DREYFUS EQUITY DIVIDEND FUND
LETTER TO SHAREHOLDERS
Dear Shareholder:
It is my pleasure to introduce Timothy M. Ghriskey, who is the manager of
the Dreyfus Equity Dividend Fund, one of our newest mutual funds.
Tim joined the investment staff of The Dreyfus Corporation in the summer
of 1995 as a Senior Equity Portfolio Manager. Before joining Dreyfus, he
spent 10 years with Loomis, Sayles & Company as both an equity and a balanced
portfolio manager. At his previous firm, Tim was an Associate Managing
Partner and a member of the Investment Policy Committee and the Planning
Committee. He began his investment career as an equity analyst following a
number of industries, including beverage, tobacco, leisure, entertainment,
home products, cosmetics, metals and mining.
Tim is a graduate of Trinity College and received his M.B.A. from the
Darden School at the University of Virginia. He is a Chartered Financial
Analyst and a Chartered Investment Counselor.
We have great confidence in the approach that Tim brings to portfolio
management.
Sincerely,
[Stephen E. Canter signature logo]
Stephen E. Canter
Chief Investment Officer
The Dreyfus Corporation
DREYFUS EQUITY DIVIDEND FUND
Dear Shareholder:
This letter accompanies the semi-annual report on the Dreyfus Equity
Dividend Fund for the four-month period ended April 30, 1996. The Fund's
total return during this period was 6.21%,* compared to 6.92% for the
Standard and Poor's 500 Composite Stock Price Index.** The Fund's total
return compares favorably to its Lipper Equity Income Fund category, which
had an average return of 5.86% for the period.***
The Dreyfus Equity Dividend Fund is a relatively defensive equity
security fund, which is designed to generate income and capital appreciation
through participation in the equity markets. I am an ardent believer in a
disciplined value style of equity investing, and the high dividend yield
investment approach practiced in managing the Fund is one form of value
investing, perhaps its most conservative form. This investment style seeks
higher dividend yielding securities with the opportunity for growth through a
disciplined investment approach.
HIGH DIVIDEND YIELD INVESTING
One significant aspect of value investing is the purchase of securities
with a high dividend yield. These dividends are cash proceeds which the
invested company returns to its shareholders generally every quarter. These
are cash proceeds which the investor can count on, generally regardless of
the level or direction of the overall stock market. The security's dividend
yield, therefore, protects the investment by providing a cushion of regular
cash support. If problems develop either in the overall stock market or at
the company itself, the security is already relatively inexpensive given its
higher dividend yield, and potentially may not decline in value as much as a
"growth" stock. Investors tend to have low expectations for securities with
high dividends, and these low expectations potentially can be more easily met
than for securities with high expectations.
Investing in value stocks is somewhat counter to human nature, a decided
advantage. A successful value investor does not follow the herd of other
investors, does not blindly accept widely distributed recommendations from
brokerage firms, and does not just buy glamorous investment stories that
almost everyone else already knows and owns. A successful value investor is
more proactive than reactive, and takes advantage of other investors'
overreaction to events. Because of its focus on securities with higher
dividends, the Fund is designed to generate steady income gains and not
experience wildly volatile price swings.
INVESTMENT PROCESS
Our approach to the selection of securities starts and ends with our
analysts who are an integral part of our investment team. We only want to own
securities that our dedicated team of analysts know and follow closely
through regular management interviews and company visits.
Using our analysts' work as a starting point, we then screen the universe
of stocks by computer according to two principal methods. First, we screen
for high current dividend yield. We generally want to own securities with a
dividend yield that is greater than the average equity security, which we
define as the dividend yield of the Standard & Poor's 500 Index. Second, we
apply our proprietary screen of 21 fundamental factors that have historically
affected stock returns. These factors include the growth outlook over various
time horizons, several relative value measures, company size, dividend growth
and pay-out ratio, earnings revision and surprise, cash flow, financial,
operating and foreign leverage, momentum measures, and a qualitative
evaluation of the potential for positive change to occur at each company.
