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                          THE DREYFUS FUND INCORPORATED

                       STATEMENT OF ADDITIONAL INFORMATION
                                   MAY 1, 2001

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      This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of The
Dreyfus Fund Incorporated (the "Fund"), dated May 1, 2001 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 Curtiss Boulevard, Uniondale, New York 11556-0144, or call
one of the following numbers:

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

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


                                TABLE OF CONTENTS
                                                                 Page

Description of the Fund..........................................2
Management of the Fund...........................................12
Management Arrangements..........................................16
How to Buy Shares................................................19
How to Redeem Shares.............................................21
Shareholder Services.............................................23
Determination of Net Asset Value.................................27
Dividends, Distributions and Taxes...............................27
Portfolio Transactions...........................................29
Performance Information..........................................32
Information About the Fund.......................................33
Counsel and Independent Auditors.................................34
Appendix.........................................................35







                             DESCRIPTION OF THE FUND

      The Fund, a Maryland corporation formed on January 2, 1947, began
operations under its present name on May 24, 1951. The Fund is an open-end,
management investment company, known as a mutual fund. The Fund is a diversified
fund, which means that, with respect to 75% of the Fund's total assets, the Fund
will not invest more than 5% of its assets in the securities of any single
issuer nor hold more than 10% of the outstanding voting securities of any single
issuer.

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

      Dreyfus Service Corporation (the "Distributor") is the distributor of the
Fund's shares.

Certain Portfolio Securities

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

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

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

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


      Investment Companies. The Fund may invest in securities issued by
registered and unregistered investment companies including participation in
equity indices such as Standard and Poor's Depositary Receipts and NASDAQ-100
Index Tracking Stock described below, to the extent consistent with its
investment objective. Under the Investment Company Act of 1940, as amended (the
"1940 Act"), the Fund's investment in such securities, subject to certain
exceptions, currently is limited to (i) 3% of the total voting stock of any one
investment company, (ii) 5% of the Fund's total assets with respect to any one
investment company and (iii) 10% of the Fund's total assets in the aggregate.
Investments in the securities of other investment companies may involve
duplication of advisory fees and certain other expenses.

SPDRs, DIAMONDS and Nasdaq-100 Shares. The Fund may invest in Standard & Poor's
Depositary Receipts ("SPDRs"). SPDRs are units of beneficial interest in an
investment trust sponsored by a wholly-owned subsidiary of the American Stock
Exchange, Inc. (the "Exchange") which represent proportionate undivided
interests in a portfolio of securities consisting of substantially all of the
common stocks, in substantially the same weighting, as the component stocks of
the Standard & Poor's 500 Stock Index (the "S&P 500 Index"). SPDRs are listed on
the Exchange and traded in the secondary market on a per-SPDR basis.

      The Fund also may invest in DIAMONDS. DIAMONDS are units of beneficial
interest in an investment trust representing proportionate undivided interests
in a portfolio of securities consisting of all the component common stocks of
the Dow Jones Industrial Average (the "DJIA"). DIAMONDS are listed on the
Exchange and may be traded in the secondary market on a per-DIAMONDS basis.

      Nasdaq-100 Index Tracking Stock (also referred to as "Nasdaq-100 Shares")
represents undivided ownership interests in a portfolio of stocks which consists
substantially of all of the securities, in substantially the same weighting, as
the component securities of the Nasdaq-100 Index and is intended to provide
investment results that, before expenses, generally correspond to the price and
yield performance of such index. Nasdaq-100 Shares are listed for trading on the
Exchange and are bought and sold in the secondary market like ordinary shares of
stock at any time during the trading day.

      SPDRs are designed to provide investment results that generally correspond
to the price and yield performance of the component common stocks of the S&P 500
Index. DIAMONDS are designed to provide investors with investment results that
generally correspond to the price and yield performance of the component common
stocks of the DJIA. Nasdaq-100 Shares are designed to provide investment results
that generally correspond to the price and yield performance of the component
common stocks of the Nasdaq-100 Index. The values of SPDRs, DIAMONDS and
Nasdaq-100 Shares are subject to change as the values of their respective
component common stocks fluctuate according to the volatility of the market.
Investments in SPDRs, DIAMONDS and Nasdaq-100 Shares involve certain inherent
risks generally associated with investments in a broadly based portfolio of
common stocks, including the risk that the general level of stock prices may
decline, thereby adversely affecting the value of each unit of SPDRs, DIAMONDS
and/or Nasdaq-100 Shares invested in by the Fund. Moreover, the Fund's
investment in SPDRs, DIAMONDS and/or Nasdaq-100 Shares may not exactly match the
performance of a direct investment in the respective indices to which they are
intended to correspond. Additionally, the respective investment trusts may not
fully replicate the performance of their respective benchmark indices due to the
temporary unavailability of certain index securities in the secondary market or
due to other extraordinary circumstances, such as discrepancies between each of
the investment trusts and the indices with respect to the weighting of
securities or the number of, for example, larger capitalized stocks held by an
index and each of the investment trusts.


      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.
These securities may include securities that are not readily marketable, such as
securities that are subject to legal or contractual restrictions on resale,
repurchase agreements providing for settlement in more than seven days after
notice, and certain privately negotiated, non-exchange traded options and
securities used to cover such options. As to these securities, the Fund is
subject to a risk that should the Fund desire to sell them when a ready buyer is
not available at a price the Fund deems representative of their value, the value
of the Fund's net assets could be adversely affected.

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

Investment Techniques

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

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

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

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

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


      The Fund will not sell securities short if, after such short sale, the
total market value of all securities sold short would exceed 25% of the value of
the Fund's net assets. The Fund may not make a short sale which results in the
Fund having sold short in the aggregate more than 5% of the outstanding
securities of any class of an issuer.


      The Fund also may make short sales "against the box," in which the Fund
enters into a short sale of a security it owns. At no time will more than 15% of
the value of the Fund's net assets be in deposits on short sales against the
box.


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


      Borrowing Money. The Fund is permitted to borrow to the extent permitted
under the 1940 Act, which permits an investment company to borrow in an amount
up to 33-1/3% of the value of its total assets. The Fund currently intends to
borrow money only for temporary or emergency (not leveraging) purposes, in an
amount up to 15% of the value of its total assets (including the amount
borrowed) valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) at the time the borrowing is made. While such
borrowings exceed 5% of the Fund's total assets, the Fund will not make any
additional investments.

