DREYFUS INVESTMENT GRADE BOND FUND INC, 497, 1999-11-30

DREYFUS INVESTMENT GRADE BOND FUND INC
497, 1999-11-30

Previous: MERRILL LYNCH CONN MUNI BD FD OF M L MULTI ST MUNI SER TR, 485BPOS, 1999-11-30

Next: BB&T MUTUAL FUNDS GROUP, NSAR-B, 1999-11-30

Dreyfus Investment Grade Bond Funds, Inc.

Dreyfus Short Term Income Fund

Dreyfus Intermediate Term Income Fund

Investing in fixed-income securities for high current income

PROSPECTUS December 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
- ------------------------------------------------------

1 Introduction

2 Goal/Approach

4 Main Risks

5 Past Performance

7 Expenses

9 Management

10 Financial Highlights

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

12 Account Policies

15 Distributions and Taxes

16 Services for Fund Investors

18 Instructions for Regular Accounts

20 Instructions for IRAs

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

Back Cover

Each fund's investment approach, risks, performance, expenses and related
information

Information for managing your fund account

Where to learn more about these and other Dreyfus funds

<PAGE>

The Funds

Dreyfus Short Term Income Fund
- -----------------------------

Ticker Symbol: DSTIX

Dreyfus Intermediate Term Income Fund
- -----------------------------

Ticker Symbol: DRITX

This combined prospectus has been prepared for your convenience so that you can
consider two investment choices in one document. Each fund is a separate entity
with a separate investment portfolio. The operations and results of one fund are
unrelated to those of the other fund.

Each fund seeks as high a level of current income as is consistent with the
preservation of capital. To pursue this goal, each fund invests primarily in a
broad range of investment grade debt securities of domestic and foreign issuers

The funds differ in their effective duration and average portfolio maturity,
which affect their level of income and degree of share price fluctuation.

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

What these funds are -- and aren't

These funds are mutual funds: pooled investments that are professionally managed
and give you the opportunity to participate in financial markets. They strive to
reach their stated goals, although as with all mutual funds, they cannot offer
guaranteed results.

An investment in these funds 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 these funds, but you also have the
potential to make money.

Introduction

Dreyfus Investment Grade Bond Funds, Inc.

GOAL/APPROACH

Dreyfus Short Term Income Fund

The fund seeks as high a level of current income as is consistent with the
preservation of capital. To pursue this goal, the fund invests at least 65% of
its net assets in investment grade fixed-income securities of U.S. and foreign
issuers or the unrated equivalent as determined by Dreyfus. These securities
include: U.S. government bonds and notes, corporate bonds, municipal bonds,
convertible securities, preferred stocks, asset-backed securities,
mortgage-related securities, and foreign bonds.

Typically, the fund's portfolio can be expected to have an average maturity and
an average effective duration of three years or less.

For additional yield, the fund may invest up to 35% of its net assets in
fixed-income securities rated below investment grade ("high yield" or "junk"
bonds) and as low as Caa/CCC by the agencies rating such securities or the
unrated equivalent as determined by Dreyfus.

The fund will focus primarily on U.S. securities, but may invest up to 30% of
total assets in fixed-income securities of foreign issuers, including those of
issuers in the emerging markets.

The fund is non-diversified, which means that a relatively high percentage of
the fund's assets may be invested in a limited number of issuers. Therefore, its
performance may be more sensitive to changes in the market value of a single
issuer or a group of issuers.

The portfolio manager buys and sells fixed-income securities based on credit
quality, financial outlook and yield potential. Fixed-income

Concepts to understand

INVESTMENT GRADE SECURITIES: independent rating organizations (like Moody's and
Standard & Poor's) analyze and evaluate an 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. Bonds
rated BBB or Baa and above are considered investment grade.

securities with deteriorating credit quality are potential sell candidates,
while those offering higher yields are potential buy candidates.

Dreyfus Intermediate Term Income Fund

Typically, the fund's portfolio can be expected to have an average maturity
ranging between five and ten years and an average effective duration ranging
between three and eight years.

The fund will focus primarily on U.S. securities, but may invest up to 30% of
total assets in fixed-income securities of foreign issuers, including those of
issuers in the emerging markets.

The portfolio manager buys and sells fixed-income securities based on credit
quality, financial outlook and yield potential. Fixed-income securities with
deteriorating credit quality are potential sell candidates, while those offering
higher yields are potential buy candidates.

Concepts to understand

DURATION: an indication of an investment's "interest rate risk," or how
sensitive a bond or mutual fund portfolio may be to changes in interest rates.
Generally speaking, the longer a fund's duration, the more it will react to
interest rate fluctuations and the greater its long-term risk/return potential.

AVERAGE MATURITY: an average of the stated maturities of the securities held by
the fund, based on their dollar-weighted proportions in the fund. In general,
the longer a fund's average portfolio maturity, the more its share price will
fluctuate in response to changing interest rates.

The Funds

MAIN RISKS

Prices of bonds tend to move inversely with changes in interest rates. While a
rise in rates may allow a 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 a fund could go up
and down, which means that you could lose money. To the extent Dreyfus
Intermediate Term Income Fund maintains a comparatively longer duration than
Dreyfus Short Term Income Fund, its share price will react more to interest rate
movements.

Each fund may invest to a limited extent in high yield bonds which involve
greater credit risk, including the risk of default, than investment grade bonds.
They tend to be more volatile in price and less liquid and are considered
speculative. The prices of high yield bonds can fall in response to bad news
about the issuer, the issuer's industry or the economy in general.

Other risk factors could have an effect on each fund's performance, including:

* if an issuer fails to make timely interest or principal payments, or there
is a decline in the credit quality of a bond, or perception of a decline,
the bond's value could fall, potentially lowering a fund's share price

* the price and yield of foreign debt securities could be affected by factors
ranging from political and economic instability to changes in currency
exchange rates

Under adverse market conditions, each fund could invest up to all of its assets
in money market securities, which could reduce the benefit from any upswing in
the market. During such period, a fund may not achieve its investment objective

Other potential risks

Each fund may, at times, invest in derivative securities, such as options and
futures, and in foreign currencies. 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. A small investment in certain derivatives
could have a potentially large impact on a fund's performance.

Each fund will engage in short-term trading, which could produce higher
brokerage costs and taxable distributions.

Each fund can buy securities with borrowed money (a form of leverage), which
could have the effect of magnifying a fund's gains or losses.

PAST PERFORMANCE

Dreyfus Short Term Income Fund

The tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's performance from year to year. The second
table compares the fund's performance over time to that of the Merrill Lynch 1-5
Year Government/Corporate Index, an unmanaged performance benchmark for
investment grade corporate securities and U.S. government securities in that
maturity range. Both tables assume reinvestment of dividends. Of course, past
performance is no guarantee of future results.
--------------------------------------------------------

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

9.15 0.11 11.19 6.16 8.23 4.29
89 90 91 92 93 94 95 96 97 98

BEST QUARTER: Q2 '95 +4.15%

WORST QUARTER: Q1 '94 -0.79%

THE FUND'S YEAR-TO-DATE TOTAL RETURN AS OF 9/30/99 WAS 4.87%.
--------------------------------------------------------

Average annual total return AS OF 12/31/98

<TABLE>
Since
inception

1 Year 5 Years (8/18/92)
--------------------------------------------------------------------------------------------

<S> <C> <C> <C>
FUND 4.29% 5.93% 6.21%

MERRILL LYNCH
1-5 YEAR
GOVERNMENT/
CORPORATE INDEX 7.68% 6.28% 6.22%

</TABLE>
The Funds

PAST PERFORMANCE (CONTINUED)

Dreyfus Intermediate Term Income Fund

The tables below show some of the risks of investing in the fund. The first
table shows the changes in the fund's performance from year to year. The second
table compares the fund's performance over time to that of the Merrill Lynch
Domestic Master Index, an unmanaged performance benchmark for U.S. government
securities and investment grade corporate securities with maturities greater
than or equal to one year. Both tables assume reinvestment of dividends. Of
course, past performance is no guarantee of future results.
--------------------------------------------------------

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

14.62 7.83
89 90 91 92 93 94 95 96 97 98

BEST QUARTER: Q3 '97 +5.40%

WORST QUARTER: Q3 '98 +0.50%

THE FUND'S YEAR-TO-DATE TOTAL RETURN AS OF 9/30/99 WAS
3.11%.
- --------------------------------------------------------

Average annual total return AS OF 12/31/98

Since
inception
1 Year (2/2/96)
- --------------------------------------------------------

FUND 7.83% 10.43%

MERRILL LYNCH
DOMESTIC MASTER
INDEX 8.87% 7.35%

EXPENSES

Dreyfus Short Term Income Fund

As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the following table. 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) or Rule 12b-1 distribution fees.
--------------------------------------------------------

Fee table

ANNUAL FUND OPERATING EXPENSES

% OF AVERAGE DAILY NET ASSETS

Management fees 0.50%

Shareholder services fee 0.20%

Other expenses 0.17%
-------------------------------------------------------

TOTAL 0.87%
--------------------------------------------------------

Expense example

<TABLE>

1 Year 3 Years 5 Years 10 Years

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

<S> <C> <C> <C>
$89 $278 $482 $1,073

</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. 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 Dreyfus for managing the fund's portfolio and
assisting in all aspects of the fund's operations.

SHAREHOLDER SERVICES FEE: a fee of up to 0.25% paid to the fund's distributor
for shareholder account service and maintenance.

OTHER EXPENSES: fees paid by the fund for miscellaneous items such as transfer
agency, custody, professional and registration fees.

The Funds

EXPENSES (CONTINUED)

Dreyfus Intermediate Term Income

Fee table

ANNUAL FUND OPERATING EXPENSES

% OF AVERAGE DAILY NET ASSETS

Management fees 0.55%

Shareholder services fee 0.25%

Other expenses 0.44%
-------------------------------------------------------

TOTAL 1.24%
--------------------------------------------------------

Expense example

<TABLE>

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

<S> <C> <C> <C>
$126 $393 $681 $1,500

Concepts to understand

MANAGEMENT FEE: the fee paid to Dreyfus for managing the fund's portfolio and
assisting in all aspects of the fund's operations.

For the fiscal year ended July 31, 1999, Dreyfus waived a portion of its fee so
that the effective management fee paid by the fund was 0.04%, reducing total
expenses from 1.24% to 0.73%. This waiver was voluntary.

SHAREHOLDER SERVICES FEE: a fee paid to the fund's distributor for shareholder
account service and maintenance.

OTHER EXPENSES: fees paid by the fund for miscellaneous items such as transfer
agency, custody, professional and registration fees.

MANAGEMENT

The investment adviser for each fund is The Dreyfus Corporation, 200 Park
Avenue, New York, New York 10166. Founded in 1947, Dreyfus manages more than
$118 billion in over 160 mutual fund portfolios. For the past fiscal year,
Dreyfus Short Term Income Fund and Dreyfus Intermediate Term Income Fund each
paid Dreyfus a management fee at the annual rate of 0.50% and 0.04%,
respectively, of the fund's average daily net assets. Dreyfus is the primary
mutual fund business of Mellon Financial Corporation, a global financial
services company with approximately $2.5 trillion in assets under management,
administration or custody, including approximately $450 billion under
management. Mellon provides wealth management, global investment services and a
comprehensive array of banking services for individuals, businesses and
institutions. Mellon is headquartered in Pittsburgh, Pennsylvania.

The Dreyfus taxable fixed income team makes investment decisions for the fund.
No individual team member is primarily responsible for making these investment
decisions. The portfolio managers comprising the team are identified in the
Statement of Additional Information.

Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.

Concepts to understand

YEAR 2000 ISSUES: these 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 a 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 share price.

FINANCIAL HIGHLIGHTS

The following tables describe each fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in a fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been independently audited by
Ernst & Young LLP, whose report for each fund, along with each fund's financial
statements, is included in the annual report.

<TABLE>

Dreyfus Short Term Income Fund

YEAR ENDED JULY 31,

1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 12.12 12.03 11.86 11.89 11.94

Investment operations:

Investment income -- net .76 .84 .86 .78 .85

Net realized and unrealized
gain (loss) on investments (.47) .08 .17 (.04) (.05)

Total from investment operations .29 .92 1.03 .74 .80

Distributions:

Dividends from investment
income -- net (.78) (.83) (.86) (.77) (.85)

Net asset value, end of period 11.63 12.12 12.03 11.86 11.89

Total return (%) 2.52 7.92 8.95 6.42 7.05
- ------------------------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses
to average net assets (%) .87 .87 .80 .80 .61

Ratio of interest expense
to average net assets (%) .00* .02 .02 -- --

Ratio of net investment income
to average net assets (%) 6.54 7.01 7.28 6.52 7.26

Decrease reflected in above expense ratios
due to actions by Dreyfus (%) -- .00* .11 .14 .34

Portfolio turnover rate (%) 204.98 185.77 292.99 291.35 511.62
- ------------------------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 358,444 358,726 279,142 189,693 210,524

* AMOUNT REPRESENTS LESS THAN .01%.

</TABLE>

<TABLE>

Dreyfus Intermediate Term Income Fund

YEAR ENDED JULY 31,

1999 1998 1997 1996(1)
- ------------------------------------------------------------------------------------------------------------------------------------

PER-SHARE DATA ($)

<S> <C> <C> <C> <C>
Net asset value, beginning of period 13.38 13.23 12.22 12.50

Investment operations:

Investment income -- net .87 .91 .95 .46

Net realized and unrealized
gain (loss) on investments (.36) .47 1.01 (.28)

Total from investment operations .51 1.38 1.96 .18

Distributions:

Dividends from investment income -- net (.88) (.89) (.95) (.46)

Dividends from net realized gain on investments (.58) (.34) -- --

Total distributions (1.46) (1.23) (.95) (.46)

Net asset value, end of period 12.43 13.38 13.23 12.22

Total return (%) 4.18 10.93 16.70 3.05(2)
- ------------------------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA

Ratio of expenses to average net assets (%) .65 .80 .52 --

Ratio of interest expense to average net assets (%) .08 .34 .06 --

Ratio of net investment income
to average net assets (%) 6.79 6.81 7.45 7.70(2)

Decrease reflected in above expense ratios
due to actions by Dreyfus (%) .51 .49 .98 2.50(2)

Portfolio turnover rate (%) 166.80 170.52 321.59 139.38(3)
- ------------------------------------------------------------------------------------------------------------------------------------

Net assets, end of period ($ x 1,000) 37,831 22,977 21,944 9,756

(1) FROM FEBRUARY 2, 1996 (COMMENCEMENT OF OPERATIONS) TO JULY 31, 1996.

