DREYFUS EQUITY DIVIDEND FUND
LETTER TO SHAREHOLDERS
Dear Shareholder:
It is a pleasure to have the opportunity to correspond with you regarding
the Dreyfus Equity Dividend Fund. This report covers the Fund's annual
reporting period ended October 31, 1996. From the Fund's inception date of
December 29, 1995 through the fiscal period-end, the Fund's total return was
12.93%.* The Standard & Poor's 500 Composite Stock Price Index had a total
return of 16.62% during this 10-month period.**
This Fund is designed to deliver a significant portion of its total
return from common stock dividends. Total return for a portfolio of stocks
comes in two forms: dividends and capital gains. Dividends can never be
negative, but capital gains can. Dividends, therefore, are believed to be the
more steady and predictable portion of total return. It follows that the
Fund's structure, emphasizing dividends, is more conservative than the vast
majority of stock mutual funds. The Fund can generally be expected to lag the
overall stock market during periods of exceptionally strong returns.
Conversely, during flat or down markets, the Fund is designed to provide
returns in excess of the market averages. The performance for the fiscal year
held true to those expectations by lagging the S&P 500 during this period of
strong stock market performance.
Economic Review
The U.S. economy is enjoying a good year. First, the tightening labor
market has failed to pressure price inflation higher. Second, economic growth
has slowed since midyear from the torrid pace of the first half. Third,
corporate profits are holding up quite well, albeit growing more slowly than
last year. These have vindicated Federal Reserve Board inaction, keeping
market interest rates stable. Although the economy has simmered down, it is
nevertheless operating with very little slack.
The Federal Reserve twice thwarted market expectations for tightening
this year, taking the view instead that steady growth won't so easily foster
inflation in this cycle. Indeed, the unemployment rate has plunged towards 5%
this year and wage growth has outpaced price inflation for the first time
since 1989. Yet there is little evidence of accelerating price inflation to
date. Even higher oil prices have failed to lift prices elsewhere. This is
very different from 1994 when the Fed preemptively hiked interest rates to
stem a future price inflation that subsequently did not materialize.
After rising 3.3% in the first half of this year, real GDP growth slowed
to a near-trend 2.2% in the third quarter. Early evidence for the fourth
quarter indicates sustained near-trend growth. In particular, consumer
spending has been lackluster since midyear, despite solid income growth and
high confidence levels. And new highs in home sales have not been matched by
new records in homebuilding. Spending on capital goods has rebounded,
however, while incoming strong export orders indicate better growth ahead for
this sector. Capital goods and exports typically dominate the business
cycle's late phase. Corporate profit growth, albeit slower than in 1995,
continues to surprise on the upside.
Interest rates this fall are not much different than in the spring.
Short-term rates have especially stabilized in recent months based on the
view that Fed tightening is unlikely this year. Long-term rates have recently
fallen. Should the economy show signs of reaccelerating, then long-term rates
would likely rise.
As the U.S. economy moves into the late-cycle phase it is, as usual, out
of sync with most business cycles overseas which are at a much earlier stage.
This portends faster world growth in 1997. How well the U.S. economy can
participate in an accelerating growth world economy without igniting
inflation remains to be seen.
Market Overview
The stock market in the last twelve months shrugged off a variety of
potentially negative factors to barrel its way to new heights.
In late 1995 and early 1996 economic activity appeared to slow down,
enough to prompt the Federal Reserve to lower interest rates in January of
this year. By springtime, when the Fed had apparently suspended its
anti-inflationary measures, investors began to worry about signs of strength
exhibited by the economy. Though the Fed took no action to raise interest rates,
investor worries about that possibility restrained an ebullient stock market.
By July, fears of higher interest rates, plus concerns that some stock
prices - technology issues in particular - might have gone too far, too fast,
caused a temporary retreat in equity prices.
As fall approached, however, the underlying factors of a strong economy,
low inflation, and investor optimism took hold again and propelled stock
prices to new highs.