      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. The Fund continues to be entitled
to payments in amounts equal to the dividends, interest or other distributions
payable on the loaned securities which affords 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
33-1/3% of the value of the Fund's total assets, and the Fund will receive
collateral consisting of cash, U.S. Government securities or irrevocable letters
of credit which will be maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities. Such loans are
terminable by the Fund at any time upon specified notice. The Fund might
experience risk of loss if the institution with which it has engaged in a
portfolio loan transaction breaches its agreement with the Fund. In connection
with its securities lending transactions, 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.

      Derivatives. The Fund may invest in, or enter into, derivatives, such as
options and futures, 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.

      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 or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level of
risk, or change the character of the risk, of its portfolio by making
investments in specific securities. However, derivatives may entail investment
exposures that are greater than their cost would suggest, meaning that a small
investment in derivatives could have a large potential impact on the Fund's
performance.

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

      Although the Fund will not be a commodity pool, certain derivatives
subject the Fund to the rules of the Commodity Futures Trading Commission which
limit the extent to which the Fund can invest in such derivatives. The Fund may
invest in futures contracts and options with respect thereto for hedging
purposes without limit. However, the Fund may not invest in such contracts and
options for other purposes if the sum of the amount of initial margin deposits
and premiums paid for unexpired options with respect to such contracts, other
than for bona fide hedging purposes, exceeds 5% of the liquidation value of the
Fund's assets, after taking into account unrealized profits and unrealized
losses on such contracts and options; provided, however, that in the case of an
option that is in-the-money at the time of purchase, the in-the-money amount may
be excluded in calculating the 5% limitation.

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

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

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

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

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

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

      The Fund may purchase and sell interest rate futures contracts. An
interest rate future obligates the Fund to purchase or sell an amount of a
specific debt security at a future date at a specific price.

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

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

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

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

Specific Options Transactions. The Fund may purchase and sell call and put
options in respect of specific securities (or groups or "baskets" of specific
securities) or stock indices listed on national securities exchanges or traded
in the over-the-counter market. An option on a stock index is similar to an
option in respect of specific securities, except that settlement does not occur
by delivery of the securities comprising the index. Instead, the option holder
receives an amount of cash if the closing level of the stock index upon which
the option is based is greater than in the case of a call, or less than in the
case of a put, the exercise price of the option. Thus, the effectiveness of
purchasing or writing stock index options will depend upon price movements in
the level of the index rather than the price of a particular stock.

      The Fund may purchase and sell call and put options on foreign currency.
These options convey the right to buy or sell the underlying currency at a price
which is expected to be lower or higher than the spot price of the currency at
the time the option is exercised or expires.

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


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



Certain Investment Considerations and Risks


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

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

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

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


      Fixed-Income Securities. If market conditions warrant, the Fund may
purchase fixed-income securities such as preferred stocks, bonds and debentures.
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 Investors
Service, Inc. ("Moody's") and BBB by Standard & Poor's Ratings Services ("S&P"),
and Fitch IBCA, Duff & Phelps ("Fitch"), 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 the
"Appendix."


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

Investment Restrictions

      The Fund's investment objective is a fundamental policy, which cannot be
changed without approval by the holders of a majority (as defined in the 1940
Act) of the Fund's outstanding voting shares. In addition, the Fund has adopted
investment restrictions numbered 1 through 9 as fundamental policies. Investment
restrictions numbered 10 through 13 are not fundamental policies and may be
changed by vote of a majority of the Fund's Board members at any time. The Fund
may not:

      1.   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.

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

      3.   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.

      4.   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.

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

      6.   Hold more than 10% of the voting securities of any one issuer. This
restriction applies only with respect to 75% of the Fund's total assets.

      7.  Purchase, hold or deal in real estate, 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 or real estate investment trusts.

      8.  Purchase and sell 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.

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

      10. Purchase any securities issued by any investment company, except to
the extent permitted under the 1940 Act.

      11. Invest in the securities of a company for the purpose of management
or the exercise of control, but the Fund votes the securities it owns in its
portfolio as a shareholder in accordance with its own views.

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

      13. 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.

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


                             MANAGEMENT OF THE FUND

      The Fund's Board is responsible for the management and supervision of the
Fund. The Board approves all significant agreements with those companies that
furnish services to the Fund. These companies are as follows:

      The Dreyfus Corporation...........  Investment Adviser
      Dreyfus Service Corporation.......  Distributor
      Dreyfus Transfer, Inc.............  Transfer Agent
      Mellon Bank, N.A..................  Custodian

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

Board Members 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. He also is a
      director of The Muscular Dystrophy Association, HealthPlan Services
      Corporation, a provider of marketing, administrative and risk management
      services to health and other benefit programs, Caryle Industries, Inc.
      (formerly, Belding Heminway, Inc.), a button packager and distributor,
      Century Business Services, Inc., a provider of various outsourcing
      functions for small and medium sized companies, The Newark Group, a
      privately held company providing a national network of paper recovery
      facilities, paperboard mills and paperboard converting plants, and
      QuikCAT.com, Inc., a private company engaged in the development of high
      speed movement, routing, storage and encryption of data across all modes
      of data transport. Prior to January 1995, he was President, a director
      and, until August 1994, Chief Operating Officer of the Manager and
      Executive Vice President and a director of the Distributor. From August
      1994 to December 1994, he was a director of Mellon Financial Corporation.
      He is 57 years old and his address is 200 Park Avenue, New York, New York
      10166.

LUCY  WILSON BENSON, Board Member. President of Benson and Associates,
      consultants to business and government. Mrs. Benson is a director of The
      International Executive Services Corps. She is also Vice Chairman of the
      Citizens Network for Foreign Affairs and of the Atlantic Council of the
      U.S. and a member of the Council on Foreign Relations. Mrs. Benson is also
      a member of the Town Meeting, Town of Amherst, Massachusetts. From 1987 to
      2000, Mrs. Benson was a director of COMSAT Corporation and was a Trustee
      of the Alfred P. Sloan Foundation from 1975 to 1977 and from 1981 to 2000.
      She was also a member of the Board of Trustees of Lafayette College from
      1985 to 2000 for which she served as Vice Chairman of the Board of
      Trustees from 1990 to 2000. From 1980 to 1994, Mrs. Benson was a director
      of The Grumman Corporation; from 1990 to 1998, she was a director of
      General RE Corporation; and from 1987 to 1999, she was a director of
      Logistics Management Institute. Mrs. Benson served as a consultant to the
      U.S. Department of State and to SRI International from 1980 to 1981. From
      1977 to 1980, she was Under Secretary of State of Security Assistance,
      Science and Technology. She is 73 years old and her address is 46 Sunset
      Avenue, Amherst, Massachusetts 01002.

