DREYFUS INCOME FUNDS INC, 485BPOS, 1997-02-27

DREYFUS INCOME FUNDS INC
485BPOS, 1997-02-27

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File Nos. 33-7172
811-4748
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]

Pre-Effective Amendment No. [ ]

Post-Effective Amendment No. 16 [ X ]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]

Amendment No. 16 [ X ]

(Check appropriate box or boxes.)

DREYFUS INCOME FUNDS
(formerly, Dreyfus Strategic Income)
(Exact Name of Registrant as Specified in Charter)

c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (212) 922-6000

Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)

It is proposed that this filing will become effective (check appropriate
box)

immediately upon filing pursuant to paragraph (b)
----

X on March 3, 1997 pursuant to paragraph (b)
----

60 days after filing pursuant to paragraph (a)(i)
----

on (date) pursuant to paragraph (a)(i)
----

75 days after filing pursuant to paragraph (a)(ii)
----
on (date) pursuant to paragraph (a)(ii) of Rule 485
----

If appropriate, check the following box:

this post-effective amendment designates a new effective date for a
X previously filed post-effective amendment.
----

Registrant has registered an indefinite number of shares of beneficial
interest under the Securities Act of 1933 pursuant to Section 24(f) of the
Investment Company Act of 1940. Registrant's Rule 24f-2 Notice for the
fiscal year ended October 31, 1996 was filed on December 30, 1996.

DREYFUS INCOME FUNDS
Cross-Reference Sheet Pursuant to Rule 495(b)

Page in the
Items in Dreyfus Equity
Portfolio Dividend Fund
Form N-1A Caption Prospectus
_________ _______ ________________

1 Cover Page Cover

2 Synopsis 3

3 Condensed Financial Information 4

4 General Description of Registrant 4

5 Management of the Fund 6

5(a) Management's Discussion of Fund's 16
Performance

6 Capital Stock and Other Securities 17

7 Purchase of Securities Being Offered 8

8 Redemption or Repurchase 13

9 Pending Legal Proceedings *

Page in the
Items in Dreyfus High
Portfolio Yield Securities
Form N-1A Caption Fund Prospectus
_________ _______ __________________

1 Cover Page Cover

2 Synopsis 4

3 Condensed Financial Information 5

4 General Description of Registrant 5

5 Management of the Fund 8

5(a) Management's Discussion of Fund's 18
Performance

6 Capital Stock and Other Securities 18

7 Purchase of Securities Being Offered 9

8 Redemption or Repurchase 14

9 Pending Legal Proceedings *

____________________________

NOTE: * Omitted since answer is negative or inapplicable.

DREYFUS INCOME FUNDS
Cross-Reference Sheet Pursuant to Rule 495(b) (continued)

Page in the
Items in Dreyfus Short
Portfolio Term High Yield
Form N-1A Caption Fund Prospectus
_________ _______ ________________

1 Cover Page Cover

2 Synopsis 4

3 Condensed Financial Information *

4 General Description of Registrant 5

5 Management of the Fund 7

5(a) Management's Discussion of Fund's 17
Performance

6 Capital Stock and Other Securities 18

7 Purchase of Securities Being Offered 9

8 Redemption or Repurchase 14

9 Pending Legal Proceedings *

Page in the
Items in Dreyfus Strategic
Portfolio Income Fund
Form N-1A Caption Prospectus
_________ _______ ____________________

1 Cover Page Cover

2 Synopsis 3

3 Condensed Financial Information 4

4 General Description of Registrant 5

5 Management of the Fund 8

5(a) Management's Discussion of Fund's 18
Performance

6 Capital Stock and Other Securities 19

7 Purchase of Securities Being Offered 9

8 Redemption or Repurchase 14

9 Pending Legal Proceedings *

____________________________

NOTE: * Omitted since answer is negative or inapplicable.

DREYFUS INCOME FUNDS
Cross-Reference Sheet Pursuant to Rule 495(b) (continued)

Items in
Part B of
Form N-1A Caption Page
_________ _______ ____

10 Cover Page Cover

11 Table of Contents Cover

12 General Information and History *

13 Investment Objectives and Policies B-2

14 Management of the Company B-18

15 Control Persons and Principal B-21
Holders of Securities

16 Investment Advisory and Other B-23
Services

Items in
Part B of
Form N-1A Caption Page
_________ _______ _____

17 Brokerage Allocation B-35

18 Capital Stock and Other Securities B-37

19 Purchase, Redemption and Pricing B-25, B-27,
of Securities Being Offered B-32

20 Tax Status B-33

21 Underwriters B-25

22 Calculations of Performance Data B-36

23 Financial Statements B-48

____________________________

NOTE: * Omitted since answer is negative or inapplicable.

DREYFUS INCOME FUNDS
Cross-Reference Sheet Pursuant to Rule 495(b) (continued)

Items in
Part C of
Form N-1A Caption Page
_________ _______ _____

24 Financial Statements and Exhibits C-1

25 Persons Controlled by or Under C-4
Common Control with Registrant

26 Number of Holders of Securities C-4

27 Indemnification C-4

28 Business and Other Connections of C-5
Investment Adviser

29 Principal Underwriters C-12

30 Location of Accounts and Records C-15

31 Management Services C-15

32 Undertakings C-15

- ------------------------------------------------------------------------------

PROSPECTUS MARCH 3, 1997

DREYFUS STRATEGIC INCOME FUND
- ------------------------------------------------------------------------------
DREYFUS STRATEGIC INCOME FUND (THE "FUND") IS A SEPARATE DIVERSIFIED
PORTFOLIO OF DREYFUS INCOME FUNDS, AN OPEN-END, MANAGEMENT INVESTMENT COMPANY
(THE "COMPANY"), KNOWN AS A MUTUAL FUND. THE FUND'S INVESTMENT OBJECTIVE IS
TO MAXIMIZE CURRENT INCOME BY INVESTING PRINCIPALLY IN DEBT SECURITIES OF
DOMESTIC AND FOREIGN ISSUERS.
YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING DREYFUS
TELETRANSFER.
THE DREYFUS CORPORATION PROFESSIONALLY MANAGES THE FUND'S PORTFOLIO.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.

THE STATEMENT OF ADDITIONAL INFORMATION, DATED MARCH 3, 1997, WHICH
MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF CERTAIN
AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST TO SOME
INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
IS INCORPORATED HEREIN BY REFERENCE. THE SECURITIES AND EXCHANGE COMMISSION
MAINTAINS A WEB SITE (HTTP://WWW.SEC.GOV) THAT CONTAINS THE STATEMENT OF
ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER
INFORMATION REGARDING THE FUND. FOR A FREE COPY OF THE STATEMENT OF
ADDITIONAL INFORMATION, WRITE TO THE FUND AT 144 GLENN CURTISS BOULEVARD,
UNIONDALE, NEW YORK 11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK
FOR OPERATOR 144.

Appendix.......................................... 21

- -----------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- -----------------------------------------------------------------------------
[This Page Intentionally Left Blank]
Page 2

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
<S> <C>
(as a percentage of average daily net assets)
Management Fees........................................................................ .60%
Other Expenses ........................................................................ .46%
Total Fund Operating Expenses.......................................................... 1.06%
</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Example: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the following
expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at
the end of each time period: $11 $34 $58 $129
</TABLE>

- -----------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL
RETURN GREATER OR LESS THAN 5%.
- -----------------------------------------------------------------------------

The purpose of the foregoing table is to assist you in understanding
the costs and expenses borne by the Fund, the payment of which will reduce
investors' annual return. Certain Service Agents (as defined below) may
charge their clients direct fees for effecting transactions in Fund shares;
such fees are not reflected in the foregoing table. For a further description
of the various costs and expenses incurred in the operation of the Fund, see
"Management of the Fund," "How to Buy Shares" and "Shareholder Services
Plan."

Page 3

CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited by Ernst &
Young LLP, the Fund's independent auditors, whose report thereon appears in
the Statement of Additional Information. Further financial data and related
notes are included in the Statement of Additional Information, available upon
request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share
of beneficial interest outstanding, total investment return, ratios to
average net assets and other supplemental data for each year indicated. This
information has been derived from the Fund's financial statements.

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------------
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year $13.51 $12.57 $12.94 $13.37 $12.35 $13.44 $14.02 $15.36 $12.95 $14.22
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net......... 1.19 1.24 1.21 1.18 1.16 1.07 1.01 .95 .93 .98
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions......... (.95) .74 .44 (1.02) 1.09 .58 1.41 (2.04) 1.27 .02
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS .24 1.98 1.65 .16 2.25 1.65 2.42 (1.09) 2.20 1.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment income-net (1.18) (1.24) (1.22) (1.18) (1.16) (1.07) (1.01) (.95) (.93) (.98)
Dividends from net realized
gain on investments........... -- (.37). -- -- -- -- (.07) (.37) -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS........... (1.18) (1.61) (1.22) (1.18) (1.16) (1.07) (1.08) (1.32) (.93) (.98)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year.. $12.57 $12.94 $13.37 $12.35 $13.44 $14.02 $15.36 $12.95 $14.22 $14.24
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN ........ 1.74% 16.71% 13.44% 1.32% 18.94% 12.64% 17.93% (7.44%) 17.57% 7.27%
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses to
average net assets............ .26% .49% .50% .50% .72% .85% .84% .94% 1.04% 1.04%
Ratio of interest expense
to average net assets......... .15% .17% .34% .32% .15% -- -- -- -- .02%
Ratio of net investment income to
average net assets............ 9.40% 9.72% 9.34% 9.24% 8.93% 7.58% 6.83% 6.84% 6.87% 6.89%
Decrease reflected in above expense
ratios due to undertakings by The Dreyfus
Corporation (limited to the expense limitation
provision of the management agreement) 1.24% 1.01% 1.00% 1.00% .78% .40% .24% .11% -- --
Portfolio Turnover Rate...... . 76.01% 154.73% 93.41% 16.40% 16.08% 72.82% 118.38% 161.35% 176.59% 214.55%
Net Assets, end of year
(000's omitted)............... $31,809 $39,058 $41,679 $41,927 $57,336 $149,801.$375,459 $322,487 $320,345 $294,911