Chief beneficiaries were the large capitalization stocks. It took a while
for technology stocks and small caps to recover the ground lost in the early
summer. However, the trend across the board was clearly bullish.
As the fiscal year closed, there were some negative factors on the
horizon. Corporate profits may have passed their peak. Consumer demand seemed
to be slowing in some sectors. There were also hints that employment costs,
which have been quite stable for a long time, might face upward pressures.
The market, however, seemed to soar above these factors. The prospect
(since become a fact) of a split government in Washington, with Republicans
controlling Congress and Democrats in the White House, was seen as favorable
for stock prices. Moreover, the specter of renewed inflation remained just
that - nothing more than a specter. Furthermore, individual investors
continued to pour money into equity mutual funds - not at constantly
increasing rates, to be sure, but still at a pace that gave strong impetus
for higher stock prices.
Fundamental Analysis
I am a practitioner of, and passionate believer in, fundamental security
analysis. This method of determining the value of a security involves our
analysts and me communicating directly with the management of companies in
which the Fund is invested or may invest. Not only do we interview management
by telephone on a regular basis, but we also periodically visit corporate
headquarters, divisional headquarters, factories and distribution outlets. We
meet with senior management and talk with all levels of employees, as well as
customers and competitors. It is through the mosaic of information collected
in these meetings that investment decisions begin to be made.
As a "value" investor, I am particularly attuned to companies with
relatively low price to book or price to earnings ratios, or a relatively
high dividend yield. In addition, I am alert to companies with the potential
for corporate restructuring or a positive change in operations, management or
perception. My investment approach tends to be "bottom-up" In other words, I
simply try to find stocks which I believe will appreciate in value more than
the average stock. Industry allocation and domestic versus foreign weightings
generally are not a consideration. Additionally, I do not try to "market
time" and generally remain fully invested.
This process is a massive undertaking for us, especially given the
thousands of securities which are available to us for investment on a
worldwide basis. It can only be accomplished with an experienced and
dedicated team of security analysts. Dreyfus employs 35 individuals who
specialize in this analytical work, one of the largest efforts of any mutual
fund firm. Our analysts are strictly dedicated to finding the best
investments for our client, the Dreyfus mutual fund shareholder. Their work
is proprietary: it is only distributed internally to our portfolio managers,
and forms the basis for security selection in our mutual funds.
Much like the complete and thorough mixture of information that we build,
our analysts form a diverse mix of individuals. Some are specialists in
certain types of securities, while others are industry specialists who
concentrate on securities within a particular sector of the economy. Most
have actual industry experience in their particular field of specialization
prior to joining Dreyfus. For example, our three-person health care team
includes a retired physician, a former medical researcher for the U.S. Army, and
a former health care lobbyist to Congress. Some of our analysts are relatively
young and some are veterans, providing a wonderful blend of energy and
experience. All of this diversity is beneficial to the investment process.
Investments are best made by thinking somewhat differently from everyone else
who is making similar investments. Ideally, one tries to make investment choices
a bit sooner than other investors make these same choices. The reason, of
course, is that through an increase in demand for ownership of a security, the
price of that security increases.
Portfolio Focus
As stated above, I primarily focus on picking value stocks. For your
Fund, I particularly look for stocks with higher than average dividend
yields. During the past fiscal year, the Fund's biggest winners included
General Electric, Monsanto, Eastman Kodak, United Technologies,
Warner-Lambert and NorAm Energy. Performance results were penalized by
holdings including RJR Nabisco Holdings, Dun & Bradstreet, Brunswick, General
Motors, and Telefonos de Mexico, Cl.L, A.D.S These underperforming securities
have been sold so that small problems would not become big problems.
Thank you for your trust and the privilege of managing your assets. The
Dreyfus organization continues to work diligently on your behalf.
