund shares and distributions to them of net capital gain generally will not
be subject to U.S. federal income tax unless the foreign shareholder is a
non-resident alien individual and is physically present in the United States for
more than 182 days during the taxable year. In the case of certain foreign
shareholders, the Fund may be required to withhold U.S. federal income tax at a
rate of 31% of capital gain distributions and of the gross proceeds from a
redemption of Fund shares unless the shareholder furnishes the Fund with a
certificate regarding the shareholder's foreign status.

B-51
<PAGE>

PORTFOLIO TRANSACTIONS

B-52
<PAGE>

organizations were to attempt to develop comparable information through their
own staffs.

Dreyfus may use research services of and place brokerage transactions with
broker-dealers affiliated with it or Mellon Bank if the commissions are
reasonable, fair and comparable to commissions charged by non-affiliated
brokerage firms for similar services. During the fiscal years ended October 31,
1998, 1997 and 1996, the Fund paid brokerage commissions of $______, $ and
$_____, respectively, to affiliates of Dreyfus or Mellon Bank. The amount paid
to affiliated brokerage firms during the fiscal years ended October 31, 1998,
1997 and 1996, was approximately __%, ___% and __%, respectively, of the
aggregate brokerage commissions paid by the Fund, for transactions involving
approximately ____%, ____% and ___%, respectively, of the aggregate
dollar volume of transactions for which the Fund paid brokerage commissions.
The difference in these percentages was due to the lower commissions paid
to affiliates of Dreyfus.

When more than one account is simultaneously engaged in the purchase or
sale of the same investment instrument, the prices and amounts are allocated in
accordance with a formula considered by Dreyfus to be equitable to each account.
In some cases this system could have a detrimental effect on the price or volume
of the investment instrument as far as the Fund is concerned. In other cases,
however, the ability of the Fund to participate in volume transactions will
produce better executions for the Fund. While the Directors will continue to
review simultaneous transactions, it is their present opinion that the
desirability of retaining Dreyfus as investment manager to the Fund outweighs
any disadvantages that may be said to exist from exposure to simultaneous
transactions.

For the fiscal years ended October 31, 1998, 1997 and 1996, the Fund paid
brokerage commissions amounting to $______, $_______ and $________,
respectively.

PORTFOLIO TURNOVER. While securities are purchased for the Fund on the
basis of potential for capital appreciation and not for short-term trading
profits, the Fund's turnover rate may exceed 100%. A portfolio turnover rate of
100% would occur, for example, if all the securities held by the Fund were
replaced once in a period of one year. A higher rate of portfolio turnover
involves correspondingly greater brokerage commissions and other expenses that
must be borne directly by the Fund and, thus, indirectly by its shareholders. In

B-53
<PAGE>

addition, a high rate of portfolio turnover may result in the realization of
larger amounts of short-term capital gains that, when distributed to the Fund's
shareholders, are taxable to them as ordinary income. Nevertheless, securities
transactions for the Fund will be based only upon investment considerations and
will not be limited by any other considerations when Dreyfus deems it
appropriate to make changes in the Fund's assets. The portfolio turnover rate
for the Fund is calculated by dividing the lesser of the Fund's annual sales or
purchases of portfolio securities (exclusive of purchases and sales of
securities whose maturities at the time of acquisition were one year or less) by
the monthly average value of securities in the Fund during the year. Portfolio
turnover may vary from year to year as well as within a year. The portfolio
turnover rates for the fiscal years ended October 31, 1997 and 1998 were ___
and ___, respectively.

PERFORMANCE INFORMATION

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "PAST PERFORMANCE."

The average annual total return (expressed as a percentage) for Class A
shares, Class B shares, Class C shares and Class R shares of the Fund for the
period from inception of each class (April 1, 1998) to October 31, 1998 was
_____%, _____%, _____% and _____%, respectively (assuming, where applicable,
deduction of the maximum sales load from the hypothetical initial investment at
the time of purchase and the assessment of the maximum CDSC).

The aggregate total return (expressed as a percentage) for Class A shares,
Class B shares, Class C shares and Class R shares of the Fund for the period
from inception of each class (April 1, 1998) to October 31, 1998 was _____%,
_____%, _____% and _____%, respectively (assuming, where applicable, deduction
of the maximum sales load from the hypothetical initial investment at the time
of purchase and the assessment of the maximum CDSC).