Further information about the Fund's performance is contained in the
Fund's annual report, which may be obtained without charge by writing to the
address or calling the number set forth on the cover page of this Prospectus.
Page 4

DEBT OUTSTANDING
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------------------
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Amount of debt outstanding at
end of year (in thousands). _ _ $ 650 _ _ _ _ _ _ _
Average amount of debt outstanding
throughout year (in thousands)(2) $ 460 $ 739 $1,321 $1,408 $1,011 _ _ _ _ $1,202
Average number of shares outstanding
throughout year (in thousands)(3) 2,077 2,737 3,093 3,260 3,661 _ _ _ _ 21,471
Average amount of debt per
share throughout year...... $ .22 $ .27 $ .43 $ .43 $ .28 _ _ _ _ $ .06
(1)From October 1, 1986 (commencement of operations) to October 31, 1986.
(2)Based upon daily outstanding borrowings.
(3)Based upon month-end balances.
</TABLE>

Page 5

DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund's investment objective is to maximize current income by
investing principally in debt securities of domestic and foreign issuers. It
cannot be changed without approval by the holders of a majority (as defined
in the Investment Company Act of 1940, as amended (the "1940 Act")) of the
Fund's outstanding voting shares. There can be no assurance that the Fund's
investment objective will be achieved.
MANAGEMENT POLICIES
At least 65% of the Fund's total assets ordinarily will be invested
in debt securities, such as bonds, debentures, notes, mortgage-related
securities, convertible debt obligations and convertible preferred stocks, of
domestic and foreign issuers. See "Appendix_Certain Portfolio Securities."
The issuers of these obligations include governments, their political
subdivisions, agencies or municipalities, and corporations.

It is a fundamental policy of the Fund that at least 95% of the debt
securities purchased by the Fund will have a rating of at least Caa by
Moody's Investor Services, Inc. ("Moody's") or CCC by Standard & Poor's
Ratings Group ("S&P") or will be of comparable quality as determined by The
Dreyfus Corporation, and that no more than 5% of the debt securities will
have a rating as low as the lowest rating assigned by Moody's or S&P.

Debt securities rated Baa by Moody's and BBB by S&P are considered
investment grade obligations which lack outstanding investment
characteristics and may have speculative characteristics as well. Debt
securities rated Caa by Moody's are of poor standing and may be in default or
there may be present elements of danger with respect to principal or
interest. S&P typically assigns a CCC rating to debt which has a current
identifiable vulnerability to default and is dependent upon favorable
business, financial and economic conditions to meet timely payments of
interest and repayment of principal. The Fund intends to invest less than 35%
of its net assets in debt securities rated Ba or lower by Moody's and BB or
lower by S&P. See "Investment Considerations and Risks_Lower Rated
Securities" below for a discussion of certain risks. The Fund may hold
securities with ratings higher than those set forth above when the yield
differential between lower rated and higher rated fixed-income securities
narrows and the risk of loss may be reduced substantially with only a
relatively small reduction in yield and also when market or economic
conditions dictate a more defensive strategy. The Fund will be particularly
alert to favorable arbitrage opportunities (such as those resulting from
favorable interest rate differentials) arising from the relative yields of
the various types of securities in which the Fund may invest and market
conditions generally.
The Fund may invest up to 30% of its total assets in debt securities
of foreign companies and foreign governments. Among the foreign securities in
which the Fund may invest are the foreign bank obligations, as well as
Eurodollar debt obligations, which are U.S. dollar-denominated debt
obligations
Page 5

issued by foreign issuers, often guaranteed by subsidiaries of domestic
companies. The Fund also may invest in the debt securities of companies in,
or governments of, developing countries.
In connection with its purchases of convertible securities, the Fund
from time to time may hold common stock received upon the conversion of the
security. The Fund does not intend to retain the common stock in its
portfolio and will sell it as promptly as it can and in a manner which it
believes will reduce the risk to the Fund of loss in connection with the
sale.
While seeking other desirable investments, the Fund may invest in
money market instruments consisting of U.S. Government securities,
certificates of deposit, time deposits, bankers' acceptances, short-term
investment grade corporate bonds and other short-term debt instruments, and
repurchase agreements, as set forth under "Appendix -- Certain Portfolio
Securities -- Money Market Instruments." Under normal market conditions, the
Fund does not expect to have a substantial portion of its assets invested in
money market instruments. However, when The Dreyfus Corporation determines
that adverse market conditions exist, the Fund may adopt a temporary
defensive posture and invest all of its assets in money market instruments.

The Fund's annual portfolio turnover rate is not expected to exceed
200%. Higher portfolio turnover rates usually generate additional brokerage
commissions and expenses and the short-term gains realized from these
transactions are taxable to shareholders as ordinary income. In an effort to
increase returns, the Fund may engage in various investment techniques, such
as foreign currency transactions, leveraging, options and futures
transactions, lending portfolio securities and short-selling. See also "Invest
ment Considerations and Risks" and "Appendix_Investment Techniques" below and
"Investment Objectives and Management Policies_Management Policies" in the
Statement of Additional Information.

INVESTMENT CONSIDERATIONS AND RISKS
GENERAL -- The Fund's net asset value per share should be expected to
fluctuate. Investors should consider the Fund as a supplement to an overall
investment program and should invest only if they are willing to undertake
the risks involved. See "Investment Objectives and Management
Policies_Management Policies" in the Statement of Additional Information for
a further discussion of certain risks.
FIXED-INCOME SECURITIES -- Even though interest-bearing securities are
investments which promise a stable stream of income, the prices of such
securities generally are inversely affected by changes in interest rates and,
therefore, are subject to the risk of market price fluctuations. The values
of fixed-income securities also may be affected by changes in the credit
rating or financial condition of the issuer. Certain securities purchased by
the Fund, such as those rated Baa or lower by Moody's and BBB or lower by
S&P, may be subject to such risk with respect to the issuing entity and to
greater market fluctuations than certain lower yielding, higher rated
fixed-income securities. See "Lower Rated Securities" below and
"Appendix_Certain Portfolio Securities_Ratings," and "Appendix" in the
Statement of Additional Information.
Lower Rated Securities _ The Fund may invest in higher yielding (and,
therefore, higher risk) debt securities to the extent described above. These
are securities such as those rated Ba by Moody's or BB by S&P, or as low as
the lowest rating assigned by Moody's or S&P (commonly known as junk bonds).
They generally are not meant for short-term investing and may be subject to
certain risks with respect to the issuing entity and to greater market
fluctuations than certain lower yielding, higher rated fixed income
securities. The retail secondary market for these securities may be less
liquid than that of higher rated securities; adverse conditions could make it
difficult at times for the Fund to sell certain securities or could result in
lower prices than those used in calculating the Fund's net asset value. The
value of these securities, as is the case with the value of higher rated
Fixed-Income Securities, will be inversely affected by changes in interest
rates. See "Appendix_Certain Portfolio Securities_Ratings" below.
Page 6

FOREIGN SECURITIES -- Foreign securities markets generally are not as
developed or efficient as those in the United States. Securities of some
foreign issuers are less liquid and more volatile than securities of
comparable U.S. issuers. Similarly, volume and liquidity in most foreign
securities markets are less than in the United States and, at times,
volatility of price can be greater than in the United States.
Because evidences of ownership of such securities usually are held
outside the United States, the Fund will be subject to additional risks which
include possible: adverse political and economic developments, seizure or
nationalization of foreign deposits and adoption of governmental restrictions
which might adversely affect the payment of principal and interest on the
foreign securities or restrict the payment of principal and interest to
investors located outside the country of the issuer, whether from currency
blockage or otherwise.
Developing countries have economic structures that are generally less
diverse and mature, and political systems that are less stable, than those of
developed countries. The markets of developing countries may be more volatile
than the markets of more mature economies; however, such markets may provide
higher rates of return to investors. Many developing countries providing
investment opportunities for the Fund have experienced substantial, and in
some periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had and may continue to have
adverse affects on the economies and securities markets of certain of these
countries.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in
U.S. dollars may be affected favorably or unfavorably by changes in currency
rates and exchange control regulations.
FOREIGN CURRENCY TRANSACTIONS -- Currency exchange rates may fluctuate
significantly over short periods of time. They generally are determined by
the forces of supply and demand in the foreign exchange markets and the
relative merits of investments in different countries, actual or perceived
changes in interest rates and other complex factors, as seen from an
international perspective. Currency exchange rates also can be affected
unpredictably by intervention by U.S. or foreign governments or central
banks, or the failure to intervene, or by currency controls or political
developments in the United States or abroad. See "Appendix _ Investment
Techniques _ Foreign Currency Transactions."
USE OF DERIVATIVES -- The Fund may invest, to a limited extent, in
derivatives ("Derivatives"). These are financial instruments which derive
their performance, at least in part, from the performance of an underlying
asset, index or interest rate. The Derivatives the Fund may use include
options and futures. While Derivatives can be used effectively in furtherance
of the Fund's investment objectives, under certain market conditions, they
can increase the volatility of the Fund's net asset value, can decrease the
liquidity of the Fund's investments and make more difficult the accurate
pricing of the Fund's portfolio. See "Appendix_Investment Techniques_Use of
Derivatives" below and "Investment Objectives and Management
Policies_Management Policies_Derivatives" in the Statement of Additional
Information.
SIMULTANEOUS INVESTMENTS -- Investment decisions for the Fund are made
independently from those of the other investment companies advised by The
Dreyfus Corporation. If, however, such other investment companies desire to
invest in, or dispose of, the same securities as the Fund, available
investments or opportunities for sales will be allocated equitably to each
investment company. In some cases, this procedure may adversely affect the
size of the position obtained for or disposed of by the Fund or the price
paid or received by the Fund.
Page 7

MANAGEMENT OF THE FUND

INVESTMENT ADVISER -- The Dreyfus Corporation, located at 200 Park Avenue,
New York, New York 10166, was formed in 1947 and serves as the Fund's
investment adviser. The Dreyfus Corporation is a wholly-owned subsidiary of
Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank
Corporation ("Mellon"). As of January 31, 1997, The Dreyfus Corporation
managed or administered approximately $85 billion in assets for more than 1.7
million investor accounts nationwide.