Combining this data with our analysts' in-depth knowledge of the
individual companies, we then construct a portfolio of securities which we
believe is adequately diversified without overly diluting the potential
impact of good investment ideas.
Selling is also a major part of our discipline and, we believe, an often
neglected part of the investment management process. We use specific criteria
to determine when selling a security is in our shareholders' best interest.
In addition to other sell factors, we sell a security when its current
dividend yield declines below the average industrial security, which we
define as the dividend yield of the Standard & Poor's Industrial Index.
PORTFOLIO OVERVIEW
Particularly strong results during this four-month period were achieved
with, among other securities, Deluxe, Eastman Kodak, Chrysler, Phillips
Petroleum, First Union, Warner-Lambert, Southern Peru Copper, Witco, Olin,
May Department Stores and Canadian National Railway. Results were penalized
by holdings such as Brunswick, Kimberly-Clark, Pharmacia & Upjohn,
Bristol-Myers Squibb and the electric/communications utility sector in
general.
As the period ended, our primary investment themes included:
*Depressed high growth securities
*Asset restructuring potential
*Neglected or misunderstood companies
*New, unappreciated growth opportunities
*Particularly undervalued situations.
Thank you for the privilege of managing your assets.
Sincerely
[Timothy M. Ghriskey signature logo]
Timothy M. Ghriskey
Portfolio Manager
May 15, 1996
New York, N.Y.
* Total return is for the period December 29, 1995 (commencement of
operations) through April 30, 1996, and includes the reinvestment of
dividends and any capital gains paid.
**SOURCE: LIPPER ANALYTICAL SERVICES, INC. - Reflects the reinvestment of
income dividends and, where applicable, capital gain distributions. The
Standard & Poor's 500 Composite Stock Price Index is a widely accepted
unmanaged index of U.S. stock market performance.
*** SOURCE: LIPPER ANALYTICAL SERVICES, INC.
The Standard & Poor's Industrial Index is a capitalization-weighted
index of all stocks designed to measure the performance of the industrial
sector of the Standard & Poor's 500 Index.
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<CAPTION>
DREYFUS EQUITY DIVIDEND FUND
STATEMENT OF INVESTMENTS APRIL 30, 1996 (UNAUDITED)
COMMON STOCKS-97.4% SHARES VALUE
______ ______
<S> <C> <C>
COMMERCIAL SERVICES-7.8% Deluxe................................. 1,400 $ 49,000
McGraw-Hill............................ 1,000 44,125
Ogden.................................. 2,300 46,575
Safety-Kleen........................... 3,100 46,500
_____
186,200
_____
CONSUMER DURABLES-9.3% Brunswick.............................. 2,000 44,000
Chrysler............................... 700 43,925
Eastman Kodak.......................... 600 45,900
General Motors......................... 800 43,400
Jostens................................ 2,000 45,000
_____
222,225
_____
CONSUMER
NON-DURABLES-7.6% American Greetings, Cl. A.............. 1,700 46,962
Colgate-Palmolive...................... 600 45,975
Flowers Industries..................... 3,300 44,138
Kimberly-Clark......................... 600 43,575
_____
180,650
_____
ELECTRONIC TECHNOLOGY-7.8% AMP.................................... 1,100 49,225
General Dynamics....................... 700 44,187
Northrop Grumman....................... 800 49,500
United Technologies.................... 400 44,200
_____
187,112
_____
ENERGY MINERALS-10.0% Exxon.................................. 500 42,500
Lyondell Petrochemical................. 1,600 47,000
Mobil.................................. 400 46,000
Phillips Petroleum..................... 1,200 49,800
Sun.................................... 1,700 52,700
_____
238,000
_____
FINANCE-9.1% CIGNA.................................. 400 45,350
