DREYFUS BALANCED FUND INC, 497, 1996-03-22

DREYFUS BALANCED FUND INC
497, 1996-03-22

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PROSPECTUS JANUARY 2, 1996
AS REVISED APRIL 1, 1996

DREYFUS BALANCED FUND, INC.
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DREYFUS BALANCED FUND, INC. (THE "FUND") IS AN OPEN-END,
NON-DIVERSIFIED, MANAGEMENT INVESTMENT COMPANY, KNOWN AS A MUTUAL FUND. ITS
GOAL IS LONG-TERM CAPITAL GROWTH AND CURRENT INCOME, CONSISTENT WITH
REASONABLE INVESTMENT RISK.
YOU CAN INVEST, REINVEST OR REDEEM SHARES AT ANY TIME WITHOUT CHARGE
OR PENALTY. YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING DREYFUS
TELETRANSFER.
THE DREYFUS CORPORATION PROFESSIONALLY MANAGES THE FUND'S PORTFOLIO.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.

THE STATEMENT OF ADDITIONAL INFORMATION, DATED JANUARY 2, 1996, AS
REVISED APRIL 1, 1996, WHICH MAY BE REVISED FROM TIME TO TIME, PROVIDES A
FURTHER DISCUSSION OF CERTAIN AREAS IN THIS PROSPECTUS AND OTHER MATTERS
WHICH MAY BE OF INTEREST TO SOME INVESTORS. IT HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION AND IS INCORPORATED HEREIN BY REFERENCE.
FOR A FREE COPY, WRITE TO THE FUND AT 144 GLENN CURTISS BOULEVARD, UNIONDALE,
NEW YORK 11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK FOR
OPERATOR 144.

MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO
TIME.
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TABLE OF CONTENTS
PAGE
ANNUAL FUND OPERATING EXPENSES ................... 3
CONDENSED FINANCIAL INFORMATION................... 3
DESCRIPTION OF THE FUND........................... 4
MANAGEMENT OF THE FUND............................ 6
HOW TO BUY FUND SHARES............................ 7
SHAREHOLDER SERVICES.............................. 9
HOW TO REDEEM FUND SHARES......................... 12
SHAREHOLDER SERVICES PLAN......................... 14
DIVIDENDS, DISTRIBUTIONS AND TAXES................ 15
PERFORMANCE INFORMATION........................... 16
GENERAL INFORMATION............................... 17
APPENDIX.......................................... 18
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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This Page Intentionally Left Blank
Page 2
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
<S> <C>
Management Fees .................................................................... .60%
Other Expenses...................................................................... .44%
Total Fund Operating Expenses ...................................................... 1.04%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the following
expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at
the end of each time period: $11 $33 $57 $127
</TABLE>
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THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL
RETURN GREATER OR LESS THAN 5%.
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The purpose of the foregoing table is to assist you in understanding
the costs and expenses borne by the Fund, the payment of which will reduce
investors' annual return. The information in the foregoing table does not
reflect any fee waivers or expense reimbursement arrangements that may be in
effect. You can purchase Fund shares without charge directly from the Fund's
distributor; you may be charged a nominal fee if you effect transactions in
Fund shares through a securities dealer, bank or other financial institution.
See "Management of the Fund" and "Shareholder Services Plan."
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited by Ernst
&Young LLP, the Fund's independent auditors, whose report thereon appears in
the Statement of Additional Information. Further financial data and related
notes are included in the Statement of Additional Information, available upon
request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share
of Common Stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each year indicated. This information
has been derived from the Fund's financial statements.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
----------------------------------
PER SHAREDATA: 1993(1) 1994 1995
------ ------ ------
<S> <C> <C> <C>
Net asset value, beginning of year........................................ $12.50 $13.28 $13.72
------ ------ ------
INVESTMENT OPERATIONS:
Investment income--net ................................................... .39 .41 .54
Net realized and unrealized gain on investments........................... .71 .59 1.99
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS.......................................... 1.10 1.00 2.53
------ ------ ------
DISTRIBUTIONS:
Dividends from investment income-net...................................... (.32) (.42) (.51)
Dividends from net realized gain on investments........................... -- (.14) (.13)
------ ------ ------
TOTAL DISTRIBUTIONS....................................................... (.32) (.56) (.64)
------ ------ ------
Net asset value, end of year.............................................. $13.28 $13.72 $15.61
====== ======= ======
TOTAL INVESTMENT RETURN 8.88%(2) 7.73% 19.03%
RATIOS / SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .................................. .23%(2) .69% 1.04%
Ratio of net investment income to average net assets...................... 3.46%(2) 3.26% 3.99%
Decrease reflected in above expense ratios due to undertakings
by The Dreyfus Corporation................................................ 1.13%(2) .41% --
Portfolio Turnover Rate................................................... 46.42%(2) 58.22% 72.42%
Net Assets, end of year (000's omitted)................................... $48,315 $82,848 $165,909
(1)From September 30, 1992 (commencement of operations) to August 31, 1993.
(2)Not annualized.
</TABLE>
Further information about the Fund's performance is contained in the
Fund's annual report, which may be obtained without charge by writing to the
address or calling the number set forth on the cover page of this Prospectus.
Page 3
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund's investment objective is to provide you with long-term
capital growth and current income, consistent with reasonable investment
risk. It cannot be changed without approval by the holders of a majority (as
defined in the Investment Company Act of 1940, as amended (the "1940 Act"))
of the Fund's outstanding voting shares. There can be no assurance that the
Fund's investment objective will be achieved.
MANAGEMENT POLICIES

The Fund is managed as a balanced fund and invests in equity and debt
securities. The proportion of the Fund's assets invested in each type of
security will vary from time to time in accordance with The Dreyfus
Corporation's assessment of economic conditions and investment opportunities.
Under normal market conditions, equity investments will range from 45% to 65%
of the Fund's portfolio, with a benchmark allocation of 50%. Fixed income
investments will range from 25% to 55%, with a benchmark allocation of 40%.
Cash and cash equivalents will comprise between 0% and 25% of the Fund's
portfolio, with a benchmark of 10%.

In determining whether the Fund should invest in a particular equity
security, The Dreyfus Corporation generally employs a value-oriented
approach, utilizing a "bottom-up" equity selection process. Unlike a process
that seeks equity securities of companies that are experiencing significant
capital growth with the prospect that such growth will continue, the process
used by the Fund involves seeking equity securities of companies that are
generally disfavored or undervalued in the marketplace, but which, in the
view of The Dreyfus Corporation, have certain characteristics indicating that
those equity securities may achieve significant capital growth. The Dreyfus
Corporation considers an equity security to be disfavored or undervalued if,
among other things, that security is selling with a relatively low price to
book ratio, low price to earnings ratio or higher than average dividend
payment in relation to price. Of course, there can be no assurance that the
equity securities actually purchased by the Fund under this process will
produce such returns.

In determining whether the Fund should invest in a particular debt
security, The Dreyfus Corporation reviews the terms of the instrument and
evaluates the creditworthiness of the issuer of the instrument, considering
all factors which it deems relevant, including, as deemed applicable, a
review of an issuer's cash flow; level of short-term debt; leverage;
capitalization; the quality and depth of management; profitability; return on
assets; and economic factors relative to the issuer's industry. The Dreyfus
Corporation, however, will not rely on its ability to predict correctly
movements in the direction of interest rates. The Fund will seek to provide a
positive real rate of return each year from its debt security investments by
investing in debt securities that have short to intermediate maturities and
offer the highest return relative to investment grade instruments in general.
The equity securities in which the Fund may invest consist of common
stocks, preferred stocks and convertible securities, as well as warrants to
purchase such securities. The Fund will be particularly alert to companies
which offer opportunities for capital appreciation and growth of earnings.
The debt securities in which the Fund may invest must be rated at
least Baa by Moody's Investors Service, Inc. ("Moody's") or at least BBB by
Standard & Poor's Ratings Group, a division of The McGraw Hill Companies,
Inc. ("S&P"), Fitch Investors Service, L.P. ("Fitch") or Duff & Phelps Credit
Rating Co. ("Duff") or, if unrated, deemed to be of comparable quality by The
Dreyfus Corporation. Debt securities rated Baa by Moody's and BBB by S&P,
Fitch and Duff are considered investment grade obligations which lack
outstanding investment characteristics and have speculative characteristics
as well. See "Appendix" in the Statement of Additional Information. The debt
securities
Page 4
in which the Fund invests have remaining maturities of 40 years or
less and, under normal market conditions, the dollar-weighted average
maturity of the Fund's portfolio invested in debt securities is expected to
be between two and ten years. During periods of rapidly rising interest
rates, the dollar-weighted average portfolio maturity of the Fund's debt
portfolio may be shortened to one year or less.
While seeking desirable investments, the Fund may invest in money
market instruments consisting of U.S. Government securities, certificates of
deposit, time deposits, bankers' acceptances, short-term investment grade
corporate bonds and other short-term debt instruments, and repurchase
agreements, as set forth under "Appendix_Certain Portfolio Securities_Money
Market Instruments." Under normal market conditions, the Fund does not expect
to have a substantial portion of its assets invested in money market
instruments. However, when The Dreyfus Corporation determines that adverse
market conditions exist, the Fund may adopt a temporary defensive posture and
invest all of its assets in money market instruments.
The Fund's annual portfolio turnover rate is not expected to exceed
100%. In an effort to increase returns, the Fund may engage in various
investment techniques, such as leveraging and lending portfolio securities.
See also "Appendix_Investment Techniques" below and "Investment Objective and
Management Policies--Management Policies"in the Statement of Additional
Information.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL -- The Fund's net asset value per share should be expected to
fluctuate. Investors should consider the Fund as a supplement to an overall
investment program and should invest only if they are willing to undertake
the risks involved. See "Investment Objective and Management
Policies_Management Policies" in the Statement of Additional Information for
a further discussion of certain risks.
EQUITY SECURITIES -- Equity securities fluctuate in value, often based on
factors unrelated to the value of the issuer of the securities, and such
fluctuations can be pronounced. Changes in the value of the Fund's
investments will result in changes in the value of its shares and thus the
Fund's total return to investors.
The securities of the smaller companies in which the Fund may invest
may be subject to more abrupt or erratic market movements than larger, more
established companies, because these securities typically are traded in lower
volume and the issuers typically are subject to a greater degree to changes
in earnings and prospects.
FIXED-INCOME SECURITIES -- Even though interest-bearing securities are
investments which promise a stable stream of income, the prices of such
securities are inversely affected by changes in interest rates and,
therefore, are subject to the risk of market price fluctuations. The values
of fixed-income securities also may be affected by changes in the credit
rating or financial condition of the issuer. Certain securities purchased by
the Fund, such as those rated Baa by Moody's and BBB by S&P, Fitch and Duff,
may be subject to such risk with respect to the issuing entity and to greater
market fluctuations than certain lower yielding, higher rated fixed-income
securities. Once the rating of a portfolio security has been changed, the
Fund will consider all circumstances deemed relevant in determining whether
to continue to hold the security. See "Appendix" in the Statement of
Additional Information.
FOREIGN SECURITIES -- The Fund's portfolio may contain securities of foreign
issuers which may subject the Fund to additional investment risks with
respect to those securities that are different in some respects from those
incurred by a fund which invests only in securities of domestic issuers. Such
risks include future political and economic developments, the possible
imposition of withholding taxes on income payable on the securities, the
possible establishment of exchange controls or the adoption of other foreign
governmental restrictions which might adversely affect an investment in these
securities and the possible seizure or nationalization of foreign deposits.
Page 5
USE OF DERIVATIVES -- The Fund may invest, to a limited extent, in
derivatives ("Derivatives"). These are financial instruments, which derive
their performance, at least in part, from the performance of an underlying
asset, index or interest rate. The Derivatives the Fund may use include
mortgage-related securities and asset-backed securities. While Derivatives
can be used effectively in furtherance of the Fund's investment objective,
under certain market conditions, they can increase the volatility of the
Fund's net asset value, can decrease the liquidity of the Fund's investments
and make more difficult the accurate pricing of the Fund's portfolio. See
"Appendix -- Investment Techniques -- Use of Derivatives" below and
"Investment Objective and Management Policies -- Management Policies --
Derivatives"in the Statement of Additional Information.
NON-DIVERSIFIED STATUS -- The Fund's classification as a "non-diversified"
investment company 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 1940 Act.
A "diversified" investment company is required by the 1940 Act generally,
with respect to 75% of its total assets, to invest not more than 5% of such
assets in the securities of a single issuer. Since a relatively high
percentage of the Fund's assets may be invested in the securities of a
limited number of issuers, some of which may be in the same industry, the
Fund's portfolio may be more sensitive to changes in the market value of a
single issuer or industry. However, to meet Federal tax requirements, at the
close of each quarter the Fund may not have more than 25% of its total assets
invested in any one issuer and, with respect to 50% of total assets, not more
than 5% of its total assets invested in any one issuer. The Fund may not
invest more than 25% of its assets in any one industry. These limitations do
not apply to U.S. Government securities.
SIMULTANEOUS INVESTMENTS -- Investment decisions for the Fund are made
independently from those of the other investment companies advised by The
Dreyfus Corporation. If, however, such other investment companies desire to
invest in, or dispose of, the same securities as the 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.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- The Dreyfus Corporation, located at 200 Park Avenue,
New York, New York 10166, was formed in 1947 and serves as the Fund's
investment adviser. The Dreyfus Corporation is a wholly-owned subsidiary of
Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank
Corporation ("Mellon"). As of October 31, 1995, The Dreyfus Corporation
managed or administered approximately $81 billion in assets for more than 1.8
million investor accounts nationwide.