Sincerely,
[Timothy M. Ghriskey signature logo]
Timothy M. Ghriskey
Portfolio Manager
November 14, 1996
New York, N.Y.
* Total return includes 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.
DREYFUS EQUITY DIVIDEND FUND OCTOBER 31, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS EQUITY
DIVIDEND FUND AND THE
STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX
[Exhibit A:
Dollars
$11,662
Standard & Poor's 500
Composite Stock Price
Index*
$11,293
Dreyfus Equity Dividend
Fund
*Source: Lipper Analytical Services, Inc.]
Actual Aggregate Total Return
From Inception (12/29/95)
to October 31, 1996
_____________
12.93%
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Dreyfus Equity Dividend
Fund on 12/29/95 (Inception Date) to a $10,000 investment made in the
Standard & Poor's 500 Composite Stock Price Index on that date. All dividends
are reinvested.
The Fund's performance shown in the line graph takes into account all
applicable fees and expenses. The Standard & Poor's 500 Composite Stock Price
Index is a widely accepted, unmanaged index of overall stock market
performance, which does not take into account charges, fees and other
expenses. Further information relating to Fund performance, including expense
reimbursements, if applicable, is contained in the Financial Highlights
section of the Prospectus and elsewhere in this report.
<TABLE>
<CAPTION>
DREYFUS EQUITY DIVIDEND FUND
STATEMENT OF INVESTMENTS OCTOBER 31, 1996
Common Stocks-95.6% Shares Value
_____ _____
<S> <C> <C>
Commercial Services-5.3% Deluxe.............. 1,400 $ 45,675
Ogden....................................... 3,200 58,000
Safety-Kleen........................... 3,100 48,438
_____
152,113
_____
Consumer Durables-3.1% Chrysler.............. 1,400 47,075
Jostens..................................... 2,000 43,000
_____
90,075
_____
Consumer Non-Durables-10.5% Colgate-Palmolive...................... 600 55,200
Flowers Industries..................... 3,300 77,138
Kimberly-Clark......................... 600 55,950
Philip Morris.......................... 600 55,575
UST......................................... 1,900 54,862
_____
298,725
_____
Electronic Technology-7.2% AMP............... 1,100 37,263
General Dynamics....................... 700 48,037
Harris...................................... 900 56,362
Northrop Grumman....................... 800 64,600
_____
206,262
_____
Energy Minerals-7.0% Amoco................... 700 53,025
Phillips Petroleum..................... 1,200 49,200
Sun......................................... 1,700 38,038
Unocal...................................... 1,600 58,600
_____
198,863
_____
Finance-8.5% Bank United, Cl. A.............. 2,500 66,563
Beacon Properties...................... 2,000 58,750
Signet Banking......................... 2,100 60,637
Simon DeBartolo Group.................. 2,200 58,025
_____
243,975
_____
Health Services-2.2% Allegiance.............. 3,400 63,750
_____
Health Technology-9.7% American Home Products 800 49,000
Baxter International................... 1,300 54,112
Bristol-Myers Squibb................... 500 52,875
Glaxo Wellcome, A.D.R.................. 2,000 63,000
Pharmacia & Upjohn..................... 1,600 57,600
_____
276,587
_____
Non-Energy Minerals-3.4% Cemex, S.A. de C.V., Cl. B 14,000 51,005
Southern Peru Copper................... 3,400 47,175
_____
98,180
_____
Process Industries-15.9% Aracruz Celulose, A.D.R 6,600 52,800
Crompton & Knowles..................... 3,600 64,800
duPont (E.I.) de Nemours & Co.......... 600 55,650
Hoechst................................ 1,500 56,275
DREYFUS EQUITY DIVIDEND FUND
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1996
Common Stocks (continued) Shares Value
_____ _____
Process Industries (continued) National Service Industries 1,600 $ 55,200
Stone Container........................ 3,700 56,425
Tenneco..................................... 1,200 59,400
Witco....................................... 1,700 52,700
_____
453,250
_____
Producer Manufacturing-9.4% General Signal... 1,300 52,975
Keystone International................. 3,100 55,800
Masco....................................... 1,700 53,337
Olin........................................ 1,200 51,000
Xerox....................................... 1,200 55,650
_____
268,762
_____
Transportation-4.4% Canadian National Railway 2,700 74,250
Illinois Central....................... 1,600 51,800
_____
126,050
_____
Utilities-9.0% Ameritech..................... 1,000 54,750
Entergy..................................... 1,800 50,400
GTE......................................... 1,100 46,338
Hong Kong Telecom, A.D.R............... 3,000 52,875
U.S. West Communications Group......... 1,700 51,637