(2) ANNUALIZED. (3) NOT ANNUALIZED.
</TABLE>

The Funds

Your Investment

ACCOUNT POLICIES

Buying shares

YOU PAY NO SALES CHARGES to invest in these funds. Your price for fund shares is
the 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
authorized entity. The funds' investments are valued generally by using
available market quotations or at fair value, which may be determined by one or
more pricing services approved by each 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): 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.

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.

Selling shares

YOU MAY SELL (REDEEM) 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 authorized entity. 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:

* 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.

Your Investment

ACCOUNT POLICIES (CONTINUED)

General policies

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:

* refuse any purchase or exchange request
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)

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).

Small account policies

To offset the relatively higher costs of servicing smaller accounts, each fund
charges regular accounts with balances below $2,000 an annual fee of $12. The
fee will be imposed during the fourth quarter of each calendar year.

The fee will be waived for: any investor whose aggregate Dreyfus mutual fund
investments total at least $25,000; IRA accounts; accounts participating in
automatic investment programs; and accounts opened through a financial
institution.

If your account falls below $500, your 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.

DISTRIBUTIONS AND TAXES

EACH FUND USUALLY PAYS ITS SHAREHOLDERS dividends from its net investment income
once a month, and distributes any net capital gains it has realized once a year.
Your dividends and distributions will be reinvested in your 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 federally 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

Any sale or exchange of fund shares, including through the checkwriting
privilege, may generate a tax liability.

The table at right also 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

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.

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.

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 SHARES worth $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.

24-hour automated account access

YOU CAN EASILY MANAGE YOUR DREYFUS ACCOUNTS, check your account balances,
transfer money between your Dreyfus funds, get price and yield information and
much more -- when it's convenient for you.

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

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 The Bank of New York, with these instructions:

* ABA# 021000018

* Dreyfus Short Term Income Fund
DDA# 8900117028

* Dreyfus Intermediate Term Income Fund
DDA# 8900275944

* 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 The Bank of New York, with these
instructions:

* ABA# 021000018

* Dreyfus Short Term Income Fund
DDA# 8900117028

* Dreyfus Intermediate Term Income Fund
DDA# 8900275944

* your account number

* name(s) of investor(s)

ELECTRONIC CHECK Same as wire, but insert "1111" before your account number.

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.

WITHOUT ANY INITIAL INVESTMENT Check the Dreyfus Step Program option on your
application. Return your application, then complete the additional materials
when they are sent to you.

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.

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

* 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

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 The Bank of New York, with these
instructions:

* ABA# 021000018

* Dreyfus Short Term Income Fund
DDA# 8900117028

* Dreyfus Intermediate Term Income Fund
DDA# 8900275944

* your account number

* name of investor

* the contribution year

ELECTRONIC CHECK Same as wire, but insert "1111" before your account number.

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 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.

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 COMPANY, 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

For More Information

Dreyfus Short Term Income Fund
Dreyfus Intermediate Term Income Fund
----------------------------

SEC file number: 811-6718

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>
- ------------------------------------------------------------------------------

DREYFUS INVESTMENT GRADE BOND FUNDS, INC.

DREYFUS SHORT TERM INCOME FUND
DREYFUS INTERMEDIATE TERM INCOME FUND

STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 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
series named above (each, a "Fund" and, collectively, the "Funds") of Dreyfus
Investment Grade Bond Funds, Inc. (the "Company"), dated December 1, 1999, as it
may be revised from time to time. To obtain a copy of the Funds' Prospectus,
please write to the Company 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

The Funds' most recent Annual Reports and Semi-Annual Reports to
Shareholders are separate documents supplied with this Statement of Additional
Information, and the financial statements, accompanying notes and report of
independent auditors appearing in the Annual Reports are incorporated by
reference into this Statement of Additional Information.

TABLE OF CONTENTS

Page

Description of the Company and Funds......................................B-2
Management of the Company.................................................B-23
Management Arrangements...................................................B-29
How to Buy Shares.........................................................B-32
Shareholder Services Plan.................................................B-34
How to Redeem Shares......................................................B-35
Shareholder Services......................................................B-37
Determination of Net Asset Value..........................................B-41
Dividends, Distributions and Taxes........................................B-42
Portfolio Transactions....................................................B-45
Performance Information...................................................B-46
Information about the Company and Funds...................................B-47
Counsel and Independent Auditors..........................................B-49
Appendix..................................................................B-50

DESCRIPTION OF THE COMPANY AND FUNDS

The Company is a Maryland corporation that was organized on June 26, 1992.
The Company is an open-end management investment company, known as a mutual
fund. Dreyfus Intermediate Term Income Fund is a diversified fund, which means
that, with respect to 75% of the Fund's total assets, the Fund will not invest
more than 5% of its assets in the securities of any single issuer. Dreyfus Short
Term Income Fund is a non-diversified fund, which means that the proportion of
the Fund's assets that may be invested in the securities of a single issuer is
not limited by the Investment Company Act of 1940, as amended (the "1940 Act").

The Dreyfus Corporation (the "Manager") serves as each Fund's investment
adviser.

Premier Mutual Fund Services, Inc. (the "Distributor") is the distributor
of each Fund's shares.

Certain Portfolio Securities

Municipal Obligations. (All Funds) Municipal obligations are debt
obligations issued by 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, the interest from
which, in the opinion of bond counsel to the issuer, is exempt from Federal
income tax. Municipal obligations generally include debt obligations issued to
obtain funds for various public purposes as well as certain industrial
development bonds issued by or on behalf of public authorities. Municipal
obligations are classified as general obligation bonds, revenue bonds and notes.
General obligation bonds are secured by the issuer's pledge of its faith, credit
and taxing power for the payment of principal and interest. Revenue bonds are
payable from the revenue derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source, but not from the general taxing power. Industrial
development bonds, in most cases, are revenue bonds that do not carry the pledge
of the credit of the issuing municipality, but generally are guaranteed by the
corporate entity on whose behalf they are issued. Notes are short-term
instruments which are obligations of the issuing municipalities or agencies and
are sold in anticipation of a bond sale, collection of taxes or receipt of other
revenues. Municipal obligations include municipal lease/purchase agreements
which are similar to installment purchase contracts for property or equipment
issued by municipalities. Municipal obligations bear fixed, floating or variable
rates of interest. Certain municipal obligations are subject to redemption at a
date earlier than their stated maturity pursuant to call options, which may be
separated from the related municipal obligation and purchased and sold
separately. Each Fund also may acquire call options on specific municipal
obligations. A Fund generally would purchase these call options to protect the
Fund from the issuer of the related municipal obligation redeeming, or other
holder of the call option from calling away, the municipal obligation before
maturity.

While, in general, municipal obligations are tax exempt securities having
relatively low yields as compared to taxable, non-municipal obligations of
similar quality, certain municipal obligations are taxable obligations, offering
yields comparable to, and in some cases greater than, the yields available on
other permissible Fund investments. Dividends received by shareholders on Fund
shares which are attributable to interest income received by the Fund from
municipal obligations generally will be subject to Federal income tax. Each Fund
may invest in municipal obligations, the ratings of which correspond with the
ratings of other permissible Fund investments. Each Fund currently intends to
invest no more than 25% of its assets in municipal obligations. However, this
percentage may be varied from time to time without shareholder approval.

Mortgage-Related Securities. (All Funds) Mortgage-related securities are a
form of derivative collateralized by pools of commercial or residential
mortgages. Pools of mortgage loans are assembled as securities for sale to
investors by various governmental, government-related and private organizations.
These securities may include complex instruments such as collateralized mortgage
obligations and stripped mortgage-backed securities, mortgage pass-through
securities, interests in real estate mortgage investment conduits ("REMICs"),
adjustable rate mortgages, real estate investment trusts ("REITs"), including
debt and preferred stock issued by REITS, as well as other real estate-related
securities.

Residential Mortgage-Related Securities-Each Fund may invest in mortgage-related
securities representing participation interests in pools of one- to four-family
residential mortgage loans issued or guaranteed by governmental agencies or
instrumentalities, such as the Government National Mortgage Association
("GNMA"), the Federal National Mortgage Association ("FNMA") and the Federal
Home Loan Mortgage Corporation ("FHLMC"), or issued by private entities.
Residential mortgage-related securities may be issued using a variety of
structures, including multi-class structures featuring senior and subordinated
classes.

Mortgage-related securities issued by GNMA include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee is
backed by the full faith and credit of the United States. GNMA certificates also
are supported by the authority of GNMA to borrow funds from the U.S. Treasury to
make payments under its guarantee. Mortgage-related securities issued by FNMA
include FNMA Guaranteed Mortgage Pass-Through Certificates (also known as
"Fannie Maes") which are solely the obligations of FNMA and are not backed by or
entitled to the full faith and credit of the United States. Fannie Maes are
guaranteed as to timely payment of principal and interest by FNMA.
Mortgage-related securities issued by FHLMC include FHLMC Mortgage Participation
Certificates (also known as "Freddie Macs" or "PCs"). Freddie Macs are not
guaranteed by the United States or by any Federal Home Loan Bank and do not
constitute a debt or obligation of the United States or of any Federal Home Loan
Bank. 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. When FHLMC
does not guarantee 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.

Commercial Mortgage-Related Securities-Commercial mortgage-related securities
generally are multi-class debt or pass-through certificates secured by mortgage
loans on commercial properties. These mortgage-related securities generally are
structured to provide protection to the senior class investors against potential
losses on the underlying mortgage loans. This protection generally is provided
by having the holders of subordinated classes of securities ("Subordinated
Securities") take the first loss if there are defaults on the underlying
commercial mortgage loans. Other protection, which may benefit all of the
classes or particular classes, may include issuer guarantees, reserve funds,
additional Subordinated Securities, cross-collateralization and
over-collateralization.

Subordinated Securities-Each Fund may invest in Subordinated Securities issued
or sponsored by commercial banks, savings and loan institutions, mortgage
bankers, private mortgage insurance companies and other non-governmental
issuers. Subordinated Securities have no governmental guarantee, and are
subordinated in some manner as to the payment of principal and/or interest to
the holders of more senior mortgage-related securities arising out of the same
pool of mortgages. The holders of Subordinated Securities typically are
compensated with a higher stated yield than are the holders of more senior
mortgage-related securities. On the other hand, Subordinated Securities
typically subject the holder to greater risk than senior mortgage-related
securities and tend to be rated in a lower rating category, and frequently a
substantially lower rating category, than the senior mortgage-related securities
issued in respect of the same pool of mortgages. Subordinated Securities
generally are likely to be more sensitive to changes in prepayment and interest
rates and the market for such securities may be less liquid than is the case for
traditional fixed-income securities and senior mortgage-related securities.

Collateralized Mortgage Obligations ("CMOs") and Multi-Class
Pass-Through-Securities-A CMO is a multiclass bond backed by a pool of mortgage
pass-through certificates or mortgage loans. CMOs may be collateralized by (a)
Ginnie Mae, Fannie Mae, or Freddie Mac pass-through certificates, (b)
unsecuritized mortgage loans insured by the Federal Housing Administration or
guaranteed by the Department of Veterans' Affairs, (c) unsecuritized
conventional mortgages, (d) other mortgage-related securities, or (e) any
combination thereof.

Each class of CMOs, often referred to as a "tranche," is issued at a
specific coupon rate and has a stated maturity or final distribution date.
Principal prepayments on collateral underlying a CMO may cause it to be retired
substantially earlier than the stated maturities or final distribution dates.
The principal and interest on the underlying mortgages may be allocated among
the several classes of a series of a CMO in many ways. One or more tranches of a
CMO may have coupon rates which reset periodically at a specified increment over
an index, such as the London Interbank Offered Rate ("LIBOR") (or sometimes more
than one index). These floating rate CMOs typically are issued with lifetime
caps on the coupon rate thereon. The Fund also may invest in inverse floating
rate CMOs. Inverse floating rate CMOs constitute a tranche of a CMO with a
coupon rate that moves in the reverse direction to an applicable index such as
LIBOR. Accordingly, the coupon rate thereon will increase as interest rates
decrease. Inverse floating rate CMOs are typically more volatile than fixed or
floating rate tranches of CMOs.

Many inverse floating rate CMOs have coupons that move inversely to a
multiple of the applicable indexes. The effect of the coupon varying inversely
to a multiple of an applicable index creates a leverage factor. Inverse floaters
based on multiples of a stated index are designed to be highly sensitive to
changes in interest rates and can subject the holders thereof to extreme
reductions of yield and loss of principal. The markets for inverse floating rate
CMOs with highly leveraged characteristics at times may be very thin. The Fund's
ability to dispose of its positions in such securities will depend on the degree
of liquidity in the markets for such securities. It is impossible to predict the
amount of trading interest that may exist in such securities, and, therefore,
the future degree of liquidity.

Stripped Mortgage-Backed Securities-Each Fund may invest in stripped
mortgage-backed securities, which are created by segregating the cash flows from
underlying mortgage loans or mortgage securities to create two or more new
securities, each with a specified percentage of the underlying securities'
principal or interest payments. Mortgage securities may be partially stripped so
that each investor class receives some interest and some principal. When
securities are completely stripped, however, all of the interest is distributed
to holders of one type of security, known as an interest-only security, or IO,
and all of the principal is distributed to holders of another type of security
known as a principal-only security, or PO. Strips can be created in a
pass-through structure or as tranches of a CMO. The yields to maturity on IOs
and POs are very sensitive to the rate of principal payments (including
prepayments) on the related underlying mortgage assets. If the underlying
mortgage assets experience greater than anticipated prepayments of principal,
the Fund may not fully recoup its initial investment in IOs. Conversely, if the
underlying mortgage assets experience less than anticipated prepayments of
principal, the yield on POs could be materially and adversely affected.

Real Estate Investment Trusts-A REIT is a corporation, or a business trust that
would otherwise be taxed as a corporation, which meets the definitional
requirements of the Internal Revenue Code of 1986, as amended (the "Code"). The
Code permits a qualifying REIT to deduct dividends paid, thereby effectively
eliminating corporate level Federal income tax and making the REIT a
pass-through vehicle for Federal income tax purposes. To meet the definitional
requirements of the Code, a REIT must, among other things, invest substantially
all of its assets in interests in real estate (including mortgages and other
REITs) or cash and government securities, derive most of its income from rents
from real property or interest on loans secured by mortgages on real property,
and distribute to shareholders annually a substantial portion of its otherwise
taxable income.