The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the Fund,
subject to the overall authority of the Company's Board in accordance with
Massachusetts law. The Fund's primary portfolio manager is Kevin McClintock.
He has held that position since December 1995 and has been employed by The
Dreyfus Corporation since November 1995. From 1993 through October 1995, Mr.
McClintock was Managing Director, Fixed Income Investments, for Aeltus
Investment Management Inc., a subsidiary of the Aetna Corporation. Prior
thereto, he was employed in various capacities by the Aetna Corporation and
its subsidiaries, including head of Separate Account Portfolio management for
Aetna Investment Management. The Dreyfus Corporation also provides research
services for the Fund as well as for other funds advised by The Dreyfus
Corporation through a professional staff of portfolio managers and securities
analysts.

Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding companies in
the United States based on total assets. Mellon's principal wholly-owned
subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc., AFCO Credit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, including The Dreyfus Corporation, Mellon managed more than
$233 billion in assets as of December 31, 1996, including approximately $86
billion in proprietary mutual fund assets. As of December 31, 1996, Mellon,
through various subsidiaries, provided non-investment services, such as
custodial or administration services, for more than $1,046 billion in assets,
including approximately $57 billion in mutual fund assets.

For the fiscal year ended October 31, 1996, the Fund paid The Dreyfus
Corporation a monthly management fee at the annual rate of .60 of 1% of the
value of the Fund's average daily net assets. From time to time, The Dreyfus
Corporation may waive receipt of its fees and/or voluntarily assume certain
expenses of the Fund, which would have the effect of lowering the Fund's
overall expense ratio and increasing yield to investors at the time such
amounts are waived or assumed, as the case may be. The Fund will not pay The
Dreyfus Corporation at a later time for any amounts it may waive, nor will
the Fund reimburse The Dreyfus Corporation for any amounts it may assume. The
Dreyfus Corporation or its affiliates may pay certain entities, including
banks, an account fee and also a fee in connection with the servicing of Fund
shareholders.

The Dreyfus Corporation may pay the Fund's distributor for
shareholder services from The Dreyfus Corporation's own assets, including
past profits but not including the management fee paid by the Fund. The
Fund's distributor may use part of all of such payments to pay Service Agents
(as defined below) in respect of these services.

DISTRIBUTOR -- The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at 60 State Street, Boston, Massachusetts 02109.
The Distributor's ultimate parent is Boston Institutional Group, Inc.

Page 8

The minimum initial purchase is $2,500, or $1,000 if you are a client
of a Service Agent which maintains an omnibus account in the Fund and has
made an aggregate minimum initial purchase for its customers of $2,500.
Subsequent investments must be at least $100. However, the minimum initial
investment for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7)
Plans with only one participant is $750, with no minimum for subsequent
purchases. Individuals who open an IRA also may open a non-working spousal
IRA with a minimum initial investment of $250. Subsequent investments in a
spousal IRA must be at least $250. The initial investment must be accompanied
by the Account Application. For full-time or part-time employees of The
Dreyfus Corporation or any of its affiliates or subsidiaries, directors of
The Dreyfus Corporation, Board members of a fund advised by The Dreyfus
Corporation, including members of the Company's Board, or the spouse or minor
child of any of the foregoing, the minimum initial investment is $1,000. For
full-time or part-time employees of The Dreyfus Corporation or any of its
affiliates or subsidiaries who elect to have a portion of their pay directly
deposited into their Fund account, the minimum initial investment is $50. The
Fund reserves the right to offer Fund shares without regard to minimum
purchase requirements to employees participating in certain qualified and
non-qualified employee benefit plans or other programs where contributions or
account information can be transmitted in a manner and form acceptable to the
Fund. The Fund reserves the right to vary further the initial and subsequent
investment minimum requirements at any time. Fund shares also are offered
without regard to the minimum initial investment requirements through
Dreyfus-AUTOMATIC Asset BuilderRegistration Mark, Dreyfus Government Direct
Deposit Privilege or Dreyfus Payroll Savings Plan pursuant to the Dreyfus
Step Program described under "Shareholder Services." These services enable
you to make regularly scheduled investments and may provide you with a
convenient way to invest for long-term financial goals. You should be aware,
however, that periodic investment plans do not guarantee a profit and will
not protect an investor against loss in a declining market.

PROCESSED ONLY UPON RECEIPT THEREBY. For the location of the nearest
Dreyfus Financial Center, please call one of the telephone numbers listed
under "General Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, DDA #8900119330/Dreyfus Strategic
Income Fund, for purchase of Fund shares in your name. The wire must include
your Fund account number (for new accounts, your Taxpayer Identification
Number ("TIN") should be included instead), account registration and dealer
number, if applicable. If your initial purchase of Fund shares is by wire,
please call 1-800-645-6561 after completing your wire payment to
obtain your Fund account number. Please include your Fund account number on
the Account Application and promptly mail the Account Application to the
Fund, as no redemptions will be permitted until the Account Application is
received. You may obtain further information about remitting funds in this
manner from your bank. All payments should be made in U.S. dollars and, to
avoid fees and delays, should be drawn only on U.S. banks. A charge will be
imposed if any check used for investment in your account does not clear. The
Fund makes available to certain large institutions the ability to issue
purchase instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct the
institution to transmit immediately available funds through the Automated
Clearing House to The Bank of New York with instructions to credit your Fund
account. The instructions must specify your Fund account registration and
your Fund account number PRECEDED BY THE DIGITS "1111."
Fund shares are sold on a continuous basis at the net asset value per
share next determined after an order in proper form is received by the
Transfer Agent or other agent. Net asset value per share is determined as of
the close of trading on the floor of the New York Stock Exchange (currently
4:00 p.m., New York time), on each day the New York Stock Exchange is open
for business. For purposes of determining net asset value per share, options
contracts will be valued 15 minutes after the close of trading on the floor
of the New York Stock Exchange. Net asset value per share is computed by
dividing the value of the Fund's net assets (i.e., the value of its assets
less liabilities) by the total number of shares outstanding. The Fund's
investments are valued based on market value or, where market quotations are
not readily available, based on fair value as determined in good faith by the
Company's Board. For further information regarding the methods employed in
valuing Fund investments, see "Determination of Net Asset Value" in the
Statement of Additional Information.
For certain institutions that have entered into agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted, and
must be received by the Transfer Agent, within three business days after the
order is placed. If such payment is not received within three business days
after the order is placed, the order may be canceled and the institution
could be held liable for resulting fees and/or losses.
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or nonqualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the Dreyfus
Family of Funds or certain other products made available by the Distributor to
such plans or programs exceeds $1,000,000 ("Eligible Benefit Plans"). Shares
of funds in the Dreyfus Family of Funds by an Eligible Benefit Plan will be
aggregated to determine the fee payable. The Distributor reserves the right to
Page 10

cease paying these fees at any time. The Distributor will pay such fees
from its own funds, other than amounts received from the Fund, including past
profits or any other source available to it.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service (the "IRS").
DREYFUS TELETRANSFER PRIVILEGE -- You may purchase shares (minimum $500,
maximum $150,000 per day) by telephone if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds will
be transferred between the bank account designated in one of these documents
and your Fund account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
The Fund may modify or terminate this Privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of shares by telephoning
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES
FUND EXCHANGES _ You may purchase, in exchange for shares of the Fund, shares
of certain other funds managed or administered by The Dreyfus Corporation, to
the extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, you should consult your Service Agent or
call 1-800-645-6561 to determine if it is available and whether any other
conditions are imposed on its use.

To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. Before any exchange, you must
obtain and should review a copy of the current prospectus of the fund into
which the exchange is being made. Prospectuses may be obtained by calling
1-800-645-6561. Except in the case of personal retirement plans, the shares
being exchanged must have a current value of at least $500; furthermore, when
establishing a new account by exchange, the shares being exchanged must have
a value of at least the minimum initial investment required for the fund into
which the exchange is being made. The ability to issue exchange instructions
by telephone is given to all Fund shareholders automatically, unless you
check the applicable "No" box on the Account Application, indicating that you
specifically refuse this Privilege. The Telephone Exchange Privilege may be
established for an existing account by written request, signed by all
shareholders on the account, or by a separate signed Shareholder Services
Form, also available by calling 1-800-645-6561. If you have established the
Telephone Exchange Privilege, you may telephone exchange instructions
(including over The Dreyfus TouchRegistration Mark automated telephone
system) by calling 1-800-645-6561. If you are calling from overseas, call
516-794-5452. See "How to Redeem Fund Shares_Procedures." Upon an exchange
into a new account, the following shareholder services and privileges, as
applicable and where available, will be automatically carried over to the
fund into which the exchange is made: Telephone Exchange Privilege, Wire
Redemption Privilege, Dreyfus TELETRANSFER Privilege and the dividend/capital
gain distribution option (except for Dreyfus Dividend Sweep) selected by the
investor.