B-54
<PAGE>

offering price per share at the beginning of the period for Class A shares or
without giving effect to any applicable CDSC at the end of the period for Class
B or Class C shares. In such cases, the calculation would not reflect the
deduction of the sales load with respect to Class A shares or any applicable
CDSC with respect to Class B or C shares, which, if reflected would reduce the
performance quoted.

Performance information for the Fund may be compared, in reports and
promotional literature, to indexes including, but not limited to: (i) the
Russell 2000 Value Index, the Russell 2000 Growth Index, or the Russell 2000
Index; (ii) the Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Industrial Average, or other appropriate unmanaged domestic or foreign indices
of performance of various types of investments so that investors may compare the
Fund's results with those of indices widely regarded by investors as
representative of the securities markets in general; (iii) other groups of
mutual funds tracked by Lipper Analytical Services, Inc., a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or other
criteria; (iv) the Consumer Price Index (a measure of inflation) to assess the
real rate of return from an investment in the Fund, or the Fund's performance
against inflation to the performance of other instruments against inflation; and
(v) products managed by a universe of money managers with similar performance
objectives. Unmanaged indices may assume the reinvestment of dividends but
generally do not reflect deductions or administrative and management costs and
expenses.

From time to time, advertising material for the Fund may include (i)
biographical information relating to its portfolio manager, including honors and
awards received, and may refer to or include commentary by the Fund's portfolio
manager relating to investment strategy, asset growth, current or past business,
political, economic or financial conditions and other matters of general
interest to investors; (ii) information concerning retirement and investing for
retirement, including statistical data or general discussions about the growth
and development of Dreyfus Retirement Services (in terms of new customers,
assets under management, market share, etc.) and its presence in the defined
contribution plan market; (iii) the approximate number of then current Fund
shareholders; and (iv) Lipper or Morningstar ratings and related analysis
supporting the ratings. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions or administrative and
management costs and expenses.

INFORMATION ABOUT THE FUND

THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION
WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED "THE FUND."

The Company has an authorized capitalization of 25 billion shares of
$0.001 per value stock.

B-55
<PAGE>

subscription or conversion rights and are freely transferable.

The Fund will send annual and semi-annual financial statements to all of
its shareholders.

TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL
AND INDEPENDENT AUDITORS

Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Company,
Dreyfus Transfer, Inc. arranges for the maintenance of shareholder account
records for the Fund, the handling of certain communications between
shareholders and the Fund, and the payment of dividends and distributions
payable by the Fund. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses.

B-56
<PAGE>

_____________________, 1800 Massachusetts Avenue, N.W., Second Floor,
Washington, D.C. 20036-1800, has passed upon the legality of the shares offered
by the Prospectus and this Statement of Additional Information.

_____________________, was appointed by the Directors to serve as the
Fund's independent auditors for the year ending October 31, 1999, providing
audit services including (1) examination of the annual financial statements, (2)
assistance, review and consultation in connection with SEC filings and (3)
review of the annual federal income tax return filed on behalf of the Fund.

FINANCIAL STATEMENTS

The financial statements for the fiscal year ended October 31, 1998,
including notes to the financial statements and supplementary information, and
the Independent Auditors' Report are included in the Annual Report to
shareholders. A copy of the Annual Report accompanies this Statement of
Additional Information. The financial statements included in the Annual Report,
and the Independent Auditors' Report thereon contained therein, and related
notes, are incorporated herein by reference.

B-57
<PAGE>

APPENDIX

DESCRIPTION OF STANDARD AND POOR'S, MOODY'S, FITCH IBCA
AND DUFF RATINGS

STANDARD & POOR'S ("S&P")

BOND RATINGS

AAA An obligation rated 'AAA' has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.

AA An obligation rated 'AA' differs from the highest rated issues only
in small degree. The obligors capacity to meet its financial
commitment on the obligation is very strong.

CC An obligation rated 'CC' is currently highly vulnerable to
nonpayment.

C The 'C' rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.

D An obligation rated 'D' is in payment default. The 'D' rating
category is used when payments on a obligation are not made on
the date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period. The 'D' rating also will be used upon the filing
of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.

The ratings from 'AA' to 'CCC' may be modified by the addition of a plus
(+) or a minus (-) sign to show relative standing within the major rating
categories

B-58
<PAGE>

NOTE RATINGS

SP-1 Strong capacity to pay principal and interest. An issue determined
to possess a very strong capacity to pay debt service is given a
plus (+) designation.

SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse finance and economic changes over the term
of the notes.

SP-3 Speculative capacity to pay principal and interest.

COMMERCIAL PAPER RATINGS

An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than 365 days.

A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issuers designated 'A-1.'

B Issues rated 'B' are regarded as having only speculative capacity
for timely payment.

C This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.

MOODY'S

BOND RATINGS

B-59
<PAGE>

While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Baa Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.

Caa Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect
to principal or interest.

Ca Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked short-comings.

C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.

B-60
<PAGE>

rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates a ranking in the lower end of a rating category.

NOTES AND OTHER SHORT-TERM OBLIGATIONS

MIG 1/
VMIG1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.

B-61
<PAGE>

MIG-2/
MIG2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.

MIG 3/
VMIG3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.

MIG 4/
VMIG4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.

COMMERCIAL PAPER RATING

Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated issuers:

. Leading market positions in well-established industries.
. High rates of return on funds employed.
. Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
. Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
. Well-established access to a range of financial markets
and assured sources of alternate liquidity.

Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations.
This will normally be evidenced by many of the characteristics
cited above but to a lesser agree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.

B-62
<PAGE>

may require relatively high financial leverage. Adequate alternative
liquidity is maintained.

FITCH IBCA

BOND RATINGS

B-63
<PAGE>

DDD, DD,
and D Default. Securities are not meeting current obligations and are
extremely speculative. 'DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For
U.S. corporates, for example, 'DD' indicates expected recovery of
50% - 90% of such outstandings, and 'D' the lowest recovery
potential, i.e. below 50%.

SHORT-TERM AND COMMERCIAL PAPER RATINGS

F-1+ Highest credit quality. Indicates the strongest capacity for timely
payment of financial commitments; may have an added "+" to denote
any exceptionally strong credit feature.

F-2 Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as
in the case of the higher ratings.

F-3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could
result in a reduction to non-investment grade.

B Speculative. Minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in
financial and economic conditions.

C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon a sustained,
favorable business and economic environment.

D Default. Denotes actual or imminent payment default.

B-64
<PAGE>

DUFF & PHELPS INC. ("DUFF & PHELPS")

LONG-TERM RATINGS

AAA Highest credit quality. The risks factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.

AA+ High credit quality. Protection factors are strong. Risk is
AA modest but may vary slightly from time to time because of economic
AA- conditions.

A+ Protections factors are average but adequate. However, risk
A factors are more variable and greater in periods of economic
A- stress.

BBB+ Below-average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.

B+ Below investment grade and possessing risk that obligations will
B not be met when due. Financial protection factors will
B- fluctuate widely according to economic cycles, industry
conditions and/or company fortunes. Potential exists for frequent
changes in the rating within this category or into a higher or lower
rating grade.

DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.

SHORT-TERM AND COMMERCIAL PAPER RATINGS

B-65
<PAGE>

D-1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.

D-1- High certainly of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.

D-3 Satisfactory liquidity and other protection factors qualify issues
as to investment grade. Risk factors are larger and subject to more
variation. Nevertheless, timely payment is expected.

D-4 Speculative investment characteristics. Liquidity is not sufficient
to insure against disruption in debt service. Operating factors
and market access may be subject to a high degree of variation.

D-5 Issuer failed to meet scheduled principal and/or interest payments.

B-66
<PAGE>

Dreyfus Premier Tax Managed Growth Fund

Investing in large-cap stocks for long-term capital appreciation while
minimizing taxable gains and income

PROSPECTUS March 1, 1999

(REGISTERED)

<PAGE>

The Fund

Dreyfus Premier Tax Managed Growth Fund
---------------------------------
Ticker Symbols CLASS A: DTMGX
CLASS B: DPTMY
CLASS C: DPTAX
CLASS T: N/A

Contents

The Fund
- --------------------------------------------------------------------------------

Goal/Approach INSIDE COVER

Main Risks 1

Past Performance 1

Expenses 2

Management 3

Financial Highlights 4

Your Investment
- --------------------------------------------------------------------------------

Account Policies 5

Distributions and Taxes 7

Services for Fund Investors 8

Instructions for Regular Accounts 9

Instructions for IRAs 10

For More Information
- --------------------------------------------------------------------------------

INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT. SEE BACK COVER.

