497 1 iti485.htm PROSPECTUS iti485
Dreyfus Intermediate Term
Income Fund
Seeks to maximize total return, consisting
of capital appreciation and current income

Contents

The Fund    
 
     
Goal/Approach 1  
     
Main Risks 2  
     
Past Performance 4  
     
Expenses 5  
     
Management 6  
     
Financial Highlights 7  
     
Your Investment    
 
     
Account Policies 9  
     
Distributions and Taxes 12  
     
Services for Fund Investors 13  
     
Instructions for Regular Accounts 14  
     
Instructions for IRAs 16  
     
For More Information    
 
     
See back cover.    

The Fund

GOAL/APPROACH

The fund seeks to maximize total return, consisting of capital appreciation and current income.To pursue this goal, the fund normally invests at least 80% of its assets in investment grade fixed-income securities of U.S. and foreign issuers or the unrated equivalent as determined by Dreyfus.These securities include: U.S. government bonds and notes, corporate bonds, municipal bonds, convertible securities, preferred stocks, inflation-indexed securities, asset-backed securities, mortgage-related securities (including CMOs), and foreign bonds.

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

For additional yield, the fund may invest up to 20% of its assets in fixed-income securities rated below investment grade (“high yield” or “junk” bonds) to as low as Caa/CCC or the unrated equivalent as determined by Dreyfus.

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

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

The fund may, but is not required to, use derivatives, such as futures and options, as a substitute for taking a position in an underlying asset, to increase returns, to manage interest rate risk, or as part of a hedging strategy. The fund also may engage in short-selling, typically for hedging purposes, such as to limit exposure to a possible market decline in the value of its portfolio securities.

Concepts to understand

Investment grade securities: fixed-income securities rated BBB or Baa or above by nationally recognized rating agencies are considered investment grade.

Mortgage-related securities: pools of residential or commercial mortgages whose cash flows are “passed through” to the holders of the securities via monthly payments of interest and principal.

CMO (collateralized mortgage obligation): a security that pools together mortgages and separates them into short-, medium-, and long-term positions (called tranches). Tranches pay different rates of interest depending on their maturity and cash flow predictability.

Bond rating: a ranking of a bond’s quality, based on its ability to pay interest and repay principal. Bonds are rated from a high of “AAA” (highly unlikely to default) through a low of “D” (companies already in default).

Duration: a measure of an investment’s “interest rate risk,” or how sensitive an investment or the fund’s portfolio may be to changes in interest rates. Generally, the longer a fund’s duration, the more likely it is to react to interest rate fluctuations and the greater its long-term risk/return potential.

Average effective maturity: an average of the stated maturities of the bonds held by the fund, adjusted to reflect provisions or market conditions that may cause a bond’s principal to be repaid earlier than at maturity.

The Fund 1

MAIN RISKS

The fund’s principal risks are discussed below. The value of your investment in the fund will fluctuate, which means you could lose money.