The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the Fund,
subject to the overall authority of the Fund's Board in accordance with
Maryland law. The Fund's primary portfolio manager is Timothy M. Ghriskey,
Senior Portfolio Manager for The Dreyfus Corporation. He has held that
position since March 1996, and has been employed by The Dreyfus Corporation
since July 1995. From 1985 to June 1995, Mr. Ghriskey was Vice President and
Associate Managing Partner of Loomis, Sayles & Company. The Fund's other
portfolio managers are identifiedin the Statement of Additional Information.
The Dreyfus Corporation also provides research services for the Fund as well
as for other funds advised by The Dreyfus Corporation through a professional
staff of portfolio managers and securities analysts.

Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
Page 6
markets. Mellon is among the twenty-five largest bank holding companies in
the United States based on total assets. Mellon's principal wholly-owned
subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc., AFCO Credit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, Mellon managed more than $209 billion in assets as of
September 30, 1995, including approximately $80 billion in proprietary mutual
fund assets. As of September 30, 1995, Mellon, through various subsidiaries,
provided non-investment services, such as custodial or administration
services, for more than $717 billion in assets, including approximately $55
billion in mutual fund assets.
For the fiscal year ended August 31, 1995, the Fund paid The Dreyfus
Corporation a monthly management fee at the annual rate of .60 of 1% of the
value of the Fund's average daily net assets. From time to time, The Dreyfus
Corporation may waive receipt of its fees and/or voluntarily assume certain
expenses of the Fund, which would have the effect of lowering the overall
expense ratio of the Fund and increasing yield to investors at the time such
amounts are waived or assumed, as the case may be. The Fund will not pay The
Dreyfus Corporation at a later time for any amounts it may waive, nor will
the Fund reimburse The Dreyfus Corporation for any amounts it may assume.
The Dreyfus Corporation may pay the Fund's distributor for
shareholder services from The Dreyfus Corporation's own assets, including
past profits but not including the management fee paid by the Fund. The
Fund's distributor may use part or all of such payments to pay securities
dealers or others in respect of these services.
DISTRIBUTOR -- The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at One Exchange Place, Boston, Massachusetts
02109. The Distributor's ultimate parent company is Boston Institutional
Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN -- Dreyfus Transfer,
Inc., a wholly-owned subsidiary of The Dreyfus Corporation, is located at One
American Express Plaza, Providence, Rhode Island 02903, and serves as the
Fund's Transfer and Dividend Disbursing Agent (the "Transfer Agent"). The
Bank of New York, 90 Washington Street, New York, New York 10286, is the
Fund's Custodian.
HOW TO BUY FUND SHARES
Fund shares are sold without a sales charge. You may be charged a
nominal fee if you effect transactions in Fund shares through a securities
dealer, bank or other financial institution. 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 securities dealer, bank or other financial institution which 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 for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7)
Plans with only one participant is $750, with no minimum for subsequent
purchases. Individuals who open an IRA also may open a non-working spousal
IRA with a minimum initial investment of $250. Subsequent investments in a
spousal IRA must be at least $250. The initial investment must be accompanied
by the Fund's Account Application. For full-time or part-time employees of
The Dreyfus Corporation or any of its affiliates or subsidiaries, directors
of The Dreyfus Corporation, Board members of a fund advised by The Dreyfus
Corporation, 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 Dreyfus Corporation or any of its
affiliates or subsidiaries who elect to have a portion of their pay directly
deposited into their Fund account, the minimum initial investment is $50. The
Fund reserves the right
Page 7
to offer Fund shares without regard to minimum purchase requirements to
employees participating in certain qualified or non-qualified employee
benefit plans or other programs where contributions or account information
can be transmitted in a manner and form acceptable to the Fund. The Fund
reserves the right to vary further the initial and subsequent investment
minimum requirements at any time. Fund shares also are offered without regard
to the minimum initial investment requirements through Dreyfus-AUTOMATIC
Asset BuilderRegistration Mark, Dreyfus Government Direct Deposit Privilege
or Dreyfus Payroll Savings Plan pursuant to the Dreyfus Step Program
described under "Shareholder Services." These services enable
you to make regularly scheduled investments and may provide you with a
convenient way to invest for long-term financial goals. You should be aware,
however, that periodic investment plans do not guarantee a profit and will
not protect an investor against loss in a declining market.
You may purchase Fund shares by check or wire, or through the Dreyfus
TELETRANSFER Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds" or, if for Dreyfus retirement plan accounts, to "The
Dreyfus Trust Company, Custodian." Payments to open new accounts which are
mailed should be sent to The Dreyfus Family of Funds, P.O. Box 9387,
Providence, Rhode Island 02940-9387, together with your Account Application.
For subsequent investments, your Fund account number should appear on the
check and an investment slip should be enclosed and sent to The Dreyfus
Family of Funds, P.O. Box 105, Newark, New Jersey 07101-0105. For Dreyfus
retirement plan accounts, both initial and subsequent investments should be
sent to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427. Neither initial nor subsequent investments should be
made by third party check. Purchase orders may be delivered in person only to
a Dreyfus Financial Center. THESE ORDERS WILL BE FORWARDED TO THE FUND AND
WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For the location of the nearest
Dreyfus Financial Center, please call one of the telephone numbers listed
under "General Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, DDA #8900117176/Dreyfus Balanced
Fund, Inc., for purchase of Fund shares in your name. The wire must include
your Fund account number (for new accounts, your Taxpayer Identification
Number ("TIN") should be included instead), account registration and dealer
number, if applicable. If your initial purchase of Fund shares is by wire,
please call 1-800-645-6561 after completing your wire payment to obtain your
Fund account number. Please include your Fund account number on the Fund's
Account Application and promptly mail the Account Application to the Fund, as
no redemptions will be permitted until the Account Application is received.
You may obtain further information about remitting funds in this manner from
your bank. All payments should be made in U.S. dollars and, to avoid fees and
delays, should be drawn only on U.S. banks. A charge will be imposed if any
check used for investment in your account does not clear. The Fund makes
available to certain large institutions the ability to issue purchase
instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct the
institution to transmit immediately available funds through the Automated
Clearing House to The Bank of New York with instructions to credit your Fund
account. The instructions must specify your Fund account registration and
your Fund account number PRECEDED BY THE DIGITS "1111."
Fund shares are sold on a continuous basis at net asset value per
share next determined after an order in proper form is received by the
Transfer Agent or other agent. 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.,
Page 8
New York time), on each day the New York Stock Exchange is open
for business. 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. The Fund's investments are valued based
on market value or, where market quotations are not readily available, based
on fair value as determined in good faith by the Fund's Board. Certain
securities may be valued by an independent pricing service approved by the
Fund's Board and are valued at fair value as determined by the pricing
service. For further information regarding the methods employed in valuing
Fund investments, see "Determination of Net Asset Value" in the Statement of
Additional Information.
For certain institutions that have entered into agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted, and
must be received by the Transfer Agent, within three business days after the
order is placed. If such payment is not received within three business days
after the order is placed, the order may be canceled and the institution
could be held liable for resulting fees and/or losses.
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plan or programs have
a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the Dreyfus
Family of Funds or certain other products made available by the Distributor
to such plans or programs exceeds one million dollars ("Eligible Benefit
Plans"). All present holdings of shares of funds in the Dreyfus Family of
Funds by Eligible Benefit Plans will be aggregated to determine the fee
payable with respect to each purchase of Fund shares. The Distributor
reserves the right to cease paying these fees at any time. The Distributor
will pay such fees from its own funds, other than amounts received from the
Fund, including past profits or any other source available to it.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund could subject you
to a $50 penalty imposed by the Internal Revenue Service (the "IRS").
DREYFUS TELETRANSFER PRIVILEGE -- You may purchase shares (minimum $500,
maximum $150,000) by telephone if you have checked the appropriate box and
supplied the necessary information on the Fund's 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 member may be so designated.
The Fund may modify or terminate this Privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of shares by telephoning
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES
FUND EXCHANGES -- You may purchase, in exchange for shares of the Fund,
shares of certain other funds managed or administered by The Dreyfus
Corporation, to the extent such shares are offered for sale in your state of
residence. These funds have different investment objectives which may be of
interest to you. If you desire to use this service, please call
1-800-645-6561 to determine if it is available and whether any conditions are
imposed on its use.
To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. See "How to Redeem Fund
Shares_Procedures." Before any exchange, you must obtain and should review a
copy of the current prospectus of the fund into which the exchange is being
made.
Page 9
Prospectuses may be obtained by calling 1-800-645-6561. Except in the
case of personal retirement plans, the shares being exchanged must have a
current value of at least $500; furthermore, when establishing a new account
by exchange, the shares being exchanged must have a value of at least the
minimum initial investment required for the fund into which the exchange is
being made. 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. The Telephone Exchange Privilege may be established for an
existing account by written request, signed by all shareholders on the
account, or by a separate signed Shareholder Services Form, also available by
calling 1-800-645-6561. If you have established the Telephone Exchange
Privilege, you may telephone exchange instructions by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452. See "How to Redeem
Fund Shares _ Procedures." Upon an exchange into a new account, the following
shareholder services and privileges, as applicable and where available, will
be automatically carried over to the fund into which the exchange is made:
Telephone Exchange Privilege, Wire Redemption Privilege, Telephone Redemption
Privilege, Dreyfus TELETRANSFER Privilege and the dividend/capital gain
distribution option (except for Dreyfus Dividend Sweep) selected by the
investor.
Shares will be exchanged at the next determined net asset value;
however, a sales load may be charged with respect to exchanges into funds
sold with a sales load. If you are exchanging into a fund that charges a
sales load, you may qualify for share prices which do not include the sales
load or which reflect a reduced sales load, if the shares of the fund from
which you are exchanging were: (a) purchased with a sales load, (b) acquired
by a previous exchange from shares purchased with a sales load, or (c)
acquired through reinvestment of dividends or distributions paid with respect
to the foregoing categories of shares. To qualify, at the time of your
exchange you must notify the Transfer Agent. Any such qualification is
subject to confirmation of your holdings through a check of appropriate
records. See "Shareholder Services" in the Statement of Additional
Information. No fees currently are charged shareholders directly in
connection with exchanges, although the Fund reserves the right, upon not less
than 60 days' written notice, to charge shareholders a nominal fee in
accordance with rules promulgated by the Securities and Exchange Commission.
The Fund reserves the right to reject any exchange request in whole or in
part. The availability of Fund Exchanges may be modified or terminated at any
time upon notice to shareholders. See "Dividends, Distributions and Taxes."
DREYFUS AUTO-EXCHANGE PRIVILEGE -- Dreyfus Auto-Exchange Privilege enables
you to invest regularly (on a semi-monthly, monthly, quarterly or annual
basis), in exchange for shares of the Fund, in shares of other funds in the
Dreyfus Family of Funds of which you are currently an investor. The amount
you designate, which can be expressed either in terms of a specific dollar or
share amount ($100 minimum), will be exchanged automatically on the first
and/or fifteenth of the month according to the schedule you have selected.
Shares will be exchanged at the then-current net asset value; however, a
sales load may be charged with respect to exchanges into funds sold with a
sales load. See "Shareholder Services" in the Statement of Additional
Information. The right to exercise this Privilege may be modified or
cancelled by the Fund or the Transfer Agent. You may modify or cancel your
exercise of this Privilege at any time by writing to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. The Fund may
charge a service fee for the use of this Privilege. No such fee currently is
contemplated. See "Dividends, Distributions and Taxes." For more information
concerning this Privilege and the Funds in the Dreyfus Family of Funds
eligible to participate in this Privilege, or to obtain a Dreyfus
Auto-Exchange Authorization Form, please call toll free 1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark -- Dreyfus-AUTOMATIC Asset
Builder permits you to purchase Fund shares (minimum of $100 and maximum of
$150,000 per transaction) at regular intervals selected
Page 10
by you. Fund shares are purchased by transferring funds from the bank account
designated by you. At your option, the bank account designated by you will
be debited in the specified amount, and Fund shares will be purchased, once a
month, on either the first or fifteenth day, or twice a month, on both days.
Only an account maintained at a domestic financial institution which is an
Automated Clearing House member may be so designated. To establish a
Dreyfus-AUTOMATIC Asset Builder account, you must file an authorization form
with the Transfer Agent. You may obtain the necessary authorization form by
calling 1-800-645-6561. You may cancel your participation in this Privilege
or change the amount of purchase at any time by mailing written notification
to The Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island
02940-9671, or, if for Dreyfus retirement plan accounts, to The Dreyfus Trust
Company, Custodian, P.O. Box 6427, Providence, Rhode Island 02940-6427, and
the notification will be effective three business days following receipt. The
Fund may modify or terminate this Privilege at any time or charge a service
fee. No such fee currently is contemplated.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE -- Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social
Security, or certain veterans', military or other payments from the Federal
government automatically deposited into your Fund account. You may deposit as
much of such payments as you elect. To enroll in Dreyfus Government Direct
Deposit, you must file with the Transfer Agent a completed Direct Deposit
Sign-Up Form for each type of payment that you desire to include in the
Privilege. The appropriate form may be obtained by calling 1-800-645-6561.
Death or legal incapacity will terminate your participation in this
Privilege. You may elect at any time to terminate your participation by
notifying in writing the appropriate Federal agency. Further, the Fund may
terminate your participation upon 30 days' notice to you.
DREYFUS PAYROLL SAVINGS PLAN -- Dreyfus Payroll Savings Plan permits you to
purchase Fund shares (minimum of $100 per transaction) automatically on a
regular basis. Depending upon your employer's direct deposit program, you may
have part or all of your paycheck transferred to your existing Dreyfus
account electronically through the Automated Clearing House system at each
pay period. To establish a Dreyfus Payroll Savings Plan account, you must
file an authorization form with your employer's payroll department. Your
employer must complete the reverse side of the form and return it to The
Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671.
You may obtain the necessary authorization form by calling 1-800-645-6561.
You may change the amount of purchase or cancel the authorization only by
written notification to your employer. It is the sole responsibility of your
employer, not the Distributor, The Dreyfus Corporation, the Fund, the
Transfer Agent or any other person, to arrange for transactions under the
Dreyfus Payroll Savings Plan. The Fund may modify or terminate this Privilege
at any time or charge a service fee. No such fee currently is contemplated.
Shares held under Keogh Plans, IRAs or other retirement plans are not
eligible for this Privilege.
DREYFUS STEP PROGRAM -- Dreyfus Step Program enables you to purchase Fund
shares without regard to the Fund's minimum initial investment requirements
through Dreyfus-AUTOMATIC-Asset Builder, Dreyfus Government Direct Deposit
Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step
Program account, you must supply the necessary information on the Fund's
Account Application and file the required authorization form(s) with the
Transfer Agent. For more information concerning this Program, or to request
the necessary authorization form(s), please call toll free 1-800-782-6620.
You may terminate your participation in this Program at any time by
discontinuing your participation in Dreyfus-AUTOMATIC Asset Builder, Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan, as the
case may be, as provided under the terms of such Privilege(s). The Fund may
modify or terminate this Program at any time. Investors who wish to purchase
Fund shares through the
Page 11
Dreyfus Step Program in conjunction with a Dreyfus-sponsored retirement plans
may do so only for IRAs, SEP- IRAs and IRA "Rollover Accounts."
DREYFUS DIVIDEND OPTIONS -- Dreyfus Dividend Sweep enables you to invest
automatically dividends or dividends and capital gain distributions, if any,
paid by the Fund in shares of another fund in the Dreyfus Family of Funds of
which you are a shareholder. Shares of the other fund will be purchased at
the then-current net asset value; however, a sales load may be charged with
respect to investments in shares of a fund sold with a sales load. If you are
investing in a fund that charges a sales load, you may qualify for share
prices which do not include the sales load or which reflect a reduced sales
load. See "Shareholder Services" in the Statement of Additional Information.
Dreyfus Dividend ACHpermits you to transfer electronically dividends or
dividends and capital gain distributions, if any, from the Fund to a
designated bank account. Only such an account maintained at a domestic
financial institution which is an Automated Clearing House member may be so
designated. Banks may charge a fee for this service.
For more information concerning these privileges or to request a
Dividend Options Form, please call toll free 1-800-645-6561. You may cancel
these privileges by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. Enrollment in or
cancellation of these privileges is effective three business days following
receipt. These privileges are available only for existing accounts and may
not be used to open new accounts. Minimum subsequent investments do not apply
for Dreyfus Dividend Sweep. The Fund may modify or terminate these privileges
at any time or charge a service fee. No such fee currently is contemplated.
Shares held under Keogh Plans, IRAs or other retirement plans are not
eligible for Dreyfus Dividend Sweep.
AUTOMATIC WITHDRAWAL PLAN -- 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. An
application for the Automatic Withdrawal Plan can be obtained by calling
1-800-645-6561. There is a service charge of 50cents for each withdrawal
check. The Automatic Withdrawal Plan may be ended at any time by you, the
Fund or the Transfer Agent. Shares for which certificates have been issued
may not be redeemed through the Automatic Withdrawal Plan.
RETIREMENT PLANS -- The Fund offers a variety of pension and profit-sharing
plans, including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts,"
401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support services also
are available. You can obtain details on the various plans by calling the
following numbers toll free: for Keogh Plans, please call 1-800-358-5566; for
IRAs and IRA "Rollover Accounts," please call 1-800-645-6561; for SEP-IRAs,
401(k) Salary Reduction Plans and 403(b)(7) Plans, please call 1-800-322-7880.
HOW TO REDEEM FUND SHARES
GENERAL -- You may request redemption of your shares at any time. When a
request is received in proper form, the Fund will redeem the shares at the
next determined net asset value.
The Fund imposes no charges when shares are redeemed. Securities
dealers, banks and other financial institutions may charge their clients a
nominal fee for effecting redemptions of Fund shares. Any certificates
representing Fund shares being redeemed must be submitted with the redemption
request. The value of the shares redeemed may be more or less than their
original cost, depending upon the Fund's then-current net asset value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY DREYFUS