DAVID W. BURKE, Board Member. Board member of various funds in the Dreyfus
      Family of Funds. Chairman of the Broadcasting Board of Governors, an
      independent board within the United States Information Agency, from August
      1994 to November 1998. From August 1994 to December 1994, Mr. Burke was a
      Consultant to the Manager, and from October 1990 to August 1994, he was
      Vice President and Chief Administrative Officer of the Manager. From 1977
      to 1990, Mr. Burke was involved in the management of national television
      news, as Vice President and Executive Vice President of ABC News, and
      subsequently as President of CBS News. He is 64 years old and his address
      is Box 654, Eastham, Massachusetts 02642.

MARTIN D. FIFE, Board Member.  Chairman of the Board of Magar Inc., a company
      specializing in financial products and developing early stage
      companies.  In addition, Mr. Fife is Chairman of the Board and Chief
      Executive Officer of Skysat Communications Network Corporation, a
      company developing telecommunications systems.  Mr. Fife also serves on
      the boards of various other companies.  He is 73 years old and his
      address is 25 Central Park West, New York, New York 10023.

WHITNEY I. GERARD, Board Member.  Partner of the New York City law firm of
      Chadbourne & Parke LLP.  He is 66 years old and his address is 30
      Rockefeller Plaza, New York, New York 10112.

ARTHUR A. HARTMAN, Board Member.  Senior consultant with APCO Associates
      Inc.  From 1981 to 1987, he was United States Ambassador to the former
      Soviet Union.  He is a  Board member of Ford Meter Box Corporation and
      is a member of the advisory councils of several other companies,
      research institutes and foundations.  Ambassador Hartman is Chairman of
      First NIS Regional Fund (ING/Barings Management) and New Russia Fund.
      He is a former President of the Harvard Board of Overseers.  He is 74
      years old and his address is 2738 McKinley Street, N.W., Washington,
      D.C. 20015.

GEORGE L. PERRY, Board Member.  An economist and Senior Fellow at the
      Brookings Institution since 1969.  He is co-director of the Brookings
      Panel on Economic Activity and editor of its journal, The Brookings
      Papers.  He is also a director of the State Farm Mutual Automobile
      Association and State Farm Life Insurance Company.  He is 67 years old
      and his address is 1775 Massachusetts Avenue, N.W., Washington, D.C.
      20036.


      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, if any,
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 and by all funds in the Dreyfus Family of Funds
for which such person was a Board member (the number of portfolios of such funds
is set forth in parenthesis next to each Board member's total compensation)*
during the year ended December 31, 2000, were as follows:



                                                 Total Compensation
                              Aggregate          From Fund and Fund
Name of Board             Compensation from       Complex Paid to
   Member                       Fund**             Board Members


Joseph S. DiMartino            $20,412             $ 805,537 (189)

Lucy Wilson Benson             $16,330             $ 107,283 (29)

David W. Burke                 $16,330             $ 254,289 (62)

Martin D. Fife                 $16,330             $ 67,577 (14)

Whitney I. Gerard              $16,330             $ 67,577 (14)

Arthur A. Hartman              $16,330             $ 67,577 (14)

George L. Perry                $16,330             $ 67,577 (14)
- -------------------------
*     Represents the number of separate portfolios comprising the investment
      companies in the Fund Complex, including the Fund, for which the Board
      member serves.
**    Amount does not include reimbursed expenses for attending Board meetings,
      which amounted to $14,202 for all Board members as a group.

Officers of the Fund

STEPHEN E. CANTER, President.   President, Chief Operating Officer, Chief
      Investment Officer and a director of the Manager, and an officer of 94
      investment companies (comprising 182 portfolios) managed by the
      Manager.  Mr. Canter also is a Director and an Executive Committee
      Member of the other investment management subsidiaries of Mellon, each
      of which is an affiliate of the Manager.  He is 55 years old.

MARK N. JACOBS, Vice President.  Executive Vice President, Secretary, and
      General Counsel of the Manager, and an officer of 95 investment
      companies (comprising 195 portfolios) managed by the Manager.  He is 54
      years old.

JOSEPH CONNOLLY, Vice President and Treasurer. Director - Mutual Fund Accounting
      of the Manager, and an officer of 95 investment companies (comprising 195
      portfolios) managed by the Manager. He is 43 years old.

MICHAEL A. ROSENBERG, Secretary.   Associate General Counsel of the Manager,
      and an officer of 94 investment companies (comprising 182 portfolios)
      managed by the Manager.  He is 41 years old.

STEVEN F. NEWMAN, Assistant Secretary. Associate General Counsel and
      Assistant Secretary of the Manager, and an officer of 95 investment
      companies (comprising 195 portfolios) managed by the Manager.  He is 51
      years old.

ROBERT R. MULLERY, Assistant Secretary.  Assistant General Counsel of the
      Manager, and an officer of 20 investment companies (comprising 39
      portfolios) managed by the Manager.  He is 49 years old.

JAMES WINDELS, Assistant Treasurer. Senior Treasury Manager of the Manager, and
      an officer of 25 investment companies (comprising 99 portfolios) managed
      by the Manager. He is 41 years old.

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

      The Fund's Board members and officers, as a group, owned less than 1% of
the Fund's voting securities outstanding on April 10, 2001.

      As of April 10, 2001, no shareholder of the Fund was known to own of
record 5% or more of the Fund's outstanding shares.