(b) acquired by a previous exchange from shares purchased with a sales load,
or (c) acquired through reinvestments of dividends or distributions paid with
respect to the foregoing categories of shares. To qualify, at the time of
your exchange you must notify the Transfer Agent or your Service Agent must
notify the Distributor. Any such qualification is subject to confirmation of
your holdings through a check of appropriate records. See "Shareholder
Services" in the Statement of Additional Information. No fees currently are
charged shareholders directly in connection with exchanges, although the Fund
reserves the right, upon not less than 60 days' written notice, to charge
shareholders a nominal fee in accordance with rules promulgated by the
Securities and Exchange Commission. The Fund reserves the right to reject any
exchange request in whole or in part. The availability of Fund Exchanges may
be modified or terminated at any time upon notice to shareholders. See
"Dividends, Distributions and Taxes."
DREYFUS AUTO-EXCHANGE PRIVILEGE -- Dreyfus Auto-Exchange Privilege enables
you to invest regularly (on a semi-monthly, monthly, quarterly or annual
basis), in exchange for shares of the Fund, in shares of other funds in the
Dreyfus Family of Funds of which you are currently an investor. The amount
you designate, which can be expressed either in terms of a specific dollar or
share amount ($100 minimum), will be exchanged automatically on the first
and/or fifteenth of the month according to the schedule you have selected.
Shares will be exchanged at the then current net asset value; however, a
sales load may be charged with respect to exchanges into funds sold with a
sales load. See "Shareholder Services" in the Statement of Additional
Information. The right to exercise this Privilege may be modified or
cancelled by the Fund or the Transfer Agent. You may modify or cancel your
exercise of this Privilege at any time by writing to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. The Fund may
charge a service fee for the use of this Privilege. No such fee currently is
contemplated. See "Dividends, Distributions and Taxes." For more information
concerning this Privilege and the funds in the Dreyfus Family of Funds
eligible to participate in this Privilege, or to obtain a Dreyfus
Auto-Exchange Authorization Form, please call toll free 1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark -- Dreyfus-AUTOMATIC Asset
Builder permits you to purchase Fund shares (minimum of $100 and maximum of
$150,000 per transaction) at regular intervals selected by you. Fund shares
are purchased by transferring funds from the bank account designated by you.
At your option, the bank account designated by you will be debited in the
specified amount, and Fund shares will be purchased, once a month, on either
the first or fifteenth day, or twice a month, on both days. Only an account
maintained at a domestic financial institution which is an Automated Clearing
House member may be so designated. To establish a Dreyfus-AUTOMATIC Asset
Builder account, you must file an authorization form with the Transfer Agent.
You may obtain the necessary authorization form by calling 1-800-645-6561.
You may cancel your participation in this Privilege or change the amount of
purchase at any time by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 6527, Providence, Rhode Island 02940-6527, or, if for Dreyfus
Retirement Plan accounts, to The Dreyfus Trust Company, Custodian, P.O. Box
6427, Providence, Rhode Island 02940-6427, and the notification will be
effective three business days following receipt. The Fund may modify or
terminate this Privilege at any time or charge a service fee. No such fee
currently is contemplated.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE -- Dreyfus Government Direct
Deposit Privilege enables you to purchase shares (minimum of $100 and maximum
of $50,000 per transaction) by having Federal salary, Social Security, or
certain veterans', military or other payments from the Federal government
automatically deposited into your Fund account. You may deposit as much of
your payments as you elect. To enroll in Dreyfus Government Direct Deposit,
you must file with the Transfer Agent a completed Direct Deposit Sign-Up Form
for each type of payment that you desire to include in this Privilege. The
appropriate form
Page 12

may be obtained by calling 1-800-645-6561. Death or legal incapacity will
terminate your participation in this Privilege. You may elect at any time to
terminate your participation by notifying in writing the appropriate Federal
agency. Further, the Fund may terminate your participation upon 30 days'
notice to you.
DREYFUS PAYROLL SAVINGS PLAN -- Dreyfus Payroll Savings Plan permits you to
purchase Fund shares (minimum of $100 per transaction) automatically on a
regular basis. Depending upon your Employer's direct deposit program, you may
have part or all of your paycheck transferred to your existing Dreyfus
account electronically through the Automated Clearing House system at each
pay period. To establish a Dreyfus Payroll Savings Plan account, you must
file an authorization form with your employer's payroll department. Your
employer must complete the reverse side of the form and return it to The
Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671.
You may obtain the necessary authorization form by calling 1-800-645-6561.
You may change the amount of purchase or cancel the authorization only by
written notification to your employer. It is the sole responsibility of your
employer, not the Distributor, The Dreyfus Corporation, the Fund, the
Transfer Agent or any other person, to arrange for transactions under the
Dreyfus Payroll Savings Plan. The Fund may modify or terminate this Privilege
at any time or charge a service fee. No such fee currently is contemplated.
Shares held under Keogh Plans, IRAs or other retirement plans are not
eligible for this Privilege.
Dreyfus Step Program _ Dreyfus Step Program enables you to purchase Fund
shares without regard to the Fund's minimum initial investment requirements
through Dreyfus-AUTOMATIC Asset Builder, Dreyfus Government Direct Deposit
Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step
Program account, you must supply the necessary information on the Account
Application and file the required authorization form(s) with the Transfer
Agent. For more information concerning this Program, or to request the
necessary authorization form(s), please call toll free 1-800-782-6620. You
may terminate your participation in this Program at any time by discontinuing
your participation in Dreyfus-AUTOMATIC Asset Builder, Dreyfus Government
Direct Deposit Privilege or Dreyfus Payroll Savings Plan, as the case may be,
as provided under the terms of such Privilege(s). The Fund may modify or
terminate this Program at any time. Investors who wish to purchase Fund
shares through the Dreyfus Step Program in conjunction with a
Dreyfus-sponsored retirement plan may do so only for IRAs, SEP-IRAs and IRA
"Rollover Accounts."
DREYFUS DIVIDEND OPTIONS -- Dreyfus Dividend Sweep enables you to invest
automatically dividends or dividends and capital gain distributions, if any,
paid by the Fund in shares of another fund in the Dreyfus Family of Funds of
which you are a shareholder. Shares of the other fund will be purchased at
the then-current net asset value; however, a sales load may be charged with
respect to investments in shares of a fund sold with a sales load. If you are
investing in a fund that charges a sales load, you may qualify for share prices
which do not include the sales load or which reflect a reduced sales load.
If you are investing in a fund that charges a contingent deferred sales
charge, the shares purchased will be subject on redemption to the contingent
deferred sales charge, if any, applicable to the purchased shares. See
"Shareholder Services" in the Statement of Additional Information. Dreyfus
Dividend ACH permits you to transfer electronically dividends or dividends
and capital gain distributions, if any, from the Fund to a designated bank
account. Only an account maintained at a domestic financial institution which
is an Automated Clearing House member may be so designated. Banks may charge
a fee for this service.
For more information concerning these privileges or to request a
Dividend Options Form, please call toll free 1-800-645-6561. You may cancel
these privileges by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. To select a new
fund after cancellation, you must submit a new Dividend Options Form.
Enrollment in or cancellation of
Page 13

these privileges is effective three business days following receipt. These
privileges are available only for existing accounts and may not be used to
open new accounts. Minimum subsequent investments do not apply for Dreyfus
Dividend Sweep. The Fund may modify or terminate these privileges at any time
or charge a service fee. No such fee currently is contemplated. Shares held
under Keogh Plans, IRAs or other retirement plans are not eligible for Dreyfus
Dividend Sweep.

AUTOMATIC WITHDRAWAL PLAN -- The Automatic Withdrawal Plan permits you to
request withdrawal of a specified dollar amount (minimum of $50) on either a
monthly or quarterly basis if you have a $5,000 minimum account. An
application for the Automatic Withdrawal Plan can be obtained by calling
1-800-645-6561. The Automatic Withdrawal Plan may be ended at any time by
you, the Fund or the Transfer Agent. Shares for which certificates have been
issued may not be redeemed through the Automatic Withdrawal Plan.

RETIREMENT PLANS -- The Fund offers a variety of pension and profit-sharing
plans, including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts,"
401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support services also
are available. You can obtain details on the various plans by calling the
following numbers toll free: for Keogh Plans, please call 1-800-358-5566; for
IRAs and IRA "Rollover Accounts," please call 1-800-645-6561; for SEP-IRAs,
401(k) Salary Reduction Plans and 403(b)(7) Plans, please call 1-800-322-7880.

HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent, as described below.
When a request is received in proper form, the Fund will redeem the shares at
the next determined net asset value.
The Fund imposes no charges when shares are redeemed. Service Agents
may charge their clients a fee for effecting redemptions of Fund shares. Any
certificates representing Fund shares being redeemed must be submitted with
the redemption request. The value of the shares redeemed may be more or less
than their original cost, depending on the Fund's then-current net asset
value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY DREYFUS
TELETRANSFER OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDER AND SUBSEQUENTLY
SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION
PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR
PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET
BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION,
THE FUND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR
PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS
DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE DREYFUS
TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST
WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR
SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT
COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO
THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE
AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF
BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until the Transfer
Agent has received your Account Application.
Page 14

The Fund reserves the right to redeem your account at its option upon
not less than 30 days' written notice if your account's net asset value is
$500 or less and remains so during the notice period.
PROCEDURES
You may redeem shares by using the regular redemption procedure
through the Transfer Agent, or, if you have checked the appropriate box and
supplied the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent, through the Wire Redemption
Privilege, the Telephone Redemption Privilege or the Dreyfus TELETRANSFER
Privilege. Other redemption procedures may be in effect for clients of
certain Service Agents. The Fund makes available to certain large
institutions the ability to issue redemption instructions through compatible
computer facilities. The Fund reserves the right to refuse any request made
by wire or telephone, including requests made shortly after a change of
address, and may limit the amount involved or the number of such requests.
The Fund may modify or terminate any redemption Privilege at any time or
charge a service fee upon notice to shareholders. No such fee currently is
contemplated.
In addition, the Distributor or its designee will accept orders from
dealers with which the Distributor has sales agreements for the repurchase of
shares held by shareholders. Repurchase orders received by the dealer prior
to the close of trading on the New York Stock Exchange on a business day and
transmitted to the Distributor or its designee prior to the close of its
business day (normally 5:15 p.m., New York time) are effected at the price
determined as of the close of trading on the floor of the New York Stock
Exchange on that day. Otherwise, the shares will be redeemed at the next
determined net asset value. It is the responsibility of the dealer to
transmit orders on a timely basis. The dealer may charge the shareholder a
fee for executing the order. This repurchase arrangement is discretionary and
may be withdrawn at any time.