TELETRANSFER PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDER AND
SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE
REDEMPTION PROCEEDS WILL
Page 12
BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE CHECK,
DREYFUS TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET BUILDER ORDER, WHICH
MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL REJECT
REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO THE DREYFUS
TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY
THE TRANSFER AGENT OF THE PURCHASE CHECK, THE DREYFUS TELETRANSFER PURCHASE
OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST WHICH SUCH REDEMPTION IS
REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY
WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR
ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS
EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL
BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares
will not be redeemed until the Transfer Agent has received your Account
Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if your account's net asset value is
$500 or less and remains so during the notice period.
PROCEDURES -- You may redeem shares by using the regular redemption procedure
through the Transfer Agent, or if you have checked the appropriate box and
supplied the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent, through the Wire
Redemption Privilege, the Telephone Redemption Privilege or the Dreyfus
TELETRANSFER Privilege. The Fund makes available to certain large institutions
the ability to issue redemption instructions through compatible computer
facilities. The Fund reserves the right to refuse any request made by wire
or telephone, including requests made shortly after a change of address, and
may limit the amount involved or the number of such requests. The Fund may
modify or terminate any redemption Privilege at any time or charge a service
fee upon notice to shareholders. No such fee currently is contemplated.
You may redeem shares by telephone if you have checked the
appropriate box on the Fund's Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption
privilege or telephone exchange privilege (which is granted automatically
unless you refuse it), you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you and
reasonably believed by the Transfer Agent to be genuine. The Fund will
require the Transfer Agent to employ reasonable procedures, such as requiring
a form of personal identification, to confirm that instructions are genuine
and, if it does not follow such procedures, the Fund or the Transfer Agent
may be liable for any losses due to unauthorized or fraudulent instructions.
Neither the Fund nor the Transfer Agent will be liable for following
telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used. During the delay, the Fund's net asset value may fluctuate.
REGULAR REDEMPTION -- Under the regular redemption procedure, you may redeem
your shares by written request mailed to The Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus retirement
plan accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427,
Providence, Rhode Island 02940-6427. Redemption requests may be delivered in
person only to a Dreyfus Financial Center. THESE REQUESTS WILL BE FORWARDED
TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For the location
of the nearest Dreyfus Financial Center, please call one of the telephone
numbers listed under "General Information." Redemption requests must be
signed by each shareholder, including each owner of a joint account, and each
signature must
Page 13
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.
If you have any questions with respect to signature-guarantees, please call
one of the telephone numbers listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE -- You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. You also may direct that redemption proceeds be paid by
check (maximum $150,000 per day)made out to the owners of record and mailed
to your address. Redemption proceeds of less than $1,000 will be paid
automatically by check. Holders of jointly registered Fund or bank accounts
may have redemption proceeds of not more than $250,000 wired within any
30-day period. You may telephone redemption requests by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. The
Statement of Additional Information sets forth instructions for transmitting
redemption requests by wire. Shares held under Keogh Plans, IRAs or other
retirement plans, and shares for which certificates have been issued, are not
eligible for this Privilege.
TELEPHONE REDEMPTION PRIVILEGE -- You may request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. Shares
held under Keogh Plans, IRAs or other retirement plans, and shares for which
certificates have been issued, are not eligible for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE -- You may request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an Automated Clearing House member may be
designated. Redemption proceeds will be on deposit in your account at an
Automated Clearing House member bank ordinarily two days after receipt of the
redemption request or, at your request, paid by check (maximum $150,000 per
day) and mailed to your address. Holders of jointly registered Fund or bank
accounts may redeem through the Dreyfus TELETRANSFER Privilege for transfer
to their bank account not more than $250,000 within any 30-day period.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of shares by telephoning
l-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
Shares held under Keogh Plans, IRAs or other retirement plans, and shares
issued in certificate form, are not eligible for this Privilege.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan pursuant to which
the Fund reimburses Dreyfus Service Corporation, a wholly-owned subsidiary of
The Dreyfus Corporation, an amount not to exceed an annual rate of .25 of 1%
of the value of the Fund's average daily net assets for certain allocated
expenses of providing personal services and/or maintaining shareholder
accounts. The services provided may include personal services relating to
shareholder accounts, such as answering shareholder inquiries regarding the
Fund and providing reports and other information, and services related to the
maintenance of shareholder accounts.
Page 14
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily declares and pays dividends from net investment
income quarterly, and distributes net realized securities gains, if any, once
a year, but it may make distributions on a more frequent basis to comply with
the distribution requirements of the Code, in all events in a manner
consistent with the provisions of the 1940 Act. The Fund will not make
distributions from net realized securities gains unless capital loss
carryovers, if any, have been utilized or have expired. You may choose whether
to receive dividends and distributions in cash or to reinvest in additional
Fund shares at net asset value. All expenses are accrued daily and deducted
before declaration of dividends to investors.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Fund will be taxable to U.S. shareholders
as ordinary income whether received in cash or reinvested in Fund shares.
Depending upon the composition of the Fund's income, all or a portion of the
dividends derived from net investment income may qualify for the dividends
received deduction allowable to certain U.S. corporations. Distributions from
net realized long-term securities gains of the Fund will be taxable to U.S.
shareholders as long-term capital gains for Federal income tax purposes,
regardless of how long shareholders have held their Fund shares and whether
such distributions are received in cash or reinvested in shares. The Code
provides that the net capital gain of an individual generally will not be
subject to Federal income tax at a rate in excess of 28%. Dividends and
distributions may be subject to state and local taxes.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Fund to a foreign investor generally are
subject to U.S. nonresident withholding taxes at the rate of 30%, unless the
foreign investor claims the benefit of a lower rate specified in a tax
treaty. Distributions from net realized long-term securities gains paid by
the Fund to a foreign investor as well as the proceeds of any redemptions
from a foreign investor's account, regardless of the extent to which gain or
loss may be realized, generally will not be subject to U.S. nonresident
withholding tax. However, such distributions may be subject to backup
withholding, as described below, unless the foreign investor certifies his
non-U.S. residency status.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
Notice as to the tax status of your dividends and distributions will
be mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends, distributions
from net realized securities gains and the proceeds of any redemption,
regardless of the extent to which gain or loss may be realized, paid to a
shareholder if such shareholder fails to certify either that the TIN
furnished in connection with opening an account is correct or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the IRS may
notify the Fund to institute backup withholding if the IRS determines a
shareholder's TIN is incorrect or if a shareholder has failed to properly
report taxable dividend and interest income on a Federal income tax return.
Page 15
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
record owner of the account, and may be claimed as a credit on the record
owner's Federal income tax return.
Management of the Fund believes that the Fund has qualified for the
fiscal year ended August 31, 1995 as a "regulated investment company" under
the Code. The Fund intends to continue to so qualify if such qualification is
in the best interests of its shareholders. Such qualification relieves the
Fund of any liability for Federal income tax to the extent its earnings are
distributed in accordance with applicable provisions of the Code. The Fund is
subject to a non-deductible 4% excise tax, measured with respect to certain
undistributed amounts of taxable investment income and capital gains.
You should consult your tax adviser regarding specific questions as
to Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance may be calculated on several
bases, including current yield, average annual total return and/or total
return.
Current yield refers to the Fund's annualized net investment income
per share over a 30-day period, expressed as a percentage of the net asset
value per share at the end of the period. For purposes of calculating current
yield, the amount of net investment income per share during that 30-day
period, computed in accordance with regulatory requirements, is compounded by
assuming that it is reinvested at a constant rate over a six-month period. An
identical result is then assumed to have occurred during a second six-month
period which, when added to the result for the first six months, provides an
"annualized" yield for an entire one-year period. Calculations of current
yield may reflect absorbed expenses pursuant to any undertaking that may be
in effect. See "Management of the Fund."
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment in the Fund was purchased with an
initial payment of $1,000 and that the investment was redeemed at the end of
a stated period of time, after giving effect to the reinvestment of dividends
and distributions during the period. The return is expressed as a percentage
rate which, if applied on a compounded annual basis, would result in the
redeemable value of the investment at the end of the period. Advertisements
of the Fund's performance will include the Fund's average annual total return
for one, five and ten year periods, or for shorter periods depending upon the
length of time during which the Fund has operated.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the net asset
value per share at the beginning of the period. Advertisements may include
the percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes the
application of the percentage rate of total return.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Standard & Poor's 500 Composite Stock Price Index,
Standard & Poor's MidCap 400 Index, the Dow Jones Industrial Average,
Morningstar, Inc. and other industry publications.
Page 16
GENERAL INFORMATION
The Fund was incorporated under Maryland law on June 9, 1992, and
commenced operations on September 30, 1992. The Fund is authorized to issue
300 million shares of Common Stock, par value $.001 per share. Each share has
one vote.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Directors or the
appointment of auditors. However, pursuant to the Fund's By-laws, the holders
of at least l0% of the shares outstanding and entitled to vote may require
the Fund to hold a special meeting of shareholders for purposes of removing a
Director from office and for any other purpose. Fund shareholders may remove
a Director by the affirmative vote of a majority of the Fund's outstanding
voting shares. In addition, the Board of Directors will call a meeting of
shareholders for the purpose of electing Directors if, at any time, less than
a majority of the Directors then holding office have been elected by
shareholders.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561. In New York City, call 1-718-895-1206; outside the U.S. and
Canada, call 516-794-5452.
Page 17
APPENDIX
INVESTMENT TECHNIQUES
LEVERAGE -- Leveraging will exaggerate the effect on net asset value of any
increase or decrease in the market value of the Fund's portfolio. Money
borrowed for leveraging will be limited to 331/3% of the value of the Fund's
total assets. 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.
The 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, the Fund's borrowings generally will
be unsecured.
LENDING PORTFOLIO SECURITIES -- The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. In connection with such
loans, the Fund continues to be entitled to payments in amounts equal to the
interest, dividends or other distributions payable on the loaned securities.
Loans of portfolio securities afford the Fund an opportunity to earn interest
on the amount of the loan and at the same time to earn income on the loaned
securities' collateral. Loans of portfolio securities may not exceed 331/3%
of the value of the Fund's total assets. In connection with such loans, 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. TheFund might experience risk of loss if the institution with which
it has engaged in a portfolio loan transaction breaches its agreement with
the Fund.
USE OF DERIVATIVES -- 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 the Fund to
increase, decrease or change the level of risk to which its portfolio is
exposed in much the same way as the Fund can increase, decrease or change the
risk of its portfolio by making investments in specific securities.
In addition, 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 the Fund's performance.
If the Fund invests in Derivatives at inappropriate times or judges
market conditions incorrectly, such investments may lower the Fund's return
or result in a loss. The Fund also could experience losses if it 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.
FORWARD COMMITMENTS -- The Fund may purchase securities on a forward
commitment or when-issued basis, which means that delivery and payment take
place a number of days after the date of the commitment to purchase. The
payment obligation and the interest rate that will be received on a forward
commitment or when-issued security are fixed at the time the Fund enters into
the commitment. However, the Fund does not make payment until it receives
delivery from the other party to the transaction. The Fund will make
commitments to purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable. A segregated account of the Fund
consisting of cash, cash equivalents or U.S. Government
Page 18
securities or other high quality liquid debt securities at least equal at all
times to the amount of the commitments will be established and maintained at
the Fund's custodian bank.
CERTAIN PORTFOLIO SECURITIES
CONVERTIBLE SECURITIES -- Convertible securities are fixed-income securities
that 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.
WARRANTS _ A warrant is an instrument issued by a corporation which gives the
holder the right to subscribe to a specified amount of the corporation's
capital stock at a set price for a specified period of time. The Fund may
invest up to 2% 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.
MORTGAGE-RELATED SECURITIES -- Mortgage-related securities are a form of
Derivative collateralized by pools of mortgages assembled for sale to
investors by various governmental agencies, such as the Government National
Mortgage Association and government-related organizations such as the Federal
Home Loan Mortgage Corporation, as well as by private issuers such as
commercial banks, savings and loan institutions, mortgage banks and private
mortgage insurance companies, and similar foreign entities. The
mortgage-related securities which may be purchased include those with fixed,
floating and variable interest rates, those with interest rates that change
based on multiples of changes in interest rates and those with interest rates
that change inversely to changes in interest rates, as well as stripped
mortgage-backed securities. Stripped mortgage-backed securities usually are
structured with two classes that receive different proportions of interest
and principal distributions on a pool of mortgage-backed securities or whole
loans. A common type of stripped mortgage-backed security will have one class
receiving some of the interest and most of the principal from the mortgage
collateral, while the other class will receive most of the interest and the
remainder of the principal. Although certain mortgage-related securities are
guaranteed by a third party or otherwise similarly secured, the market value
of the security, which may fluctuate, is not secured. 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. As with other interest-bearing securities, the prices of certain
of these 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 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.
For further discussion concerning the investment considerations involved, see
"Description of the Fund -- Investment Considerations and Risks --
Fixed-Income Securities" and "Illiquid Securities" below.
ASSET-BACKED SECURITIES -- 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. 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
Page 19
account receivables. The 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 the
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.
MONEY MARKET INSTRUMENTS -- The Fund may invest, in the circumstances
described under "Description of the Fund--Management Policies," in the
following types of money market instruments.
U.S. GOVERNMENT SECURITIES. Securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities include U.S. Treasury
securities that differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others, by the right of the issuer to borrow from the Treasury;
others, by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others, only by the credit
of the agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. While the U.S. Government provides financial
support to such U.S. Government-sponsored agencies and instrumentalities, no
assurance can be given that it will always do so since it is not so obligated
by law.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Fund buys, and
the seller agrees to repurchase, a security at a mutually agreed upon time
and price (usually within seven days). The repurchase agreement thereby
determines the yield during the purchaser's holding period, while the
seller's obligation to repurchase is secured by the value of the underlying
security. Repurchase agreements could involve risks in the event of a default
or insolvency of the other party to the agreement, including possible delays
or restrictions upon the Fund's ability to dispose of the underlying
securities. The Fund may enter into repurchase agreements with certain banks
or non-bank dealers.
BANK OBLIGATIONS. The Fund may purchase certificates of deposit, time
deposits, bankers' acceptances and other short-term obligations issued by
domestic banks, foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions. With respect to such securities
issued by foreign subsidiaries or foreign branches of domestic banks, and
domestic and foreign branches of foreign banks, the Fund may be subject to
additional investment risks that are different in some respects from those
incurred by a fund which invests only in debt obligations of U.S. domestic
issuers.
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period
of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven
days) at a stated interest rate.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments reflect
the obligation both of the bank and the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
COMMERCIAL PAPER. Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs. The commercial
paper purchased by the Fund will consist only of direct obligations which, at
the time of their purchase, are (a) rated not lower than Prime-1 by Moody's,
A-1 by S&P, F-1 by Fitch or Duff-1 by Duff, (b) issued by companies having an
outstanding unsecured debt issue currently rated at least Aa3 by Moody's or
AA- by S&P, Fitch or Duff, or (c) if unrated, determined by The Dreyfus
Corporation to be of comparable quality to those rated obligations which may
be purchased by the Fund.
Page 20
ZERO COUPON AND STRIPPED SECURITIES _ The 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. The Fund also may invest in zero coupon securities
issued by corporations and financial institutions which constitute a
proportionate ownership of the issuer's pool of underlying U.S. Treasury
securities. A zero coupon security pays no interest to its holder during its
life and is sold at a discount to its face value at maturity. The amount of
the discount fluctuates with the market price of the security. The market
prices of zero coupon securities generally are more volatile than the market
prices of securities that pay interest periodically and are likely to respond
to a greater degree to changes in interest rates than non-zero coupon
securities having similar maturities and credit qualities. For a discussion
of the potential tax implications of such investments, see "Dividends,
Distributions and Taxes" in the Statement of Additional Information.
ILLIQUID SECURITIES -- The 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. Such securities may include securities that are not readily
marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, and repurchase agreements providing for
settlement in more than seven days after notice. 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.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 21
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Page 23
DREYFUS
Balanced
Fund, Inc.