                             MANAGEMENT ARRANGEMENTS

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


      The Manager provides management services pursuant to the Management
Agreement (the "Agreement") between the Manager and the Fund. The Agreement 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 Fund's outstanding voting securities,
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 Agreement is terminable upon 60 days'
notice by either party and 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:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice Chairman--Institutional and a
director; Lawrence S. Kash, Vice Chairman; J. David Officer, Vice Chairman
and a director; Ronald P. O'Hanley III, Vice Chairman; Mark N. Jacobs,
Executive Vice President, General Counsel and Secretary; William T. Sandalls,
Jr., Executive Vice President; Stephen R. Byers, Senior Vice President; Diane
P. Durnin, Senior Vice President; Patrice M. Kozlowski, Senior Vice
President--Corporate Communications; Mary Beth Leibig, Vice President--Human
Resources; Theodore A. Schachar, Vice President--Tax; Wendy H. Strutt, Vice
President; Ray Van Cott, Vice President--Information Systems; William H.
Maresca, Controller; James Bitetto, Assistant Secretary; Steven F. Newman,
Assistant Secretary; and Mandell L. Berman, Burton C. Borgelt, Steven G.
Elliot, Martin G. McGuinn, Richard W. Sabo and Richard F. Syron, directors.

      The Manager manages the Fund's 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 Board to execute purchases and sales of
securities. The Fund's portfolio managers are Timothy M. Ghriskey and Douglas D.
Ramos. The Manager also maintains a research department with a professional
staff of portfolio managers and securities analysts who provide research
services for the Fund and for other funds advised by the Manager.

      Mellon Bank, N.A., the Manager's parent, and its affiliates may have
deposit, loan and commercial banking or other relationships with the issuers of
securities purchased by the Fund. The Manager has informed the Company that in
making its investment decisions it does not obtain or use material inside
information that Mellon Bank, N.A. or its affiliates may posses with respect to
such issuers.


      The Manager's Code of Ethics subjects its employees' personal securities
transactions to various restrictions to ensure that such trading does not
disadvantage any fund advised by the Manager. In that regard, portfolio managers
and other investment personnel of the Manager must pre-clear and report their
personal securities transactions and holdings, which are reviewed for compliance
with the Code of Ethics, and are also subject to the oversight of Mellon's
Investment Ethics Committee. Portfolio managers and other investment personnel
who comply with the pre-clearance and disclosure procedures of the Code of
Ethics and the requirements of the Committee may be permitted to purchase, sell
or hold securities which also may be or are held in fund(s) they manage or for
which they otherwise provide investment advice.


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

      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: taxes, interest, brokerage fees and commissions, if any, fees
of directors 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, advisory fees, state Blue Sky qualification fees, charges of
custodians, transfer and dividend disbursing agents' fees, certain insurance
premiums, industry association fees, outside auditing and legal expenses, costs
of maintaining corporate existence, costs of independent pricing services, costs
attributable to investor services (including, without limitation, telephone and
personnel expenses), costs of shareholders' reports and corporate 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.

      As compensation for its services, the Fund has agreed to pay the Manager
an annual fee, payable monthly, as follows:

             Annual Fee as a
        Percentage of Average     Average Daily Net Assets
           Daily Net Assets

                .65 of 1%         of the first $1.5 billion
                .625 of 1%        between $1.5 billion and $2.0
                                     billion
                .60 of 1%         between $2.0 billion and $2.5
                                  billion
                .55 of 1%         over $2.5 billion

      The Agreement also provides that if the aggregate expenses of the Fund,
exclusive of taxes and brokerage commissions but including the management fee,
exceed 1% of the value of the Fund's average daily net assets for any full
fiscal year, the Manager will bear such expenses or refund to the Fund the
amount of such excess. No expense reimbursement was required for the last three
fiscal years.

      The management fees paid by the Fund to the Manager for the fiscal years
ended December 31, 1998, 1999 and 2000 amounted to $16,220,063, $16,523,173 and
$16,445,222, respectively.

      Distributor. The Distributor, a wholly-owned subsidiary of the Manager
located at 200 Park Avenue, New York, New York 10166, serves as the Fund's
distributor on a best efforts basis pursuant to an agreement with the Fund which
is renewable annually.

      The Distributor may pay dealers a fee based on the amount invested through
such dealers in Fund shares by employees participating in qualified or
non-qualified employee benefit plans or other programs where (i) the employers
or affiliated employers maintaining such plans or programs have a minimum of 250
employees eligible for participation in such plans or programs, or (ii) such
plan's or program's aggregate investment in the Dreyfus Family or Funds or
certain other products made available by the Distributor to such plan or
programs exceeds $1,000,000 ("Eligible Benefit Plans"). Generally, the fee paid
to dealers will not exceed 1% of the amount invested through such dealers. The
Distributor, however, may pay dealers a higher fee and reserves the right to
cease paying these fees at any time. The Distributor will pay such fees from its
own funds, other than amounts received from the Fund, including past profits or
any other source available to it.

      Transfer and Dividend Disbursing Agent and Custodian. Dreyfus Transfer,
Inc. (the "Transfer Agent"), a wholly-owned subsidiary of the Manager, P.O. Box
9671, Providence, Rhode Island 02940-9671, is 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
reimbursed for certain out-of-pocket expenses.

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

                                HOW TO BUY SHARES

      General. Fund shares are sold without a sales charge. You may be charged a
fee if you effect transactions in Fund shares through a securities dealer, bank
or other financial institution. 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 maintains an
omnibus account in the Fund and has made an aggregate minimum initial purchase
for its customers of $2,500. Subsequent investments must be at least $100.
However, the minimum initial investment is $750 for Dreyfus-sponsored Keogh
Plans, IRAs (including regular IRAs, spousal IRAs for a non-working spouse, Roth
IRAs, IRAs set up under a Simplified Employee Pension Plan ("SEP-IRAs"), and
rollover IRAs) and 403(b)(7) Plans with only one participant and $500 for
Dreyfus-sponsored Education IRAs, with no minimum for subsequent purchases. The
initial investment must be accompanied by the Account Application. For full-time
or part-time employees of the Manager or any of its affiliates or subsidiaries,
directors of the Manager, Board members of a fund advised by the Manager,
including members of the Fund's Board, or the spouse or minor child of any of
the foregoing, the minimum initial investment is $1,000. For full-time or
part-time employees of the Manager or any of its affiliates or subsidiaries who
elect to have a portion of their pay directly deposited into their Fund
accounts, the minimum initial investment is $50. The Fund reserves the right to
offer Fund shares without regard to minimum purchase requirements to employees
participating in certain qualified or non-qualified employee benefit plans or
other programs where contributions or account information can be transmitted in
a manner and form acceptable to the Fund. The Fund reserves the right to 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 Builder(R), 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.