Chelsea GCA Realty..................... 1,300 37,050
First Union............................ 800 49,200
Student Loan Marketing Association..... 600 43,950
Willis Corroon Group, A.D.S............ 3,600 41,850
_____
217,400
_____
HEALTH TECHNOLOGY-9.1% American Home Products................. 400 42,200
Baxter International................... 1,000 44,250
Bristol-Myers Squibb................... 500 41,125
Pharmacia & Upjohn..................... 1,200 45,900
Warner-Lambert......................... 400 44,700
_____
218,175
_____
DREYFUS EQUITY DIVIDEND FUND
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996 (UNAUDITED)
COMMON STOCKS (CONTINUED) SHARES VALUE
______ ______
NON-ENERGY MINERALS-2.1% Southern Peru Copper................... 2,700 50,625
_____
PROCESS INDUSTRIES-5.9% Dow Chemical........................... 500 $ 44,438
duPont (E.I.) deNemours................ 600 48,225
Witco.................................. 1,400 47,775
_____
140,438
_____
PRODUCER
MANUFACTURING-7.6% Keystone International.................. 2,200 48,125
National Service Industries............. 1,200 44,400
Olin.................................... 500 44,250
Tenneco................................. 800 43,900
_____
180,675
_____
RETAIL TRADE-4.0% May Department Stores................... 900 45,900
Penney (J.C.)........................... 1,000 49,500
_____
95,400
_____
TRANSPORTATION-4.2% Canadian National Railway.............. 2,700 51,300
Illinois Central....................... 1,600 48,000
_____
99,300
_____
UTILITIES-12.9% Ameritech.............................. 700 40,862
Entergy................................ 1,800 47,700
Frontier............................... 1,400 44,275
GTE.................................... 1,100 47,713
NYNEX.................................. 900 44,213
Telefonos de Mexico, Cl. L, A.D.S...... 1,300 44,200
Texas Utilities........................ 1,000 40,250
_____
309,213
_____
TOTAL COMMON STOCKS
(cost $2,210,158).................... $2,325,413
======
TOTAL INVESTMENTS (cost $2,210,158)......................................... 97.4% $2,325,413
=== ======
CASH AND RECEIVABLES (NET).................................................. 2.6% $ 62,762
=== ======
NET ASSETS.................................................................. 100.0% $2,388,175
=== ======
See notes to financial statements.
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DREYFUS EQUITY DIVIDEND FUND
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996 (UNAUDITED)
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $2,210,158)-see statement....................................... $2,325,413
Cash.................................................................... 39,078
Dividends receivable.................................................... 4,042
Prepaid expenses........................................................ 2,206
Due from The Dreyfus Corporation........................................ 20,687
______
2,391,426
LIABILITIES:
Due to Distributor...................................................... $ 480
Accrued expenses........................................................ 2,771 3,251
____ ______
NET ASSETS.................................................................. $2,388,175
======
REPRESENTED BY:
Paid-in capital......................................................... $2,269,455
Accumulated undistributed investment income-net......................... 1,260
Accumulated undistributed net realized gain on investments.............. 2,205
Accumulated net unrealized appreciation on investments-Note 3........... 115,255
______
NET ASSETS at value applicable to 180,974 outstanding shares of
Beneficial Interest, equivalent to $13.20 per share
(unlimited number of $.001 par value shares authorized) ................ $2,388,175
======
See notes to financial statements.