Prospectus
(LION LOGO)
Registration Mark

Copy Rights 1996, Dreyfus Service Corporation
222p040196

__________________________________________________________________________

DREYFUS BALANCED FUND, INC.
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
JANUARY 2, 1996, As Revised April 1, 1996

__________________________________________________________________________

This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus
of Dreyfus Balanced Fund, Inc. (the "Fund"), dated January 2, 1996, as
revised April 1, 1996, as it may be revised from time to time. To obtain
a copy of the Fund's Prospectus, please write to the Fund at 144 Glenn
Curtis Boulevard, Uniondale, New York 11556-0144, or call the following
numbers:

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

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

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

TABLE OF CONTENTS

Page

Investment Objective and Management Policies . . . . . . . B-2
Management of the Fund . . . . . . . . . . . . . . . . . . B-7
Management Agreement . . . . . . . . . . . . . . . . . . . B-11
Shareholder Services Plan. . . . . . . . . . . . . . . . . B-13
Purchase of Fund Shares. . . . . . . . . . . . . . . . . . B-14
Redemption of Fund Shares. . . . . . . . . . . . . . . . . B-15
Shareholder Services . . . . . . . . . . . . . . . . . . . B-17
Determination of Net Asset Value . . . . . . . . . . . . . B-20
Dividends, Distributions and Taxes . . . . . . . . . . . . B-20
Performance Information. . . . . . . . . . . . . . . . . . B-21
Portfolio Transactions . . . . . . . . . . . . . . . . . . B-22
Information About the Fund . . . . . . . . . . . . . . . . B-23
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors . . . . . . . . . . . . B-23
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . B-25
Financial Statements . . . . . . . . . . . . . . . . . . . B-30
Report of Independent Auditors . . . . . . . . . . . . . . B-40

INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES

The following information supplements and should be read in
conjunction with the sections in the Fund's Prospectus entitled
"Description of the Fund" and "Appendix."

Portfolio Securities

Repurchase Agreements. The Fund's custodian or sub-custodian will
have custody of, and will hold in a segregated account, securities
acquired by the Fund under a repurchase agreement. Repurchase agreements
are considered by the staff of the Securities and Exchange Commission to
be loans by the Fund. In an attempt to reduce the risk of incurring a
loss on a repurchase agreement, the Fund will enter into repurchase
agreements only with domestic banks with total assets in excess of one
billion dollars, or primary government securities dealers reporting to the
Federal Reserve Bank of New York, with respect to securities of the type
in which the Fund may invest, and will require that additional securities
be deposited with it if the value of the securities purchased should
decrease below the resale price.

Commercial Paper and Other Short-Term Corporate Obligations. These
investments include variable amount master demand notes, which are
obligations that permit the Fund to invest fluctuating amounts at varying
rates of interest pursuant to direct arrangements between the Fund, as
lender, and the borrower. These notes permit daily changes in the amounts
borrowed. As mutually agreed between the parties, the Fund may increase
the amount under the notes at any time up to the full amount provided by
the note agreement, or decrease the amount, and the borrower may repay up
to the full amount of the note without penalty. Because these obligations
are direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there
generally is no established secondary market for these obligations,
although they are redeemable at face value, plus accrued interest, at any
time. Accordingly, where these obligations are not secured by letters of
credit or other credit support arrangements, the Fund's right to redeem is
dependent on the ability of the borrower to pay principal and interest on
demand. Such obligations frequently are not rated by credit rating
agencies, and the Fund may invest in them only if at the time of an
investment the borrower meets the criteria set forth in the Fund's
Prospectus for other commercial paper issuers.

Convertible Securities. Although to a lesser extent than with fixed-
income securities generally, 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.

As fixed-income securities, convertible securities are investments
that provide for a stable stream of income with generally higher yields
than common stocks. As with all fixed-income securities, there can be no
assurance of current income because the issuers of the convertible
securities may default on their obligations. Convertible securities,
however, generally offer lower interest or dividend yields than non-
convertible securities of similar quality because of the potential for
capital appreciation. 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.

Mortgage-Related Securities

Government-Agency Securities. Mortgage-related securities issued by
the Government National Mortgage Association ("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 is a wholly-owned U.S. Government corporation within the
Department of Housing and Urban Development. GNMA certificates also are
supported by the authority of GNMA to borrow funds from the U.S. Treasury
to make payments under its guarantee.