      Shares are sold on a continuous basis at the net asset value per share
next determined after an order in proper form is received by the Transfer Agent
or other entity authorized to receive orders on behalf of the Fund. 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., Eastern time) on each day the New York
Stock Exchange or the Transfer Agent is open for business. For purposes of
computing net asset value per share, options and futures will be valued 15
minutes after the close of trading on the floor of the New York Stock Exchange.
Net asset value per share is computed by dividing the value of the Fund's net
assets (i.e., the value of its assets less liabilities) by the total number of
shares outstanding. For information regarding the methods employed in valuing
the Fund's investments, see "Determination of Net Asset Value."


      Dreyfus TeleTransfer Privilege. You may purchase shares by telephone if
you have checked the appropriate box and supplied the necessary information on
the Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The proceeds will be transferred between the bank account
designated in one of these documents and your Fund account. Only a bank account
maintained in a domestic financial institution which is an Automated Clearing
House ("ACH") member may be so designated.


      Dreyfus TeleTransfer purchase orders may be made at any time. Purchase
orders received by 4:00 p.m., Eastern time, on any day that the Transfer Agent
and the New York Stock Exchange are open for business will be credited to the
shareholder's Fund account on the next bank business day following such purchase
order. Purchase orders made after 4:00 p.m., Eastern time, on any day the
Transfer Agent and the New York Stock Exchange are open for business, or orders
made on Saturday, Sunday or a 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 Dreyfus TeleTransfer Privilege, the initial payment for purchase
of Fund shares must be drawn on, and redemption proceeds paid to, the same bank
and account as are designated on the Account Application or Shareholder Services
Form on file. If the proceeds of a particular redemption are to be wired to an
account at any other bank, the request must be in writing and
signature-guaranteed. See "How to Redeem Shares--Dreyfus TeleTransfer
Privilege."


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


                              HOW TO REDEEM SHARES


      General. 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(R) and
subsequently submit a written redemption request to the Transfer Agent, the Fund
may delay redemption of such shares, and the redemption proceeds may not be
transmitted to you, for up to eight business days after the purchase of such
shares. 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(R)
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
sufficient collected balance in your account to cover the redemption request.
Fund shares may not be redeemed until the Transfer Agent has received your
Account Application.


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

      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. You may request by telephone that
redemption proceeds be transferred between your Fund account and your bank
account. Only a bank account maintained in a domestic financial institution
which is an ACH member may be designated. Holders of jointly registered Fund or
bank accounts may redeem through the Dreyfus TeleTransfer Privilege for transfer
to their bank account not more than $500,000 within any 30-day period. You
should be aware that if you have selected the Dreyfus TeleTransfer Privilege,
any request for a wire redemption will be effected as a Dreyfus TeleTransfer
transaction through the ACH system unless more prompt transmittal specifically
is requested. Redemption proceeds will be on deposit in your account at an ACH
member bank ordinarily two business days after receipt of the redemption
request. See "How to Buy Shares--Dreyfus TeleTransfer Privilege."


      Redemption through Dealers. The Distributor or its designee will accept
orders from dealers with which it has sales agreements for repurchase of shares
held by shareholders. Repurchase orders received by the dealer prior to the
close of trading on the floor of the New York Stock Exchange on any business day
and transmitted to the Distributor or its designee prior to the close of its
business day (normally 5:15 p.m., Eastern time) are effected at the price
determined as of the close of trading on the floor of the New York Stock
Exchange on that day. Otherwise, the shares will be redeemed at the next
determined net asset value. It is the responsibility of the dealer to transmit
orders on a timely basis. The dealer may charge the shareholder a fee for
executing the order. This repurchase arrangement is discretionary and may be
withdrawn at any time.


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


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


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

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

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

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

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

      To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless you check the applicable "No" box on the account application, indicating
that you specifically refuse this Privilege. By using Telephone Exchange
Privilege, you authorize the Transfer Agent to act on telephonic instructions
(including over The Dreyfus Touch(R) automated telephone system) from any person
representing himself or herself to be you and reasonably believed by the
Transfer Agent to be genuine. Telephone exchanges may be subject to limitations
as to the amount involved or the number of telephone exchanges permitted. Shares
issued in certificate form are not eligible for telephone exchange. No fees
currently are charged shareholders directly in connection with exchanges,
although the Fund reserves the right, upon not less than 60 days' written
notice, to charge shareholders a nominal administrative fee in accordance with
rules promulgated by the Securities and Exchange Commission.

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


      Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege permits
you to purchase, in exchange for shares of the Fund, shares of another fund in
the Dreyfus Family of Funds or shares of certain funds advised by Founders, of
which you are a shareholder. 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. You will be notified if your account falls below
the amount designated to be exchanged under this Privilege. In this case, your
account will fall to zero unless additional investments are made in excess of
the designated amount prior to the next Auto-Exchange transaction. Shares held
under IRA and other retirement plans are eligible for this Privilege. Exchanges
of IRA shares may be made between IRA accounts and from regular accounts to IRA
accounts, but not from IRA accounts to regular accounts. With respect to all
other retirement accounts, exchanges may be made only among those accounts.


      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 Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.

      Dreyfus-Automatic Asset Builder(R). Dreyfus-Automatic Asset Builder
permits you to purchase Fund shares (minimum of $100 and maximum of $150,000 per
transaction) at regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you.

      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 U.S. Government
automatically deposited into your Fund account. You may deposit as much of such
payments as you elect.

      Dreyfus Payroll Savings Plan. Dreyfus Payroll Savings Plan permits you to
purchase Fund shares (minimum of $100 per transaction) automatically on a
regular basis. Depending upon your employer's direct deposit program, you may
have part or all of your paycheck transferred to your existing Dreyfus account
electronically through the ACH system at each pay period. To establish a Dreyfus
Payroll Savings Plan account, you must file an authorization form with your
employer's payroll department. It is the sole responsibility of your employer to
arrange for transactions under the Dreyfus Payroll Savings Plan.