  • Interest rate risk. Prices of bonds tend to move inversely with changes in interest rates.Typically, a rise in rates will adversely affect bond prices and, accordingly, the fund’s share price. The longer the fund’s effective maturity and duration, the more its share price is likely to react to interest rates.
  • Call risk. Some bonds give the issuer the option to call, or redeem, the bonds before their maturity date. If an issuer “calls” its bond during a time of declining interest rates, the fund might have to reinvest the proceeds in an investment offering a lower yield.
  • Credit risk. Failure of an issuer to make timely interest or principal payments, or a decline or perception of a decline in the credit quality of a bond, can cause a bond’s price to fall, potentially lowering the fund’s share price. Although the fund invests primarily in investment grade bonds, the fund may invest to a limited extent in high yield (“junk”) bonds, which involve greater credit risk, including the risk of default, than investment grade bonds, and are considered predominantly speculative with respect to the issuer’s continuing ability to make principal and interest payments. The prices of high yield bonds can fall dramatically in response to bad news about the issuer or its industry, or the economy in general.
  • Market risk. The value of a security may decline due to general market conditions that are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. They also may decline because of factors that affect a particular industry.
  • Liquidity risk. When there is no active trading market for specific types of securities, it can become more difficult to sell the securities at or near their perceived value. In such a market, the value of such securities and the fund’s share price may fall dramatically. Investments in foreign securities tend to have greater exposure to liquidity risk than domestic securities.
  • Prepayment and extension risk. When interest rates fall, the principal on mortgage-backed and certain asset-backed securities may be prepaid. The loss of higher yielding, underlying mortgages and the reinvestment of proceeds at lower interest rates can reduce the fund’s potential price gain in response to falling interest rates, reduce the fund’s yield, or cause the fund’s share price to fall.When interest rates rise, the effective duration of the fund’s mortgage-related and asset-backed securities may lengthen due to a drop in prepayments of the underlying mortgages or assets. This is known as extension risk and would increase the fund’s sensitivity to rising rates and its potential for price declines.
  • Derivatives risk. In addition to mortgage-related and asset-backed securities, the fund may invest in other derivative instruments such as options, futures and options on futures (including those relating to securities, indexes, foreign currencies and interest rates), swaps and other credit deriva-tives.A small investment in derivatives could have a potentially large impact on the fund’s performance. The use of derivatives involves risks different from, or possibly greater than, the risks associated with investing directly in the underlying assets. Derivatives can be highly volatile, illiquid and difficult to value, and there is the risk that changes in the value of a derivative held by the fund will not correlate with the fund’s other investments.
  • Foreign investment risk. The prices and yields of foreign bonds can be affected by political and economic instability or changes in currency exchange rates. The bonds of issuers located in emerging markets can be more volatile and less liquid than those of issuers in more mature economies.

2

  • Inflation-indexed security risk. Interest payments on inflation-indexed securities can be unpredictable and will vary as the principal and/or interest is periodically adjusted based on the rate of inflation. If the index measuring inflation falls, the interest payable on these securities will be reduced.The U.S.Treasury has guaranteed that in the event of a drop in prices, it would repay the par amount of its inflation-indexed securities. Any increase in the principal amount of an inflation-indexed security will be considered taxable ordinary income, even though investors do not receive their principal until maturity. Inflation-indexed securities issued by corporations generally do not guarantee repayment of principal.
  • Short sale risk. The fund may make short sales, which involves selling a security it does not own in anticipation that the security’s price will decline. Short sales expose the fund to the risk that it will be required to buy the security sold short (also known as “covering” the short position) at a time when the security has appreciated in value, thus resulting in a loss to the fund.
  • Market sector risk. The fund’s overall risk level will depend on the market sectors in which the fund is invested and the current interest rate, liquidity and credit quality of such sectors. The fund may overweight or underweight certain industries or market sectors, which may cause the fund’s performance to be more or less sensitive to developments affecting those industries or sectors.
  • Leveraging risk. The use of leverage, such as borrowing money to purchase securities, engaging in reverse repurchase agreements, lending portfolio securities and engaging in forward commitment transactions, will magnify the fund’s gains or losses.

Other potential risks

Under adverse market conditions, the fund could invest some or all of its assets in U.S. Treasury securities and money market securities. Although the fund would do this for temporary defensive purposes, it could reduce the benefit from any upswing in the market. During such periods, the fund may not achieve its investment objective.

The fund may lend its portfolio securities to brokers, dealers and other financial institutions. In connection with such loans, the fund will receive collateral from the borrower equal to at least 100% of the value of the loaned securities. Should the borrower of the securities fail financially, the fund may experience delays in recovering the loaned securities or exercising its rights in the collateral.

At times, the fund may engage in short-term trading, which could produce higher transaction costs and taxable distributions, and lower the fund’s after-tax performance.