Government-Related Securities. Mortgage-related securities issued by
the Federal National Mortgage Association ("FNMA") include FNMA Guaranteed
Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are
solely the obligations of the FNMA and are not backed by or entitled to
the full faith and credit of the United States. The FNMA is a
government-sponsored organization owned entirely by private stockholders.
Fannie Maes are guaranteed as to timely payment of principal and interest
by FNMA.

Mortgage-related securities issued by the Federal Home Loan Mortgage
Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates
(also known as "Freddie Macs" or "PCs"). FHLMC is a corporate
instrumentality of the United States created pursuant to an Act of
Congress, which is owned entirely by Federal Home Loan Banks. 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.

Illiquid Securities. When purchasing securities that have not been
registered under the Securities Act of 1933, as amended, and are not
readily marketable, the Fund will endeavor, to the extent practicable, to
obtain the right to registration at the expense of the issuer. Generally,
there will be a lapse of time between the Fund's decision to sell any such
security and the registration of the security permitting sale. During any
such period, the price of the securities will be subject to market
fluctuations. However, where a substantial market of qualified
institutional buyers has developed for certain unregistered securities
purchased by the Fund pursuant to Rule 144A under the Securities Act of
1933, as amended, the Fund intends to treat such securities as liquid
securities in accordance with procedures approved by the Fund's Board.
Because it is not possible to predict with assurance how the market for
specific restricted securities sold pursuant to Rule 144A will develop,
the Fund's Board has directed the Manager to monitor carefully the Fund's
investments in such securities with particular regard to trading activity,
availability of reliable price information and other relevant information.
To the extent that, for a period of time, qualified institutional buyers
cease purchasing restricted securities pursuant to Rule 144A, the Fund's
investing in such securities may have the effect of increasing the level
of illiquidity in its investment portfolio during such period.

Management Policies

Leverage. For borrowings for investment purposes, the Investment
Company Act of 1940, as amended (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 securities 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. To the extent the Fund
enters into a reverse repurchase agreement, the Fund will maintain in a
segregated custodial account cash or U.S. Government securities or other
high quality liquid debt securities at least equal to the aggregate amount
of its reverse repurchase obligations, plus accrued interest, in certain
cases, in accordance with releases promulgated by the Securities and
Exchange Commission. The Securities and Exchange Commission views reverse
repurchase transactions as collateralized borrowings by the Fund.

Lending Portfolio Securities. The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. In connection with
its securities lending transactions, the 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.

The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned:
(1) the Fund must receive at least 100% cash collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value
of the securities rises above the level of such collateral; (3) the Fund
must be able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any dividends, interest or
other distributions payable on the loaned securities, and any increase in
market value; (5) the Fund may pay only reasonable custodian fees in
connection with the loan; and (6) while voting rights on the loaned
securities may pass to the borrower, the Fund's Board must terminate the
loan and regain the right to vote the securities if a material event
adversely affecting the investment occurs.

Derivatives. The Fund may invest in Derivatives (as defined in the
Fund's Prospectus) for a variety of reasons, including to hedge certain
market risks, 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.

Forward Commitments. 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 the 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 the 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.

Investment Restrictions

The Fund has adopted investment restrictions numbered 1 through 7 as
fundamental policies, 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. Investment restrictions numbered 8 through 13
are not fundamental policies and may be changed by vote of a majority of
the Board at any time. The Fund may not:

1. Invest in commodities, except that the Fund may purchase and
sell options, forward contracts, 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, forward contracts, 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 Fund'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 Securities Act
of 1933, as amended, by virtue of disposing of portfolio securities.

6. Invest more than 25% of its assets in the securities of issuers
in any single industry, provided 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, 9 and 10 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
deposit of assets in escrow in connection with writing covered put and
call options and the purchase of securities on a when-issued or forward
commitment basis and collateral and initial or variation margin
arrangements with respect to options, forward contracts, 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 may be described in the Fund's Prospectus and this Statement of
Additional Information.

11. Purchase securities of any company having less than three years'
continuous operations (including operations of any predecessors) if such
purchase would cause the value of the Fund's investments in all such
companies to exceed 5% of the value of its total assets.

12. 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.

13. Purchase securities of other investment companies, except to the
extent permitted under the 1940 Act, or those received as part of a merger
or consolidation.

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.

The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states.
Should the Fund determine that a commitment is no longer in the best
interest of the Fund and its shareholders, the Fund reserves the right to
revoke the commitment by terminating the sale of Fund shares in the state
involved.

MANAGEMENT OF THE FUND

Directors and officers of the Fund, together with information as to
their principal business occupations during at least the last five years,
are shown below. Each Director who is deemed to be an "interested person"
of the Fund, as defined in the 1940 Act, is indicated by an asterisk.

Directors of the Fund

*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman
of the Board of various funds in the Dreyfus Family of Funds. For
more than five years prior thereto, 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 Fund's Distributor. From August 1994 to
December 31, 1994, he was a director of Mellon Bank Corporation. Mr.
DiMartino is Chairman of the Board of the Noel Group, Inc., a venture
capital company; a trustee of Bucknell University; and a director of
The Muscular Dystrophy Association, HealthPlan Services Corporation,
Belding Heminway Company, Inc., Curtis Industries, Inc., Simmons
Outdoor Corporation and Staffing Resources, Inc. Mr. DiMartino is 52
years old and his address is 200 Park Avenue, New York, New York
10166.

*DAVID P. FELDMAN, Director. Corporate Vice President--Investment
Management of AT&T. He is also a trustee of Corporate Property
Investors, a real estate investment company. Mr. Feldman is 56 years
old and his address is One Oak Way, Berkeley Heights, New Jersey
07922.

JOHN M. FRASER, JR., Director. President of Fraser Associates, a service
company for planning and arranging corporate meetings and other
events. He was Executive Vice President of Flagship Cruises Ltd.
from September 1975 to June 1978. Prior thereto, he was Senior Vice
President and Resident Director of the Swedish-American Line for the
United States and Canada. Mr. Fraser is 74 years old and his address
is 133 East 64th Street, New York, New York 10021.

ROBERT R. GLAUBER, Director. Research Fellow, Center for Business and
Government at the John F. Kennedy School of Government, Harvard
University since January 1992. He 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 also a director of
MidOcean Reinsurance Co. Ltd. and Cooke & Bieler, Inc., investment
counselors. Mr. Glauber is 56 years old and his address is 79 John
F. Kennedy Street, Cambridge, Massachusetts 02138.

JAMES F. HENRY, Director. President of the CPR Institute for Dispute
Resolution, a non-profit organization principally engaged in the
development of alternatives to business litigation. He was of
counsel to the law firm of Lovejoy, Wasson & Ashton from October 1975
to December 1976 and from October 1979 to June 1983, and was a
partner of that firm from January 1977 to September 1979. He was
President and a director of the Edna McConnell Clark Foundation, a
philanthropic organization, from September 1971 to December 1976.
Mr. Henry is 65 years old and his address is c/o CPR Institute for
Dispute Resolution, 366 Madison Avenue, New York, New York 10017.

ROSALIND GERSTEN JACOBS, Director. Director of Merchandise and Marketing
for Corporate Property Investors, a real estate investment company.
From 1974 to 1976, she was owner and manager of a merchandise and
marketing consulting firm. Prior to 1974, she was a Vice President
of Macy's, New York. Mrs. Jacobs is 70 years old and her address is
c/o Corporate Property Investors, 305 East 47th Street, New York, New
York 10017.

IRVING KRISTOL, Director. John M. Olin Distinguished Fellow of the
American Enterprise Institute for Public Policy Research, co-editor
of The Public Interest magazine, and an author or co-editor of
several books. From May 1981 to December 1994, he was a consultant
to the Manager on economic matters; from 1969 to 1988, he was
Professor of Social Thought at the Graduate School of Business
Administration, New York University; from September 1969 to August
1979, he was Henry R. Luce Professor of Urban Values at New York
University; from 1975 to 1990, he was a director of Lincoln National
Corporation, an insurance company; and from 1977 to 1990, he was a
director of Warner-Lambert Company, a pharmaceutical and consumer
products company. Mr. Kristol is 75 years old and his address is c/o
The Public Interest, 1112 16th Street, N.W., Suite 530, Washington,
D.C. 20036.

DR. PAUL A. MARKS, Director. President and Chief Executive Officer of
Memorial Sloan-Kettering Cancer Center. He was Vice President for
Health Sciences and Director of the Cancer Center at Columbia
University from 1973 to 1980, and Professor of Medicine and of Human
Genetics and Development at Columbia University from 1968 to 1982.
From 1976 to 1991, he was a director of the Charles H. Revson
Foundation; from 1992 to 1993, he was a director of Biotechnology
General, Inc., a biotechnology development company; and from 1991 to
1995 he was a director of National Health Laboratories, a national
clinical diagnostic laboratory. He is also a director of Pfizer,
Inc., a pharmaceutical company, Life Technologies, Inc., a life
science company producing products for cell and molecular biology and
microbiology, and Tularik, Inc., a biotechnology company, and a
limited partner of LINC Venture Lease Partners II, L.P., a limited
partnership engaged in leasing. Dr. Marks is 69 years old and his
address is c/o Memorial Sloan-Kettering Cancer Center, 1275 York
Avenue, New York, New York 10021.

DR. MARTIN PERETZ, Director. Editor-in-Chief of The New Republic magazine
and a lecturer in Social Studies at Harvard University, where he has
been a member of the faculty since 1965. He is a trustee of The
Center for Blood Research at the Harvard Medical School, and the
Academy for Liberal Education, an accrediting agency for colleges and
universities certified by the U.S. Department of Education, and a
director of LeukoSite Inc., a biopharmaceutical company. From 1988
to 1989, he was a director of Bank Leumi Trust Company of New York;
and from 1988 to 1991 he was a director of Carmel Container
Corporation. Dr. Peretz is 56 years old and his address is c/o The
New Republic, 1220 19th Street, N.W., Washington, D.C. 20036.

BERT W. WASSERMAN, Director. Financial Consultant. From January 1990 to
March 1995, Executive Vice President and Chief Financial Officer, and
from January 1990 to March 1993 a director, of Time Warner Inc; from
1981 to 1990, he was a member of the office of the President and a
director of Warner Communications, Inc. He is also a member of the
Chemical Bank National Advisory Board and a director of The New
Germany Fund, Mountasia Entertainment International, Inc. and the
Lillian Vernon Corporation. Mr. Wasserman is 63 years old and his
address is 126 East 56th Street, Suite 12 North, New York, New York
10022-3613.

The Fund 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 Fund for the
fiscal year ended August 31, 1995, and by all other funds in the Dreyfus
Family of Funds for which such person is 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, 1994, is as follows:
<TABLE>
<CAPTION>

(5)
(3) Total
(2) Pension or (4) Compensation from
(1) Aggregate Retirement Benefits Estimated Annual Fund and Fund
Name of Board Compensation from Accrued as Part of Benefits Upon Complex Paid to
Member Fund* Fund's Expenses Retirement Board Members
- ----------------- ------------------ ------------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Joseph S. DiMartino $1,214 none none $445,000**(93)

David P. Feldman $1,471 none none $ 85,631(37)

John M. Fraser, Jr. $2,000 none none $ 46,766(14)

Robert R. Glauber $2,000 none none $ 79,696(20)

James F. Henry $2,000 none none $ 44,946(10)

Rosalind Gersten Jacobs $2,000 none none $ 57,638(20)

Irving Kristol $2,000 none none $ 44,946(10)

Dr. Paul A. Marks $1,750 none none $ 44,946(10)

Dr. Martin Peretz $2,000 none none $ 44,946(10)

Bert W. Wasserman $2,000 none none $ 40,720(10)
___________________________
* Amount does not include reimbursed expenses for attending Board meetings, which amounted to $472 for all Board members as a
group.
** Estimated amount for the year ended December 31, 1995.
</TABLE>
For so long as the Fund's plan described in the section captioned
"Shareholder Services Plan" remains in effect, the Board members of the
Fund who are not "interested persons" of the Fund, as defined in the 1940
Act, will be selected and nominated by the Board members who are not
"interested persons" of the Fund.

Officers of the Fund

MARIE E. CONNOLLY, President and Treasurer. Director, President, Chief
Operating Officer and Compliance Officer of the Distributor and an
officer of other investment companies advised or administered by the
Manager. From December 1991 to July 1994, she was President and
Chief Compliance Officer of Funds Distributor, Inc., the ultimate
parent of which is Boston Institutional Group, Inc. Prior to
December 1991, she served as Vice President and Controller, and later
as Senior Vice President, of The Boston Company Advisors, Inc. She
is 38 years old.

JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President,
General Counsel, Secretary and Clerk of the Distributor and an
officer of other investment companies advised or administered by the
Manager. From February 1992 to July 1994, he served as Counsel for
The Boston Company Advisors, Inc. From August 1990 to February 1992,
he was employed as an Associate at Ropes & Gray. He is 31 years old.