      Dreyfus Step Program. Dreyfus Step Program enables you to purchase Fund
shares without regard to the Fund's minimum initial investment requirements
through Dreyfus-Automatic Asset Builder(R), Dreyfus Government Direct Deposit
Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step Program
account, you must supply the necessary information on the Account Application
and file the required authorization form(s) with the Transfer Agent. For more
information concerning this Program, or to request the necessary authorization
form(s), please call toll free 1-800-782-6620. You may terminate your
participation in this Program at any time by discontinuing your participation in
Dreyfus-Automatic Asset Builder, Dreyfus Government Direct Deposit Privilege or
Dreyfus Payroll Savings Plan, as the case may be, as provided under the terms of
such Privilege(s). The Fund may modify or terminate this Program at any time.



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


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

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


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


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

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

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

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

      If you wish to purchase Fund shares in conjunction with a Keogh Plan, a
403(b)(7) Plan or an IRA, including a SEP-IRA, you may request 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 for subsequent purchases. The minimum initial investment is $750
for Dreyfus-sponsored Keogh Plans, IRAs (including regular IRAs, spousal IRAs
for a non-working spouse, Roth IRAs, SEP-IRAs and rollover IRAs) and 403(b)(7)
Plans with only one participant and $500 for Dreyfus-sponsored Education IRAs,
with no minimum for subsequent purchases.

      You 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

      Valuation of Portfolio Securities. Portfolio securities are valued at the
last sale price on the securities exchange or national securities market on
which such securities are primarily 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 recently reported bid and
asked prices. Bid price is used when no asked price is available. Options are
valued at the last sale price on an exchange. Options for which there were no
transactions are valued at the average of the most recently reported bid and
asked prices. Market quotations of foreign securities in foreign currencies are
translated to U.S. dollars at the prevailing rates of exchange. Any securities
or other assets for which market quotations are not readily available are valued
at fair value as determined in good faith by the Fund's Board. Expenses and
fees, including the management fee, reduced by the expense limitation, if any,
are accrued daily and taken into account for the purpose of determining the net
asset value of Fund shares.

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


                       DIVIDENDS, DISTRIBUTIONS AND TAXES


      Management 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 December 31, 2000. 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 taxes to the
extent its net investment income and net realized capital gains are distributed
in accordance with the applicable provisions of the Code. To qualify as a
regulated investment company, the Fund must distribute at least 90% of its net
income (consisting of net investment income and net short-term capital gain) to
its shareholders, and meet certain asset diversification and other requirements.
If the Fund does not qualify as a regulated investment company, it will be
treated for tax purposes as an ordinary corporation subject to Federal income
tax. The term "regulated investment company" does not imply the supervision of
management or investment practices or policies by any government agency.


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

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

      In general, dividends (other than capital gain dividends) paid by the Fund
to U.S. corporate shareholders may be eligible for the dividends received
deduction to the extent that the Fund's income consists of dividends paid to
U.S. corporations on shares that have been held by the Fund for at least 46 days
during the 90-day period commencing 45 days before the shares become
ex-dividend. In order to claim the dividends received deduction, the investor in
the Fund must have held its shares in the Fund for at least 46 days during the
90-day period commencing 45 days before the Fund shares become ex-dividend.
Additional restrictions on an investor's ability to claim the dividends received
deduction may apply.

      Ordinarily, gains or losses realized from portfolio transactions will be
treated as capital gains or losses. However, a portion of the gain or loss
realized from the disposition of certain non-U.S. dollar denominated securities
(including debt instruments and certain futures or forward contracts and
options) may be treated as ordinary income or loss. In addition, all or a
portion of the gain realized from the disposition of certain market discount
bonds will be treated as ordinary income. Finally, all or a portion of the gains
realized from engaging in "conversion transactions" (generally including certain
transactions designed to convert ordinary income into capital gains) may be
treated as ordinary income.

      Gain or loss, if any, realized by the Fund from certain financial futures
or forward contracts and options transactions ("Section 1256 contracts") will be
treated as 60% long-term capital gain or loss and 40% short-term capital gain or
loss. Gain or loss will arise upon exercise or lapse of Section 1256 contracts
as well as from closing transactions. In addition, any Section 1256 contracts
remaining unexercised at the end of the Fund's taxable year will be treated as
sold for its then fair market value, resulting in additional gain or loss to the
Fund characterized in the manner described above.

      Offsetting positions held by the Fund involving certain futures or forward
contracts or options transactions may be considered, for tax purposes, to
constitute "straddles." "Straddles" are defined to include "offsetting
positions" in actively traded personal property. To the extent the straddle
rules apply to positions established by the Fund, losses realized by the Fund
may be deferred to the extent of unrealized gain in the offsetting position. In
addition, short-term capital loss on straddle positions may be recharacterized
as long-term capital loss, and long-term capital gains on straddle positions may
be treated as short-term capital gains or ordinary income. Certain of the
straddle positions held by the Fund may constitute "mixed straddles." The Fund
may make one or more elections with respect to the treatment of "mixed
straddles," resulting in different tax consequences. In certain circumstances,
the provisions governing the tax treatment of straddles override or modify
certain of the provisions discussed above.

      If the Fund either (1) holds an appreciated financial position with
respect to stock, certain debt obligations, or partnership interests
("appreciated financial position") and then enters into a short sale, futures,
forward, or offsetting notional principal contract (collectively, a "Contract")
respecting the same or substantially identical property or (2) holds an
appreciated financial position that is a Contract and then acquires property
that is the same as, or substantially identical to, the underlying property, the
Fund generally will be taxed as if the appreciated financial position were sold
at its fair market value on the date the Fund enters into the financial position
or acquires the property, respectively.


                             PORTFOLIO TRANSACTIONS

      The Manager assumes general supervision over the placement of securities
buy and sell orders on behalf of the funds it manages. In choosing brokers, the
Manager evaluates the ability of the broker to execute the particular
transaction (taking into account the market for the stock and the size of the
order) at the best combination of price and quality of execution. In selecting
brokers no factor is necessarily determinative, and seeking to obtain best
execution for all trades takes precedence over all other considerations. Brokers
are selected after a review of all relevant criteria, including: the actual
price to be paid for the shares; the broker's knowledge of the market for the
particular stock; the broker's reliability; the broker's integrity or ability to
maintain confidentiality; the broker's research capability; commission rates; a
broker's ability to ensure that the shares will be delivered on settlement date;
a broker's ability to handle specific orders of various size and complexity; the
broker's financial condition; the broker's willingness to commit capital; and
the sale by the broker of funds managed by the Manager. At various times and for
various reasons, certain factors will be more important than others in
determining which broker to use.