You may redeem shares by telephone if you have checked the
appropriate box on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption
privilege or telephone exchange privilege (which is granted automatically
unless you refuse it), you authorize the Transfer Agent to act on telephone
instructions (including over The Dreyfus TouchRegistration Mark automated
telephone system) from any person representing himself or herself to be you,
and reasonably believed by the Transfer Agent to be genuine. The Fund will
require the Transfer Agent to employ reasonable procedures, such as requiring
a form of personal identification, to confirm that instructions are genuine
and, if it does not follow such procedures, the Fund or the Transfer Agent
may be liable for any losses due to unauthorized or fraudulent instructions.
Neither the Fund nor the Transfer Agent will be liable for following
telephone instructions reasonably believed to be genuine.

each shareholder, including each owner of a joint account, and each signature
must be guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents Medallion
Program ("STAMP"), and the Stock Exchanges Medallion Program. If you have any
questions with respect to signature-guarantees, please call one of the
telephone numbers listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE -- You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. You also may direct that redemption proceeds be paid by
check (maximum $150,000 per day) made out to the owners of record and mailed
to your address. Redemption proceeds of less than $1,000 will be paid
automatically by check. Holders of jointly registered Fund or bank accounts
may have redemption proceeds of not more than $250,000 wired within any
30-day period. You may telephone redemption requests by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. The
Statement of Additional Information sets forth instructions for transmitting
redemption requests by wire. Shares held under Keogh Plans, IRAs or other
retirement plans, and shares for which certificates have been issued, are not
eligible for this Privilege.
TELEPHONE REDEMPTION PRIVILEGE -- You may request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. Shares
held under Keogh Plans, IRAs or other retirement plans, and shares for which
certificates have been issued, are not eligible for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE _ You may request by telephone that redemption
proceeds (minimum $500 per day) be transferred between your Fund account and
your bank account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be designated.
Redemption proceeds will be on deposit in your account at an Automated
Clearing House member bank ordinarily two days after receipt of the
redemption request or, at your request, paid by check (maximum $150,000 per
day) and mailed to your address. Holders of jointly registered Fund or bank
accounts may redeem through the Dreyfus TELETRANSFER Privilege for transfer
to their bank account not more than $250,000 within any 30-day period.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of shares by telephoning
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
Shares held under Keogh Plans, IRAs or other retirement plans, and shares
issued in certificate form, are not eligible for this Privilege.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan, pursuant to which
the Fund pays the Distributor for the provision of certain services to
shareholders a fee at the 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.
Page 16

The Distributor may make payments to Service Agents in respect of these
services. The Distributor determines the amounts to be paid to Service Agents.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Under the Internal Revenue Code of 1986, as amended (the "Code"), the
Fund is treated as a separate entity for purposes of qualification and
taxation as a regulated investment company. The Fund ordinarily declares
dividends from its net investment income on each day that the New York Stock
Exchange is open for business. The Fund's earnings for Saturdays, Sundays and
holidays are declared as dividends on the preceding business day. Dividends
usually are paid on the last business day of each month and automatically
reinvested in additional Fund shares at net asset value, without a sales
load, unless you elect payment in cash. If you redeem all shares in your
account at any time during the month, all dividends to which you are entitled
will be paid to you along with the proceeds of the redemption. If you are an
omnibus account-holder and indicate in a partial redemption request that a
portion of any accrued dividends to which such account is entitled belongs to
an underlying account-holder who has redeemed all shares in his or her
account, such portion of the accrued dividends will be paid to you along with
the proceeds of the redemption. Distributions of net realized securities
gains, if any, generally are declared and paid once a year, but the Fund may
make distributions on a more frequent basis to comply with the distribution
requirements of the Code, in all events in a manner consistent with the 1940
Act. The Fund will not make distributions from net realized securities gains
unless capital loss carryovers, if any, have been utilized or have expired.
You may choose whether to receive distributions in cash or to reinvest such
amounts in additional shares at net asset value without a sales load. All
expenses are accrued daily and deducted before declaration of dividends.
Fund shares begin earning income dividends on the day immediately
available funds ("Federal Funds" (monies of member banks within the Federal
Reserve System which are held on deposit at a Federal Reserve Bank)) are
received by the Transfer Agent in written or telegraphic form. If a purchase
order is not accompanied by remittance in Federal Funds, there may be a delay
between the time the purchase order becomes effective and the time the shares
purchased start earning dividends. If your payment is not made in Federal
Funds, it must be converted into Federal Funds. This usually occurs within
one business day of receipt of a bank wire and within two business days of
receipt of a check drawn on a member bank of the Federal Reserve System.
Checks drawn on banks which are not members of the Federal Reserve System may
take considerably longer to convert into Federal Funds.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Fund will be taxable to U.S. shareholders
as ordinary income whether received in cash or reinvested in additional Fund
shares. Distributions from net realized long-term capital gains of the Fund
to U.S. shareholders generally are taxable as long-term capital gains for
Federal income tax purposes, regardless of how long shareholders have held
their Fund shares and whether such distributions are received in cash or
reinvested in additional Fund shares. The Code provides that the net
long-term capital gain of an individual generally will not be subject to
Federal income tax at a rate in excess of 28%. Dividends and distributions
may be subject to state and local taxes.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Fund to a foreign investor generally are
subject to U.S. nonresi-
Page 17

dent withholding taxes at the rate of 30%, unless the foreign investor claims
the benefit of a lower rate specified in a tax treaty. Distributions from net
realized long-term securities gains paid by the Fund to a foreign investor,
as well as the proceeds of any redemptions from a foreign investor's account,
regardless of the extent to which gain or loss may be realized, generally will
not be subject to U.S. nonresident withholding tax. However, such
distributions may be subject to backup withholding, as described below, unless
the foreign investor certifies his non-U.S. residency status.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
Notice as to the tax status of your dividends and distributions is
mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends, distributions
from net realized securities gains of the Fund and the proceeds of any
redemption, regardless of the extent to which gain or loss may be realized,
paid to a shareholder if such shareholder fails to certify either that the
TIN furnished in connection with opening an account is correct, or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the IRS may
notify the Fund to institute backup withholding if the IRS determines that a
shareholder's TIN is incorrect or if a shareholder has failed to properly
report dividend and interest income on your Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
record owner of the account, and may be claimed as a credit on the record
owner's Federal income tax return.

Management of the Company believes that the Fund has qualified for
the fiscal year ended October 31, 1996 as a "regulated investment company"
under the Code. The Fund intends to continue to so qualify if such
qualification is in the best interests of its shareholders. Such
qualification relieves the Fund of any liability for Federal income taxes to
the extent its earnings are distributed in accordance with applicable
provisions of the Code. The Fund is subject to a non-deductible 4% excise
tax, measured with respect to certain undistributed amounts of taxable
investment income and capital gains.

You should consult your tax adviser regarding specific questions as
to Federal, state and local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance may be calculated on several
bases, including current yield, average annual total return, and/or total
return.
Current yield refers to the Fund's annualized net investment income
per share over a 30-day period, expressed as a percentage of the net asset
value per share at the end of the period. For purposes of calculating current
yield, the amount of net investment income per share during that 30-day
period, computed in accordance with regulatory requirements, is compounded by
assuming that it is reinvested at a constant rate over a six-month period. An
identical result is then assumed to have occurred during a second six-month
period which, when added to the result for the first six months, provides an
"annualized" yield for an entire one-year period. Calculations of the Fund's
current yield may reflect absorbed expenses pursuant to expense limitations
in effect. See "Management of the Fund."
Page 18

Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment in the Fund was purchased with an
initial payment of $1,000 and that the investment was redeemed at the end of
a stated period of time, after giving effect to the reinvestment of dividends
and distributions during the period. The return is expressed as a percentage
rate which, if applied on a compounded annual basis, would result in the
redeemable value of the investment at the end of the period. Advertisements
of the Fund's performance will include the Fund's average annual total return
for one, five and ten year periods, or for shorter time periods depending
upon the length of time during which the Fund has operated.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the net asset
value per share at the beginning of the period. Advertisements may include
the percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes the
application of the percentage rate of total return.
Performance will vary from time to time and past results are not
necessarily representative of future results. Investors should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Moody's Bond Survey Bond Index, Lehman Brothers
Municipal Bond Index, Morningstar, Inc., Value Line Mutual Fund Survey and
other industry publications.
GENERAL INFORMATION
The Company was organized as an unincorporated business trust under
the laws of the Commonwealth of Massachusetts pursuant to an Agreement and
Declaration of Trust (the "Trust Agreement") dated July 24, 1985, and
commenced operations on October 1, 1986. Before January 1, 1996, the
Company's name was Dreyfus Strategic Income. The Company is authorized to
issue an unlimited number of shares of beneficial interest, par value $.001
per share. Each share has one vote.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of a
Massachusetts business trust. However, the Trust Agreement disclaims
shareholder liability for acts or obligations of the Company and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by the Company or a Trustee. The Trust
Agreement provides for indemnification from the Fund's property for all
losses and expenses of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder's incurring
financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations
, a possibility which management believes is remote. Upon payment of any
liability incurred by the Fund, the shareholder paying such liability will be
entitled to reimbursement from the general assets of the Fund. The Company
intends to conduct its operations in such a way so as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of the Fund.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Board members or
the appointment of auditors. However, pursuant to the Company's By-Laws, the
Page 19

holders of at least 10% of the shares outstanding and entitled to vote may
require the Company to hold a special meeting of shareholders for purposes of
removing a Board member from office or for any other purpose. Shareholders
may remove a Board member by the affirmative vote of not less than two-thirds
of the Company's outstanding voting shares. In addition, the Board will call
a meeting of shareholders for the purpose of electing Board members if, at any
time, less than a majority of the Board members then holding office have
been elected by shareholders.
The Company is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for
certain matters under the 1940 Act and for other purposes. A shareholder of
one portfolio is not deemed to be a shareholder of any other portfolio. For
certain matters shareholders vote together as a group; as to others they vote
separately by portfolio. By this Prospectus, shares of the Fund are being
offered. Other portfolios are sold pursuant to other offering documents.