The Fund 3

PAST PERFORMANCE

The bar chart and table shown illustrate the risks of investing in the fund. The bar chart shows the changes in the performance of the fund’s Investor shares from year to year. The table compares the average annual total returns of the fund’s Investor shares and Institutional shares to those of the Lehman Brothers U.S. Aggregate Index and the Merrill Lynch Domestic Master Index, each an unmanaged benchmark of total return performance for bonds. All returns assume reinvestment of dividends and distributions. Of course, past performance is no guarantee of future results. Each of the fund’s sales classes invests in the same portfolio of securities. Performance of each share class will vary from the performance of the fund’s other share class due to differences in charges and expenses.

After-tax performance is shown only for Investor shares. After-tax performance of the fund’s Institutional shares will vary. After-tax returns for Investor shares are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown, and the after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

The year-to-date total return of the fund’s Investor shares as of 3/31/04 was 1.50%.

Average annual total returns as of 12/31/02
Share class/         Since
inception date 1 Year   5 Years   inception
 
 
Investor shares          
(2/2/96)          
returns before taxes 6.81%   7.69%   8.81%
Investor shares          
returns after taxes          
on distributions 4.51%   4.52%   5.50%
Investor shares          
returns after taxes          
on distributions and          
sale of fund shares 4.13%   4.58%   5.44%
Institutional shares          
(5/31/01)          
returns before taxes 7.10%   —   5.47%
Lehman Brothers U.S.          
Aggregate Index*          
reflects no deduction for          
   fees, expenses or taxes 10.26%   10.10%   7.26%**
Merrill Lynch          
Domestic Master Index          
reflects no deduction for          
   fees, expenses or taxes 10.41%   7.58%   7.28%**

* The Lehman Brothers U.S.Aggregate Index has been selected as the fund’s primary index because it is a more widely used measure of taxable bond market performance.

** Based on life of Investor shares. For comparative purposes, the value of each index on 1/31/96 is used as the beginning value on 2/2/96.

What this fund is — and isn’t

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

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

4

EXPENSES

As an investor, you pay certain fees and expenses in connection with the fund, which are described in the table below. Annual fund operating expenses are paid out of fund assets, so their effect is included in the share price.The fund has no sales charge (load) or Rule 12b-1 distribution fees.

Fee table        
Annual fund operating expenses        
% of average daily net assets Investor   Institutional  
  shares   shares  
 
 
 
Management fees 0.45%   0.45%  
Shareholder services fee 0.25%   none  
Other expenses 0.20%   0.08%  
 
 
Total 0.90%   0.53%  
Expense example                        
  1 Year   3 Years   5 Years   10 Years  
 
 
 
 
                 
Investor shares $ 92   $ 287   $ 498   $ 1,108  
Institutional shares $ 54   $ 170   $ 296   $ 665  

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

Concepts to understand

Management fee: the fee paid to Dreyfus for managing the fund’s portfolio and assisting in all aspects of the fund’s operations. During the past fiscal year, Dreyfus waived a portion of its fee and/or assumed certain fund expenses pursuant to an undertaking, reducing total expenses from 0.90% to 0.82% for Investor shares and from 0.53% to 0.50% for Institutional shares. This undertaking was voluntary.

Shareholder services fee: the fee paid to the fund’s distributor for shareholder account service and maintenance for Investor shares.

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

The Fund 5

MANAGEMENT

The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue, New York, New York 10166. Founded in 1947, Dreyfus manages approximately $170 billion in approximately 200 mutual fund portfolios. For the past fiscal year, the fund paid Dreyfus a management fee at the annual rate of 0.38% of the fund’s average daily net assets. Dreyfus is the primary mutual fund business of Mellon Financial Corporation, a global financial services company with approximately $3.2 trillion of assets under management, administration or custody, including approximately $625 billion under management. Mellon provides financial services for institutions, corporations and individuals, offering institutional asset management, mutual funds, private wealth management, asset servicing, human resources services and treasury services. Mellon is headquartered in Pittsburgh, Pennsylvania.