GOAL/APPROACH-------------------------------------------------------------------

The fund seeks long-term capital appreciation consistent with minimizing
realized capital gains and taxable current income. This objective may be changed
without shareholder approval. To pursue its goal, the fund normally invests at
least 80% of its net assets in common stocks and employs a tax-managed strategy.
The fund focuses on "blue chip" companies with market capitalizations of more
than $5 billion.

In choosing stocks, the fund first identifies economic sectors that it believes
will expand over the next three to five years or longer. Using fundamental
analysis, the fund then seeks companies within these sectors that have
demonstrated sustained patterns of profitability, strong balance sheets, an
expanding global presence and the potential to achieve predictable,
above-average earnings growth. The fund is also alert to companies which it
considers undervalued in terms of current earnings, assets or growth prospects.

The fund attempts to enhance after tax returns by minimizing its annual taxable
distributions to shareholders. To do so, the fund employs a "buy and hold"
investment strategy and normally seeks to keep the annual portfolio turnover
rate below 15%. The fund also emphasizes investments in equities of high quality
companies, generally with relatively low yields. The fund may sell
underperforming securities to realize capital losses to offset capital gains and
invest in companies that use share-repurchase programs to return excess cash to
shareholders.

Concepts to understand

TAX-MANAGED STRATEGY: an approach to managing a fund that seeks to reduce
current tax liabilities. The fund seeks to minimize taxable distributions,
particularly short-term capital gains and current income, which are taxed at a
higher rate than long-term capital gains. For example, when selling securities,
the fund generally will select those shares bought at the highest price to
minimize capital gains. When this would produce short-term capital gains,
however, the fund may sell those highest-cost shares with a long-term holding
period.

INSIDE COVER

<PAGE>

MAIN RISKS
- --------------------

Because different types of stocks tend to shift in and out of favor depending on
market and economic conditions, the fund's performance may sometimes be lower or
higher than that of other types of funds (such as those emphasizing smaller
companies). Moreover, since the fund holds large positions in a relatively small
number of stocks, it can be volatile when the large-capitalization sector of the
market is out of favor with investors.

Growth companies are expected to increase their earnings at a certain rate. When
these expectations are not met, investors can punish the stocks inordinately --
even if earnings showed an absolute increase. In addition, growth stocks
typically lack the dividend yield that can cushion stock prices in market
downturns.

Other potential risks

The fund may invest up to 10% of its assets in foreign securities which involve
additional risks compared to U.S. securities. These include less liquidity,
political and economic instability a lack of adequate company information and
changes in currency exchange rates.

The fund may invest in derivatives write (i.e. sell) covered call option
contracts. These practices can be used to hedge the fund's portfolio and also to
increase returns. They may sometimes reduce returns or increase volatility.

PAST PERFORMANCE
- -------------------

The first table below shows the performance of the fund's Class A shares for
calendar year 1998. Sales loads are not reflected, if they were, returns would
be less than shown. The second table compares the performance of each of the
fund's share classes over time to that of the S&P 500(REGISTERED), a widely
recognized unmanaged index of stock performance. These returns reflect any
applicable sales loads. Both tables assume the reinvestment of dividends and
distributions. As with all mutual funds, the past is not a prediction of the
future.
- --------------------------------------------------------------------------------

Year-by-year total return AS OF 12/31 EACH YEAR (%)

BEST QUARTER: QX 'XX X.XX%

WORST QUARTER: QX 'XX X.XX%
- --------------------------------------------------------------------------------

Average annual total return AS OF 12/31/98

Inception date 1 Year Life of fund
- --------------------------------------------------------------------------------

CLASS A (11/4/97) X.XX% X.XX%

CLASS B (11/4/97) X.XX% X.XX%

CLASS C (11/4/97) X.XX% X.XX%

CLASS T (11/4/97) X.XX% X.XX%

S&P 500(REGISTERED) INDEX X.XX% X.XX%*

* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON XX/XX/XX IS USED AS THE
BEGINNING VALUE ON XX/XX/XX.

What this fund is -- and isn't

The Fund 1

<PAGE>

EXPENSES
- -------------------

As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the tables below.