REITs are characterized as equity REITs, mortgage REITs and hybrid REITs.
Equity REITs, which may include operating or finance companies, own real estate
directly and the value of, and income earned by, the REITs depend upon the
income of the underlying properties and the rental income they earn. Equity
REITs also can realize capital gains (or losses) by selling properties that have
appreciated (or depreciated) in value. Mortgage REITs can make construction,
development or long-term mortgage loans and are sensitive to the credit quality
of the borrower. Mortgage REITs derive their income from interest payments on
such loans. Hybrid REITs combine the characteristics of both equity and mortgage
REITs, generally by holding both ownership interests and mortgage interests in
real estate. The value of securities issued by REITs are affected by tax and
regulatory requirements and by perceptions of management skill. They also are
subject to heavy cash flow dependency, defaults by borrowers or tenants,
self-liquidation and the possibility of failing to qualify for tax-free status
under the Code or to maintain exemption from the 1940 Act.

Private Entity Securities-These mortgage-related securities are issued by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other nongovernmental issuers. Timely payment
of principal and interest on mortgage-related securities backed by pools created
by non-governmental issuers often is supported partially by various forms of
insurance or guarantees, including individual loan, title, pool and hazard
insurance. The insurance and guarantees are issued by government entities,
private insurers and the mortgage poolers. There can be no assurance that the
private insurers or mortgage poolers can meet their obligations under the
policies, so that if the issuers default on their obligations the holders of the
security could sustain a loss. No insurance or guarantee covers the Fund or the
price of the Fund's shares. Mortgage-related securities issued by
non-governmental issuers generally offer a higher rate of interest than
government-agency and government-related securities because there are no direct
or indirect government guarantees of payment.

Other Mortgage-Related Securities-Other mortgage-related securities include
securities other than those described above that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
on real property, including CMO residuals. Other mortgage-related securities may
be equity or debt securities issued by agencies or instrumentalities of the U.S.
Government or by private originators of, or investors in, mortgage loans,
including savings and loan associations, homebuilders, mortgage banks,
commercial banks, investment banks, partnerships, trusts and special purpose
entities of the foregoing.

Asset-Backed Securities. (All Funds) Asset-backed securities are a form of
derivative. The securitization techniques used for asset-backed securities are
similar to those used for mortgage-related securities. These securities include
debt securities and securities with debt-like characteristics. The collateral
for these securities has included home equity loans, automobile and credit card
receivables, boat loans, computer leases, airplane leases, mobile home loans,
recreational vehicle loans and hospital account receivables. Each Fund may
invest in these and other types of asset-backed securities that may be developed
in the future.

Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities may provide a Fund with
a less effective security interest in the related collateral than do
mortgage-backed securities. Therefore, there is the possibility that recoveries
on the underlying collateral may not, in some cases, be available to support
payments on these securities.

Lower Rated Securities. (All Funds) Each Fund is permitted to invest up to
35% of its assets in higher yielding (and therefore higher risk) debt
securities, such as those rated Ba by Moody's Investors Service, Inc.
("Moody's") or BB by Standard & Poor's Ratings Group ("S&P"), Fitch IBCA, Inc.
("Fitch") or Duff & Phelps Credit Rating Co. ("Duff," and with Moody's, S&P and
Fitch, the "Rating Agencies") and as low as Caa by Moody's or CCC by S&P, Fitch
or Duff. Securities rated Ba by Moody's are judged to have speculative elements;
their future cannot be considered as well assured and often the protection of
interest and principal payments may be very moderate. Securities rated BB by
S&P, Fitch or Duff are regarded as having predominantly speculative
characteristics and, while such obligations have less near-term vulnerability to
default than other speculative grade debt, they face major ongoing uncertainties
or exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
Securities rated Caa by Moody's are of poor standing and may be in default or
there may be present elements of danger with respect to principal or interest.
S&P, Fitch and Duff typically assign a CCC rating to debt which has a current
identifiable vulnerability to default and is dependent upon favorable business,
financial and economic conditions to meet timely payments of interest and
repayment of principal. Such securities, though high yielding, are characterized
by great risk. See "Appendix" for a general description of securities ratings.

The ratings of Moody's, S&P, Fitch and Duff represent their opinions as to
the quality of the obligations which they undertake to rate. Ratings are
relative and subjective and, although ratings may be useful in evaluating the
safety or interest and principal payments, they do not evaluate the market value
risk of such obligations. Although these ratings may be an initial criterion for
selection of portfolio investments, the Manager also will evaluate these
securities and the ability of the issuers of such securities to pay interest and
principal. A Fund's ability to achieve its investment objective may be more
dependent on the Manager's credit analysis than might be the case for a fund
that invested in higher rated securities.

The average distribution of investments of the Funds in corporate bonds
(excluding convertible bonds, in the case of Dreyfus Short Term Income Fund, and
preferred stock, convertible preferred stock and convertible bonds, in the case
of Dreyfus Intermediate Term Income Fund) by ratings for the fiscal year ended
July 31, 1999, calculated monthly on a dollar-weighted basis, was as follows:
<TABLE>

Percentage

Dreyfus Dreyfus
Short Term Intermediate
Income Fund Term Income

Fund

Moody's or S&P, Fitch or Duff

<S> <C> <C> <C>
Aaa AAA 32.2% 29.4%
Aa AA .5% 3.3%
A A 10.4% 10.5%
Baa BBB 31.1% 26.3%
Ba BB 15.5% 11.9%
B B 2.5% 5.9%
Caa CCC .7% N/A
Ca CC .4% 1.0%
NR NR 2.4%* 5.2%***
----- -------
95.7%** 93.5%****
======= =========

* The Manager has determined these unrated securities to be of comparable
quality to securities rated in the following categories: Baa/BBB .1%,
Ba/BB .3%, B 1.9%, and Caa/CCC .1%.

** The Fund also owns convertible preferred stocks rated Aaa/AAA .7%, Baa/BBB
.1%, Ba/BBB .1% and Caa/CCC 2.2% and convertible bonds rated Baa/BBB .5%,
Ba/BB .3% and B 2.0%. Approximately (1.6%) of the Fund's assets were
invested in cash or cash equivalents.

*** The Manager has determined these unrated securities to be of comparable
quality to securities rated in the following categories: Baa/BBB 2.1%,
Ba/BB .8% and B 2.3%.

**** The Fund also owns equity securities .6%, convertible preferred stocks
rated Baa/BBB .2%, Ba/BB 1.0% and Caa/CCC 5.4% and convertible bonds rated
Baa/BBB .2% and B .7%. Approximately (1.6%) of the Fund's assets were
invested in cash or cash equivalents.

The actual distribution of each Fund's corporate bond investments by
ratings on any given date will vary, and the distribution of the Fund's
investments by ratings as set forth above should not be considered as
representative of a Fund's future portfolio composition.
</TABLE>

Foreign Government Obligations; Securities of Supranational Entities. (All
Funds) A Fund may invest in obligations issued or guaranteed by one or more
foreign governments or any of their political subdivisions, agencies or
instrumentalities that are determined by the Manager to be of comparable quality
to the other obligations in which the Fund may invest. Such securities also
include debt obligations of supranational entities. Supranational entities
include international organizations designated or supported by governmental
entities to promote economic reconstruction or development and international
banking institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the World Bank), the
European Coal and Steel Community, the Asian Development Bank and the
InterAmerican Development Bank.

Convertible Securities. (All Funds) Convertible securities may be
converted at either a stated price or stated rate into underlying shares of
common stock. Convertible securities have characteristics similar to both
fixed-income and equity securities. Convertible securities generally are
subordinated to other similar but non-convertible securities of the same issuer,
although convertible bonds, as corporate debt obligations, enjoy seniority in
right of payment to all equity securities, and convertible preferred stock is
senior to common stock of the same issuer. Because of the subordination feature,
however, convertible securities typically have lower ratings than similar
non-convertible securities.

Although to a lesser extent than with fixed-income securities, the market
value of convertible securities tends to decline as interest rates increase and,
conversely, tends to increase as interest rates decline. In addition, because of
the conversion feature, the market value of convertible securities tends to vary
with fluctuations in the market value of the underlying common stock. A unique
feature of convertible securities is that as the market price of the underlying
common stock declines, convertible securities tend to trade increasingly on a
yield basis, and so may not experience market value declines to the same extent
as the underlying common stock. When the market price of the underlying common
stock increases, the prices of the convertible securities tend to rise as a
reflection of the value of the underlying common stock. While no securities
investments are without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same issuer.

Convertible securities are investments that provide for a stable stream of
income with generally higher yields than common stocks. There can be no
assurance of current income because the issuers of the convertible securities
may default on their obligations. A convertible security, in addition to
providing fixed income, offers the potential for capital appreciation through
the conversion feature, which enables the holder to benefit from increases in
the market price of the underlying common stock. There can be no assurance of
capital appreciation, however, because securities prices fluctuate. Convertible
securities, however, generally offer lower interest or dividend yields than
non-convertible securities of similar quality because of the potential for
capital appreciation.

Each Fund may invest in convertible preferred stocks that offer enhanced
yield features, such as PERCS (Preferred Equity Redemption Cumulative Stock).
PERCS are preferred stock which generally feature a mandatory conversion date,
as well as a capital appreciation limit that is usually expressed in terms of a
stated price. Each Fund also may invest in other classes of enhanced convertible
securities, such as ACES (Automatically Convertible Equity Securities), PEPS
(Participating Equity Preferred Stock), PRIDES (Preferred Redeemable Increased
Dividend Equity Securities), SAILS (Stock Appreciation Income Linked
Securities), TECONS (Term Convertible Notes), QICS (Quarterly Income Cumulative
Securities) and DECS (Dividend Enhanced Convertible Securities). These
securities are company-issued convertible preferred stock. Unlike PERCS, they do
not have a capital appreciation limit. They are designed to provide the investor
with high current income with some prospect of future capital appreciation,
issued with three- or four-year maturities, and typically have some built-in
call protection. Investors have the right to convert them into shares of common
stock at a preset conversion ratio or hold them until maturity. Upon maturity
they will convert mandatorily into either cash or a specified number of shares
of common stock.

Warrants. (All Funds) 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. Each
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.

Zero Coupon Securities. (All Funds) Each Fund may invest in zero coupon
U.S. Treasury securities, which are Treasury Notes and Bonds 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. Receipts include Treasury Receipts ("TRs"), Treasury
Investment Growth Receipts ("TIGRs"), Liquid Yield Option Notes ("LYONs"), and
Certificates of Accrual on Treasury Securities ("CATS"). TIGRs, LYONs and CATS
are interests in private proprietary accounts, while TRs are interests in
accounts sponsored by the U.S. Treasury.

Illiquid Securities. (All Funds) Each Fund may invest up to 15% of the
value of its net assets in securities as to which a liquid trading market does
not exist, provided such investments are consistent with the Fund's investment
objective. These securities may include securities that are not readily
marketable, such as securities that are subject to legal or contractual
restrictions on resale, repurchase agreements providing for settlement in more
than seven days after notice, and certain privately negotiated, non-exchange
traded options and securities used to cover such options. As to these
securities, the Fund is subject to a risk that should the Fund desire to sell
them when a ready buyer is not available at a price the Fund deems
representative of their value, the value of the Fund's net assets could be
adversely affected.

Money Market Instruments. (All Funds) When the Manager determines that
adverse market conditions exist, a Fund may adopt a temporary defensive position
and invest up to 100% of its assets in money market instruments, including U.S.
Government securities, repurchase agreements, bank obligations and commercial
paper. A Fund also may purchase money market instruments when it has cash
reserves or in anticipation of taking a market position.

Investment Techniques

The following information supplements and should be read in conjunction
with the Funds' Prospectus.

Duration. (All Funds) As a measure of a fixed-income security's cash flow,
duration is an alternative to the concept of "term to maturity" in assessing the
price volatility associated with changes in interest rates. Generally, the
longer the duration, the more volatility an investor should expect. For example,
the market price of a bond with a duration of three years would be expected to
decline 3% if interest rates rose 1%. Conversely, the market price of the same
bond would be expected to increase 3% if interest rates fell 1%. The market
price of a bond with a duration of six years would be expected to increase or
decline twice as much as the market price of a bond with a three-year duration.
Duration is a way of measuring a security's maturity in terms of the average
time required to receive the present value of all interest and principal
payments as opposed to its term to maturity. The maturity of a security measures
only the time until final payment is due; it does not take account of the
pattern of a security's cash flows over time, which would include how cash flow
is affected by prepayments and by changes in interest rates. Incorporating a
security's yield, coupon interest payments, final maturity and option features
into one measure, duration is computed by determining the weighted average
maturity of a bond's cash flows, where the present values of the cash flows
serve as weights. In computing the duration of a Fund, the Manager will estimate
the duration of obligations that are subject to features such as prepayment or
redemption by the issuer, put options retained by the investor or other imbedded
options, taking into account the influence of interest rates on prepayments and
coupon flows.

Portfolio Maturity. (All Funds) Under normal market conditions, the
average effective portfolio maturity is expected to be three years or less for
Dreyfus Short Term Income Fund and to range between five and ten years for
Dreyfus Intermediate Term Income Fund. For purposes of calculating average
effective portfolio maturity, a security that is subject to redemption at the
option of the issuer on a particular date (the "call date") which is prior to
the security's stated maturity may be deemed to mature on the call date rather
than on its stated maturity date. The call date of a security will be used to
calculate average effective portfolio maturity when the Manager reasonably
anticipates, based upon information available to it, that the issuer will
exercise its right to redeem the security. The Manager may base its conclusion
on such factors as the interest rate paid on the security compared to prevailing
market rates, the amount of cash available to the issuer of the security, events
affecting the issuer of the security, and other factors that may compel or make
it advantageous for the issuer to redeem a security prior to its stated
maturity.

Leverage. (All Funds) Leveraging (that is, buying securities using
borrowed money) exaggerates the effect on net asset value of any increase or
decrease in the market value of a Fund's portfolio. These borrowings will be
subject to interest costs which may or may not be recovered by appreciation of
the securities purchased; in certain cases, interest costs may exceed the return
received on the securities purchased. For borrowings for investment purposes,
the 1940 Act requires the Fund to maintain continuous asset coverage (that is
total assets including borrowings, less liabilities exclusive of borrowings) of
300% of the amount borrowed. If the required coverage should decline as a result
of market fluctuations or other reasons, the Fund may be required to sell some
of its portfolio holdings within three days to reduce the amount of its
borrowings and restore the 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell securities at that time.
The Fund also may be required to maintain minimum average balances in connection
with such borrowing or pay a commitment or other fee to maintain a line of
credit; either of these requirements would increase the cost of borrowing over
the stated interest rate.