_____
256,000
_____
TOTAL COMMON STOCKS
(cost $2,533,581).................... $2,732,592
======
Principal
Short-Term Investments-2.9% Amount
_____
U.S. Treasury Bills: 4.97%, 1/16/97.......... $ 38,000 $ 37,599
4.98%, 1/23/97......................... 44,000 43,493
_____
TOTAL SHORT-TERM INVESTMENTS
(cost $81,096)....................... $ 81,092
======
TOTAL INVESTMENTS (cost $2,614,677)......................................... 98.5% $2,813,684
==== ======
CASH AND RECEIVABLES (NET).................................................. 1.5% $ 44,248
==== ======
NET ASSETS.................................................................. 100.0% $2,857,932
==== ======
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS EQUITY DIVIDEND FUND
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1996
Cost Value
_____ _____
ASSETS: Investments in securities-See Statement of Investments $2,614,677 $2,813,684
Cash....................................... 99,155
Dividends and interest receivable.......... 5,193
Prepaid expenses........................... 2,431
_____
2,920,463
_____
LIABILITIES: Due to The Dreyfus Corporation and affiliates 832
Due to Distributor......................... 603
Payable for investment securities purchased 56,529
Accrued expenses........................... 4,567
_____
62,531
_____
NET ASSETS.................................................................. $2,857,932
======
REPRESENTED BY: Paid-in capital............................ $2,597,833
Accumulated undistributed investment income-net 2,173
Accumulated net realized gain (loss) on investments 58,919
Accumulated net unrealized appreciation (depreciation)
on investments-Note 4................................. 199,007
_____
NET ASSETS.................................................................. $2,857,932
======
SHARES OUTSTANDING
(UNLIMITED NUMBER OF $ .001 PAR VALUE SHARES OF BENEFICIAL INTEREST AUTHORIZED).... 205,798
NET ASSET VALUE, offering and redemption price per share.................... $13.89
======
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS EQUITY DIVIDEND FUND
STATEMENT OF OPERATIONS
FROM DECEMBER 29, 1995 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1996
INVESTMENT INCOME
INCOME: Cash dividends (net of $648 foreign taxes withheld
at source)............................. $ 66,514
Interest................................... 4,161
____
Total Income......................... $ 70,675
EXPENSES: Management fee-Note 3(a)................... $ 15,722
Legal fees................................. 38,059
Shareholder servicing costs-Note 3(b)...... 8,610
Registration fees.......................... 3,214
Prospectus and shareholders' reports....... 3,096
Custodian fees............................. 1,952
Directors' fees and expenses-Note 3(c)..... 272
Audit fees................................. 256
Miscellaneous.............................. 1,060
____
Total Expenses....................... 72,241
Less-expense reimbursement from Manager due to
undertaking-Note 3..................... (45,343)
____
Net Expenses......................... 26,898
____
INVESTMENT INCOME-NET....................................................... 43,777
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-Note 4:
Net realized gain (loss) on investments.... $ 58,919
Net unrealized appreciation (depreciation) on investments 199,007
____
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...................... 257,926
____
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $301,703
=====
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS EQUITY DIVIDEND FUND
STATEMENT OF CHANGES IN NET ASSETS
FROM DECEMBER 29, 1995 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1996
OPERATIONS:
Investment income-net....................................................................... $ 43,777
Net realized gain (loss) on investments..................................................... 58,919
Net unrealized appreciation (depreciation) on investments................................... 199,007
_____
Net Increase in Net Assets Resulting from Operations.................................. 301,703
_____
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net....................................................................... (41,604)
_____
CAPITAL STOCK TRANSACTIONS :
Net proceeds from shares sold............................................................... 2,686,354
Dividends reinvested........................................................................ 40,843
Cost of shares redeemed..................................................................... (129,364)