Fee table
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>

CLASS A CLASS B CLASS C CLASS T
- ------------------------------------------------------------------------------------------------------------------------------------

SHAREHOLDER TRANSACTION FEES (FEES PAID FROM YOUR ACCOUNT)

Maximum sales charge on purchases

AS A % OF OFFERING PRICE 5.75 NONE NONE 4.50

Maximum deferred sales charge (CDSC)

AS A % OF PURCHASE OR SALE PRICE, WHICHEVER IS LESS NONE* 4.00 1.00 NONE*
- ------------------------------------------------------------------------------------------------------------------------------------

ANNUAL FUND OPERATING EXPENSES (EXPENSES PAID FROM FUND ASSETS)

% OF AVERAGE DAILY NET ASSETS

Management fees 1.10 1.10 1.10 1.10

12b-1 fee .25 1.00 1.00 .50

Other expenses .00 .00 .00 .00
- ------------------------------------------------------------------------------------------------------------------------------------

TOTAL 1.35 2.10 2.10 1.60
</TABLE>

* SHARES BOUGHT WITHOUT AN INITIAL SALES CHARGE AS PART OF AN INVESTMENT OF $1
MILLION OR MORE MAY BE CHARGED A CDSC OF 1.00% IF REDEEMED WITHIN ONE YEAR.

Expense example

1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------

CLASS A $000 $000 $000 $000

CLASS B
WITH REDEMPTIONS $000 $000 $000 $000**
WITHOUT REDEMPTIONS $000 $000 $000 $000**

CLASS C
WITH REDEMPTIONS $000 $000 $000 $000
WITHOUT REDEMPTIONS $000 $000 $000 $000

CLASS T $000 $000 $000 $000

** ASSUMES CONVERSION OF CLASS B TO CLASS A AT END OF THE SIXTH YEAR FOLLOWING
THE DATE OF PURCHASE.

This example shows what you could pay in expenses over time. It uses the same
hypothetical conditions other funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in expenses. Because actual
return and expenses will be different, the example is for comparison only.

Concepts to understand

<PAGE>

MANAGEMENT
- -------------------

The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, NY 10166. Founded in 1947, Dreyfus manages one of the nation's leading
mutual fund complexes, with more than $110 billion in more than 160 mutual fund
portfolios. Dreyfus is the mutual fund business of Mellon Bank Corporation, a
broad-based financial services company with a bank at its core. With more than
$325 billion of assets under management and $1.6 trillion of assets under
administration and custody, Mellon provides a full range of banking, investment
and trust products and services to individuals, businesses and institutions. Its
mutual fund companies place Mellon as the leading bank manager of mutual funds.
Mellon is headquartered in Pittsburgh, Pennsylvania.

Dreyfus has engaged Fayez Sarofim & Co., located at Two Houston Center, Suite
2907, Houston, Texas 77010, to serve as the fund's sub-investment adviser.
Sarofim, subject to Dreyfus' supervision and approval, provides investment
advisory assistance and research and the day-to-day management of the fund's
investments. As of June 30, 1998, Sarofim managed approximately $4.3 billion in
assets for 4 other registered investment companies and provided investment
advisory services to discretionary accounts having aggregate assets of
approximately $45.7 billion.

Management philosophy

Portfolio manager

Fayez Sarofim, president and chairman of Sarofim, is the fund's primary
portfolio manager. Mr. Sarofim founded Fayez Sarofim & Co. in 1958.

Concepts to understand

Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.

The Fund 3

<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------

PERIOD ENDED
OCTOBER 31,
CLASS A 1998(1)
- --------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period

Investment operations: Investment income (loss) -- net

Net realized and unrealized gain (loss) on investments

Total from investment operations

Net asset value, end of period

Total return (%)
- --------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%)

Ratio of net investment income (loss) to average net assets (%)

Portfolio turnover rate (%)
- --------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000)

(1)FOR THE PERIOD FROM NOVEMBER 4, 1997 THROUGH OCTOBER 31, 1998.

PERIOD ENDED
OCTOBER 31,
CLASS B 1998(1)
- --------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period

Investment operations: Investment income (loss) -- net

Net realized and unrealized gain (loss) on investments

Total from investment operations

Net asset value, end of period

Total return (%)
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%)

Ratio of net investment income (loss) to average net assets (%)

Portfolio turnover rate (%)
- --------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000)

(1)FOR THE PERIOD FROM NOVEMBER 4, 1997 THROUGH OCTOBER 31, 1998.

<PAGE>

PERIOD ENDED
OCTOBER 31,
CLASS C 1998(1)
- --------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period

Investment operations: Investment income (loss) -- net

Net realized and unrealized gain (loss) on investments

Total from investment operations

Net asset value, end of period

Total return (%)
- --------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%)

Ratio of net investment income (loss) to average net assets (%)

Portfolio turnover rate (%)
- --------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000)

(1)FOR THE PERIOD FROM NOVEMBER 4, 1997 THROUGH OCTOBER 31, 1998.