Each Fund may enter into reverse repurchase agreements with banks, brokers
or dealers. This form of borrowing involves the transfer by the Fund of an
underlying debt instrument in return for cash proceeds based on a percentage of
the value of the security. The Fund retains the right to receive interest and
principal payments on the security. At an agreed upon future date, the Fund
repurchases the security at principal plus accrued interest. Except for these
transactions, each Fund's borrowings generally will be unsecured.

Short-Selling. (Dreyfus Intermediate Term Income Fund only) In these
transactions, the Fund sells a security it does not own in anticipation of a
decline in the market value of the security. To complete the transaction, the
Fund must borrow the security to make delivery to the buyer. The Fund is
obligated to replace the security borrowed by purchasing it subsequently at the
market price at the time of replacement. The price at such time may be more or
less than the price at which the security was sold by the Fund, which would
result in a loss or gain, respectively.

Securities will not be sold short if, after effect is given to any such
short sale, the total market value of all securities sold short would exceed 25%
of the value of the Fund's net assets.

The Fund also may make short sales "against the box," in which the Fund
enters into a short sale of a security it owns.

Until the Fund closes its short position or replaces the borrowed
security, it will: (a) segregated permissible liquid assets in the amount that,
together with the amount deposited with the broker as collateral always equals
the current value of the security sold short; or (b) otherwise cover its short
position.

Lending Portfolio Securities. (All Funds) Each 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. Such loans are terminable by the
Fund at any time upon specified notice. The Fund might experience risk of loss
if the institution with which it has engaged in a portfolio loan transaction
breaches its agreement with the Fund.

In connection with its securities lending transactions, each Fund may
return to the borrower or a third party which is unaffiliated with the Fund, and
which is acting as a "placing broker," a part of the interest earned from the
investment of collateral received for securities loaned.

Derivatives. (All Funds) A Fund may invest in, or enter into, derivatives,
such as options and futures, mortgage-related securities and asset-backed
securities and, with respect to Dreyfus Intermediate Term Income Fund, interest
rate swaps, for a variety of reasons, including to hedge certain market risks,
to manage the interest rate sensitivity (sometimes called duration) of
fixed-income securities, to provide a substitute for purchasing or selling
particular securities or to increase potential income gain. Derivatives may
provide a cheaper, quicker or more specifically focused way for the Fund to
invest than "traditional" securities would.

Derivatives can be volatile and involve various types and degrees of risk,
depending upon the characteristics of the particular derivative and the
portfolio as a whole. Derivatives permit a Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level of
risk, or change the character of the risk, of its portfolio by making
investments in specific securities. However, derivatives may entail investment
exposures that are greater than their cost would suggest, meaning that a small
investment in derivatives could have a large potential impact on a Fund's
performance.

If a Fund invests in derivatives at inopportune times or judges market
conditions incorrectly, such investments may lower the Fund's return or result
in a loss. A Fund also could experience losses if its derivatives were poorly
correlated with its other investments, or if the Fund were unable to liquidate
its position because of an illiquid secondary market. The market for many
derivatives is, or suddenly can become, illiquid. Changes in liquidity may
result in significant, rapid and unpredictable changes in the prices for
derivatives.

Although neither the Company nor any Fund will be a commodity pool,
certain derivatives subject the Funds to the rules of the Commodity Futures
Trading Commission which limit the extent to which a Fund can invest in such
derivatives. A Fund may invest in futures contracts and options with respect
thereto for hedging purposes without limit. Dreyfus Intermediate Term Income
Fund may invest in futures contracts and options thereon for other than hedging
purposes. However, Dreyfus Intermediate Term Income Fund may not invest in such
contracts and options for other than hedging purposes if the sum of the amount
of initial margin deposits and premiums paid for unexpired options with respect
to such contracts, other than for bona fide hedging purposes, exceeds 5% of the
liquidation value of the Fund's assets, after taking into account unrealized
profits and unrealized losses on such contracts and options; provided, however,
that in the case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in calculating the 5% limitation.

Derivatives may be purchased on established exchanges or through privately
negotiated transactions referred to as over-the-counter derivatives.
Exchange-traded derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such derivatives. This guarantee usually
is supported by a daily variation margin system operated by the clearing agency
in order to reduce overall credit risk. As a result, unless the clearing agency
defaults, there is relatively little counterparty credit risk associated with
derivatives purchased on an exchange. By contrast, no clearing agency guarantees
over-the-counter derivatives. Therefore, each party to an over-the-counter
derivative bears the risk that the counterparty will default. Accordingly, the
Manager will consider the creditworthiness of counterparties to over-the-counter
derivatives in the same manner as it would review the credit quality of a
security to be purchased by the Fund. Over-the-counter derivatives are less
liquid than exchange-traded derivatives since the other party to the transaction
may be the only investor with sufficient understanding of the derivative to be
interested in bidding for it.

Futures Transactions-In General- (All Funds) Each Fund may enter into
futures contracts in U.S. domestic markets or, with respect to Dreyfus
Intermediate Term Income Fund only, on exchanges located outside the United
States. Foreign markets may offer advantages such as trading opportunities or
arbitrage possibilities not available in the United States. Foreign markets,
however, may have greater risk potential than domestic markets. For example,
some foreign exchanges are principal markets so that no common clearing facility
exists and an investor may look only to the broker for performance of the
contract. In addition, any profits the Fund might realize in trading could be
eliminated by adverse changes in the exchange rate, or the Fund could incur
losses as a result of those changes. Transactions on foreign exchanges may
include both commodities which are traded on domestic exchanges and those which
are not. Unlike trading on domestic commodity exchanges, trading on foreign
commodity exchanges is not regulated by the Commodity Futures Trading
Commission.

Engaging in these transactions involves risk of loss to a Fund which could
adversely affect the value of the Fund's net assets. Although each Fund intends
to purchase or sell futures contracts only if there is an active market for such
contracts, no assurance can be given that a liquid market will exist for any
particular contract at any particular time. Many futures exchanges and boards of
trade limit the amount of fluctuation permitted in futures contract prices
during a single trading day. Once the daily limit has been reached in a
particular contract, no trades may be made that day at a price beyond that limit
or trading may be suspended for specified periods during the trading day.
Futures contract prices could move to the limit for several consecutive trading
days with little or no trading, thereby preventing prompt liquidation of futures
positions and potentially subjecting the Fund to substantial losses.

Successful use of futures by a Fund also is subject to the Manager's
ability to predict correctly movements in the direction of the relevant market
and, to the extent the transaction is entered into for hedging purposes, to
ascertain the appropriate correlation between the transaction being hedged and
the price movements of the futures contract. For example, if a Fund uses futures
to hedge against the possibility of a decline in the market value of securities
held in its portfolio and the prices of such securities instead increase, the
Fund will lose part or all of the benefit of the increased value of securities
which it has hedged because it will have offsetting losses in its futures
positions. Furthermore, if in such circumstances the Fund has insufficient cash,
it may have to sell securities to meet daily variation margin requirements. A
Fund may have to sell such securities at a time when it may be disadvantageous
to do so.

Pursuant to regulations and/or published positions of the Securities and
Exchange Commission, a Fund may be required to segregate permissible liquid
assets to cover its obligations relating to its transactions in derivatives. To
maintain this required cover, the Fund may have to sell portfolio securities at
disadvantageous prices or times since it may not be possible to liquidate a
derivative position at a reasonable price. In addition, the segregation of such
assets will have the effect of limiting the Fund's ability otherwise to invest
those assets.

Specific Futures Transactions- (All Funds) Each Fund may purchase and sell
interest rate futures contracts. An interest rate future obligates the Fund to
purchase or sell an amount of a specific debt security at a future date at a
specific price.

Dreyfus Intermediate Term Income Fund may purchase and sell currency
futures. A currency future obligates the Fund to purchase or sell an amount of a
specific currency at a future date at a specific price.

Each Fund may purchase and sell stock index futures contracts. A stock
index future obligates the Fund to pay or receive an amount of cash equal to a
fixed dollar amount specified in the futures contract multiplied by the
difference between the settlement price of the contract on the contract's last
trading day and the value of the index based on the stock prices of the
securities that comprise it at the opening of trading in such securities on the
next business day.

Interest Rate Swaps- (Dreyfus Intermediate Term Income Fund only) Interest rate
swaps involve the exchange by the Fund with another party of their respective
commitments to pay or receive interest (for example, an exchange of floating
rate payments for fixed-rate payments). The exchange commitments can involve
payments to be made in the same currency or in different currencies. The use of
interest rate swaps is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
security transactions. If the Manager is incorrect in its forecasts of market
values, interest rates and other applicable factors, the investment performance
of the Fund would diminish compared with what it would have been if these
investment techniques were not used. Moreover, even if the Manager is correct in
its forecasts, there is a risk that the swap position may correlate imperfectly
with the price of the asset or liability being hedged. There is no limit on the
amount of interest rate swap transactions that may be entered into by the Fund.
These transactions do not involve the delivery of securities or other underlying
assets or principal. Accordingly, the risk of loss with respect to interest rate
swaps is limited to the net amount of interest payments that the Fund is
contractually obligated to make. If the other party to an interest rate swap
defaults, the Fund's risk of loss consists of the net amount of interest
payments that the Fund contractually is entitled to receive.

Options-In General- (Dreyfus Intermediate Term Income Fund only) Dreyfus
Intermediate Term Income Fund may invest up to 5% of its assets, represented by
the premium paid, in the purchase of call and put options. Dreyfus Intermediate
Term Income Fund may write (i.e., sell) covered call and put option contracts to
the extent of 20% of the value of its net assets at the time such option
contracts are written. A call option gives the purchaser of the option the right
to buy, and obligates the writer to sell, the underlying security or securities
at the exercise price at any time during the option period, or at a specific
date. Conversely, a put option gives the purchaser of the option the right to
sell, and obligates the writer to buy, the underlying security or securities at
the exercise price at any time during the option period, or at a specific date.

A covered call option written by the Fund is a call option with respect to
which the Fund owns the underlying security or otherwise covers the transaction
by segregating cash or other securities. A put option written by the Fund is
covered when, among other things, cash or liquid securities having a value equal
to or greater than the exercise price of the option are placed in a segregated
account with the Fund's custodian to fulfill the obligation undertaken. The
principal reason for writing covered call and put options is to realize, through
the receipt of premiums, a greater return than would be realized on the
underlying securities alone. The Fund receives a premium from writing covered
call or put options which it retains whether or not the option is exercised.

There is no assurance that sufficient trading interest to create a liquid
secondary market on a securities exchange will exist for any particular option
or at any particular time, and for some options no such secondary market may
exist. A liquid secondary market in an option may cease to exist for a variety
of reasons. In the past, for example, higher than anticipated trading activity
or order flow, or other unforeseen events, at times have rendered certain of the
clearing facilities inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of orders
or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
covered call option writer, the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.

Specific Options Transactions- (Dreyfus Intermediate Term Income Fund only)
Dreyfus Intermediate Term Income Fund may purchase and sell call and put options
on foreign currency. These options convey the right to buy or sell the
underlying currency at a price which is expected to be lower or higher than the
spot price of the currency at the time the option is exercised or expires.

Dreyfus Intermediate Term Income Fund may purchase cash-settled options on
interest rate swaps and interest rate swaps denominated in foreign currency in
pursuit of its investment objective. A cash-settled option on a swap gives the
purchaser the right, but not the obligation, in return for the premium paid, to
receive an amount of cash equal to the value of the underlying swap as of the
exercise date. These options typically are purchased in privately negotiated
transactions from financial institutions, including securities brokerage firms.

Successful use by the Fund of options will be subject to the Manager's
ability to predict correctly movements in foreign currencies or interest rates.
To the extent the Manager's predictions are incorrect, the Fund may incur
losses.

Future Developments. (All Funds) A Fund may take advantage of
opportunities in the area of options and futures contracts and options on
futures contracts and any other derivatives which are not presently contemplated
for use by the Fund or which are not currently available but which may be
developed, to the extent such opportunities are both consistent with the Fund's
investment objective and legally permissible for the Fund. Before entering into
such transactions or making any such investment, the Fund will provide
appropriate disclosure in the Prospectus or this Statement of Additional
Information.

Forward Roll Transactions. (All Funds) To enhance current income, each
Fund may enter into forward roll transactions with respect to mortgage-related
securities. In a forward roll transaction, the Fund sells a mortgage-related
security to a financial institution, such as a bank or broker-dealer, and
simultaneously agrees to purchase a similar security from the institution at a
later date at an agreed upon price. The securities that are purchased will bear
the same interest rate as those sold, but generally will be collateralized by
different pools of mortgages with different pre-payment histories than those
sold. During the period between the sale and purchase, the Fund will not be
entitled to receive interest and principal payments on the securities sold.
Proceeds of the sale typically will be invested in short-term instruments,
particularly repurchase agreements, and the income from these investments,
together with any additional fee income received on the sale will be expected to
generate income for the Fund exceeding the yield on the securities sold. Forward
roll transactions involve the risk that the market value of the securities sold
by the Fund may decline below the purchase price of those securities. The Fund
will segregate permissible liquid assets at least equal to the amount of the
repurchase price (including accrued interest).

Forward Commitments. (All Funds) Each Fund may purchase or sell securities
on a forward commitment, when-issued or delayed delivery basis, which means
delivery and payment take place a number of days after the date of the
commitment to purchase or sell the securities at a predetermined price and/or
yield. Typically, no interest accrues to the purchaser until the security is
delivered. When purchasing a security on a forward commitment basis, a Fund
assumes the rights and risks of ownership of the security, including the risk of
price and yield fluctuations, and takes such fluctuations into account when
determining its net asset value. Because the Fund is not required to pay for
these securities until the delivery date, these risks are in addition to the
risks associated with the Fund's other investments. If the Fund is fully or
almost fully invested when forward commitment purchases are outstanding, such
purchases may result in a form of leverage. The Fund intends to engage in
forward commitments to increase its portfolio's financial exposure to the types
of securities in which it invests. Leveraging the portfolio in this manner will
increase the Fund's exposure to changes in interest rates and will increase the
volatility of its returns. The Fund will segregate permissible liquid assets at
least equal at all times to the amount of the Fund's purchase commitments. At no
time will the Fund have more than 33-1/3% of its assets committed to purchase
securities on a forward commitment basis.