      The Manager has adopted written trade allocation procedures for its equity
and fixed income trading desks. Under the procedures, portfolio managers and the
trading desks ordinarily will seek to aggregate (or "bunch") orders that are
placed or received concurrently for more than one account. In some cases, this
policy may adversely affect the price paid or received by an account, or the
size of the position obtained or liquidated. Generally, bunched trades will be
allocated among the participating accounts based on the number of shares
designated for each account on the trade order. If securities available are
insufficient to satisfy the requirements of the participating accounts,
available securities generally are allocated among accounts pro rata, based on
order sizes. In the case of debt securities, the pro rata allocation is based on
asset sizes. In allocating trades made on a combined basis, the trading desks
seeks to achieve the same net unit price of the securities for each
participating account. Because a pro rata allocation may not always adequately
accommodate all facts and circumstances, the trade allocation procedures allow
the allocation of securities on a basis other than pro rata. For example,
adjustments may be made to eliminate de minimis positions, to give priority to
accounts with specialized investment policies and objectives or to consider the
unique characteristics of certain accounts (e.g., available cash, industry or
issuer concentration, duration, credit exposure).

      Under the Manager's special trade allocation procedures applicable to
domestic and foreign initial and secondary public offerings and Rule 144A
transactions (collectively herein "IPOs"), all portfolio managers seeking to
participate in an IPO must use reasonable efforts to indicate their interest in
the IPO, by account and in writing, to the Equity Trading Desk at least 24 hours
prior to the pricing of a deal. Except upon prior written authorization from the
Director of Investments or his designee, an indication of interest submitted on
behalf of any account must not exceed an amount based on the account's
approximate median position size.

      Portfolio managers may specify by account the minimum number of shares
deemed to be an adequate allocation. Portfolio managers may not decline any
allocation in excess of the minimum number of shares specified on the ground
that too few shares are available, and will not receive an allocation of fewer
than the minimum number of shares specified. If a portfolio manager does not
specify a minimum number of shares deemed to be an adequate allocation, a
"default minimum" equal to ten percent of the requested number of shares is
assumed. De minimis adjustments may result in larger accounts participating in
IPOs to a lesser extent than smaller accounts.

      Based on the indications of interest received by the Equity Trading Desk,
the Chief Investment Officer's designee prepares an IPO Allocation Worksheet
indicating an appropriate order size for each account, taking into consideration
(i) the number of shares requested for each account; (ii) the relative size of
each account; (iii) each account's investment objectives, style and portfolio
composition, and (iv) any other factors that may lawfully be considered in
allocating IPO shares among accounts.

      If there are insufficient securities to satisfy all orders as reflected on
the IPO Allocation Worksheet, the Manager's allocation generally will be
distributed among participating accounts pro rata on the basis of each account's
order. Allocations may deviate from a strict pro rata allocation if the Chief
Investment Officer or his designee determines that it is fair and equitable to
allocate on other than a pro rata basis.

      Certain brokers and dealers who provide quality brokerage and execution
services also furnish research services to the Manager. The Manager has adopted
a brokerage allocation policy embodying the concepts of Section 28(e) of the
Securities Exchange Act of 1934 ("Section 28(e)"), which permits an investment
adviser to cause an account to pay commission rates in excess of those another
broker or dealer would have charged for effecting the same transaction, if the
adviser determines in good faith that the commission paid is reasonable in
relation to the value of the brokerage and research services provided. The
determination may be made in terms of either a particular transaction involved
or the overall responsibilities of the adviser with respect to the accounts over
which it exercises investment discretion. Research may not necessarily benefit
all accounts paying commissions to such brokers. The Manager may receive
research, as defined in Section 28(e), in connection with selling concessions
and designations in fixed price offerings for non-ERISA accounts.

      The Manager may deem it appropriate for one of its accounts to sell a
security while another of its accounts is purchasing the same security. Under
such circumstances, the Manager may arrange to have the purchase and sale
transaction effected directly between its accounts ("cross transactions"). Cross
transactions will be effected pursuant to procedures adopted under Rule 17a-7
under the 1940 Act.


      Portfolio turnover may vary from year to year as well as within the 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 fiscal years ended December 31, 1998, 1999 and 2000, the Fund paid
brokerage commissions of $5,776,039, $2,996,216 and $3,101,726, respectively,
none of which was paid to the Distributor. The above figures for brokerage
commissions paid do not include gross spreads and concessions on principal
transactions, which, where determinable, amounted to $-0-, $529,207 and $17,280
in 1998, 1999 and 2000, respectively, none of which was paid to the Distributor.

      The aggregate amount of transactions during the last fiscal year in
securities effected on an agency basis through a broker for, among other things,
research services, and the commissions and concessions related to such
transactions were as follows:


                Transaction              Commissions and
                  Amount                   Concessions
                  ------                   -----------
               $338,386,302                 $357,316


      The Fund contemplates that, consistent with the policy of obtaining the
most favorable net price, brokerage transactions may be conducted through the
Manager or its affiliates, including Dreyfus Investment Services Corporation
("DISC") and Dreyfus Brokerage Services, Inc. ("DBS"), a wholly-owned subsidiary
of Mellon. The Fund's Board has adopted procedures in conformity with Rule 17e-1
under the 1940 Act to ensure that all brokerage commissions paid to the Manager
or its affiliates are reasonable and fair.

      DBS was paid $96,723, which represented approximately 3% of the aggregate
brokerage commissions paid by the Fund for transactions involving approximately
6% of the aggregate dollar value of transactions for which the Fund paid
brokerage commissions.

                             PERFORMANCE INFORMATION

      The Fund's average annual total return for the 1, 5 and 10 year periods
ended December 31, 2000 was -14.27%, 9.84% and 10.53%, respectively. Average
annual total return is calculated by determining the ending redeemable value of
an investment purchased with a hypothetical $1,000 payment made at the beginning
of the period (assuming the reinvestment of dividends and distributions),
dividing by the amount of the initial investment, taking the "n"th root of the
quotient (where "n" is the number of years in the period) and subtracting 1 from
the result.