The Transfer Agent maintains a record of your ownership and sends you
confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561. In New York City, call 1-718-895-1206; outside the U.S. and
Canada, call 516-794-5452.
Page 20

APPENDIX
INVESTMENT TECHNIQUES
FOREIGN CURRENCY TRANSACTIONS -- Foreign currency transactions may be entered
into for a variety of purposes, including: to fix in U.S. dollars, between
trade and settlement date, the value of a security the Fund has agreed to buy
or sell; or to hedge the U.S. dollar value of securities the Fund already
owns, particularly if it expects a decrease in the value of the currency in
which the foreign security is denominated; or to gain exposure to the foreign
currency in an attempt to realize gains.
Foreign currency transactions may involve, for example, the Fund's
purchase of foreign currencies for U.S. dollars or the maintenance of short
positions in foreign currencies, which would involve the Fund agreeing to
exchange an amount of a currency it did not currently own for another
currency at a future date in anticipation of a decline in the value of the
currency sold relative to the currency the Fund contracted to receive in the
exchange. The Fund's success in these transactions will depend principally on
The Dreyfus Corporation's ability to predict accurately the future exchange
rates between foreign currencies and the U.S. dollar.
LEVERAGE -- Leveraging will exaggerate the effect on net asset value of any
increase or decrease in the market value of the Fund's portfolio. Money
borrowed for leveraging will be limited to 33 1/3% of the value of the Fund's
total assets. These borrowings will be subject to interest costs which may or
may not be recovered by appreciation of the securities purchased; in certain
cases, interest costs may exceed the return received on the securities
purchased.
The Fund may enter into reverse repurchase agreements with banks,
brokers or dealers. This form of borrowing involves the transfer by the Fund
of an underlying debt instrument in return for cash proceeds based on a
percentage of the value of the security. The Fund retains the right to
receive interest and principal payments on the security. At an agreed upon
future date, the Fund repurchases the security at principal plus accrued
interest. Except for these transactions, the Fund's borrowings generally will
be unsecured.
SHORT SELLING -- In these transactions, the Fund sells a security it does not
own in anticipation of a decline in the market value of the security. To
complete the transaction, the Fund must borrow the security to make delivery
to the buyer. The Fund is obligated to replace the security borrowed by
purchasing it subsequently at the market price at the time of replacement.
The price at such time may be more or less than the price at which the
security was sold by the Fund. The Fund will incur a loss if the price of the
security increases between the date of the short sale and the date on which
the Fund replaces the borrowed security; it will realize a gain if the
security declines in price between those dates.
Securities will not be sold short if, after effect is given to any
such short sale, the total market value of all securities sold short would
exceed 25% of the value of the Fund's net assets. The Fund may not sell short
the securities of any single issuer listed on a national securities exchange
to the extent of more than 5% of the value of the Fund's net assets. The Fund
may not sell short the securities of any class of an issuer if, as a result
of such sale, the Fund would have sold short in the aggregate more than 5% of
the outstanding securities of that class.
The Fund also may make short sales "against the box," in which the
Fund enters into a short sale of a security it owns in order to hedge an
unrealized gain on the security. At no time will more than 15% of the value
of the Fund's net assets be in deposits on short sales against the box.
LENDING PORTFOLIO SECURITIES -- The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. In connection with such
loans, the Fund continues to be entitled to payments in amounts equal to the
interest, dividends
Page 21

or other distributions payable on the loaned securities. Loans of portfolio
securities afford the Fund an opportunity to earn interest on the amount of
the loan and at the same time to earn income on the loaned securities'
collateral. Loans of portfolio securities may not exceed 33 1/3% of the value
of the Fund's total assets. In connection with such loans, the Fund will
receive collateral consisting of cash, U.S. Government securities or
irrevocable letters of credit which will be maintained at all times in an
amount equal to at least 100% of the current market value of the loaned
securities. Such loans are terminable by the Fund at any time upon specified
notice. The Fund might experience risk of loss if the institution with which
it has engaged in a portfolio loan transaction breaches its agreement with
the Fund.
USE OF DERIVATIVES -- The Fund may invest in the following types of
Derivatives: options and futures, and mortgage-related securities. These
instruments and certain related risks are described more specifically under
"Investment Objective and Management Policies--Management
Policies_Derivatives" in the Statement of Additional Information.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and the
portfolio as a whole. Derivatives permit the Fund to increase, decrease or
change the level of risk to which its portfolio is exposed in much the same
way as the Fund can increase, decrease or change the risk of its portfolio by
making investments in specific securities.
In addition, Derivatives may entail investment exposures that are
greater than their cost would suggest, meaning that a small investment in
Derivatives could have a large potential impact on the Fund's performance.
If the Fund invests in Derivatives at inappropriate times or judges
market conditions incorrectly, such investments may lower the Fund's return
or result in a loss. The Fund also could experience losses if it were unable
to liquidate its position because of an illiquid secondary market. The market
for many Derivatives is, or suddenly can become, illiquid. Changes in
liquidity may result in significant, rapid and unpredictable changes in the
prices for Derivatives.
Although the Fund will not be a commodity pool, Derivatives subject
the Fund to the rules of the Commodity Futures Trading Commission which limit
the extent to which the Fund can invest in certain Derivatives. The Fund may
invest in futures contracts and options with respect thereto for hedging
purposes without limit. However, the Fund may not invest in such contracts
and options for other purposes if the sum of the amount of initial margin
deposits and premiums paid for unexpired options with respect to such
contracts, other than for bona fide hedging purposes, exceed 5% of the
liquidation value of the Fund's assets, after taking into account unrealized
profits and unrealized losses on such contracts and options; provided,
however, that in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.
The Fund may invest up to 5% of its assets, represented by the
premium paid, in the purchase of call and put options. The Fund may write
(i.e., sell) covered call and put option contracts to the extent of 20% of
the value of its net assets at the time such option contracts are written.
When required by the Securities and Exchange Commission, the Fund will set
aside permissible liquid assets in a segregated account to cover its
obligations relating to its purchase of Derivatives. To maintain this required
cover, the Fund may have to sell portfolio securities at disadvantageous
prices or times since it may not be possible to liquidate a Derivative
position at a reasonable price.
FORWARD COMMITMENTS -- The Fund may purchase securities on a forward
commitment or when-issued basis, which means that delivery and payment take
place a number of days after the date of the commitment to purchase. The
payment obligation and the interest rate that will be received on a forward
com-
Page 22

mitment or when-issued security are fixed at the time the Fund enters into
the commitment. However, the Fund does not make a payment until it receives
delivery from the other party to the transaction. The Fund will make
commitments to purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable. A segregated account of the Fund
consisting of permissible liquid assets at least equal at all times to the
amount of the commitments will be established and maintained at the Fund's
custodian bank.
FORWARD ROLL TRANSACTIONS -- In order to enhance current income, the Fund may
enter into forward roll transactions with respect to mortgage-related
securities. In a forward roll transaction, the Fund sells a mortgage security
to a financial institution, such as a bank or broker-dealer, and
simultaneously agrees to repurchase a similar security from the institution
at a later date at an agreed-upon price. The mortgage securities that are
repurchased will bear the same interest rate as those sold, but generally
will be collateralized by different pools of mortgages with different
prepayment histories than those sold. During the period between the sale and
repurchase, the Fund will not be entitled to receive interest and principal
payments on the securities sold. Proceeds of the sale will be invested in
short-term instruments, particularly repurchase agreements, and the income
from these investments, together with any additional fee income received on
the sale will generate income for the Fund exceeding the yield on the
securities sold. Forward roll transactions involve the risk that the market
value of the securities sold by the Fund may decline below the repurchase
price of those securities. A segregated account of the Fund consisting of
cash, U.S. Government securities or other high quality liquid debt securities
at least equal to the amount of the repurchase price (including accrued
interest) will be established and maintained at the Fund's custodian bank.
CERTAIN PORTFOLIO SECURITIES
Convertible Securities _ Convertible securities are fixed-income securities
that may be converted at either a stated price or stated rate into underlying
shares of common stock. Convertible securities have characteristics similar
to both fixed-income and equity securities. Convertible securities generally
are subordinated to other similar but non-convertible securities of the same
issuer, although convertible bonds, as corporate debt obligations, enjoy
seniority in right of payment to all equity securities, and convertible prefer
red stock is senior to common stock, of the same issuer. Because of the
subordination feature, however, convertible securities typically have lower
ratings than similar non-convertible securities.
Mortgage-Related Securities _ Mortgage-related securities are a form of
Derivative collateralized by pools of mortgages assembled for sale to
investors by various governmental agencies, such as the Government National
Mortgage Association and government related organizations such as the Federal
National Mortgage Association and the Federal Home Loan Mortgage Corporation,
as well as by private issuers such as commercial banks, savings and loan
institutions, mortgage banks and private mortgage insurance companies, and
similar foreign entities. The mortgage-related securities which may be
purchased include those with fixed, floating and variable interest rates,
those with interest rates that change based on multiples of changes in
interest rates and those with interest rates that change inversely to changes
in interest rates, as well as stripped mortgage-backed securities. Stripped
mortgage-backed securities usually are structured with two classes that
receive different proportions of interest and principal distributions on a
pool of mortgage-backed securities or whole loans. A common type of stripped
mortgage-backed security will have one class receiving some of the interest
and most of the principal from the mortgage collateral, while the other class
will receive most of the interest and the remainder of the principal.
Although certain mortgage-related securities are guaranteed by a third party
or otherwise
Page 23