On March 30, 2004, Mellon Bank, N.A., a wholly owned subsidiary of Mellon Financial and the then-current parent company of Dreyfus, transferred its entire interest in Dreyfus, including Dreyfus Service Corporation (the fund’s distributor) and all of Dreyfus’ other direct and indirect subsidiaries, to Mellon Financial.The reorganization did not result in a change in the control or management of Dreyfus under the Investment Advisers Act of 1940, as amended, or the Investment Company Act of 1940, as amended (the 1940 Act); Dreyfus merely became a direct, rather than indirect, wholly owned subsidiary of Mellon Financial. The reorganization was part of a larger reorganization of Mellon Financial that is expected to increase organizational synergies and create a more efficient capital structure throughout the organization.

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

The Dreyfus Taxable Fixed Income Team, which consists of sector specialists, collectively makes investment decisions for the fund. The team’s spe-

cialists focus on, and monitor conditions in, the different sectors of the fixed-income market. Once different factors have been analyzed, the sector specialists then decide on allocation weights for the portfolio and recommend securities for investment.

The fund, Dreyfus and Dreyfus Service Corporation (the fund’s distributor) have each adopted a code of ethics that permits its personnel, subject to such code, to invest in securities, including securities that may be purchased or held by the fund. The Dreyfus code of ethics restricts the personal securities transactions of its employees, and requires portfolio managers and other investment personnel to comply with the code’s preclearance and disclosure procedures. Its primary purpose is to ensure that personal trading by Dreyfus employees does not disadvantage any Dreyfus-managed fund.

Two class actions have been filed against Mellon Financial and Mellon Bank, N.A., and Dreyfus and Founders Asset Management LLC (the Investment Advisers), and the directors of all or substantially all of the Dreyfus funds, alleging that the Investment Advisers improperly used assets of the Dreyfus funds, in the form of directed brokerage commissions and 12b-1 fees, to pay brokers to promote sales of Dreyfus funds, and that the use of fund assets to make these payments was not properly disclosed to investors. The complaints further allege that the directors breached their fiduciary duties to fund shareholders under the 1940 Act and at common law.The complaints seek unspecified compensatory and punitive damages, rescission of the funds’ contracts with the Investment Advisers, an accounting of all fees paid, and an award of attorneys’ fees and litigation expenses. Dreyfus and the Dreyfus funds believe the allegations to be totally without merit and will defend the actions vigorously.

Additional lawsuits arising out of these circumstances and presenting similar allegations and requests for relief may be filed against the defendants in the future. Neither Dreyfus nor the Dreyfus funds believe that any of the pending actions will have a material adverse effect on the Dreyfus funds or Dreyfus’ ability to perform its contract with the Dreyfus funds.

6

FINANCIAL HIGHLIGHTS

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

        Year Ended July 31,      
Investor shares   2003   20021   2001   2000   1999  
 
 
 
 
 
Per-Share Data ($):                      
Net asset value, beginning of period 12.42   13.22   12.50   12.43   13.38  
Investment operations: Investment income — net .562   .722   .84   .86   .87  
  Net realized and unrealized                    
  gain (loss) on investments .51   (.64)   .75   .22   (.36)  
Total from investment operations 1.07   .08   1.59   1.08   .51  
Distributions: Dividends from investment                    
  income — net (.63)   (.76)   (.84)   (.87)   (.88)  
  Dividends from net realized                    
  gain on investments —   (.12)   (.03)   (.14)   (.58)  
Total distributions   (.63)   (.88)   (.87)   (1.01)   (1.46)  
Net asset value, end of period 12.86   12.42   13.22   12.50   12.43  
Total Return (%)   8.64   .64   13.14   9.05   4.18  
 
 
 
 
 
Ratios/Supplemental Data (%):                    
Ratio of operating expenses to average net assets .82   .70   .67   .65   .65  
Ratio of interest expense to average net assets .003   .003   .003   .003   .08  
Ratio of net investment income to average net assets 4.34   5.58   6.44   6.95   6.79  
Decrease reflected in above expense                    
ratios due to undertakings by Dreyfus .08   .16   .27   .48   .51  
Portfolio turnover rate   838.50   474.20   555.90   566.57   166.80  
 
 
 
 
 
Net assets, end of period ($ x 1,000) 831,818   738,618   359,114   60,541   37,831  

1 As required, effective August 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing discount or premium on fixed-income securities on a scientific basis and including paydown gains and losses in interest income.The effect of this change for the period ended July 31, 2002 was to decrease net investment income per share by $.04, increase net realized and unrealized gain (loss) on investments per share by $.04 and decrease the ratio of net investment income to average net assets from 5.90% to 5.58%. Per-share data and ratios/supplemental data for periods prior to August 1, 2001 have not been restated to reflect this change in presentation.