Securities purchased on a forward commitment or when-issued basis are
subject to changes in value (generally changing in the same way, i.e.,
appreciating when interest rates decline and depreciating when interest rates
rise) based upon the public's perception of the creditworthiness of the issuer
and changes, real or anticipated, in the level of interest rates. Securities
purchased on a forward commitment or when-issued basis may expose a Fund to
risks because they may experience such fluctuations prior to their actual
delivery. Purchasing securities on a when-issued basis can involve the
additional risk that the yield available in the market when the delivery takes
place actually may be higher than that obtained in the transaction itself.
Purchasing securities on a forward commitment or when-issued basis when a Fund
is fully or almost fully invested may result in greater potential fluctuation in
the value of the Fund's net assets and its net asset value per share.

Foreign Currency Transactions. (All Funds) Each Fund may enter into
foreign currency transactions for a variety of purposes, including: to fix in
U.S. dollars, between trade and settlement date, the value of a security a Fund
has agreed to buy or sell; to hedge the U.S. dollar value of securities a Fund
already owns, particularly if it expects a decrease in the value of the currency
in which the foreign security is denominated; or to gain exposure to the foreign
currency in an attempt to realize gains.

Foreign currency transactions may involve, for example, a Fund's purchase
of foreign currencies for U.S. dollars or the maintenance of short positions in
foreign currencies, which would involve the Fund agreeing to exchange an amount
of a currency it did not currently own for another currency at a future date in
anticipation of a decline in the value of the currency sold relative to the
currency the Fund contracted to receive in the exchange. A Fund's success in
these transactions will depend principally on the Manager's ability to predict
accurately the future exchange rates between foreign currencies and the U.S.
dollar.

Currency exchange rates may fluctuate significantly over short periods of
time. They generally are determined by the forces of supply and demand in the
foreign exchange markets and the relative merits of investments in different
countries, actual or perceived changes in interest rates and other complex
factors, as seen from an international perspective. Currency exchange rates also
can be affected unpredictably by intervention by U.S. or foreign governments or
central banks, or the failure to intervene, or by currency controls or political
developments in the United States or abroad.

Investment Considerations and Risks

Lower Rated Securities. (All Funds) Each Fund may invest in securities
rated below investment grade such as those rated Ba by Moody's or BB by S&P,
Fitch and Duff and as low as those rated Caa/CCC by the Rating Agencies. They
may be subject to certain risks with respect to the issuing entity and to
greater market fluctuations than certain lower yielding, higher rated
securities. The retail secondary market for these securities may be less liquid
than that of higher rated securities; adverse conditions could make it difficult
at times for the Fund to sell certain securities or could result in lower prices
than those used in calculating the Fund's net asset value.

Companies that issue certain of these securities often are highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of such
issuers generally is greater than is the case with the higher rated securities.
For example, during an economic downturn or a sustained period of rising
interest rates, highly leveraged issuers of these securities may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations also may be affected adversely by
specific corporate developments, forecasts, or the unavailability of additional
financing. The risk of loss because of default by the issuer is significantly
greater for the holders of these securities because such securities generally
are unsecured and often are subordinated to other creditors of the issuer.

Because there is no established retail secondary market for many of these
securities, the Fund anticipates that such securities could be sold only to a
limited number of dealers or institutional investors. To the extent a secondary
trading market for these securities does exist, it generally is not as liquid as
the secondary market for higher rated securities. The lack of a liquid secondary
market may have an adverse impact on market price and yield and the Fund's
ability to dispose of particular issues when necessary to meet the Fund's
liquidity needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. The lack of a liquid
secondary market for certain securities also may make it more difficult for the
Fund to obtain accurate market quotations for purposes of valuing the Fund's
portfolio and calculating its net asset value. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of these securities. In such cases, judgment may play a
greater role in valuation because less reliable, objective data may be
available.

These securities may be particularly susceptible to economic downturns. It
is likely that an economic recession would disrupt severely the market for such
securities and may have an adverse impact on the value of such securities, and
could adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon which would increase the incidence of default
for such securities.

A Fund may acquire these securities during an initial offering. Such
securities may involve special risks because they are new issues. Neither Fund
has any arrangement with any person concerning the acquisition of such
securities, and the Manager will review carefully the credit and other
characteristics pertinent to such new issues.

The credit risk factors pertaining to lower rated securities also apply to
lower rated zero coupon securities and pay-in-kind bonds, in which each Fund may
invest up to 5% of its total assets. Pay-in-kind bonds pay interest through the
issuance of additional securities. Zero coupon securities and pay-in-kind bonds
carry an additional risk in that, unlike bonds which pay interest throughout the
period to maturity, the Fund will realize no cash until the cash payment date
unless a portion of such securities are sold and, if the issuer defaults, the
Fund may obtain no return at all on its investment.

Mortgage-Related Securities. (All Funds) Mortgage-related securities are
complex derivative instruments, subject to both credit and prepayment risk, and
may be more volatile and less liquid than more traditional debt securities.
Mortgage-related securities generally are subject to credit risks associated
with the performance of the underlying mortgage properties. In certain
instances, the credit risk associated with mortgage-related securities can be
reduced by third party guarantees or other forms of credit support. Improved
credit risk does not reduce prepayment risk which is unrelated to the rating
assigned to the mortgage-related security. Prepayment risk can lead to
fluctuations in value of the mortgage-related security which may be pronounced.
If a mortgage-related security is purchased at a premium, all or part of the
premium may be lost if there is a decline in the market value of the security,
whether resulting from changes in interest rates or prepayments on the
underlying mortgage collateral. Certain mortgage-related securities that may be
purchased by a Fund, such as inverse floating rate collateralized mortgage
obligations, have coupons that move inversely to a multiple of a specific index
which may result in a form of leverage. As with other interest-bearing
securities, the prices of certain mortgage-related securities are inversely
affected by changes in interest rates. However, although the value of a
mortgage-related security may decline when interest rates rise, the converse is
not necessarily true, since in periods of declining interest rates the mortgages
underlying the security are more likely to be prepaid. For this and other
reasons, a mortgage-related security's stated maturity may be shortened by
unscheduled prepayments on the underlying mortgages, and, therefore, it is not
possible to predict accurately the security's return to the Fund. Moreover, with
respect to certain stripped mortgage-backed securities, if the underlying
mortgage securities experience greater than anticipated prepayments of
principal, the Fund may fail to fully recoup its initial investment even if the
securities are rated in the highest rating category by a nationally recognized
statistical rating organization. During periods of rapidly rising interest
rates, prepayments of mortgage-related securities may occur at slower than
expected rates. Slower prepayments effectively may lengthen a mortgage-related
security's expected maturity which generally would cause the value of such
security to fluctuate more widely in response to changes in interest rates. Were
the prepayments on the Fund's mortgage-related securities to decrease broadly,
the Fund's effective duration, and thus sensitivity to interest rate
fluctuations, would increase.

Foreign Securities. (All Funds) Foreign securities markets generally are
not as developed or efficient as those in the United States. Securities of some
foreign issuers are less liquid and more volatile than securities of comparable
U.S. issuers. Similarly, volume and liquidity in most foreign securities markets
are less than in the United States and, at times, volatility of price can be
greater than in the United States.

Because evidences of ownership of foreign securities usually are held
outside the United States, the Fund investing in such securities will be subject
to additional risks which include possible adverse political and economic
developments, seizure or nationalization of foreign deposits and adoption of
governmental restrictions which might adversely affect or restrict the payment
of principal and interest on the foreign securities to investors located outside
the country of the issuer, whether from currency blockage or otherwise.
Moreover, foreign securities held by the Fund may trade on days when the Fund
does not calculate its net asset value and thus affect the Fund's net asset
value on days when investors have no access to the Fund.

Developing countries have economic structures that are generally less
diverse and mature, and political systems that are less stable, than those of
developed countries. The markets of developing countries may be more volatile
than the markets of more mature economies; however, such markets may provide
higher rates of return to investors. Many developing countries providing
investment opportunities for the Funds have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have adverse
effects on the economies and securities markets of certain of these countries.

Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in U.S.
dollars may be affected favorably or unfavorably by changes in currency rates
and exchange control regulations.

Simultaneous Investments. (All Funds) Investment decisions for each Fund
are made independently from those of the other investment companies advised by
the Manager. If, however, such other investment companies desire to invest in,
or dispose of, the same securities as a Fund, available investments or
opportunities for sales will be allocated equitably to each investment company.
In some cases, this procedure may adversely affect the size of the position
obtained for or disposed of by the Fund or the price paid or received by the
Fund.

Investment Restrictions

Each Fund's investment objective is a fundamental policy, which cannot be
changed without approval by the holders of a majority (as defined in the 1940
Act) of the Fund's outstanding voting shares. In addition, each Fund has adopted
investment restrictions numbered 1 through 7 as fundamental policies and Dreyfus
Intermediate Term Income Fund has adopted investment restrictions numbered 14
and 15 as fundamental policies. Investment restrictions numbered 8 through 13
are not fundamental policies and may be changed by vote of a majority of the
Company's Board members at any time. Neither Fund may:

1. Invest in commodities, except that the Fund may purchase and sell futures
contracts, including those relating to indices, and options on futures contracts
or indices.

2. Purchase, hold or deal in real estate, or oil, gas or other mineral leases or
exploration or development programs, but the Fund may purchase and sell
securities that are secured by real estate or issued by companies that invest or
deal in real estate. In particular, the Fund may purchase mortgage-backed
securities and real estate investment trust securities.

3. Borrow money, except to the extent permitted under the 1940 Act (which
currently limits borrowing to no more than 33-1/3% of the value of the Fund's
total assets). For purposes of this Investment Restriction, the entry into
options, futures contracts, including those relating to indices, and options on
futures contracts or indices shall not constitute borrowing.

4. Make loans to others, except through the purchase of debt obligations and the
entry into repurchase agreements. However, the Fund may lend its portfolio
securities in an amount not to exceed 33-1/3% of the value of its total assets.
Any loans of portfolio securities will be made according to guidelines
established by the Securities and Exchange Commission and the Company's Board.

5. Act as an underwriter of securities of other issuers, except to the extent
the Fund may be deemed an underwriter under the 1933 Act by virtue of disposing
of portfolio securities.

6. Invest more than 25% of the value of its total assets in the securities of
issuers in any single industry, provided that there shall be no limitation on
the purchase of obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.

7. Issue any senior security (as such term is defined in Section 18(f) of the
1940 Act), except to the extent the activities permitted in Investment
Restriction Nos. 1, 3, and 9 may be deemed to give rise to a senior security.

8. Invest in the securities of a company for the purpose of exercising
management or control, but the Fund will vote the securities it owns in its
portfolio as a shareholder in accordance with its views.

9. Pledge, mortgage or hypothecate its assets, except to the extent necessary to
secure permitted borrowings and to the extent related to the purchase of
securities on a when-issued or forward commitment basis and the deposit of
assets in escrow in connection with writing covered put and call options and
collateral and initial or variation margin arrangements with respect to options,
futures contracts, including those relating to indices, and options on futures
contracts or indices.

10. Purchase, sell or write puts, calls or combinations thereof, except as
described in the Prospectus and Statement of Additional Information.

11. Enter into repurchase agreements providing for settlement in more than seven
days after notice or purchase securities which are illiquid, if, in the
aggregate, more than 15% of the value of the Fund's net assets would be so
invested.

12. Purchase securities of other investment companies, except to the extent
permitted under the 1940 Act or as they may be acquired as part of a merger,
consolidation or acquisition of assets.

13. Purchase securities on margin, but the Fund may make margin deposits in
connection with transactions in futures, including those relating to indices,
and options on futures or indices.

The following investment restrictions numbered 14 and 15 apply only to
Dreyfus Intermediate Term Income Fund. Dreyfus Intermediate Term Income Fund may
not:

14. Invest more than 5% of its assets in the obligations of any single issuer,
except that up to 25% of the value of the Fund's total assets may be invested,
and securities issued or guaranteed by the U.S. Government, or its agencies or
instrumentalities may be purchased, without regard to any such limitation.

15. Hold more than 10% of the outstanding voting securities of any single
issuer. This Investment Restriction applies only with respect to 75% of the
Fund's total assets.

If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from a change in values or assets will not
constitute a violation of such restriction.

MANAGEMENT OF THE COMPANY

The Company's Board is responsible for the management and supervision of
the Funds. The Board approves all significant agreements between a 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, N.A..........................Custodian

Board members and officers of the Company, together with information as to
their principal business occupations during at least the last five years, are
shown below.

Board Members of the Company

JOSEPH S.DiMARTINO, Chairman of the Board. Since January 1995, Chairman of the
Board of various funds in the Dreyfus Family of Funds. He also is a
director of 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 outsourcing functions for
small and medium sized companies, and Career Blazers Inc. (formerly,
Staffing Resources, Inc.), a temporary placement agency. For more than
five years prior to January 1995, he was President, a director and, until
August 1994, Chief Operating Officer of the Manager and Executive Vice
President and a director of Dreyfus Service Corporation, a wholly-owned
subsidiary of the Manager and, until August 24, 1994, the Company's
distributor. From August 1994 until December 31, 1994, he was a director
of Mellon Financial Corporation. He is 56 years old and his address is 200
Park Avenue, New York, New York 10166.

LUCY WILSON BENSON, Board Member. President of Benson and Associates,
consultants to business and government. Mrs. Benson is a director of
COMSAT Corporation and Logistics Management Institute. She is also a
Trustee of the Alfred P. Sloan Foundation, Vice Chairman of the Board of
Trustees of Lafayette College, Vice Chairman of the Citizens Network for
Foreign Affairs and of The Atlantic Council of the U.S. and a member of
the Council on Foreign Relations. From 1980 to 1994, Mrs. Benson was a
director of the Grumman Corporation, and from 1990 to 1998, she was a
director of General RE Corporation. Mrs. Benson served as a consultant to
the U.S. Department of State and to SRI International from 1980 to 1981.
From 1977 to 1980, she was Under Secretary of State for Security
Assistance, Science and Technology. She is 72 years old and her address is
46 Sunset Avenue, Amherst, Massachusetts 01002.

DAVID W.BURKE, Board Member. Board member of various funds in the Dreyfus
Family of Funds. Chairman of the Broadcasting Board of Governors, an
independent board within the United States Information Agency, from August
1994 to November 1998. From August 1994 to December 1994, Mr. Burke was a
Consultant to the Manager and, from October 1990 to August 1994, he was
Vice President and Chief Administrative Officer of the Manager. From 1977
to 1990, Mr. Burke was involved in the management of national television
news, as Vice President and Executive Vice President of ABC News, and
subsequently as President of CBS News. He is 63 years old and his address
is Box 654, Eastham, Massachusetts 02642.