similarly secured, the market value of the security, which may fluctuate,
is not secured. If a mortgage-related security is purchased at a premium,
all or part of the premium may be lost if there is a decline in the
market value of the security, whether resulting from changes in interest
rates or prepayments on the underlying mortgage collateral. As with other
interest-bearing securities, the prices of certain of these securities are
inversely affected by changes in interest rates. However, although the value
of a mortgage-related security may decline when interest rates rise, the
converse is not necessarily true, since in periods of declining interest
rates the mortgages underlying the security are more likely to be prepaid.
For this and other reasons, a mortgage-related security's stated maturity may
be shortened by unscheduled prepayments on the underlying mortgages, and,
therefore, it is not possible to predict accurately the security's return to
the Fund. Moreover, with respect to stripped mortgage-backed securities, if
the underlying mortgage securities experience greater than anticipated
prepayments of principal, the Fund may fail to fully recoup its initial
investment even if the securities are rated in the highest rating category by
a nationally recognized statistical rating organization. The mortgage-related
securities in which the Fund may invest also include multi-class pass-through
certificates secured principally by mortgage loans on commercial properties.
These mortgage-related securities are structured similarly to
mortgage-related securities secured by pools of residential mortgages.
Commercial lending, however, generally is viewed as exposing the lender to a
greater risk of loss than one- to four-family residential lending. Commercial
lending, for example, typically involves larger loans to single borrowers or
groups of related borrowers than residential one- to four-family mortgage
loans. In addition, the repayment of loans secured by income producing
properties typically is dependent upon the successful operation of the
related real estate project and the cash flow generated therefrom.
Consequently, adverse changes in economic conditions and circumstances are
more likely to have an adverse impact on mortgage-related securities secured
by loans on commercial properties than on those secured by loans on
residential properties. For further discussion concerning the investment
considerations involved, see "Description of the Fund_Investment
Considerations and Risks_Fixed-Income Securities" and "Illiquid Securities"
below.
MONEY MARKET INSTRUMENTS -- The Fund may invest in the following types of
money market
instruments.
U.S. GOVERNMENT SECURITIES. Securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities include U.S. Treasury
securities that differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others, by the right of the issuer to borrow from the Treasury;
others, by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others, only by the credit
of the agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. While the U.S. Government provides financial
support to such U.S. Government-sponsored agencies and instrumentalities, no
assurance can be given that it will always do so since it is not so obligated
by law.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Fund buys, and
the seller agrees to repurchase, a security at a mutually agreed upon time
and price (usually within seven days). The repurchase agreement thereby
determines the yield during the purchaser's holding period, while the
seller's obligation to repurchase is secured by the value of the underlying
security. Repurchase agreements could involve risks in the event of a default
or insolvency of the other party to the agreement, including possible delays
or restrictions upon the Fund's ability to dispose of the underlying
securities. The Fund may enter into repurchase agreements with certain banks
or non-bank dealers.
Page 24

BANK OBLIGATIONS. The Fund may purchase certificates of deposit, time
deposits, bankers' acceptances and other short-term obligations issued by
domestic banks, foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions. With respect to such securities
issued by foreign subsidiaries or foreign branches of domestic banks, and
domestic and foreign branches of foreign banks, the Fund may be subject to
additional investment risks that are different in some respects from those
incurred by a fund which invests only in debt obligations of U.S. domestic
issuers.
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period
of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven
days) at a stated interest rate. See "Description of the Fund_Investment
Considerations and Risks_Foreign Securities."
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments reflect
the obligation both of the bank and the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
COMMERCIAL PAPER. Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs. The commercial
paper purchased by the Fund will consist only of direct obligations which, at
the time of their purchase, are (a) rated not lower than Prime-1 by Moody's,
or A-1 by S&P, (b) issued by companies having an outstanding unsecured debt
issue currently rated at least A3 by Moody's or A- by S&P, or (c) if unrated,
determined by The Dreyfus Corporation to be of comparable quality to those
rated obligations which may be purchased by the Fund.
ILLIQUID SECURITIES -- The Fund may invest up to 15% of the value of its net
assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment
objective. Such securities may include securities that are not readily
marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, repurchase agreements providing for
settlement in more than seven days after notice, and certain privately
negotiated, non-exchange traded options and securities used to cover such
options. As to these securities, the Fund is subject to a risk that should
the Fund desire to sell them when a ready buyer is not available at a price
the Fund deems representative of their value, the value of the Fund's net
assets could be adversely affected.
Ratings _ Securities rated Ba by Moody's are judged to have speculative
elements; their future cannot be considered as well assured and often the
protection of interest and principal payments may be very moderate.
Securities rated BB by S&P are regarded as having predominantly speculative
characteristics and, while such obligations have less near-term vulnerability
to default than other speculative grade debt, they face major ongoing
uncertainties or exposure to adverse business, financial or economic
conditions which could lead to inadequate capacity to meet timely interest
and principal payments. Securities rated Caa by Moody's are of poor standing
and may be in default or there may be present elements of danger with respect
to principal or interest. S&P typically assigns a CCC rating to debt which
has a current identifiable vulnerability to default and is dependent upon
favorable business, financial and economic conditions to meet timely payments
of interest and repayment of principal. Such securities, though high
yielding, are characterized by great risk. See "Appendix" in the Statement of
Additional Information for a general description of securities ratings.
Page 25

The ratings of Moody's and S&P represent their opinions as to the
quality of the obligations which they undertake to rate. Ratings are relative
and subjective and, although ratings may be useful in evaluating the safety
of interest and principal payments, they do not evaluate the market value
risk of such obligations. Although these ratings may be an initial criterion
for selection of portfolio investments, The Dreyfus Corporation also will
evaluate these securities and the ability of the issuers of such securities
to pay interest and principal. The Fund's ability to achieve its investment
objective may be more dependent on The Dreyfus Corporation's credit analysis
than might be the case for a fund that invested in higher rated securities.

The average distribution of investments of the Fund in corporate
bonds (excluding preferred stock, convertible preferred stock and convertible
bonds) by ratings for the year ended October 31, 1996, calculated monthly on
a dollar weighted basis, was as follows:

<TABLE>
<CAPTION>
MOODY'S OR S&P, FITCH OR DUFF PERCENTAGE
------------- -------------------------- -----------------
<S> <C> <C>
Aaa AAA 44.8%
Aa AA 6.0%
A A 17.6%
Baa BBB 10.7%
Ba BB 7.1%
B B 6.8%
Caa CCC 1.4%
NR NR 3.2%*
--------
97.6%**
--------
--------
</TABLE>

The actual distribution of the Fund's corporate bond investments by
ratings on any given date will vary, and the distribution of the Fund's
investments by ratings as set forth above should not be considered as
representative of the Income Fund's future portfolio composition.

* These unrated securities (3.2%) have been determined by The Dreyfus
Corporation to be of comparable quality to securities rated: BBB (.3%), BB
(.9%), B (.1%), CCC (.1%), convertible bonds_BB (1.8%) and convertible
bonds_B (.1%).

**The Fund also owns preferred stock (1.8%), convertible bonds_BBB (.5%),
convertible bonds_BB (.1%) and convertible bonds_B (1.2%). Approximately
(1.2%) of the Fund's assets were invested in cash or cash equivalents.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 26

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Page 27

Strategic
Income
Fund
Prospectus

Registration Mark

Copy Rights1997 Dreyfus Service Corporation
031p030397
Page 28

- ------------------------------------------------------------------------------

PROSPECTUS MARCH 3, 1997

DREYFUS EQUITY DIVIDEND FUND
- ------------------------------------------------------------------------------
DREYFUS EQUITY DIVIDEND FUND (THE "FUND") IS A SEPARATE DIVERSIFIED
PORTFOLIO OF DREYFUS INCOME FUNDS, AN OPEN-END, MANAGEMENT INVESTMENT COMPANY
(THE "COMPANY"), KNOWN AS A MUTUAL FUND. THE FUND'S PRIMARY INVESTMENT
OBJECTIVE IS CURRENT INCOME. CAPITAL APPRECIATION IS A SECONDARY OBJECTIVE.
YOU CAN INVEST, REINVEST OR REDEEM SHARES AT ANY TIME WITHOUT
PENALTY.
YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING DREYFUS
TELETRANSFER.
THE DREYFUS CORPORATION PROFESSIONALLY MANAGES THE FUND'S PORTFOLIO.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.

MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO TIME.
TABLE OF CONTENTS
PAGE
ANNUAL FUND OPERATING EXPENSES.................... 3
CONDENSED FINANCIAL INFORMATION................... 4
DESCRIPTION OF THE FUND........................... 4
MANAGEMENT OF THE FUND............................ 6
HOW TO BUY SHARES................................. 8
SHAREHOLDER SERVICES.............................. 10
HOW TO REDEEM SHARES.............................. 13
SHAREHOLDER SERVICES PLAN......................... 15
DIVIDENDS, DISTRIBUTIONS AND TAXES................ 15
PERFORMANCE INFORMATION........................... 16
GENERAL........................................... 17
APPENDIX.......................................... 18
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------

[This Page Intentionally Left Blank]
Page 2

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets) <C>
<S>
Management Fees.............................................................. .75%
Other Expenses............................................................... 1.75%
Total Fund Operating Expenses................................................ 2.50%
</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the following
expenses on a $1,000 invest-
ment, assuming (1) 5% annual
return and (2) redemption at
the end of each time period: $25 $78 $133 $284
</TABLE>

The purpose of the foregoing table is to assist you in understanding
the costs and expenses borne by the Fund, the payment of which will reduce
investors' annual return. The information in the foregoing table does not
reflect any fee waivers or expense reimbursement arrangements that may be in
effect. Certain Service Agents (as defined below) may charge their clients
direct fees for effecting transactions in Fund shares; such fees are not
reflected in the foregoing table. For a further description of the various
costs and expenses incurred in the operation of the Fund, as well as expense
reimbursement or waiver arrangements, see "Management of the Fund," "How to
Buy Shares" and "Shareholder Services Plan."