2 Based on average shares outstanding at each month end.

3 Amount represents less than .01%.

The Fund 7

FINANCIAL HIGHLIGHTS (continued)

        Year Ended July 31,      
Institutional shares   2003   20021   20012  
 
 
 
Per-Share Data ($):              
Net asset value, beginning of period 12.41   13.22   13.08  
Investment operations: Investment income — net .633   .763   .14  
  Net realized and unrealized gain (loss) on investments .48   (.66)   .14  
Total from investment operations 1.11   .10   .28  
Distributions: Dividends from investment income — net (.67)   (.79)   (.14)  
  Dividends from net realized gain on investments —   (.12)   —  
Total distributions   (.67)   (.91)   (.14)  
Net asset value, end of period 12.85   12.41   13.22  
Total Return (%)   9.07   .81   12.864  
 
 
 
Ratios/Supplemental Data (%):            
Ratio of operating expenses to average net assets .50   .45   .454  
Ratio of interest expense to average net assets .005   .005   —  
Ratio of net investment income to average net assets 4.88   5.80   6.564  
Decrease reflected in above expense ratios due to undertakings by Dreyfus .03   .08   1.214  
Portfolio turnover rate   838.50   474.20   555.90  
 
 
 
Net assets, end of period ($ x 1,000) 4,470   7,976   676  

1 As required, effective August 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing discount or premium on fixed-income securities on a scientific basis and including paydown gains and losses in interest income.The effect of this change for the period ended July 31, 2002 was to decrease net investment income per share by $.04, increase net realized and unrealized gain (loss) on investments per share by $.04 and decrease the ratio of net investment income to average net assets from 6.12% to 5.80%. Per-share data and ratios/supplemental data for periods prior to August 1, 2001 have not been restated to reflect this change in presentation.

2 The fund commenced offering Institutional shares on May 31, 2001.

3 Based on average shares outstanding at each month end.

4 Annualized.

5 Amount represents less than .01%.

8

Your Investment

ACCOUNT POLICIES

Buying shares

You pay no sales charges to invest in this fund. Your price for fund shares is the net asset value per share (NAV), which is generally calculated as of the close of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern time) on days the exchange is open for regular business. Your order will be priced at the next NAV calculated after your order is accepted by the fund’s transfer agent or other authorized entity. The fund’s investments are valued generally based on market value or, where market quotations are not readily available, based on fair value, as determined in good faith by the fund’s board. Foreign securities held by the fund may trade on days that the fund is not open for business, thus affecting the value of the fund’s assets on days when fund shareholders may not be able to buy or sell fund shares.

Concepts to understand

Net asset value (NAV): a share class’s price on a given day. A share class’s NAV is calculated by dividing the value of its net assets by the number of existing shares in the class.

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

Minimum investments        
  Initial   Additional
 
         
Institutional shares* $ 1,000,000   $100; $ 500 for
Dreyfus            
        TeleTransfer investments
Investor shares $ 2,500   $100; $ 500 for
Dreyfus            
        TeleTransfer investments
Traditional IRAs $ 750   no minimum
Spousal IRAs $ 750   no minimum
Roth IRAs $ 750   no minimum
Education Savings $ 500   no minimum
Account       after the first year
Dreyfus automatic $ 100   $ 100  
investment plans            

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

* Institutional shares have lower expenses and are offered by the fund to any investor that can maintain a minimum fund account balance of $1 million. Institutional shares held by investors who do not maintain such a minimum account balance will convert to Investor shares upon 45 days’ notice to the investor.