MARTIN D. FIFE, Board Member. Chairman of the Board of Magar, Inc., a company
specializing in financial products and developing early stage companies. In
addition, Mr. Fife is Chairman of the Board and Chief Executive Officer of
Skysat Communications Network Corporation, a company developing
telecommunications systems. Mr. Fife also serves on the boards of various
other companies. He is 72 years old and his address is 405 Lexington
Avenue, New York, New York 10174.

WHITNEY I. GERARD, Board Member. Partner of the New York City law firm of
Chadbourne & Parke. He is 65 years old and his address is 30 Rockefeller
Plaza, New York, New York 10112.

ROBERT R.GLAUBER, Board Member. Research Fellow, Center for Business and
Government at the John F. Kennedy School of Government, Harvard University
since January 1992. Mr. Glauber was Under Secretary of the Treasury for
Finance at the U.S. Treasury Department from May 1989 to January 1992. For
more than five years prior thereto, he was a Professor of Finance at the
Graduate School of Business Administration of Harvard University and, from
1985 to 1989, Chairman of its Advanced Management Program. He is chairman
of The Measurisk Group, a risk measurement advisory and software
development firm, co-chairman of the Investment Committee, Massachusetts
State Retirement Fund, and also is a director of The Dun & Bradstreet
Corp., Exel Limited, a Bermuda based insurance company, Cooke and Bieler,
Inc., investment counselors, National Association of Securities Dealers,
Inc., NASD Regulation, Inc. and the Federal Reserve Bank of Boston. He is
60 years old and his address is 79 John F. Kennedy Street, Cambridge,
Massachusetts 02138.

ARTHUR A. HARTMAN, Board Member. Senior consultant with APCO Associates Inc.
From 1981 to 1987, he was United States Ambassador to the former Soviet
Union. He sits on the Boards of Ford Meter Box Corporation and Lawter
International and is a member of the advisory councils of several other
companies, research institutes and foundations. Ambassador Hartman is
Chairman of First NIS Regional Funds (ING/Barings Management) and former
President of the Harvard Board of Overseers. He is 73 years old and his
address is 2738 McKinley Street, N.W., Washington, D.C. 20015.

GEORGE L. PERRY, Board Member. An economist and Senior Fellow at the Brookings
Institution since 1969. He is co-director of the Brookings Panel on
Economic Activity and editor of its journal, The Brookings Papers. He is
also a director of the State Farm Mutual Automobile Association and State
Farm Life Insurance Company and a Trustee of Federal Realty Investment
Trust. He is 65 years old and his address is 1775 Massachusetts Avenue,
N.W., Washington, D.C. 20036.

PAUL D. WOLFOWITZ, Board Member. Dean of The Paul H. Nitze School of Advanced
International Studies at Johns Hopkins University. From 1989 to 1993, he
was Under Secretary of Defense for Policy. From 1986 to 1989, he was the
U.S. Ambassador to the Republic of Indonesia. From 1982 to 1986, he was
Assistant Secretary of State for East Asian and Pacific Affairs of the
Department of State. He is also a director of Hasbro, Inc. He is 53 years
old and his address is 1740 Massachusetts Avenue, N.W., Washington, D.C.
20036.

The Company has a standing nominating committee comprised of its Board
members who are not "interested persons" of the Company, as defined in the 1940
Act. The function of the nominating committee is to select and nominate all
candidates who are not "interested persons" of the Company for election to the
Company's Board.

The Company typically pays its Board members an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the Board
receives an additional 25% of such compensation. Emeritus Board members are
entitled to receive an annual retainer and a per meeting fee of one-half the
amount paid to them as Board members. The aggregate amount of compensation paid
to each Board member by the Company for the fiscal year ended July 31, 1999, and
by all funds in the Dreyfus Family of Funds for which such person was a Board
member (the number of which is set forth in parenthesis next to each Board
member's total compensation)* for the year ended December 31, 1998, was as
follows:

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

Joseph S. DiMartino $4,688 $619,660 (187)

Lucy Wilson Benson $3,750 $77,168 (24)

David W. Burke $3,750 $233,500 (62)

Martin D. Fife $3,750 $56,000 (15)

Whitney I. Gerard $3,750 $60,250 (15)

Robert R. Glauber $3,500 $88,250 (41)

Arthur A. Hartman $3,750 $55,750 (15)

George L. Perry $3,500 $51,750 (15)

Paul D. Wolfowitz $3,750 $49,500 (14)

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

* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Funds, for which the Board
member serves.

** Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $2,884 for Dreyfus Short Term Income Fund and $688 for
Dreyfus Intermediate Term Income Fund for all Board members as a group.

Officers of the Company

MARIE E.CONNOLLY, President and Treasurer. 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., and an officer of other investment companies advised or
administered by the Manager. She is 42 years old.

MARGARET W.CHAMBERS, Vice President and Secretary. Senior Vice President and
General Counsel of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. 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. She is 40 years old.

*FREDERICK C. DEY, Vice President, Assistant Treasurer and Assistant Secretary.
Vice President, New Business Development of Funds Distributor, Inc. since
September 1994, and an officer of other investment companies advised or
administered by the Manager. He is 37 years old.

STEPHANIE D. PIERCE, Vice President, Assistant Secretary and Assistant
Treasurer. Vice President of the Distributor and Funds Distributor, Inc.,
and an officer of other investment companies advised or administered by
the Manager. 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 Second Vice President with Chase
Manhattan Bank. She is 31 years old.

*JOHN P. COVINO, Vice President and Assistant Treasurer. Vice President and
Treasury Group Manager of Treasury Servicing and Administration of Funds
Distributor, Inc. since December 1998, and an officer of other investment
companies advised or administered by the Manager. From December 1995 to
November 1998, he was employed by Fidelity Investments where he held
multiple positions in their Institutional Brokerage Group. Prior to
joining Fidelity, he was employed by SunGard Brokerage Systems where he
was responsible for the technology and development of the accounting
product group. He is 36 years old.

MARY A. NELSON, Vice President and Assistant Treasurer. Vice President of the
Distributor and Funds Distributor, Inc., and an officer of other investment
companies advised or administered by the Manager. She is 35 years old.

*GEORGE A. RIO, Vice President and Assistant Treasurer. Executive Vice President
and Client Service Director of Funds Distributor, Inc., and an officer of
other investment companies advised or administered by the Manager. 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. He is 44
years old.

JOSEPH F. TOWER, III, Vice President and Assistant Treasurer. Senior Vice
President, Treasurer, Chief Financial Officer and a director of the
Distributor and Funds Distributor, Inc., and an officer of other investment
companies advised or administered by the Manager. He is 37 years old.

DOUGLAS C. CONROY, Vice President and Assistant Secretary. Assistant Vice
President of Funds Distributor, Inc., and an officer of other investment
companies advised or administered by the Manager. From April 1993 to
January 1995, he was a Senior Fund Accountant for Investors Bank & Trust
Company. He is 30 years old.

*KAREN JACOPPO-WOOD, Vice President and Assistant Secretary. Vice President and
Senior Counsel of Funds Distributor, Inc. since February 1997, and an
officer of other investment companies advised or administered by the
Manager. From June 1994 to January 1996, she was Manager of SEC
Registration at Scudder, Stevens & Clark, Inc. She is 32 years old.

CHRISTOPHER J. KELLEY, Vice President and Assistant Secretary. Vice President
and Senior Associate General Counsel of Funds Distributor, Inc., and an
officer of other investment companies advised or administered by the
Manager. From April 1994 to July 1996, he was Assistant Counsel at Forum
Financial Group. He is 34 years old.

KATHLEEN K. MORRISEY, Vice President and Assistant Secretary. Manager of
Treasury Services Administration of Funds Distributor, Inc., and an officer
of other investment companies advised or administered by the Manager. From
July 1994 to November 1995, she was a Fund Accountant for Investors Bank &
Trust Company. She is 27 years old.

ELBA VASQUEZ, Vice President and Assistant Secretary. Assistant Vice President
of Funds Distributor, Inc., and an officer of other investment companies
advised or administered by the Manager. 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. She is 37 years old.

The address of each officer of the Company is 200 Park Avenue, New York,
New York 10166, except those officers indicated by an (*), whose address is 60
State Street, Boston, Massachusetts 02109.

The Company's Board members and officers, as a group, owned less than 1%
of each Fund's shares outstanding on November 10, 1999.

The following person is known by the Company to own of record 5% or more
of Dreyfus Short Term Income Fund's outstanding voting securities as of November
10, 1999: Charles Schwab & Co., Inc., Reinvest Account ATTN: Mutual Funds
Department, 101 Montgomery Street, San Francisco, California 94104-4122-8.1926%.

MANAGEMENT ARRANGEMENTS

Investment Adviser. The Manager is a wholly-owned subsidiary of Mellon
Bank, N.A., which is a wholly-owned subsidiary of Mellon Financial Corporation
("Mellon").

The Manager provides management services pursuant to a Management
Agreement (the "Agreement") between the Company and the Manager. As to each
Fund, the Agreement is subject to annual approval by (i) the Company's Board or
(ii) vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of such Fund, provided that in either event the continuance also is
approved by a majority of the Board members who are not "interested persons" (as
defined in the 1940 Act) of the Company or the Manager, by vote cast in person
at a meeting called for the purpose of voting on such approval. As to each Fund,
the Agreement is terminable without penalty, on 60 days' notice, by the
Company's Board or by vote of the holders of a majority of such Fund's shares,
or, on not less than 90 days' notice, by the Manager. The Agreement will
terminate automatically, as to the relevant Fund, in the event of its assignment
(as defined in the 1940 Act).

The following persons are officers and/or directors of the Manager:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment Officer
and a director; Lawrence S. Kash, Vice Chairman and a director; J. David
Officer, Vice Chairman and a director; Thomas F. Eggers, Vice
Chairman--Institutional and a director; Ronald P. O'Hanley III, Vice Chairman;
William T. Sandalls, Jr., Executive Vice President; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Diane P. Durnin, Vice
President--Product Development; 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, Steven G. Elliot,
Martin C. McGuinn, Richard W. Sabo and Richard F. Syron, directors.

The Manager manages each Fund's investments in accordance with the stated
policies of such Fund, subject to the approval of the Company's Board. The
Manager is responsible for investment decisions, and provides the Funds with
portfolio managers who are authorized by the Board to execute purchases and
sales of securities. Each Fund's portfolio managers are: Michael Hoeh, Roger
King, John Koerber and Gerald Thunelius. The Manager also maintains a research
department with a professional staff of portfolio managers and securities
analysts who provide research services for the Fund and for other funds advised
by the Manager.

The Manager maintains office facilities on behalf of the Funds, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Funds. The Manager may pay the Distributor for shareholder
services from the Manager's own assets, including past profits but not including
the management fees paid by the Fund. The Distributor may use part or all of
such payments to pay securities dealers, banks or other financial institutions
in respect of these services. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time deems
appropriate.

Under the Manager's personal securities trading policy (the
"Policy"), the Manager's employees must preclear personal transactions in
securities not exempt under the Policy. In addition, the Manager's employees
must report their personal securities transactions and holdings, which are
reviewed for compliance with the Policy. In that regard, the Manager's portfolio
managers and other investment personnel also are subject to the oversight of
Mellon's Investment Ethics Committee. The Manager's portfolio managers and other
investment personnel who comply with the Policy's preclearance and disclosure
procedures and the requirements of the Committee may be permitted to purchase,
sell or hold securities which also may be or are held in fund(s) they manage or
for which they otherwise provide investment advice.

All expenses incurred in the operation of the Company are borne by the Company,
except to the extent specifically assumed by the Manager. The expenses borne by
the Company include: taxes, interest, loan commitment fees, interest and
distributions paid on securities sold short, brokerage fees and commissions, if
any, fees of Board members who are not officers, directors, employees or holders
of 5% or more of the outstanding voting securities of the Manager, Securities
and Exchange Commission fees, state Blue Sky qualification fees, advisory fees,
charges of custodians, transfer and dividend disbursing agents' fees, certain
insurance premiums, industry association fees, outside auditing and legal
expenses, costs of maintaining the Company's existence, costs of independent
pricing services, costs attributable to investor services (including, without
limitation, telephone and personnel expenses), costs of preparing and printing
prospectuses and statements of additional information for regulatory purposes
and for distribution to existing shareholders, costs of shareholders' reports
and meetings, and any extraordinary expenses. In addition, Fund shares are
subject to an annual service fee. See "Shareholder Services Plan." Expenses
attributable to a particular Fund are charged against the assets of that Fund;
other expenses of the Company are allocated between the Funds on the basis
determined by the Board, including, but not limited to, proportionately in
relation to the net assets of each Fund.

As compensation for the Manager's services to the Company, the Company has
agreed to pay the Manager a monthly management fee at the annual rate of .50%of
the value of Dreyfus Short Term Income Fund's average daily net assets and .55%
of the value of Dreyfus Intermediate Term Income Fund's average daily net
assets. For the fiscal years ended July 31, 1997, 1998 and 1999, the management
fees payable with respect to Dreyfus Short Term Income Fund amounted to
$1,141,534, $1,550,660 and $1,776,946, respectively; however, such amounts were
reduced by $247,639, $3,975 and $0 in 1997, 1998 and 1999, respectively,
pursuant to an undertaking by the Manager, which resulted in $893,895 being paid
in fiscal 1997 and $1,546,685 being paid in fiscal 1998 with respect to Dreyfus
Short Term Income Fund. For the fiscal years ended July 31, 1997, 1998 and 1999,
the management fee payable with respect to Dreyfus Intermediate Term Income Fund
amounted to $123,707, $152,467 and $157,462, respectively; however, such amounts
were reduced by $123,707, $114,598 and $146,720, respectively, pursuant to an
undertaking by the Manager, which resulted in no management fees being paid in
fiscal 1997, $37,869 being paid in fiscal 1998 and $10,742 being paid in fiscal
1999 with respect to Dreyfus Intermediate Term Income Fund.

As to each Fund, the Manager has agreed that if in any fiscal year the
aggregate expenses of the Fund, exclusive of taxes, brokerage, interest on
borrowings and (with the prior written consent of the necessary state securities
commissions) extraordinary expenses, but including the management fee, exceed
the expense limitation of any state having jurisdiction over the Fund, the Fund
may deduct from the payment to be made to the Manager under the Agreement, or
the Manager will bear, such excess expense to the extent required by state law.
Such deduction or payment, if any, will be estimated daily, and reconciled and
effected or paid, as the case may be, on a monthly basis.

The aggregate of the fees payable to the Manager is not subject to
reduction as the value of a Fund's net assets increases.