ELIZABETH BACHMAN, Vice President and Assistant Secretary. Assistant Vice
President of the Distributor and an officer of other investment
companies advised or administered by the Manager. She is 26 years
old.

ERIC B. FISCHMAN, Vice President and Assistant Secretary. Vice President
and Associate General Counsel of the Distributor and an officer of
other investment companies advised or administered by the Manager.
From September 1992 to August 1994, he was an attorney with the Board
of Governors of the Federal Reserve System. He is 31 years old.

FREDERICK C. DEY, Vice President and Assistant Treasurer. Senior Vice
President of the Distributor and an officer of other investment
companies advised or administered by the Manager. From 1988 to
August 1994, he was manager of the High Performance Fabric Division
of Springs Industries Inc. He is 34 years old.

JOSEPH F. TOWER, III, Assistant Treasurer. Senior Vice President,
Treasurer and Chief Financial Officer of the Distributor and an
officer of other investment companies advised or administered by the
Manager. From July 1988 to August 1994, he was employed by The
Boston Company, Inc. where he held various management positions in
the Corporate Finance and Treasury areas. He is 33 years old.

JOHN J. PYBURN, Assistant Treasurer. Assistant Treasurer of the
Distributor and an officer of other investment companies advised or
administered by the Manager. From 1984 to July 1994, he was
Assistant Vice President in the Mutual Fund Accounting Department of
the Manager. He is 60 years old.

MARGARET PARDO, Assistant Secretary. An employee of the Distributor and
an officer of other investment companies advised or administered by
the Manager. She is 27 years old.

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

Board members and officers of the Fund, as a group, owned less than
1% of the Fund's shares of common stock outstanding on October 24, 1995.

The following persons are known by the Fund to own of record 5% or
more of the Fund's outstanding voting securities as of October 24, 1995:
Dreyfus Trust Company, as trustee for FDC Incentive Savings Plan, 144
Glenn Curtiss Boulevard, Uniondale, New York 11556--25.10%; Charles Schwab
& Co. Inc.--Reinvestment Account, Mutual Funds Department, 101 Montgomery
Street, San Francisco, CA 94104-4122--15.19%. Under applicable trust law,
Fund shares held in trust by the Dreyfus Trust Company are beneficially
owned by plan participants having an interest in such trust. A
shareholder who beneficially owns, directly or indirectly, more than 25%
of the Fund's voting securities may be deemed a "control person" (as
defined in the 1940 Act) of the Fund.

MANAGEMENT AGREEMENT

The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Management
of the Fund."

The Manager provides management services pursuant to the Management
Agreement (the "Agreement") dated August 24, 1994, with the Fund, which is
subject to annual approval by (i) the Fund's Board or (ii) vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities
of the 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 Fund or the Manager, by vote
cast in person at a meeting called for the purpose of voting on such
approval. The Board, including a majority of the Board members who are
not "interested persons" of any party to the Agreement, approved the
Agreement at a meeting held on June 5, 1995. Shareholders of the Fund
approved the Agreement on August 2, 1994. The Agreement is terminable
without penalty, on 60 days' notice, by the Fund's Board or by vote of the
holders of a majority of the Fund's shares, or, on not less than 90 days'
notice, by the Manager. The Agreement will terminate automatically in the
event of its assignment (as defined in the 1940 Act).

The following persons are officers and/or directors of the Manager:
Howard Stein, Chairman of the Board and Chief Executive Officer; W. Keith
Smith, Vice Chairman of the Board; Christopher M. Condron, President,
Chief Operating Officer and a director; Stephen E. Canter, Vice Chairman,
Chief Investment Officer and a director; Lawrence S. Kash, Vice Chairman-
Distribution and a director; Philip L. Toia, Vice Chairman-Operations and
Administration and a director; Barbara E. Casey, Vice President-Dreyfus
Retirement Services; Diane M. Coffey, Vice President-Corporate
Communications; Elie M. Genadry, Vice President-Institutional Sales;
William F. Glavin, Jr., Vice President-Corporate Development; Henry D.
Gottmann, Vice President-Retail Sales and Service; Mark N. Jacobs, Vice
President-Legal and Secretary; Daniel C. Maclean, Vice President and
General Counsel; Jeffrey N. Nachman, Vice President-Mutual Fund
Accounting; Andrew S. Wasser, Vice President-Information Services;
Katherine C. Wickham, Vice President-Human Resources; Maurice Bendrihem,
Controller; Elvira Oslapas, Assistant Secretary; and Mandell L. Berman,
Frank V. Cahouet, Alvin E. Friedman, Lawrence M. Green, Julian M. Smerling
and David B. Truman, directors.

The Manager manages the Fund's portfolio of investments in accordance
with the stated policies of the Fund, subject to the approval of the
Fund's Board. The Manager is responsible for investment decisions, and
provides the Fund with portfolio managers who are authorized by the Fund's
Board to execute purchases and sales of securities. The Fund's portfolio
managers are Donald C. Geogerian, Timothy M. Ghriskey, C. Matthew Olson
and Ernest G. Wiggins, Jr. The Manager also maintains a research
department with a professional staff of portfolio managers and securities
analysts who provide research services for the Fund as well as for other
funds advised by the Manager. All purchases and sales are reported for
the Board's review at the meeting subsequent to such transactions.

The Manager maintains office facilities on behalf of the Fund and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time
deems appropriate.

All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The
expenses borne by the Fund include: organizational costs, taxes, interest,
loan commitment fees, dividends and interest 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 Fund's existence, costs of independent pricing services,
costs attributable to investor services (including, without limitation,
telephone and personnel expenses), costs of shareholders' reports and
meetings, costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes and for distribution to
existing shareholders, and any extraordinary expenses. In addition, the
Fund is subject to an annual service fee for ongoing personal services
relating to shareholder accounts and services related to the maintenance
of shareholder accounts. See "Shareholder Services Plan."

As compensation for the Manager's services, the Fund has agreed to
pay the Manager a monthly management fee at the annual rate of .60 of 1%
of the value of the Fund's average daily net assets. All fees and
expenses are accrued daily and deducted before declaration of dividends to
shareholders. For the period from September 30, 1992 (commencement of
operations) through August 31, 1993, and for the fiscal years ended August
31, 1994 and 1995, the management fees payable by the Fund amounted to
$118,046, $398,658 and $693,265, respectively; however, pursuant to
undertakings in effect, the Manager reduced its fee by $118,046 for the
period from September 30, 1992 (commencement of operations) through August
31, 1993 and $269,761 for the fiscal year ended August 31, 1994, resulting
in no fee being paid by the Fund in fiscal 1993 and a net fee of $128,897
paid in fiscal 1994.

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 the Fund's net assets increases.

SHAREHOLDER SERVICES PLAN

The following information supplements and should be read in
conjunction with the section in the Prospectus entitled "Shareholder
Services Plan."

The Fund has adopted a Shareholder Services Plan (the "Plan")
pursuant to which the Fund reimburses Dreyfus Service Corporation for
certain allocated expenses of providing personal services and/or
maintaining shareholder accounts. The services provided may include
personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding the Fund and providing reports and other
information, and services related to the maintenance of shareholder
accounts.

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

For the fiscal year ended August 31, 1995, the Fund reimbursed
Dreyfus Service Corporation $288,860 pursuant to the Plan.

PURCHASE OF FUND SHARES

The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund Shares."

The Distributor. The Distributor serves as the Fund's distributor on
a best efforts basis pursuant to an agreement which is renewable annually.
The Distributor also acts as distributor for the other funds in the
Dreyfus Family of Funds and for certain other investment companies. In
some states, banks or other financial institutions effecting transactions
in Fund shares may be required to register as dealers pursuant to state
law.

Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 P.M., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (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 folllowing such purchase order.
Purchase orders made after 4:00 P.M., New York time, on any business 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 shares must be drawn on, and redemption
proceeds paid to, the same bank and account as are designated on the
Account Application or Shareholder Services Form on file. If the proceeds
of a particular redemption are to be wired to an account at any other
bank, the request must be in writing and signature-guaranteed. See
"Redemption of Fund Shares--Dreyfus TeleTransfer Privilege."

Transactions Through Securities Dealers. Fund shares may be
purchased and redeemed through securities dealers which may charge a
nominal transaction fee for such services. Some dealers will place the
Fund's shares in an account with their firm. Dealers also may require
that the customer invest more than the $1,000 minimum investment; the
customer not take physical delivery of share certificates; the customer
not request redemption checks to be issued in the customer's name;
fractional shares not be purchased; or other conditions.

There is no sales or service charge by the Fund or the Distributor,
although investment dealers, banks and other institutions may make
reasonable charges to investors for their services. The services provided
and the applicable fees are established by each dealer or other
institution acting independently of the Fund. The Fund has been given to
understand that these fees may be charged for customer services including,
but not limited to, same-day investment of client funds; same-day access
to client funds; advice to customers about the status of their accounts,
yield currently being paid or income earned to date; provision of periodic
account statements showing security and money market positions; other
services available from the dealer, bank or other institution; and
assistance with inquiries related to their investment. Any such fees will
be deducted monthly from the investor's account, which on smaller accounts
could constitute a substantial portion of distributions. Small, inactive,
long-term accounts involving monthly service charges may not be in the
best interest of investors. Investors should be aware that they may
purchase shares of the Fund directly from the Fund without imposition of
any maintenance or service charges, other than those already described
herein.

Reopening an Account. An investor may reopen an account with a
minimum investment of $100 without filing a new Account Application during
the calendar year the account is closed or during the following calendar
year, provided the information on the old Account Application is still
applicable.

REDEMPTION OF FUND SHARES

The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Redeem Fund Shares."

Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, and reasonably believed by the Transfer Agent to be genuine.
Ordinarily, the Fund will initiate payment for shares redeemed pursuant to
this Privilege on the next business day after receipt if the Transfer
Agent receives the redemption request in proper form. Redemption proceeds
($1,000 minimum) will be transferred by Federal Reserve wire only to the
commercial bank account specified by the investor on the Account
Application or Shareholder Services Form, or to a correspondent bank if
the investor's bank is not a member of the Federal Reserve System. Fees
ordinarily are imposed by such bank and usually are borne by the investor.
Immediate notification by the correspondent bank to the investor's bank is
necessary to avoid a delay in crediting the funds to the investor's bank
account.

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

Transfer Agent's
Transmittal Code Answer Back Sign

144295 144295 TSSG PREP

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

To change the commercial bank or account designated to receive 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. Investors should be aware that if
they have selected the Dreyfus TeleTransfer Privilege, any request for a
wire redemption will be effected as a Dreyfus TeleTransfer transaction
through the Automated Clearing House ("ACH") system unless more prompt
transmittal specifically is requested. Redemption proceeds will be on
deposit in the investor's account at an ACH member bank ordinarily two
business days after receipt of the redemption request. See "Purchase of
Fund Shares--Dreyfus TeleTransfer Privilege."

Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing
agencies and savings associations, as well as from participants in the 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. 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 Board reserves the right to make payments in whole or in part
in securities or other assets in case of an emergency or any time a cash
distribution would impair the liquidity of the Fund to the detriment of
the existing shareholders. In such event, the securities would be valued
in the same manner as the Fund's securities are valued. If the recipient
sold such securities, brokerage charges would be incurred.

Suspension of Redemptions. 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

The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Shareholder Services."

Fund Exchanges. Shares of 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 that are offered without a sales
load will be made without a sales load.

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

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

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

To accomplish an exchange under item D above, shareholders must
notify the Transfer Agent of their prior ownership of fund shares and
their account number.

To request an exchange, an investor must give exchange instructions
to the Transfer Agent in writing or by telephone. The ability to issue
exchange instructions by telephone is given to all Fund shareholders
automatically, unless the investor checks the applicable "No" box on the
Account Application, indicating that the investor specifically refuses
this Privilege. By using the Telephone Exchange Privilege, the investor
authorizes the Transfer Agent to act on telephonic instructions from any
person representing himself or herself to be the investor, 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.

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.
For Dreyfus-sponsored Keogh Plans, IRAs and IRAs set up under a Simplified
Employee Pension Plan ("SEP-IRAs") with only one participant, the minimum
initial investment is $750. To exchange shares held in corporate plans,
403(b)(7) Plans and SEP-IRAs with more than one participant, the minimum
initial investment is $100 if the plan has at least $2,500 invested among
the funds in the Dreyfus Family of Funds. To exchange shares held in
personal retirement plans, the shares exchanged must have a current value
of at least $100.

Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund,
shares of another fund in the Dreyfus Family of Funds. This Privilege is
available only for existing accounts. 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 the
investor. An investor will be notified if his account falls below the
amount designated to be exchanged under this Privilege. In this case, an
investor's account will fall to zero unless additional investments are
made in excess of the designated amount prior to the next Auto-Exchange
transaction. Shares held under 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.

Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available
to shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between
accounts having identical names and other identifying designations.