_____
Increase (Decrease) in Net Assets from Capital Stock Transactions..................... 2,597,833
_____
Total Increase (Decrease) in Net Assets............................................. 2,857,932
NET ASSETS:
Beginning of Period......................................................................... --
_____
End of Period............................................................................... $2,857,932
======
UNDISTRIBUTED INVESTMENT INCOME-NET............................................................. $ 2,173
_____
CAPITAL SHARE TRANSACTIONS:
Shares
_____
Shares sold................................................................................. 212,527
Shares issued for dividends reinvested...................................................... 3,055
Shares redeemed............................................................................. (9,784)
_____
Net Increase (Decrease) in Shares Outstanding......................................... 205,798
======
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS EQUITY DIVIDEND FUND
FINANCIAL HIGHLIGHTS
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 from December 29, 1995
(commencement of operations) to October 31, 1996. This information has been
derived from the Fund's financial statements.
PER SHARE DATA:
Net asset value, beginning of period..................................................... $12.50
___
Investment Operations:
Investment income-net.................................................................... .23
Net realized and unrealized gain (loss)
on investments......................................................................... 1.38
___
Total from Investment Operations......................................................... 1.61
___
Distributions;
Dividends from investment income-net..................................................... (.22)
___
Net asset value, end of period........................................................... $13.89
===
TOTAL INVESTMENT RETURN...................................................................... 12.93% (1)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.................................................. 1.08% (1)
Ratio of net investment income
to average net assets.................................................................. 1.76% (1)
Decrease reflected in above expense ratios due to undertakings by the Manager
(limited to the expense limitation provision of the management agreement).............. 1.05% (1)
Portfolio Turnover Rate.................................................................. 98.84% (1)
Average commission rate paid (2)......................................................... $.0483
Net Assets, end of period (000's Omitted)................................................ $2,858
(1) Not annualized.
(2) Reflects the average commission rate paid per share for purchases and sales of investment securities.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS EQUITY DIVIDEND FUND
NOTES TO FINANCIAL STATEMENTS
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 four funds,
including the Dreyfus Equity Dividend Fund (the "Fund") which commenced
operations on December 29, 1995. The Fund's investment objective is current
income. The Dreyfus Corporation ("Manager") serves as the Fund's investment
adviser. The Manager is a direct subsidiary of Mellon Bank, N.A. 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 October 31, 1996, Allomon Corporation, a subsidiary of Mellon Bank
Investments Corporation, the parent company of which is Mellon Bank, held
162,603 shares of the Fund.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management
estimates and assumptions. Actual results could differ from those estimates.
(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.
Investments denominated in foreign currencies are translated to U.S. dollars
at the prevailing rates of exchange.
(B) FOREIGN CURRENCY TRANSACTIONS: The Fund does not isolate that portion
of the results of operations resulting from changes in foreign exchange rates
on investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency
gains or losses realized on securities transactions, the difference between
the amounts of dividends, interest, and foreign withholding taxes recorded on
the Fund's books, and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains or losses arise from
changes in the value of assets and liabilities other than investments in
securities, resulting from changes in exchange rates. Such gains and losses
are included with net realized and unrealized gain or loss on investments.
(c) 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.
(d) 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.