Distributor. 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.

The Distributor may pay dealers a fee based on 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 plan or
programs exceeds $1,000,000 ("Eligible Benefit Plans"). Generally, the fee paid
to dealers will not exceed 1% of the amount invested through such dealers. The
Distributor, however, may pay dealers a higher fee and 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.

Transfer and Dividend Disbursing Agent and Custodian. Dreyfus Transfer,
Inc. (the "Transfer Agent"), a wholly-owned subsidiary of the Manager, P.O. Box
9671, Providence, Rhode Island 02940-9671, is each Fund's transfer and dividend
disbursing agent. Under a transfer agency agreement with the Company, the
Transfer Agent arranges for the maintenance of shareholder account records for
each 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, the Transfer Agent receives a monthly fee computed on the basis
of the number of shareholder accounts it maintains for the Fund during the
month, and is reimbursed for certain out-of-pocket expenses.

Mellon Bank, N.A. (the "Custodian"), One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258, is each Fund's custodian. Under a custody agreement with the
Company, the Custodian holds each Fund's securities and keeps all necessary
accounts and records. For its custody services, the Custodian receives a monthly
fee based on the market value of the Fund's assets held in custody and receives
certain securities transactions charges.

HOW TO BUY SHARES

General. (All Funds) Fund shares are sold without a sales charge. You may
be charged a fee if you effect transactions in Fund shares through a securities
dealer, bank or other financial institution (collectively, "Service Agents").
Stock certificates are issued only upon your written request. No certificates
are issued for fractional shares. The Fund reserves the right to reject any
purchase order.

The minimum initial investment is $2,500, or $1,000 if you are a client of
a Service Agent which 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. However, the minimum initial investment is
$750 for Dreyfus-sponsored Keogh Plans, IRAs (including regular IRAs, spousal
IRAs for a non-working spouse, Roth IRAs, IRAs set up under a Simplified
Employee Pension Plan ("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. The initial investment must be accompanied by
the Account Application. For full-time or part-time employees of the Manager or
any of its affiliates or subsidiaries, directors of the Manager, Board members
of a fund advised by the Manager, including members of the Fund's Board, or the
spouse or minor child of any of the foregoing, the minimum initial investment is
$1,000. For full-time or part-time employees of the Manager or any of its
affiliates or subsidiaries who elect to have a portion of their pay directly
deposited into their Fund accounts, the minimum initial investment 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 further vary the initial and subsequent investment
minimum requirements at any time.

Fund shares also are offered without regard to the minimum initial
investment requirements through Dreyfus-Automatic Asset Builder(reg. tm.),
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 you against loss in a declining market.

Shares are sold on a continuous basis at the net asset value per share
next determined after an order in proper form is received by the Transfer Agent
or other authorized entity. Net asset value per share is determined as of the
close of trading on the floor of the New York Stock Exchange (currently 4:00
p.m., New York time), on each day the New York Stock Exchange is open for
business. For purposes of determining net asset value per share, options and
futures contracts will be valued 15 minutes after the close of trading on the
floor of the New York Stock Exchange. Net asset value 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 shares outstanding. See "Determination of
Net Asset Value."

Dreyfus TeleTransfer Privilege. (All Funds) You may purchase shares by
telephone 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 day the Transfer Agent and
the New York Stock Exchange 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 day the
Transfer Agent and the New York Stock Exchange are open for business, or orders
made on Saturday, Sunday or any Fund holiday (e.g., when the New York Stock
Exchange 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 "How to Redeem Shares--Dreyfus TeleTransfer
Privilege."

Reopening an Account. You 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.

SHAREHOLDER SERVICES PLAN

The Company has adopted a Shareholder Services Plan with respect to each
Fund, pursuant to which the Company pays the Distributor for the provision of
certain services to Fund shareholders a fee at the annual rate of .20% of the
value of Dreyfus Short Term Income Fund's average daily net assets and .25% of
the value of Dreyfus Intermediate Term Income Fund's average daily net assets.
The services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Company and
providing reports and other information, and services related to the maintenance
of such shareholder accounts. Under the Shareholder Services Plan, the
Distributor may make payments to Service Agents in respect of these services.
The Distributor determines the amounts to be paid to Service Agents.

A quarterly report of the amounts expended under the Shareholder Services
Plan, and the purposes for which such expenditures were incurred, must be made
to the Board for its review. In addition, the Shareholder Services Plan provides
that material amendments must be approved by the Company's Board, and by the
Board members who are not "interested persons" (as defined in the 1940 Act) of
the Company and have no direct or indirect financial interest in the operation
of the Shareholder Services Plan or in any agreements entered into in connection
with the Shareholder Services Plan, by vote cast in person at a meeting called
for the purpose of considering such amendments. As to each Fund, the Shareholder
Services Plan is subject to annual approval by such vote of the Board members
cast in person at a meeting called for the purpose of voting on the Shareholder
Services Plan. The Shareholder Services Plan is terminable with respect to each
Fund at any time by vote of a majority of the Board members who are not
"interested persons" and have no direct or indirect financial interest in the
operation of the Shareholder Services Plan or in any agreements entered into in
connection with the Shareholder Services Plan.

For the fiscal year ended July 31, 1999, the Fund was charged $710,779
with respect to Dreyfus Short Term Income Fund and $71,573 with respect to
Dreyfus Intermediate Term Income Fund under the Plan.

HOW TO REDEEM SHARES

Check Redemption Privilege. (All Funds) Each Fund provides Redemption
Checks ("Checks") automatically upon opening an account, unless you specifically
refuse the Check Redemption Privilege by checking the applicable "No" box on the
Account Application. Checks will be sent only to the registered owner(s) of the
account and only to the address of record. The Check Redemption Privilege may be
established for an existing account by a separate signed Shareholder Services
Form. The Account Application or Shareholder Services Form must be manually
signed by the registered owner(s). Checks are drawn on your Fund account and 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
your agent, will cause the Fund to redeem a sufficient number of shares in your
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 you. You
generally will be subject to the same rules and regulations that apply to
checking accounts, although election of this Privilege creates only a
shareholder-transfer agent relationship with the Transfer Agent. If you hold
shares in a Dreyfus-sponsored IRA account, you may be permitted to make
withdrawals from your IRA account using checks furnished to you by The Dreyfus
Trust Company.

You should date your Checks with the current date when you write them.
Please do not postdate your Checks. If you do, 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.

Checks are free, but the Transfer Agent will impose a fee for stopping
payment of a Check upon your request or if the Transfer Agent cannot honor a
Check due to insufficient funds or other valid reason. If the amount of the
Check is greater than the value of the shares in your account, the Check will be
returned marked insufficient funds. Checks should not be used to close an
account.

This Privilege will be terminated immediately, without notice, with
respect to any account which is, or becomes, subject to backup withholding on
redemptions. Any Check written on an account which has become subject to backup
withholding on redemptions will not be honored by the Transfer Agent.

Wire Redemption Privilege. (All Funds) By using this Privilege, you
authorize the Transfer Agent to act on wire, telephone or letter redemption
instructions from any person representing himself or herself to be you, 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 if the Transfer Agent receives a 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 you on the Account Application
or Shareholder Services Form, or to a correspondent bank if your bank is not a
member of the Federal Reserve System. Fees ordinarily are imposed by such bank
and borne by the investor. Immediate notification by the correspondent bank to
your bank is necessary to avoid a delay in crediting the funds to your bank
account.

If you have access to telegraphic equipment, you 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

If you do not have direct access to telegraphic equipment, you may have
the wire transmitted by contacting a TRT Cables operator at 1-800-654-7171, toll
free. You 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 wire
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. (All Funds) You may request by telephone
that redemption proceeds 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. 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. You should be aware
that if you 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
"How to Buy Shares--Dreyfus TeleTransfer Privilege."

Stock Certificates; Signatures. (All Funds) 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 New York Stock Exchange 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. (All Funds) The Fund has committed itself to pay in
cash all redemption requests by any shareholder of record, 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 Securities and Exchange
Commission. In the case of requests for redemption in excess of such amount, the
Fund's Board reserves the right to make payments in whole or in part in
securities or other assets of the Fund 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 portfolio of the Fund is valued. If the recipient sells such
securities, brokerage charges might be incurred.

Suspension of Redemptions. (All Funds) The right of redemption may be
suspended or the date of payment postponed (a) during any period when the New
York Stock Exchange 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 Securities and
Exchange Commission so that disposal of the Fund's investments or determination
of its net asset value is not reasonably practicable or (c) for such other
periods as the Securities and Exchange Commission by order may permit to protect
the Fund's shareholders.

SHAREHOLDER SERVICES

Fund Exchanges. (All Funds) You may purchase, in exchange for shares of a
Fund, shares of certain other funds managed or administered by the Manager, to
the extent such shares are offered for sale in your state of residence. Shares
of other funds purchased by exchange will be purchased on the basis of relative
net asset value per share as follows:

A. Exchanges for shares of funds 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 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"), but 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, you must notify the Transfer
Agent of your prior ownership of fund shares and your account number.

To request an exchange, you 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 you check the applicable "No" box on the Account Application, indicating
that you specifically refuse this privilege. By using the Telephone Exchange
Privilege, you authorize the Transfer Agent to act on telephonic instructions
(including over The Dreyfus Touch(reg. tm.) automated telephone system) from any
person representing himself or herself to be you, 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 administrative fee in accordance with
rules promulgated by the Securities and Exchange Commission.

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. (All Funds) Dreyfus Auto-Exchange
Privilege permits you to purchase, in exchange for shares of the Fund, shares of
another fund in the Dreyfus Family of Funds of which you are a shareholder. This
Privilege is available only for existing accounts and to shareholders residing
in any state in which shares of the fund being acquired may legally be sold.
Shares will be exchanged on the basis of relative net asset value as described
above under "Fund Exchanges." Enrollment in or modification or cancellation of
this Privilege is effective three business days following notification by you.
You will be notified if your account falls below the amount designated to be
exchanged under this Privilege. In this case, your 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 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.

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. Shares may be exchanged only between
accounts having identical names and other identifying designations.The Fund
Exchanges service or Dreyfus Auto-Exchange Privilege may be modified or
terminated at any time upon notice to shareholders.

Dreyfus-Automatic Asset Builder(reg. tm.). (All Funds)
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.

Dreyfus Government Direct Deposit Privilege. (All Funds) 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 U.S.
Government automatically deposited into your Fund account. You may deposit as
much of such payments as you elect.

Dreyfus Payroll Savings Plan. (All Funds) 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 Payroll Savings Plan account, you must file an authorization
form with your employer's payroll department. It is the sole responsibility of
your employer to arrange for transactions under the Dreyfus Payroll Savings
Plan.

Dreyfus Step Program. (All Funds) The Dreyfus Step Program enables you
to purchase Fund shares without regard to the Fund's minimum initial investment
requirements through Dreyfus-Automatic Asset Builder(reg. tm.), 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). If you wish to
purchase Fund shares through the Dreyfus Step Program in conjunction with a
Dreyfus-sponsored retirement plan, you may do so only for IRAs, SEP-IRAs and IRA
"Rollover Accounts." The Fund may modify or terminate this Program at any time.

Dreyfus Dividend Options. (All Funds) Dreyfus Dividend Sweep allows you to
invest automatically your dividends or dividends and capital gain distributions,
if any, from the Fund in shares of another fund in the Dreyfus Family of Funds
of which you are a shareholder. Shares of other funds purchased pursuant to this
privilege will be purchased on the basis of relative net asset value per share
as follows:

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

B. Dividends and 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 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"), but 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 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.

Automatic Withdrawal Plan. (All Funds) The Automatic Withdrawal Plan
permits you to request withdrawal of a specified dollar amount (minimum of $50)
on either a monthly or quarterly basis if you have a $5,000 minimum account.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends and
distributions, your shares will be reduced and eventually may be depleted. The
Automatic Withdrawal Plan may be terminated at any time by you, the Fund or the
Transfer Agent. Shares for which stock certificates have been issued may not be
redeemed through the Automatic Withdrawal Plan.

Corporate Pension/Profit-Sharing and Personal Retirement Plans. (All
Funds) Each 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, Education IRAs and IRA
"Rollover Accounts") and 403(b)(7) Plans. Plan support services also
are available.

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 forms for
adoption of such plans from the Distributor.

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.

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 receipts of funds.

You should read the Prototype Retirement Plan and the form of Custodial
Agreement for further details on eligibility, service fees and tax implications,
and should consult a tax adviser.

DETERMINATION OF NET ASSET VALUE

Valuation of Portfolio Securities. Substantially all of each Fund's
investments (excluding short-term investments) are valued each business day by
one or more independent pricing services (the "Service") approved by the Board.
Securities valued by the Service for which quoted bid prices in the judgment of
the Service are readily available and are representative of the bid side of the
market are valued at the mean between the quoted bid prices (as obtained by the
Service from dealers in such securities) and asked prices (as calculated by the
Service based upon its evaluation of the market for such securities). Other
investments valued by the Service are carried at fair value as determined by the
Service, based on methods which include consideration of: yields or prices of
securities of comparable quality, coupon, maturity and type; indications as to
values from dealers; and general market conditions. Short-term investments are
not valued by the Service and are valued at the mean price or yield equivalent
for such securities or for securities of comparable maturity, quality and type
as obtained from market makers. Other investments that are not valued by the
Service are valued at the average of the most recent bid and asked prices in the
market in which such investments are primarily traded, or at the last sales
price for securities traded primarily on an exchange or the national securities
market. In the absence of reported sales of investments traded primarily on an
exchange or the national securities market, the average of the most recent bid
and asked prices is used. Bid price is used when no asked price is available.
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 by the Federal
Reserve Bank of New York or, if no such rate is quoted on such date, at the
exchange rate previously quoted by the Federal Reserve Bank of New York or at
such other quoted market exchange rate as may be determined to be appropriate by
the Manager. Expenses and fees, including the management fee (reduced by the
expense limitation, if any), are accrued daily and taken into account for the
purpose of determining the net asset value of a Fund's shares.

Restricted securities, as well as securities or other assets for which
recent market quotations are not readily available or which are not valued by
the Service, are valued at fair value as determined in good faith by the Board.
The Board will review the method of valuation on a current basis. In making
their good faith valuation of restricted securities, the Board members 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 if the Board members believe that it 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.