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DREYFUS EQUITY DIVIDEND FUND
STATEMENT OF OPERATIONS
FROM DECEMBER 29, 1995 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1996 (UNAUDITED)
INVESTMENT INCOME:
<S> <C> <C>
INCOME:
Cash dividends (net of $144 foreign taxes withheld at source)......... $ 22,407
Interest.............................................................. 2,825
____
TOTAL INCOME.................................................... $ 25,232
EXPENSES:
Management fee-Note 2(a).............................................. 5,691
Legal fees............................................................ 21,758
Shareholder servicing costs-Note 2(b)................................. 2,001
Registration fees..................................................... 1,220
Custodian fees........................................................ 857
Prospectus and shareholders' reports.................................. 666
Auditing fees......................................................... 122
Trustees' fees and expenses-Note 2(c)................................. 119
Miscellaneous......................................................... 885
____
TOTAL EXPENSES.................................................. 33,319
Less-expense reimbursement from Manager due to
undertaking-Note 2(a)............................................. 23,059
____
NET EXPENSES.................................................... 10,260
____
INVESTMENT INCOME-NET........................................... 14,972
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 2,205
Net unrealized appreciation on investments.............................. 115,255
____
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 117,460
____
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $132,432
======
See notes to financial statements.
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DREYFUS EQUITY DIVIDEND FUND
STATEMENT OF CHANGES IN NET ASSETS
FROM DECEMBER 29, 1995 (COMMENCEMENT OF OPERATIONS) TO APRIL 30, 1996 (UNAUDITED)
OPERATIONS:
<S> <C>
Investment income-net................................................................. $ 14,972
Net realized gain on investments...................................................... 2,205
Net unrealized appreciation on investments for the period............................. 115,255
_____
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................ 132,432
_____
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net................................................................. (13,712)
_____
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold......................................................... 2,334,334
Dividends reinvested.................................................................. 13,502
Cost of shares redeemed............................................................... (78,381)
_____
INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS........................ 2,269,455
_____
TOTAL INCREASE IN NET ASSETS.................................................... 2,388,175
NET ASSETS:
Beginning of period................................................................... -
_____
End of period (including undistributed investment income-net;
$1,260 on April 30, 1996)........................................................... $2,388,175
=====
SHARES
_____
CAPITAL SHARE TRANSACTIONS:
Shares sold........................................................................... 185,909
Shares issued for dividends reinvested................................................ 1,028
Shares redeemed....................................................................... (5,963)
_____
NET INCREASE IN SHARES OUTSTANDING.................................................. 180,974
=====
See notes to financial statements.
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DREYFUS EQUITY DIVIDEND FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for the period December 29, 1995
(commencement of operations) to April 30, 1996. This information has been
derived from the Fund's financial statements.
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period....................................................... $12.50
___
INVESTMENT OPERATIONS:
Investment income-net...................................................................... .08
Net realized and unrealized gain on investments............................................ .70
___
TOTAL FROM INVESTMENT OPERATIONS........................................................ .78
___
DISTRIBUTIONS;
Dividends from investment income-net....................................................... (.08)
___
Net asset value, end of period............................................................. $13.20
===
TOTAL INVESTMENT RETURN........................................................................ 6.21%(1)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.................................................... .46%(1)
Ratio of net investment income to average net assets....................................... .67%(1)
Decrease reflected in above expense ratio due to undertaking by the Manager
(limited to the expense limitation provision of the management agreement)................ .38%(1)
Portfolio Turnover Rate.................................................................... 37.10%(1)
Average commission rate paid(2)........................................................ $.0478
Net Assets, end of period (000's Omitted).............................................. $2,388
____________________________
(1) Not annualized.
(2) Reflects the average commission rate paid per share for purchases and sales of investment securities.
See notes to financial statements.
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DREYFUS EQUITY DIVIDEND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Income Funds (the "Company") is registered under the Investment
Company Act of 1940 ("Act") as a diversified open-end management investment
company and operates as a series company currently offering three series,
including the Dreyfus Equity Dividend Fund (the "Fund") which commenced
operations on December 29, 1995. The Fund's primary investment objective is
current income, with capital appreciation as a secondary objective. The
Dreyfus Corporation ("Manager") serves as the Fund's investment adviser. The
Manager is a direct subsidiary of Mellon Bank, N.A. ("Mellon"). Premier
Mutual Fund Services, Inc. (the "Distributor") acts as the distributor of the
Fund's shares, which are sold to the public without a sales charge.