Your Investment 9

ACCOUNT POLICIES (continued)

Selling shares

You may sell (redeem) shares at any time. Your shares will be sold at the next NAV calculated after your order is accepted by the fund’s transfer agent or other authorized entity. Any certificates representing fund shares being sold must be returned with your redemption request. Your order will be processed promptly and you will generally receive the proceeds within a week.

Before selling or writing a check against shares recently purchased by check, Dreyfus TeleTransfer or Automatic Asset Builder, please note that:

  • if you send a written request to sell such shares, the fund may delay sending the proceeds for up to eight business days following the purchase of those shares
  • the fund will not honor redemption checks, or process wire, telephone, online or Dreyfus TeleTransfer redemption requests, for up to eight business days following the purchase of those shares
Limitations on selling shares by phone
or online through Dreyfus.com      
Proceeds Minimum   Maximum
sent by phone/online   phone/online
 
Check* no minimum   $ 250,000 per day
Wire $ 1,000   $ 500,000 for joint
        accounts every 30 days/
        $ 20,000 per day
Dreyfus $ 500   $ 500,000 for joint
TeleTransfer       accounts every 30 days/
        $ 20,000 per day

* Not available online on accounts whose address has been changed within the last 30 days.

Written sell orders

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

  • amounts of $10,000 or more on accounts whose address has been changed within the last 30 days
  • requests to send the proceeds to a different payee or address

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

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

10

General policies

Unless you decline teleservice privileges on your application, the fund’s transfer agent is authorized to act on telephone or online instructions from any person representing himself or herself to be you and reasonably believed by the transfer agent to be genuine. You may be responsible for any fraudulent telephone or online order as long as the fund’s transfer agent takes reasonable measures to confirm that instructions are genuine.

The fund reserves the right to:

  • refuse any purchase or exchange request including those from any individual or group who, in the fund’s view, is likely to engage in excessive trading (usually defined as more than four exchanges out of the fund within a calendar year)
  • refuse any purchase or exchange request in excess of 1% of the fund’s total assets
  • change or discontinue its exchange privilege, or temporarily suspend this privilege during unusual market conditions
  • change its minimum investment amounts
  • delay sending out redemption proceeds for up to seven days (generally applies only in cases of very large redemptions, excessive trading or during unusual market conditions)

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

In addition, the fund reserves the right to convert, upon 45 days’ notice, an investor’s Institutional shares to Investor shares if the investor’s fund account balance is below $1 million.

Small account policies

If your account falls below $500, the fund may ask you to increase your balance. If it is still below $500 after 45 days, the fund may close your account and send you the proceeds.

Your Investment 11

DISTRIBUTIONS AND TAXES

The fund earns dividends, interest and other income from its investments, and distributes this income (less expenses) to shareholders as dividends. The fund also realizes capital gains from its investments, and distributes these gains (less any losses) to shareholders as capital gain distributions. The fund normally pays dividends once a month and capital gain distributions annually. Fund dividends and capital gain distributions will be reinvested in the fund unless you instruct the fund otherwise.There are no fees or sales charges on reinvestments.

Distributions paid by the fund are subject to federal income tax, and may also be subject to state or local taxes (unless you are investing through a tax-advantaged retirement account). For federal tax purposes, in general, certain fund distributions, including distributions of short-term capital gains, are taxable to you as ordinary income. Other fund distributions, including dividends from U.S. companies and certain foreign companies and distributions of long-term capital gains, are taxable to you as qualified dividends and capital gains.

High portfolio turnover and more volatile markets can result in significant taxable distributions to shareholders, regardless of whether their shares have increased in value.The tax status of any distribution generally is the same regardless of how long you have been in the fund and whether you reinvest your distributions or take them in cash.

If you buy shares when a fund has realized but not yet distributed income or capital gains, you will be “buying a dividend” by paying the full price for the shares and then receiving a portion back in the form of a taxable distribution.

Your sale of shares, including exchanges into other funds, may result in a capital gain or loss for tax purposes.A capital gain or loss on your investment in the fund generally is the difference between the cost of your shares and the amount you receive when you sell them.