New York Stock Exchange Closings. The holidays (as observed) on which the
New York Stock Exchange is closed currently are: New Year's Day, Martin Luther
King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and

Christmas.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Management of the Company believes that each Fund has qualified for the
fiscal year ended July 31, 1999 as a "regulated investment company" under the
Code. Each Fund intends to continue to so qualify if such qualification is in
the best interests of its shareholders. As a regulated investment company, each
Fund will pay no Federal income tax on net investment income and net realized
securities gains to the extent that such income and gains are distributed to
shareholders in accordance with applicable provisions of the Code. To qualify as
a regulated investment company, the Fund must distribute at least 90% of its net
income (consisting of net investment income and net short-term capital gains) to
its shareholders and meet certain asset diversification and other requirements.
If a Fund did not qualify as a regulated investment company, it would be treated
for tax purposes as an ordinary corporation subject to Federal income tax. The
term "regulated investment company" does not imply the supervision of management
or investment practices or policies by any government agency.

Each Fund ordinarily declares dividends from net investment income on each
day the New York Stock Exchange is open for business. Each Fund's earnings for
Saturdays, Sundays and holidays are declared as dividends on the next business
day. Dividends usually are paid on the last business day of each month.
Distributions from net realized 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. Neither Fund will make
distributions from net realized securities gains unless capital loss carryovers,
if any, have been utilized or have expired.

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

Any dividend or distribution paid shortly after an investor's purchase may
have the effect of reducing the aggregate net asset value of the shares below
the cost of his other investment. Such a dividend or distribution would be a
return of investment in an economic sense, although taxable as stated above. In
addition, the Code provides that if a shareholder has not held his other shares
more than for six months (or shorter period as the Internal Revenue Service may
prescribe by regulation) and has received a capital gain distribution with
respect to such shares, any loss incurred on the sale of such shares will be
treated as long-term capital loss to the extent of the capital gain
distribution.

Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gain or loss. However, a portion of the gain or loss realized
from the disposition of foreign currencies (including foreign currency
denominated bank deposits) and non-U.S. dollar denominated securities (including
debt instruments and certain forward 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 gains realized from the sale or other disposition of certain
market discount bonds will be treated as ordinary income under Section 1276 of
the Code. Finally, all or a portion of the gain realized from engaging in
"conversion transactions" 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 to
produce capital gains, or 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 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, resulting in additional gain or loss to such Fund
characterized in the manner described above.

Offsetting positions held by a Fund involving certain foreign currency
forward contracts or options may constitute "straddles." "Straddles" are defined
to include "offsetting positions" in actively traded personal property. The tax
treatment of "straddles" is governed by Sections 1092 and 1258 of the Code,
which, in certain circumstances, override or modify the provisions of Sections
1256 and 988 of the Code.

If a 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
of the Code. A 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, to the extent the "straddle" and conversion
transaction 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" and conversion transaction
rules, short-term capital loss on "straddle" positions may be recharacterized as
long-term capital loss, and long-term capital gain on "straddle" positions may
be recharacterized as short-term capital gains or ordinary income.

The Taxable Relief Act of 1997 included constructive sale provisions that
generally apply if a Fund either (1) holds an appreciated financial position
with respect to stock, certain debt obligations, or partnership interests,
("appreciated financial position") and then enters into a short sale, futures,
forward, or offsetting notional principal contract (collectively, a "Contract")
respecting the same or substantially identical property or (2) holds an
appreciated financial position that is a Contract and then acquires property
that is the same as, or substantially identical to, the underlying property. In
each instance, with certain exceptions, the Fund generally will be taxed as if
the appreciated financial position were sold at its fair market value on the
date the Fund enters into the financial position or acquires the property,
respectively. Transactions that are identified hedging or straddle transactions
under other provisions of the Code can be subject to the constructive sale
provisions.

Investment by a Fund in securities issued or acquired at a discount, or
providing for deferred interest or for payment of interest in the form of
additional obligations could under special tax rules affect the amount, timing
and character 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 accrue a portion of the discount (or deemed discount) at which the
securities were issued each year and to distribute such income in order to
maintain its qualification as a regulated investment company. In such case, the
Fund may have to dispose of securities which it might otherwise have continued
to hold in order to generate cash to satisfy these distribution requirements.

PORTFOLIO TRANSACTIONS

The Manager assumes general supervision over placing orders on behalf of
the Company for the purchase or sale of portfolio securities. Allocation of
brokerage transactions, including their frequency, is made in the best judgment
of the Manager and in a manner deemed fair and reasonable to shareholders. The
primary consideration is prompt execution of orders at the most favorable net
price. Subject to this consideration, the brokers selected will include those
that supplement the Manager's research facilities with statistical data,
investment information, economic facts and opinions. Information so received is
in addition to and not in lieu of services required to be performed by the
Manager and the Manager's fees are not reduced as a consequence of the receipt
of such supplemental information. Such information may be useful to the Manager
in serving both the Company and other funds which it advises and, conversely,
supplemental information obtained by the placement of business of other clients
may be useful to the Manager in carrying out its obligations to the Company.

Sales by a broker of shares of a Fund or other funds advised by the
Manager or its affiliates may be taken into consideration, and brokers also will
be selected because of their ability to handle special executions such as are
involved in large block trades or broad distributions, provided the primary
consideration is met. Large block trades may, in certain cases, result from two
or more funds advised or administered by the Manager being engaged
simultaneously in the purchase or sale of the same security. Certain of the
Funds' transactions in securities of foreign issuers may not benefit from the
negotiated commission rates available to the Funds for transactions in
securities of domestic issuers. When transactions are executed in the
over-the-counter market, each Fund will deal with the primary market makers
unless a more favorable price or execution otherwise is obtainable. Foreign
exchange transactions are made with banks or institutions in the interbank
market at prices reflecting a mark-up or mark-down and/or commission.

Portfolio turnover may vary from year to year as well as within a year.
High turnover rates are likely to result in greater brokerage expenses. The
overall reasonableness of brokerage commissions paid is evaluated by the Manager
based upon its knowledge of available information as to the general level of
commissions paid by other institutional investors for comparable services.

For the fiscal years ended July 31, 1997, 1998 and 1999, total brokerage
commissions paid amounted to $18,178, $177,655 and $81,144, respectively, with
respect to Dreyfus Short Term Income Fund and $1,912, $41,035 and $2,196,
respectively, with respect to Dreyfus Intermediate Term Income Fund, none of
which was paid to the Distributor. Gross spreads and concessions on principal
transactions, where determinable, amounted to $70,000 and $154,000 for the
fiscal years ended July 31, 1997 and 1998, respectively, with respect to Dreyfus
Short Term Income Fund, and $0 for each of the fiscal years ended July 31, 1997,
1998 and 1999 with respect to Dreyfus Intermediate Term Income Fund, none of
which was paid to the Distributor.

PERFORMANCE INFORMATION

The current yield for the 30-day period ended July 31, 1999 for Dreyfus
Short Term Income Fund and Dreyfus Intermediate Term Income Fund was 6.69% and
7.35%, respectively, which reflects the absorption of certain expenses pursuant
to expense limitations in effect. Had certain expenses not been absorbed,
current yield for the same period would have been 6.90% for Dreyfus Intermediate
Term Income Fund. Current yield is computed pursuant to a formula which operates
as follows: the amount of the Fund's expenses accrued for the 30-day period (net
of reimbursements) is subtracted from the amount of the dividends and interest
earned (computed in accordance with regulatory requirements) by the Fund during
the period. That result is then divided by the product of: (a) the average daily
number of shares outstanding during the period that were entitled to receive
dividends, and (b) the net asset value per share on the last day of the period
less any undistributed earned income per share reasonably expected to be
declared as a dividend shortly thereafter. The quotient is then added to 1, and
that sum is raised to the 6th power, after which 1 is subtracted. The current
yield is then arrived at by multiplying the result by 2.

Dreyfus Short Term Income Fund's average annual return for the 1 and 5
year periods ended July 31, 1999, and for the period from August 18, 1992
(commencement of operations) through July 31, 1999, was 2.52%, 6.55% and 6.11%,
respectively. Dreyfus Intermediate Term Income Fund's average annual return for
the 1 year period ended July 31, 1999 and for the period from February 2, 1996
(commencement of operations) through July 31, 1999, was 4.18% and 9.42%,
respectively. 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 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.

Dreyfus Short Term Income Fund's total return for the period August 18,
1992 (commencement of operations) through July 31, 1999 was 51.02%. Dreyfus
Intermediate Term Income Fund's total return for the period February 2, 1996
(commencement of operations) through July 31, 1999 was 36.90%. Total return is
calculated by subtracting the amount of the Fund's net asset value per share at
the beginning of a stated period from the net asset value per share at the end
of the period (after giving effect to the reinvestment of dividends and
distributions during the period), and dividing the result by the net asset value
per share at the beginning of the period.

Comparative performance information may be used from time to time in
advertising or marketing Fund shares, including data from Lipper Analytical
Services, Inc., Merrill Lynch Domestic Master Index, Lehman Brothers Aggregate
Bond Index, Moody's Bond Survey Bond Index, Bond Buyer's 20-Bond Index,
Morningstar, Inc. and other industry publications. Each Fund's yield should
generally be higher than money market funds (neither Fund, however, seeks to
maintain a stabilized price per share nor may it be able to return an investor's
principal) and its price per share should fluctuate less than long term bond
funds (which generally have somewhat higher yields).

From time to time, the Company may compare a Fund's performance with the
performance of other instruments, such as certificates of deposit and
FDIC-insured bank money market accounts.

From time to time, advertising materials may refer to studies performed by
The Dreyfus Corporation or its affiliates, such as "The Dreyfus Tax Informed
Investing Study" or "The Dreyfus Gender Investment Comparison Study (1996 &
1997)" or other such studies.

INFORMATION ABOUT THE COMPANY AND FUNDS

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. Fund shares
are of one class and have equal rights as to dividends and in liquidation.
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 shareholders 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.

To date, the Board has authorized the creation of two series of shares.
All consideration received by the Company for shares of one of the series and
all assets in which such consideration is invested will belong to that series
(subject only to the rights of creditors of the Company) and will be subject to
the liabilities related thereto. The income attributable to, and the expenses
of, one series are treated separately from those of the other series. The
Company has the ability to create, from time to time, new series without
shareholder approval.

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.

Each Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculating 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 following a market-timing strategy or is
otherwise engaging 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 or the Dreyfus Premier 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 a
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 any 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 net asset value but the
purchase order would be effective only at the net asset value next determined
after the fund being purchased receives the proceeds of the redemption, which
may result in the purchase being delayed.

To offset the relatively higher costs of servicing smaller accounts, each
Fund will charge regular accounts with balances below $2,000 an annual fee of
$12. The valuation of accounts and the deductions are expected to take place
during the last four months of each year. The fee will be waived for any
investor whose aggregate Dreyfus mutual fund investments total at least $25,000,
and will not apply to IRA accounts or to accounts participating in automatic
investment programs or opened through a securities dealer, bank or other
financial institution, or to other fiduciary accounts.

The Company sends annual and semi-annual financial statements to all its
shareholders.

COUNSEL AND INDEPENDENT AUDITORS

Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038-4982, as counsel for the Company, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the shares
being sold pursuant to the Funds' Prospectus.

Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as independent auditors of the Company.

<PAGE>

APPENDIX

Description of certain ratings assigned by S&P, Moody's, Fitch and Duff:

S&P

Bond Ratings

AAA

Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.

Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher rated
categories.

BBB

Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.

Bonds rated BB have less near-term vulnerability to default than other
speculative grade debt. However, they face major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.

Bonds rated B have a greater vulnerability to default but presently have
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.

CCC

Bonds rated CCC have a current identifiable vulnerability to default, and
are dependent upon favorable business, financial and economic conditions to meet
timely payments of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, they are not likely to have the
capacity to pay interest and repay principal.

S&P's letter ratings may be modified by the addition of a plus (+) or
minus (-) sign designation, which is used to show relative standing within the
major rating categories, except in the AAA (Prime Grade) category.

Commercial Paper Rating

The designation A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus sign (+)
designation.

Moody's

Bond Ratings

Aaa

Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally 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.

Bonds 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.

Bonds 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 sometime in the future.

Baa

Bonds 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.

Bonds 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 therefore not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

Bonds 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 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.

Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and in
the categories below 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.

Commercial Paper Rating

The rating Prime-1 (P-1) is the highest commercial paper rating assigned
by Moody's. Issuers of P-1 paper must have a superior capacity for repayment of
short-term promissory obligations, and ordinarily will be evidenced by leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structures with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.

Fitch

Bond Ratings

The ratings represent Fitch's assessment of the issuer's ability to meet
the obligations of a specific debt issue or class of debt. The ratings take into
consideration special features of the issue, its relationship to other
obligations of the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the political and
economic environment that might affect the issuer's future financial strength
and credit quality.

AAA

Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.

Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1+.

Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.

BBB

Bonds rated BBB are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on these bonds
and, therefore, impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.

Bonds rated BB are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.

Bonds rated B are considered highly speculative. While bonds in this class
are currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity throughout
the life of the issue.

CCC

Bonds rated CCC have certain identifiable characteristics, which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.

Plus (+) and minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category.

Short-Term Ratings

Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.

Although the credit analysis is similar to Fitch's bond rating analysis,
the short-term rating places greater emphasis than bond ratings on the existence
of liquidity necessary to meet the issuer's obligations in a timely manner.

F-1+

Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1

Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.

Duff

Bond Ratings

AAA

Bonds rated AAA are considered highest credit quality. The risk factors
are negligible, being only slightly more than for risk-free U.S. Treasury debt.

Bonds rated AA are considered high credit quality. Protection factors are
strong. Risk is modest but may vary slightly from time to time because of
economic conditions.

Bonds rated A have protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.

BBB

Bonds rated BBB are considered to have below average protection factors
but still considered sufficient for prudent investment. Considerable variability
in risk exists during economic cycles.

Bonds rated BB are below investment grade but are deemed by Duff as likely
to meet obligations when due. Present or prospective financial protection
factors fluctuate according to industry conditions or company fortunes. Overall
quality may move up or down frequently within the category.

Bonds rated B are below investment grade and possess the risk that
obligations will not be met when due. Financial protection factors will
fluctuate widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in quality rating within
this category or into a higher or lower quality rating grade.

CCC

Bonds rated CCC are well below investment grade securities. Such bonds may
be in default or have considerable uncertainty as to timely payment of interest,
preferred dividends and/or principal. Protection factors are narrow and risk can
be substantial with unfavorable economic or industry conditions and/or with
unfavorable company developments.

Plus (+) and minus (-) signs are used with a rating symbol (except AAA) to
indicate the relative position of a credit within the rating category.

Commercial Paper Rating

The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by ample asset protection.
Risk factors are minor.