      The Fund's cumulative total return for the period May 24, 1951 to December
31, 2000 was 27,586.03%. Total return is calculated by subtracting the amount of
the Fund's net asset value per share at the beginning of a stated period from
the net asset value per share at the end of the period (after giving effect to
the reinvestment of dividends and distributions during the period), and dividing
the result by the net asset value per share at the beginning of the period.

      Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., the Dow Jones Industrial Average, Morningstar, Inc.,
Standard & Poor's 500 Composite Stock Price Index and other industry
publications. From time to time, advertising materials for the Fund may provide
historical information about the Fund or the Manager such as: the aggregate size
of the Fund's assets for the number of shareholder accounts in the Fund at
various points in time; causes for the Fund's growth in assets during various
time periods; portfolio philosophy and practices utilized in managing the Fund's
assets; past promotional efforts on behalf of the Fund such as the use of the
"Dreyfus Lion" as a logo or the "Dreyfus Lion/Subway" television commercial;
biographical information about Jack J. Dreyfus, Jr., the Fund's first President;
the public offering of shares of the Manager in 1965; the public awareness of
the concept of growth funds at the time of the Fund's inception; or the role
played by Jack J. Dreyfus, Jr. and/or the Fund in popularizing the concept of
mutual funds as an investment vehicle or the growth of assets in the mutual fund
industry since the Fund's inception.

      From time to time, advertising materials for the Fund may refer to or
discuss current or past business, political, economic or financial conditions,
such as any U.S. monetary or fiscal policies. In addition, from time to time,
advertising materials for the Fund may include information concerning retirement
and investing for retirement.

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

      From time to time, Fund advertisements may include statistical data or
general discussions about the growth and development of Dreyfus Retirement
Services (in terms of new customers, assets under management, market share,
etc.) and its presence in the defined contribution plan market.

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


                           INFORMATION ABOUT THE FUND

      Each Fund share has one vote, and when issued and paid for in accordance
with the terms of the offering, is fully paid and nonassessable. Fund shares are
of one class and have equal rights as to dividends and in liquidation. Shares
have no preemptive, subscription or conversion rights and are freely
transferable.

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

      The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculating on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to the
Funds' performance and its shareholders. Accordingly, if the Fund's management
determines that an investor is following a market-timing strategy or is
otherwise engaging in excessive trading, the Fund, with or without prior notice,
may temporarily or permanently terminate the availability of Fund Exchanges, or
reject in whole or part any purchase or exchange request, with respect to such
investor's account. Such investors also may be barred from purchasing other
funds in the Dreyfus Family of Funds. Generally, an investor who makes more than
four exchanges out of the Fund during any calendar year or who makes exchanges
that appear to coincide with a market-timing strategy may be deemed to be
engaged in excessive trading. Accounts under common ownership or control will be
considered as one account for purposes of determining a pattern of excessive
trading. In addition, the Fund may refuse or restrict purchase or exchange
requests by any person or group if , in the judgment of the Fund's management,
the Fund would be unable to invest the money effectively in accordance with its
investment objective and policies or could otherwise be adversely affected or if
the Fund receives or anticipates receiving simultaneous orders that may
significantly affect the Fund (e.g., amounts equal to 1% or more of the Fund's
total assets). If any exchange request is refused, the Fund will take no other
action with respect to the shares until it receives further instructions from
the investor. The Fund may delay forwarding redemption proceeds for up to seven
days if the investor redeeming shares is engaged in excessive trading or if the
amount of the redemption request otherwise would be disruptive to efficient
portfolio management or would adversely affect the Fund. The Fund's policy on
excessive trading applies to investors who invest in the Fund directly or
through financial intermediaries, but does not apply to the Dreyfus
Auto-Exchange Privilege, to any automatic investment or withdrawal privilege
described herein, or to participants in employer-sponsored retirement plans.

      During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange requests
based on their separate components -- redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Fund's next determined net asset value but the
purchase order would be effective only a t the net asset value next determined
after the fund being purchased receives the proceeds of the redemption, which
may result in the purchase being delayed.

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


                        COUNSEL AND INDEPENDENT AUDITORS

      Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038-4982, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the shares
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 independent auditors of the Fund.






                                    APPENDIX


                                Rating Categories

      Description of certain ratings assigned by Standard & Poor's Ratings Group
("S&P"), Moody's Investor Services ("Moody's"), and Fitch IBCA, Duff & Phelps
("Fitch"):

S&P

Long-term issue credit ratings

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

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

A
An obligation rated 'A' is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.

BBB
An obligation rated 'BBB' exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation. Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as
having significant speculative characteristics. 'BB' indicates the least degree
of speculation and 'C' the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.

Short-term issue credit ratings
A-1
A short-term obligation rated 'A-1' is rated in the highest category by S&P. The
obligor's capacity to meet its financial commitment on the obligation is strong.
Within this category, certain obligations are designated with a plus sign (+).
This indicates that the obligor's capacity to meet its financial commitment on
these obligations is extremely strong.

A-2
A short-term obligation rated 'A-2' is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to
meet its financial commitment on the obligation is satisfactory.
Moody's

Debt 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
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.


Aa

Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally 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 risk appear somewhat larger than the Aaa securities.


A

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


Baa

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

      Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification except Aaa. The modifier 1 indicates that the obligation ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.

Prime Rating System

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

      Leading market positions in well-established industries.

      High rates of return on funds employed.

      Conservative capitalization structure with moderate reliance on debt and
      ample asset protection.

      Broad margins in earnings coverage of fixed financial charges and high
      internal cash generation.

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

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

Fitch

Investment Grade

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

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

A
High credit quality. `A' ratings denote a low expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.

BBB
Good credit quality. `BBB' ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.

Speculative Grade

 "+" or "-" may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to the 'AAA' long-term rating
category.

Short-Term Credit Ratings

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

F1
Highest credit quality. Indicates the strongest capacity for timely payment of
financial commitments; may have an added "+" to denote any exceptionally strong
credit feature.

F2
Good credit quality. A satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of the
higher ratings.