The tax status of your distributions will be detailed in your annual tax statement from the fund. Because everyone’s tax situation is unique, please consult your tax adviser before investing.

12

SERVICES FOR FUND INVESTORS

Automatic services

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

1-800-645-6561.

For investing  
Dreyfus Automatic For making automatic investments
Asset Builder® from a designated bank account.
   
Dreyfus Payroll For making automatic investments
Savings Plan through a payroll deduction.
   
Dreyfus Government For making automatic investments
Direct Deposit from your federal employment,
Privilege Social Security or other regular
  federal government check.
   
Dreyfus Dividend For automatically reinvesting the
Sweep dividends and distributions from
  one Dreyfus fund into another
  (not available for IRAs).
   
For exchanging shares
   
Dreyfus Auto- For making regular exchanges from
Exchange Privilege one Dreyfus fund into another.
   
For selling shares  
   
Dreyfus Automatic For making regular withdrawals
Withdrawal Plan from most Dreyfus funds.

Dreyfus Financial Centers

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

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

Checkwriting privilege

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

Exchange privilege

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

Dreyfus TeleTransfer privilege

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

Dreyfus Express® voice-activated account access

You can easily manage your Dreyfus accounts, check your account balances, purchase fund shares, transfer money between your Dreyfus funds, get price and yield information and much more —when it’s convenient for you — by calling 1-800-645-6561. Certain requests may require the services of a representative.

Retirement plans

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

  • for traditional, rollover and Roth IRAs, and Education Savings Accounts, call 1-800-645-6561
  • for SEP-IRAs, Keogh accounts, 401(k) and 403(b) accounts, call 1-800-358-0910

Your Investment 13

Concepts to understand

Wire transfer: for transferring money from one financial
institution to another. Wiring is the fastest way to move
money, although your bank may charge a fee to send or
receive wire transfers. Wire redemptions from the fund are
subject to a $1,000 minimum.
Electronic check: for transferring money out of a bank
account. Your transaction is entered electronically, but may
take up to eight business days to clear. Electronic checks
usually are available without a fee at all Automated Clearing
House (ACH) banks.

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

1-800-645-6561

Outside the U.S. 516-794-5452

Make checks payable to:

The Dreyfus Family of Funds

You also can deliver requests to any Dreyfus Financial Center. Because processing time may vary, please ask the representative when your account will be credited or debited.

14

Your Investment 15

Concepts to understand

Wire transfer: for transferring money from one financial
institution to another. Wiring is the fastest way to move
money, although your bank may charge a fee to send or
receive wire transfers. Wire redemptions from the fund are
subject to a $1,000 minimum.
Electronic check: for transferring money out of a bank
account. Your transaction is entered electronically, but may
take up to eight business days to clear. Electronic checks
usually are available without a fee at all Automated Clearing
House (ACH) banks.

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

1-800-645-6561

Outside the U.S. 516-794-5452

Make checks payable to:

The Dreyfus Trust Company, Custodian

You also can deliver requests to any Dreyfus Financial Center. Because processing time may vary, please ask the representative when your account will be credited or debited.

16

NOTES

For More Information

More information on this fund is available free upon request, including the following:

Annual/Semiannual Report

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

Statement of Additional Information (SAI)

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

To obtain information:

By telephone

Call 1-800-645-6561

By mail Write to:

The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard Uniondale, NY 11556-0144

By E-mail Send your request to info@dreyfus.com

On the Internet Text-only versions of certain fund documents can be viewed online or downloaded from: face="sans-serif">SEC http://www.sec.gov Dreyfus face="sans-serif">http://www.dreyfus.com

You can also obtain copies, after paying a duplicating fee, by visiting the SEC’s Public Reference Room in Washington, DC (for information, call 1-202-942-8090) or by E-mail request to publicinfo@sec.gov, or by writing to the SEC’s Public Reference Section, Washington, DC 20549-0102.

© 2004 Dreyfus Service Corporation 0082P0604