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

Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis. Withdrawal payments are the proceeds from sales of Fund shares, not
the yield on the shares. If withdrawal payments exceed reinvested
dividends and distributions, the investor's shares will be reduced and
eventually may be depleted. There is a service charge of $.50 for each
withdrawal check. Automatic Withdrawal may be terminated at any time by
the investor, the Fund or the Transfer Agent. Shares for which
certificates have been issued may not be redeemed through the Automatic
Withdrawal Plan.

Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest on the payment date their 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 the investor is 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 that
are 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"), provided that, if
the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any
reduced loads, the difference will be deducted.

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

Corporate Pension/Profit-Sharing and Retirement Plans. The Fund
makes available to corporations a variety of prototype pension and
profit-sharing plans including a 401(k) Salary Reduction Plan. In
addition, the Fund makes available Keogh Plans, IRAs, including SEP-IRAs
and IRA "Rollover Accounts," and 403(b)(7) Plans. Plan support services
also are available.

Investors who wish to purchase Fund shares in conjunction with a
Keogh Plan, a 403(b)(7) Plan or an IRA, including an SEP-IRA, may request
from the Distributor forms for adoption of such plans.

The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or
IRAs may charge a fee, payment of which could require the liquidation of
shares. All fees charged are described in the appropriate form.

Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans
may not be made in advance of receipt of funds.

The minimum initial investment for corporate plans, Salary Reduction
Plans, 403(b)(7) Plans and SEP-IRAs with more than one participant, is
$2,500 with no minimum or subsequent purchases. The minimum initial
investment for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7)
Plans with only one participant, is normally $750, with no minimum on
subsequent purchases. Individuals who open an IRA may also open a
non-working spousal IRA with a minimum investment of $250.

The investor should read the prototype retirement plan and the
appropriate form of custodial agreement for further details on
eligibility, service fees and tax implications, and should consult a tax
adviser.

DETERMINATION OF NET ASSET VALUE

The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund Shares."

Valuation of Portfolio Securities. Portfolio securities, including
covered call options written by the Fund, are valued at the last sale
price on the securities exchange or national securities market on which
such securities primarily are traded. Securities not listed on an
exchange or national securities market, or securities in which there were
no transactions, are valued at the average of the most recent bid and
asked prices, except in the case of open short positions where the asked
price is used for valuation purposes. 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 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. Short-term
investments are carried at amortized cost, which approximates value.
Expenses and fees, including the management fee, are accrued daily and
taken into account for the purpose of determining the net asset value of
Fund shares.

Restricted securities, as well as securities or other assets for
which recent market quotations are not readily available, or are not
valued by a pricing service approved by the Fund's Board, 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, 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 it believes that the discount no
longer reflects the value of the restricted securities. Restricted
securities not of the same class as securities for which a public market
exists usually will be valued initially at cost. Any subsequent
adjustment from cost will be based upon considerations deemed relevant by
the Board.

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

DIVIDENDS, DISTRIBUTIONS AND TAXES

The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Dividends,
Distributions and Taxes."

Management believes that the Fund qualified as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended
(the "Code"), for the fiscal year ended August 31, 1995. The Fund intends
to continue to so qualify if such qualification is in the best interests
of its shareholders. Qualification as a regulated investment company
relieves the Fund from any liability for Federal income taxes to the
extent its earnings are distributed in accordance with the applicable
provisions of the Code. The term "regulated investment company" does not
imply the supervision of management or investment practices or policies by
any government agency.

Depending on the composition of the Fund's income, all or a portion
of the dividends paid by the Fund from net investment income may qualify
for the dividends received deduction allowable to certain U.S. corporate
shareholders ("dividends received deduction"). In general, dividend
income of the Fund distributed to qualifying corporate shareholders will
be eligible for the dividends received deduction only to the extent that
(i) the Fund's income consists of dividends paid by U.S. corporations and
(ii) the Fund would have been entitled to the dividends received deduction
with respect to such dividend income if the Fund were not a regulated
investment company. The dividends received deduction for qualifying
corporate shareholders may be further reduced if the shares of the Fund
held by them with respect to which dividends are received are treated as
debt-financed or deemed to have been held for less than 46 days. In
addition, the Code provides other limitations with respect to the ability
of a qualifying corporate shareholder to claim the dividends received
deduction in connection with holding Fund shares.

Any dividend or distribution paid shortly after an investor's
purchase may have the effect of reducing the aggregate net asset value of
his shares below the cost of his investment. Such a dividend or
distribution would be a return on investment in an economic sense,
although taxable as stated above. In addition, the Code provides that if
a shareholder holds shares of the Fund for six months or less 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 a long-term capital
loss to the extent of the capital gain distribution received.

Investment by the 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.

PERFORMANCE INFORMATION

The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Performance Information."

The Fund's current yield for the 30-day period ended August 31, 1995
was 4.07%. 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.

The Fund's average annual return for the 1 and 2.921 year periods
ended August 31, 1995 (the Fund's fiscal year end) was 19.03% and 12.11%,
respectively. Average annual total return is calculated by determining
the ending redeemable value of an investment purchased at net asset value
per share 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.

The Fund's total return for the period September 30, 1992
(commencement of operations) through August 31, 1995 (the Fund's fiscal
year end) was 39.61%. 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.

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

PORTFOLIO TRANSACTIONS

The Manager supervises the placement of orders on behalf of the Fund
for the purchase or sale of portfolio securities. Allocation of brokerage
transactions, including their frequency, is made in the Manager's best
judgment 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 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 fee is not reduced as a
consequence of the receipt of such supplemental information. Such
information may be useful to the Manager in serving both the Fund and
other clients 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 obligation to the Fund. Brokers also are
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, in certain cases, may
result from two or more clients the Manager might advise being engaged
simultaneously in the purchase or sale of the same security. Certain of
the Fund's transactions in securities of foreign issuers may not benefit
from the negotiated commission rates available to the Fund for
transactions in securities of domestic issuers. 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. When
transactions are executed in the over-the-counter market, the Fund will
deal with the primary market makers unless a more favorable price or
execution otherwise is obtainable.

Portfolio turnover may vary from year to year, as well as within a
year. High turnover rates are likely to result in comparatively 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 period September 30, 1992 (commencement of operations)
through August 31, 1993 and for the fiscal years ended 1994 and 1995, the
Fund paid total brokerage commissions of $53,266, $71,142 and $104,786,
respectively, none of which was paid to the Distributor. The above
figures for brokerage commissions do not include gross spreads and
concessions on principal transactions, which, where determinable, amounted
to $62,478, $244,004 and $54,186, respectively, for such periods, none of
which was paid to the Distributor.

INFORMATION ABOUT THE FUND

The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "General
Information."

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.

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

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

Dreyfus Transfer Inc., a wholly-owned subsidiary of the Manager is
located at One American Express Plaza, Providence, Rhode Island 02903, and
serves as the Fund's transfer and dividend disbursing agent. Under a
transfer agency agreement with the Fund, the Transfer Agent arranges for
the maintenance of shareholder account records for the Fund, the handling
of certain communications between shareholders and the Fund and the
payment of dividends and distributions payable by the Fund. For these
services, 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 reimbured for certain out-of-pocket expenses. The Bank of
New York, 90 Washington Street, New York, New York 10286, acts as
custodian of the Fund's investments. Neither the Transfer Agent nor The
Bank of New York has any part in determining the investment policies of
the Fund or which securities are to be purchased or sold by the Fund.

Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York
10004-2696, as counsel for the Fund, has rendered its opinion as to
certain legal matters regarding the due authorization and valid issuance
of the shares of common stock being sold pursuant to the Fund's
Prospectus.

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

APPENDIX

Description of certain ratings assigned by Standard & Poor's Ratings
Group, a division of The McGraw Hill Companies, Inc. ("S&P"), Moody's
Investors Service, Inc. ("Moody's"), Fitch Investors Service, L.P.
("Fitch") and Duff & Phelps Credit Rating Co. ("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 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.

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

Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.

Baa

Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.

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

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 during economic cycles.

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.

DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS AUGUST 31, 1995
PRINCIPAL
BONDS AND NOTES-60.9% AMOUNT VALUE
----------------- ---------------
<S> <C> <C> <C>
AEROSPACE-.3% Raytheon, Notes,
6 1/2%, 2005................................... $ 525,000 $ 516,400
----------------
BANKING-4.5% Chemical Banking, Sub. Deb.,
6 1/2%, 2009................................... 1,000,000 929,951
Citicorp, Medium-Term Notes,
7.07%, 2000.................................... 2,500,000 2,538,170
MBNA American Bank, Medium-Term Notes,
5.975%, 1997.................................. 2,500,000(a) 2,499,523
Nationsbank, Sr. Medium-Term Notes,
6 1/8%, 1995................................... 1,500,000(a) 1,498,906
----------------
7,466,550
----------------
FINANCE-8.3% Ameritech Capital Funding, Notes
(Gtd. by Ameritech),
5.925%, 1998.................................. 2,000,000(a) 2,003,798
Banco Commercial Itialiano, Sub. Ctfs.,
8 1/4%, 2007......................... 3,025,000 3,157,177
CoreStates Capital, Sr. Medium-Term Notes,
6.35%, 1996.................................... 1,000,000(a) 1,000,000
General Motors Acceptance, Notes,
6.437%, 1998................................... 2,000,000(a) 1,996,800
Household Finance, Sr. Medium-Term Notes,
7%, 2000....................................... 2,500,000 2,535,105
Norwest, Medium-Term Notes,
6.80%, 2002.................................... 3,000,000 3,016,683
----------------
13,709,563
----------------
FOOD & BEVERAGE-1.5% Coca-Cola Enterprises, Deb.,
8 3/4%, 2017................................... 2,450,000 2,545,234
----------------
INDUSTRIAL-3.7% American Brands, Notes,
9 1/8%, 2016................................... 2,766,000 2,918,655
First Union, Sub. Notes,
8.77%, 2004.................................... 3,000,000 3,203,574
----------------
6,122,229
----------------
OIL AND GAS-1.0% Consolidated Natural Gas, Deb.,
8 5/8%, 2011................................... 1,500,000 1,600,125
----------------
POLLUTION CONTROL-.4% Waste Management, Notes,
4 5/8%, 1996................................... 750,000 744,466
----------------
TELECOMMUNICATIONS-3.2%. Pacific Bell, Notes,
7%, 2004....................................... 2,530,000 2,552,707
Telecommunications, Medium-Term Notes,
7.49%, 2003.................................... 2,700,000 2,700,000
----------------
5,252,707
----------------

DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
PRINCIPAL
BONDS AND NOTES (CONTINUED) AMOUNT VALUE
------------------- ----------------

FOREIGN-2.6% Canada, Deb.,
6 3/8%, 2005................................... $ 1,500,000 $ 1,473,282
Swedish Export Credit, Eurobonds,
8 5/8%, 2026................................... 2,750,000 2,818,750
----------------
4,292,032
----------------
OTHER-3.3%. Case Equipment Loan Trust 1994-A,
Asset Backed Ctfs.,
Cl. A-2, 4.65%, 1999........................... 905,312 897,617
First USA Credit Card Master Trust,
Asset Backed Ctfs.,
Ser. 1994-5, Cl. A, 6.015%, 2000............... 2,000,000(a) 2,002,400
GMAC 1993-B Grantor Trust,
Asset Backed Ctfs.,
Cl. A, 4%, 1998................................ 222,927 219,236
Premier Auto Trust 1995-3
Asset Backed Ctfs.,
Cl. A-3, 5.95%, 1998........................... 2,330,000 2,321,519
World Omni 1992-A Grantor Trust,
Asset Backed Ctfs.,
Cl. A, 4 3/4%, 1998............................ 9,228 9,171
----------------
5,449,943
----------------
U.S. GOVERNMENT
AND AGENCIES-32.2% Federal Farm Credit Banks,
Consolidated Systemwide Medium-Term Notes:
6.10%, 11/1/1995............................... 3,800,000 3,805,765
5.60%, 8/26/1997............................... 250,000 247,374
7.03%, 5/4/1998................................ 2,500,000 2,521,973
Federal Home Loan Banks,
Medium-Term Notes,
7 5/8%, 10/14/1999............................. 2,000,000 2,057,812
Federal Home Loan Mortgage Corp., Deb.,
4 1/2%, 12/31/1995............................. 899,221 896,650
Federal National Mortgage Association,
Real Estate Mortgage Investment Conduit:
5.72%, 11/15/1995............................. 3,000,000 3,000,960
Ser. 93-146B, Zero Coupon, 11/1/1996(b)....... 900,000 796,500
Ser. 91-169, Cl. PG, 6 3/4%, 8/15/1996........ 1,025,881 1,023,256
Ser. 92-112, Cl. D, 7%, 6/25/2018............. 1,000,000 999,100
U.S. Department of Housing and Urban Development,
Gtd. Participation Ctfs.,
Ser. 95-A, 8.15%, 8/1/2000..................... 3,000,000 3,210,000
U.S. Treasury Bonds:
7 1/4%, 5/15/2016.............................. 11,950,000 12,596,053
7 1/2%, 11/15/2016............................. 2,700,000 2,924,016

DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
PRINCIPAL
BONDS AND NOTES (CONTINUED) AMOUNT VALUE
----------------- ----------------

U.S. GOVERNMENT
AND AGENCIES (CONTINUED) U.S. Treasury Notes:
3 7/8%, 10/31/1995............................. $ 1,800,000 $ 1,795,079
7 1/2%, 1/31/1996.............................. 750,000 755,684
5 1/2%, 7/31/1997.............................. 750,000 745,547
5 3/4%, 10/31/1997............................. 3,000,000 2,992,500
6%, 11/30/1997................................. 750,000 751,875
5 5/8%, 1/31/1998.............................. 700,000 695,516
5 1/8%, 3/31/1998.............................. 350,000 343,383
5 1/8%, 11/30/1998............................. 1,000,000 975,000
5%, 1/31/1999.................................. 2,725,000 2,640,269
7 1/8%, 9/30/1999.............................. 2,500,000 2,594,140
7 1/2%, 5/15/2002.............................. 4,300,000 4,610,408
5 7/8%, 2/15/2004.............................. 375,000 364,453
----------------
53,343,313
----------------

TOTAL BONDS AND NOTES
(cost $99,678,217)............................. $101,042,562
================

COMMON STOCKS-34.8% SHARES
--------------
BANKING-6.2%..................Bank of New York................................. 81,000 $ 3,523,500
Citicorp......................................... 53,700 3,564,338
First Interstate Bancorp......................... 33,100 3,161,050
----------------
10,248,888
----------------
CHEMICALS-2.2%................Olin............................................. 56,600 3,657,775
----------------
CONGLOMERATES-1.0%............Wal-Mart Stores.................................. 64,800 1,595,700
----------------
CONSUMER-3.2%.................Fluor............................................ 20,300 1,187,550
Nike, Cl. B...................................... 12,500 1,157,812
Topps............................................ 490,900 2,945,400
----------------
5,290,762
----------------
ELECTRONICS-2.0%..............Teradyne......................................... 29,200(c) 1,105,950
Texas Instruments................................ 30,600 2,291,175
----------------
3,397,125
----------------
FINANCIAL SERVICES-1.6%.......Equifax.......................................... 69,500 2,701,812
----------------
FOOD & BEVERAGE-.9%...........Wendy's International............................ 78,500 1,540,562
----------------
HEALTH CARE-4.1%..............Humana........................................... 119,600 2,182,700
Pfizer........................................... 65,200 3,219,250
United Healthcare................................ 32,700 1,381,575
----------------
6,783,525
----------------
MACHINERY-1.7%................Caterpillar...................................... 24,800 1,664,700
Deere & Co....................................... 13,900 1,188,450
----------------
2,853,150
----------------

DREYFUS BALANCED FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
COMMON STOCKS (CONTINUED) SHARES VALUE
------------------ ----------------

OIL & GAS-.7%.................Schlumberger Ltd................................. 17,500 $ 1,128,750
----------------
PHARMACEUTICALS-3.0%..........Merck & Co....................................... 52,400 2,613,450
Schering-Plough.................................. 49,000 2,284,625
----------------
4,898,075
----------------
REAL ESTATE-2.5%..............Chelsea GCA Realty............................... 82,900 2,487,000
HGI Realty....................................... 66,900 1,680,863
----------------
4,167,863
----------------
RETAIL-3.1%...................Limited.......................................... 109,900 2,033,150
Price Costco..................................... 187,500 3,164,062
----------------
5,197,212
----------------
TECHNOLOGY-2.6%...............EMC.............................................. 82,100(c) 1,683,050
International Business Machines.................. 25,000 2,584,375
----------------
4,267,425
----------------

TOTAL COMMON STOCKS
(cost $46,705,879)............................. $ 57,728,624
================

PRINCIPAL
SHORT-TERM INVESTMENTS-3.0% AMOUNT VALUE
---------------- ----------------
U.S. TREASURY BILLS:..........5.38%, 9/21/1995
(cost $5,001,008)................................ $ 5,016,000 $ 5,000,902
================
TOTAL INVESTMENTS (cost $151,385,104)................................................. 98.7% $163,772,088
========= ================
CASH AND RECEIVABLES (NET)............................................................ 1.3% $ 2,137,204
========= ================
NET ASSETS............................................................................ 100.0% $165,909,292
========= ================

NOTES TO STATEMENT OF INVESTMENTS:
(a) Variable rate security--interest rate subject to periodic change.
(b) This date represents the projected maturity date, the stated
maturity date is 5/25/2023.
(c) Non-income producing.

</TABLE>

See notes to financial statements.
<TABLE>
<CAPTION>

DREYFUS BALANCED FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1995
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $151,385,104)-see statement..................................... $163,772,088
Cash.................................................................... 1,430,807
Receivable for investment securities sold............................... 2,736,279
Interest and dividends receivable....................................... 1,676,810
Receivable for shares of Common Stock subscribed........................ 9,494
Prepaid expenses........................................................ 41,431
Due from The Dreyfus Corporation........................................ 12,844
----------------
169,679,753
LIABILITIES:
Payable for investment securities purchased............................. $3,611,919
Accrued expenses and other liabilities.................................. 158,542 3,770,461
---------- ----------
NET ASSETS.................................................................. $165,909,292
================

REPRESENTED BY:
Paid-in capital......................................................... $144,427,022
Accumulated undistributed investment income-net......................... 1,075,756
Accumulated undistributed net realized gain on investments.............. 8,019,530
Accumulated net unrealized appreciation on investments-Note 3........... 12,386,984
----------------

NET ASSETS at value applicable to 10,631,082 shares outstanding
(300 million shares of $.001 par value Common Stock authorized)......... $165,909,292
================

NET ASSET VALUE, offering and redemption price per share
($165,909,292/10,631,082 shares)........................................ $15.61
==========

</TABLE>

See notes to financial statements.
<TABLE>
<CAPTION>

DREYFUS BALANCED FUND, INC.
STATEMENT OF OPERATIONS YEAR ENDED AUGUST 31, 1995
<S> <C> <C>
INVESTMENT INCOME:
INCOME:
Interest.............................................................. $4,958,267
Cash dividends........................................................ 859,146
---------------

TOTAL INCOME...................................................... $ 5,817,413
EXPENSES:
Management fee-Note 2(a).............................................. 693,265
Shareholder servicing costs-Note 2(b)................................. 352,915
Professional fees..................................................... 50,816
Registration fees..................................................... 42,484
Custodian fees........................................................ 19,461
Directors' fees and expenses-Note 2(c)................................ 18,692
Prospectus and shareholders' reports.................................. 8,818
Miscellaneous......................................................... 16,712
--------------

TOTAL EXPENSES.................................................... 1,203,163
---------------

INVESTMENT INCOME-NET............................................. 4,614,250
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $8,267,726
Net unrealized appreciation on investments.............................. 9,201,437
--------------

NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 17,469,163
----------------

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $22,083,413
===============

</TABLE>

See notes to financial statements.

DREYFUS BALANCED FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
--------------------------------
1994 1995
-------------- -------------
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 2,163,346 $ 4,614,250
Net realized gain on investments........................................ 1,084,707 8,267,726
Net unrealized appreciation on investments for the year................. 1,806,069 9,201,437
--------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. 5,054,122 22,083,413
--------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net................................................... (1,997,395) (3,967,630)
Net realized gain on investments........................................ (595,034) (839,686)
--------------- --------------
TOTAL DIVIDENDS....................................................... (2,592,429) (4,807,316)
--------------- --------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold........................................... 70,591,550 96,785,162
Dividends reinvested.................................................... 2,564,031 4,709,482
Cost of shares redeemed................................................. (41,084,328) (35,709,773)
--------------- --------------
INCREASE IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS................ 32,071,253 65,784,871
--------------- --------------
TOTAL INCREASE IN NET ASSETS...................................... 34,532,946 83,060,968
NET ASSETS:
Beginning of year....................................................... 48,315,378 82,848,324
--------------- --------------
End of year (including undistributed investment income-net:
$429,136 in 1994 and $1,075,756 in 1995).............................. $ 82,848,324 $165,909,292
=============== ==============

SHARES SHARES
--------------- --------------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 5,252,861 6,733,976
Shares issued for dividends reinvested.................................. 194,979 336,603
Shares redeemed......................................................... (3,049,797) (2,476,932)
--------------- --------------
NET INCREASE IN SHARES OUTSTANDING.................................... 2,398,043 4,593,647
=============== ==============

</TABLE>

See notes to financial statements.

DREYFUS BALANCED FUND, INC.
FINANCIAL HIGHLIGHTS
Reference is made to page 3 of the Fund's Prospectus dated January 2, 1996.

See notes to financial statements.

DREYFUS BALANCED FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940 ("Act")
as a non-diversified open-end management investment company. Premier Mutual
Fund Services, Inc. (the "Distributor") acts as the distributor of the Fund's
shares, which are sold to the public without a sales charge. The Distributor,
located at One Exchange Place, Boston, Massachusetts 02109, is a wholly-owned
subsidiary of FDI Distribution Services, Inc., a provider of mutual fund
administration services, which in turn is a wholly-owned subsidiary of FDI
Holdings, Inc., the parent company of which is Boston Institutional Group,
Inc. The Dreyfus Corporation ("Manager") serves as the Fund's investment
adviser. The Manager is a direct subsidiary of Mellon Bank, N.A.
(A) PORTFOLIO VALUATION: Most debt securities (excluding short-term
investments) are valued each business day by an independent pricing service
("Service") approved by the Board of Directors. Debt securities for which
quoted bid prices are readily available and are representative of the bid
side of the market in the judgment of the Service are valued at the mean
between the quoted bid prices (as obtained by the Service from dealers in
such securities) and asked prices (as calculated by the Service based upon
its evaluation of the market for such securities). Other debt securities are
carried at fair value as determined by the Service, based on methods which
include consideration of: yields or prices of securities of comparable
quality, coupon, maturity and type; indications as to values from dealers;
and general market conditions. Other securities are valued at the average of
the most recent bid and asked prices in the market in which such securities
are primarily traded, or at the last sales price for securities traded primari
ly on an exchange or the national securities market. In the absence of
reported sales of securities traded primarily on an exchange or 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. Securities for
which there are no such valuations are valued at fair value as determined in
good faith under the direction of the Board of Directors. Investments
denominated in foreign currencies are translated to U.S. dollars at the
prevailing rates of exchange.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis.
(C) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend
date. Dividends from investment income-net are declared and paid quarterly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Fund not to distribute such gain.
On September 28, 1995, the Board of Directors declared a cash dividend of
$.151 per share from undistributed investment income-net, payable on
September 29, 1995 (ex-dividend date), to shareholders of record as of the
close of business on September 28, 1995.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with
DREYFUS BALANCED FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

the applicable provisions of the Internal Revenue Code, and to make
distributions of taxable income sufficient to relieve it from substantially
all Federal income and excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .60 of 1% of the average
daily value of the Fund's net assets and is payable monthly. The Agreement
provides that the Fund may deduct from the fee to be paid to the Manager, or
the Manager will bear such excess expense, to the extent required by state
law, should the Fund's aggregate expenses, exclusive of taxes, brokerage,
interest on borrowings and extraordinary expenses, exceed the expense
limitation of any state having jurisdiction over the Fund. The most stringent
state expense limitation applicable to the Fund presently requires
reimbursement of expenses in any full fiscal year that such expenses
(exclusive of certain expenses as described above) exceed 21\2% of the first
$30 million, 2% of the next $70 million and 11\2% of the excess over $100
million of the average value of the Fund's net assets in accordance with
California "blue-sky" regulations. There was no expense reimbursement during
the year ended August 31, 1995.
(B) Pursuant to the Fund's Shareholder Services Plan, the Fund reimburses
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager, an
amount not to exceed an annual rate of .25 of 1% of the value of the Fund's
average daily net assets for certain allocated expenses of providing personal
services and/or maintaining shareholder accounts. The services provided may
include personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding the Fund and providing reports and other
information, and services related to the maintenance of shareholder accounts.
During the year ended August 31, 1995, the Fund was charged an aggregate of
$288,860 pursuant to the Shareholder Services Plan.
(C) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $1,000 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
other than short-term securities, during the year ended August 31, 1995,
amounted to $143,489,625 and $75,617,774, respectively.
At August 31, 1995, accumulated net unrealized appreciation on
investments was $12,386,984, consisting of $13,423,434 gross unrealized
appreciation and $1,036,450 gross unrealized depreciation.
At August 31, 1995, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).

DREYFUS BALANCED FUND, INC.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS BALANCED FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Dreyfus Balanced Fund, Inc., including the statement of investments, as of
August 31, 1995, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in
the period then ended, and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 1995 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Dreyfus Balanced Fund, Inc. at August 31, 1995, the results of
its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.
[Ernst and Young LLP signature logo]

New York, New York
October 5, 1995