PERIOD ENDED
OCTOBER 31,
CLASS T 1998(1)
- --------------------------------------------------------------------------------

PER-SHARE DATA ($)

Net asset value, beginning of period

Investment operations: Investment income (loss) -- net

Net realized and unrealized gain (loss) on investments

Total from investment operations

Net asset value, end of period

Total return (%)
- --------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%)

Ratio of net investment income (loss) to average net assets (%)

Portfolio turnover rate (%)
- --------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000)

(1)FOR THE PERIOD FROM NOVEMBER 4, 1997 THROUGH OCTOBER 31, 1998.

The Fund 5

<PAGE>

YOUR INVESTMENT

ACCOUNT POLICIES
- -------------------

o Class A shares can be the most cost-effective choice, if you are investing
for the long term, especially if you are investing $50,000 or more.

o Class B shares can make sense if you have a long time horizon and are
investing less than $50,000.

o Class C shares may be appropriate if you have a shorter or less certain time
horizon and are investing less than $50,000.

o Class T shares have a lower front-end load and a higher Rule 12b-1 fee than
Class A shares.

Reduced Class A and Class T sales charge

LETTER OF INTENT: lets you purchase Class A and Class T shares over a 13-month
period and receive the same sales charge as if all shares had been purchased at
once.

RIGHT OF ACCUMULATION: lets you add the value of any Class A and Class T shares
you already own to the amount of your next Class A and Class T investment for
purposes of calculating the sales charge.

CONSULT THE STATEMENT OF ADDITIONAL INFORMATION (SAI) OR YOUR FINANCIAL
REPRESENTATIVE FOR MORE DETAILS.

Share class charges

EACH SHARE CLASS has its own fee structure. In some cases, you may not have to
pay a sales charge to buy or sell shares. Contact your financial representative
or refer to the SAI to see if this may apply to you. Because class A has lower
expenses than class T, if you invest $1 million or more in the fund you should
consider buying class A shares.
- --------------------------------------------------------------------------------

Sales charges

CLASS A AND CLASS T -- CHARGED WHEN YOU BUY SHARES

Sales charge Sales charge as
deducted as a % a % of your
Your investment of offering price net investment
- --------------------------------------------------------------------------------

Class Class Class Class
A T A T
- --------------------------------------------------------------------------------

Up to $49,999 5.75% 4.50% 6.10% 4.70%

$50,000 -- $99,999 4.50% 4.00% 4.70% 4.20%

$100,000 -- $249,999 3.50% 3.00% 3.60% 3.10%

$250,000 -- $499,999 2.50% 2.00% 2.60% 2.00%

$500,000 -- $999,999 2.00% 1.50% 2.00% 1.50%

$1 million or more* 0.00% 0.00% 0.00% 0.00%

* A 1.00% contingent deferred sales charge may be charged on any shares sold
within one year of purchase (except shares bought through reinvestment).

Class A shares carry an annual Rule 12b-1 fee of 0.25%, and Class T shares carry
an annual Rule 12b-1 fee of 0.50%, of the respective class's average daily net
assets.
- --------------------------------------------------------------------------------

CLASS B -- CHARGED WHEN YOU SELL SHARES

Up to 2 years 4.00%

2 -- 4 years 3.00%

4 -- 5 years 2.00%

5 -- 6 years 1.00%

More than 6 years Shares will automatically
convert to Class A

Class B shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.
- --------------------------------------------------------------------------------

CLASS C -- CHARGED WHEN YOU SELL SHARES

A 1.00% CDSC is imposed on redemptions made within the first year of purchase.
Class C shares also carry an annual Rule 12b-1 fee of 1.00% of the class's
average daily net assets.

<PAGE>

Buying shares

The net asset value (NAV) of each class is generally calculated as of the close
of trading on the New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern
time) every day the exchange is open. Your order will be priced at the NAV next
calculated after your order is accepted by the funds transfer agent or other
authorized entity to accept orders on the fund's behalf. The fund's investments
are valued based on market value, or, where market quotations are not readily
available, based on fair value as determined in good faith by the fund's board.