The Company accounts separately for the assets, liabilities and
operations of each fund. Expenses directly attributable to each fund are
charged to that fund's operations; expenses which are applicable to all funds
are allocated among them on a pro rata basis.
As of April 30, 1996, Allomon Corporation, a subsidiary of Mellon Bank
Investments Corporation, the parent company of which is Mellon Bank
Corporation, held 160,928 shares of the Fund.
(A) PORTFOLIO VALUATION: Investments in securities (including options and
financial futures) are valued at the last sales price on the securities
exchange on which such securities are primarily traded or at the last sales
price on the national securities market. Securities not listed on an exchange
or the national securities market, or securities for which there were no
transactions, are valued at the average of the most recent bid and asked
prices, except for open short positions, where the asked price is used for
valuation purposes. Bid price is used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis.
(C) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend
date. Dividends from investment income-net are declared and paid on a
quarterly basis. Dividends from net realized capital gain are normally
declared and paid annually, but the Fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code. To the extent that net realized capital gain can be offset by
capital loss carryovers, if any, it is the policy of the Fund not to
distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to qualify as a
regulated investment company, if such qualification is in the best interests
of its shareholders, by complying with the applicable provisions of the
Internal Revenue Code, and to make distributions of taxable income sufficient
to relieve it from substantially all Federal income and excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .75 of 1% of the value
of the Fund's average daily net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the
DREYFUS EQUITY DIVIDEND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Fund's aggregate expenses, exclusive of taxes, brokerage, interest on
borrowings and extraordinary expenses, exceed the expense limitation of any
state having jurisdiction over the Fund. The most stringent state expense
limitation applicable to the Fund presently requires reimbursement of
expenses in any full fiscal year that such expenses (exclusive of certain
expenses as described above) exceed 2-1\2% of the first $30 million, 2% of the
next $70 million and 1-1\2% of the excess over $100 million of the average
value of the Fund's net assets in accordance with California "blue sky"
regulations. The Manager has currently undertaken from December 29, 1995
through December 31, 1996 to reduce the management fee paid by, or reimburse
such excess expenses of the Fund, to the extent that the Fund's aggregate
annual expenses (exclusive of certain expenses as described above) exceed an
annual rate of 1.25 of 1% of the value of the Fund's average daily net
assets. The expense reimbursement, pursuant to the undertaking, amounted to
$23,059 for the period ended April 30, 1996.
The undertaking may be extended, modified or terminated by the Manager,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
(B) The Fund has adopted a Shareholder Services Plan, pursuant to which
it pays a fee to the Distributor for the provision of certain services to
Fund shareholders at an annual rate of .25 of 1% of the value of the Fund's
average daily net assets. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder inquiries
regarding the Fund and providing reports and other information, and services
related to the maintenance of shareholder accounts. The Distributor may make
payments to Service Agents (a securities dealer, financial institution or
other industry professional) in respect of these services. The Distributor
determines the amounts to be paid to Service Agents. For the period ended
April 30, 1996, the Fund was charged an aggregate of $1,897 pursuant to the
Shareholder Services Plan.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such
compensation amounted to $95 for the period from December 29, 1995 through
April 30, 1996.
Effective May 10, 1996, the Fund entered into a Custody Agreement with
Mellon to provide custodial services for the Fund.
(C) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Company an annual fee of $2,500 and an attendance fee of
$500 per meeting. The Chairman of the Board receives an additional 25% of
such compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the period ended April 30, 1996
amounted to $2,875,886 and $668,676, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $115,255, consisting of $138,731 gross unrealized appreciation and
$23,476 gross unrealized depreciation.
At April 30, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
[Dreyfus lion "d" logo]
DREYFUS EQUITY DIVIDEND FUND
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
One American Express Plaza
Providence, RI 02903
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A. 042SA964
[Dreyfus logo]
Equity
Dividend Fund
Semi-Annual Report
April 30, 1996