DREYFUS EQUITY DIVIDEND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(e) Federal income taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with 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-BANK LINE OF CREDIT:
The Fund participates with other Dreyfus-managed Funds in a $100 million
unsecured line of credit primarily to be utilized for temporary or emergency
purposes, including the financing of redemptions. Interest is charged to the
Fund at rates which are related to the Federal Funds rate in effect at the
time of borrowings. For the period ended October 31, 1996, the Fund did not
borrow under the line of credit.
NOTE 3-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 that if in any full fiscal year the aggregate expenses of the Fund,
exclusive of taxes, brokerage, interest on borrowings and extraordinary
expenses, exceed the expense limitation of any state having jurisdiction over
the Fund, the Fund may deduct from payments to be made to the Manager, or the
Manager will bear the amount of such excess to the extent required by state
law. 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 Portfolio's net assets in
accordance with California "blue sky" regulations. The Manager has 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 the value of the Fund's
average daily net assets. The expense reimbursement pursuant to the
undertaking, amounted to $45,343 for the period ended October 31, 1996.
The undertaking may be modified by the Manager from time to time,
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 in respect of these services. The Distributor
determines the amounts to be paid to Service Agents. For the period ended
October 31, 1996, the Fund was charged $5,241 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 $351 for the period from December 29, 1995 through
October 31, 1996.
Effective May 10, 1996, the Fund entered into a custody agreement with
Mellon to provide custodial services for the Fund. During the period from May
10, 1996 through October 31, 1996, $833 was paid to Mellon pursuant to the
custody agreement.
DREYFUS EQUITY DIVIDEND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(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 4-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the period ended October 31, 1996
amounted to $4,692,381 and $2,218,493, respectively.
At October 31, 1996, accumulated net unrealized appreciation on
investments was $199,007, consisting of $271,436 gross unrealized
appreciation and $72,429 gross unrealized depreciation.
At October 31, 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 EQUITY DIVIDEND FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Trustees
Dreyfus Equity Dividend Fund
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Dreyfus Equity Dividend Fund (one
of the Funds constituting Dreyfus Income Funds) as of October 31, 1996, and
the related statements of operations and changes in net assets and financial
highlights for the period from December 29, 1995 (commencement of operations)
to October 31, 1996. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included verification by
examination of securities held by the custodian as of October 31, 1996 and
confirmation of securities not held by the custodian by correspondence with
others. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Dreyfus Equity Dividend Fund at October 31, 1996, and the results
of its operations, the changes in its net assets and the financial highlights
for the period from December 29, 1995 to October 31, 1996, in conformity with
generally accepted accounting principles.
[Ernst and Young LLP signature logo]
New York, New York
December 10, 1996
DREYFUS EQUITY DIVIDEND FUND
IMPORTANT TAX INFORMATION (UNAUDITED)
In accordance with Federal tax law, the Fund designates 52.62% of the
ordinary dividends paid during the fiscal year ended October 31, 1996 as
qualifying for the corporate dividends received deduction. Shareholders will
receive notification in January 1997 of the percentage applicable to the
preparation of their 1996 income tax returns.
[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.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 042AR9610
[Dreyfus logo]
Equity
Dividend Fund
Annual Report
October 31, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
DREYFUS EQUITY DIVIDEND FUND AND THE STANDARD AND POOR'S
500 COMPOSITE STOCK PRICE INDEX
EXHIBIT A:
__________________________________________
| | DREYFUS |STANDARD & POOR'S
| | EQUITY | 500 COMPOSITE
| PERIOD | DIVIDEND | STOCK PRICE
| | FUND | INDEX*
|-------- | -----------|-----------------
|12/29/95 | 10,000 | 10,000
|1/31/96 | 10,368 | 10,340
|4/30/96 | 10,621 | 10,692
|7/31/96 | 10,293 | 10,523
|10/31/96 | 11,293 | 11,662
|-------- | -----------|-----------------
*Source: Lipper Analytical Services, Inc.