- --------------------------------------------------------------------------------

Minimum investments

Initial Additional
- --------------------------------------------------------------------------------

REGULAR ACCOUNTS $1,000 $100; $500 FOR
TELETRANSFER INVESTMENTS

TRADITIONAL IRAS $750 NO MINIMUM

SPOUSAL IRAS $750 NO MINIMUM

ROTH IRAS $750 NO MINIMUM

EDUCATION IRAS $500 NO MINIMUM
AFTER THE FIRST YEAR

DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS

All investments must be in U.S. dollars. Third-party checks cannot be accepted.
You may be charged a fee for any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.

Concepts to understand

NET ASSET VALUE (NAV): the market value of one share, computed by dividing the
total net assets of a fund or class by its shares outstanding. The fund's Class
A and T shares are offered to the public at NAV plus a sales charge. Classes B
and C are offered at NAV, but may be subject to higher annual operating fees and
a sales charge upon redemption.

Selling shares

YOU MAY SELL SHARES AT ANY TIME through your financial representative, or you
can contact the fund directly. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
authorized entity to accept orders on the fund's behalf. Any certificates
representing fund shares being sold must be returned with your redemption
request. Your order will be processed promptly and you will generally receive
the proceeds within a week.

Written sell orders

Some circumstances require written sell orders along with signature guarantees.
These include:

o amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days

o requests to send the proceeds to a different payee or address

Written sell orders of $100,000 or more must also be signature guaranteed.

Your Investment 7

<PAGE>

ACCOUNT POLICIES (CONTINUED)

General policies

IF YOUR ACCOUNT FALLS BELOW $500, the fund may ask you to increase your balance.
If it is still below $500 after 30 days, the fund may close your account and
send you the proceeds.

UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.

THE FUND RESERVES THE RIGHT TO:

o refuse any purchase or exchange request that could adversely affect the fund
or its operations, including those from any individual or group who, in the
fund's view, is likely to engage in excessive trading (usually defined as
more than four exchanges out of the fund within a calendar year)

o refuse any purchase or exchange request in excess of 1% of the fund's total
assets

o change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions

o change its minimum investment amounts

o delay sending out redemption proceeds for up to seven days (generally applies
only in cases of very large redemptions, excessive trading or during unusual
market conditions)

DISTRIBUTIONS AND TAXES
- -----------------------

- --------------------------------------------------------------------------------

Taxability of distributions

Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
- --------------------------------------------------------------------------------

INCOME ORDINARY ORDINARY
DIVIDENDS INCOME RATE INCOME RATE

SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE

LONG-TERM
CAPITAL GAINS 10% 20%

Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.

Taxes on transactions

The fund may not be suitable for individual retirement accounts (IRAs) and other
qualified retirement plans whose income is not subject to current federal tax.
At the same time, the fund is not a tax-exempt fund and may earn and distribute
taxable income and realize and distribute capital gains from time to time.

Except between tax-deferred accounts, any sale or exchange of fund shares may
generate a tax liability. Of course, withdrawals or distributions from
tax-deferred accounts are taxable when received.

The table above is a guide for potential tax liability when selling or
exchanging fund shares. "Short-term capital gains" applies to fund shares sold
up to 12 months after buying them. "Long-term capital gains" applies to shares
sold after 12 months.

<PAGE>

SERVICES FOR FUND INVESTORS
- ---------------------------

Automatic services

- --------------------------------------------------------------------------------

For investing

DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((REGISTERED)) from a designated bank account.

DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.

DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another
(not available for IRAs).
- --------------------------------------------------------------------------------

For exchanging shares

DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
- --------------------------------------------------------------------------------

For selling shares

DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds. There
will be no CDSC on Class B
shares, as long as the amounts
withdrawn do not exceed 12%
annually of the account value
at the time the shareholder
elects to participate in the
plan.

Exchange privilege

YOU CAN EXCHANGE SHARES WORTH $500 OR MORE (no minimum for retirement accounts)
from one class of the fund into the same class of another Dreyfus Premier fund.
You can also exchange Class T shares into Class A shares of other funds. You can
request your exchange by contacting your financial representative. Be sure to
read the current prospectus for any fund into which you are exchanging before
investing. Any new account established through an exchange will generally have
the same privileges as your original account (as long as they are available).
There is currently no fee for exchanges, although you may be charged a sales
load when exchanging into any fund that has a higher one.

TeleTransfer privilege

Reinvestment privilege

UPON WRITTEN REQUEST, YOU CAN REINVEST up to the number of Class A, B or T
shares you redeemed within 45 days of selling them at the current share price
without any sales charge. If you paid a CDSC, it will be credited back to your
account. This privilege may be used only once.