Page 3

CONDENSED FINANCIAL INFORMATION
The information in the following table below sets forth certain
information covering the Fund's investment results for the period indicated.
Further financial data and related notes are included in the Statement of
Additional Information, available upon request.
FINANCIAL HIGHLIGHTS

Contained below is per share operating performance data for a share
of beneficial interest outstanding, total investment return, ratios to
average net assets and other supplemental data for the period December 29,
1995 (commencement of operations) through October 31, 1996 (unaudited). This
information has been derived from the Fund's financial statements.

<TABLE>
<CAPTION>
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period...................................... $12.50
-------
INVESTMENT OPERATIONS:
Investment income-net..................................................... .23
Net realized and unrealized gain 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
Dreyfus Corporation
(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 annual commission rate paid per share for purchases and sales of investment securities.
</TABLE>

DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVES
The Fund's primary investment objective is current income. Capital
appreciation is a secondary objective. The Fund's investment objectives
cannot be changed without approval by the holders of a majority (as defined
in the Investment Company Act of 1940, as amended (the "1940 Act")) of the
Fund's outstanding voting shares. There can be no assurance that the Fund's
investment objectives will be achieved.
MANAGEMENT POLICIES
Under normal market conditions, the Fund will invest at least 65% of
the value of its net assets in equity securities, including dividend-paying
common stocks, preferred stocks and securities that are convertible into
common stocks (collectively, "Equity Securities") of domestic and foreign
issuers. The Fund also may invest in Equity Securities in the form of
American Depositary Receipts, and in warrants to purchase Equity Securities.
The Dreyfus Corporation will be particularly alert to investing in Equity
Securities of companies which pay above-average dividends and which it
believes have the capacity to raise dividends in the future and the potential
for capital appreciation.
Page 4

In addition, the Fund may invest up to 35% of the value of its total
assets in non-dividend-paying Equity Securities and in debt securities of
domestic and foreign issuers. The debt securities in which the Fund may
invest must be rated investment grade by Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Ratings Group ("S&P"), Fitch Investors Service,
L.P. ("Fitch") or Duff & Phelps Credit Rating Co. ("Duff"), or, if unrated,
deemed to be of comparable quality by The Dreyfus Corporation. Investment
grade debt securities are those rated at least Baa by Moody's or at
least BBB by S&P, Fitch and Duff. Debt securities rated Baa by Moody's and
BBB by S&P, Fitch and Duff are considered investment grade obligations which
lack outstanding investment characteristics and may have speculative
characteristics as well. See "Investment Considerations and Risks--Fixed
Income Securities" below.

While seeking desirable investments, the Fund may invest in money
market instruments consisting of U.S. Government securities, certificates of
deposit, time deposits, bankers' acceptances, short-term investment grade
corporate bonds and other short-term debt instruments, and repurchase
agreements, as set forth under "Appendix_Certain Portfolio Securities_Money
Market Instruments." Under normal market conditions, the Fund does not
expect to have a substantial portion of its assets invested in money market
instruments. However, when The Dreyfus Corporation determines that adverse
market conditions exist, the Fund may adopt a temporary defensive posture and
invest all of its assets in money market instruments.

The Fund's annual portfolio turnover rate is not expected to exceed
100%. Higher portfolio turnover rates usually generate additional brokerage
commissions and expenses and the short-term gains realized from these
transactions are taxable to shareholders as ordinary income. In addition, the
Fund currently intends, to a limited extent, to engage in options and futures
transactions, foreign currency transactions and short-selling. For a
discussion of these investment techniques and their related risks, see
"Investment Considerations and Risks" and "Appendix_Investment Techniques"
below and "Investment Objectives and Management Policies_Management Policies"
in the Statement of Additional Information.

INVESTMENT CONSIDERATIONS AND RISKS
GENERAL -- The Fund's net asset value per share should be expected to
fluctuate. Investors should consider the Fund as a supplement to an overall
investment program and should invest only if they are willing to undertake
the risks involved. See "Investment Objectives and Management
Policies_Management Policies" in the Statement of Additional Information for
a further discussion of certain risks.
EQUITY SECURITIES -- Equity securities fluctuate in value, often based on
factors unrelated to the value of the issuer of the securities, and such
fluctuations can be pronounced. Changes in the value of the Fund's
investments will result in changes in the value of its shares and thus the
Fund's total return to investors.
FIXED-INCOME SECURITIES -- Even though interest-bearing securities are
investments which promise a stable stream of income, the prices of such
securities generally are inversely affected by changes in interest rates and,
therefore, are subject to the risk of market price fluctuations. The values
of fixed-income securities also may be affected by changes in the credit
rating or financial condition of the issuer. Certain securities purchased by
the Fund, such as those rated Baa by Moody's and BBB by S&P, Fitch and Duff,
may be subject to such risk with respect to the issuing entity and to greater
market fluctuations than certain lower yielding, higher rated fixed-income
securities. Once the rating of a portfolio security has been changed, the
Fund will consider all circumstances deemed relevant in determining whether
to continue to hold the security. See "Appendix" in the Statement of
Additional Information.
FOREIGN SECURITIES -- Foreign securities markets generally are not as
developed or efficient as those in the United States. Securities of some
foreign issuers are less liquid and more volatile than securities of
comparable U.S. issuers. Similarly, volume and liquidity in most foreign
securities markets are less than in the United States and, at times,
volatility of price can be greater than in the United States.
Page 5

Because evidences of ownership of such securities usually are held
outside the United States, the Fund will be subject to additional risks which
include adverse political and economic developments, seizure or
nationalization of foreign deposits and adoption of governmental restrictions
which might adversely affect the payment of principal and interest on the
foreign securities or might restrict the payment of principal and interest to
investors located outside the country of the issuer, whether from currency
blockage or otherwise.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in
U.S. dollars may be affected favorably or unfavorably by changes in currency
rates and exchange control regulations.
FOREIGN CURRENCY TRANSACTIONS -- Currency exchange rates may fluctuate
significantly over short periods of time. They generally are determined by
the forces of supply and demand in the foreign exchange markets and the
relative merits of investments in different countries, actual or perceived
changes in interest rates and other complex factors, as seen from an
international perspective. Currency exchange rates also can be affected
unpredictably by intervention by U.S. or foreign governments or central
banks, or the failure to intervene, or by currency controls or political
developments in the United States or abroad. See "Appendix _ Investment
Techniques _ Foreign Currency Transactions."
USE OF DERIVATIVES -- The Fund may invest, to a limited extent, in
derivatives ("Derivatives"). These are financial instruments which derive
their performance, at least in part, from the performance of an underlying
asset, index or interest rate. The Derivatives the Fund may use include
options and futures. While Derivatives can be used effectively in furtherance
of the Fund's investment objectives, under certain market conditions, they
can increase the volatility of the Fund's net asset value, can decrease the
liquidity of the Fund's portfolio and make more difficult the accurate
pricing of the Fund's portfolio. See "Appendix_Investment Techniques_Use of
Derivatives" below and "Investment Objectives and Management
Policies_Management Policies_Derivatives" in the Statement of Additional
Information.
SIMULTANEOUS INVESTMENTS -- Investment decisions for the Fund are made
independently from those of the other investment companies advised by The
Dreyfus Corporation. If, however, such other investment companies desire to
invest in, or dispose of, the same securities as the Fund, available
investments or opportunities for sales will be allocated equitably to each
investment company. In some cases, this procedure may adversely affect the
size of the position obtained for or disposed of by the Fund or the price
paid or received by the Fund.
MANAGEMENT OF THE FUND

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

comprehensive range of financial products and services in domestic and
selected international markets. Mellon is among the twenty-five largest bank
holding companies in the United States based on total assets. Mellon's
principal wholly-owned subsidiaries are Mellon Bank, N.A., Mellon Bank (DE)
National Association, Mellon Bank (MD), The Boston Company, Inc., AFCO Credit
Corporation and a number of companies known as Mellon Financial Services
Corporations. Through its subsidiaries, including The Dreyfus Corporation,
Mellon managed more than $233 billion in assets as of December 31, 1996,
including approximately $86 billion in proprietary mutual fund assets. As of
December 31, 1996 Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for
more than $1,046 billion in assets, including approximately $57 billion in
mutual fund assets.

Under the terms of the Management Agreement, the Fund has agreed to
pay The Dreyfus Corporation a monthly fee at the annual rate of .75 of 1% of
the value of the Fund's average daily net assets. From time to time, The
Dreyfus Corporation may waive receipt of its fees and/or voluntarily assume
certain expenses of the Fund, which would have the effect of lowering the
expense ratio of the Fund and increasing yield to investors. The Fund will
not pay The Dreyfus Corporation at a later time for any amounts it may waive,
nor will the Fund reimburse The Dreyfus Corporation for any amounts it may
assume.
EXPENSES -- All expenses incurred in the operation of the Company are borne
by the Company, except to the extent specifically assumed by The Dreyfus
Corporation. The expenses borne by the Company include: organizational
costs, taxes, interest, loan commitment fees, interest and distributions paid
on securities sold short, brokerage fees and commissions, if any, fees of
Board members who are not officers, directors, employees or holders of 5% or
more of the outstanding voting securities of The Dreyfus Corporation or any
of its affiliates, Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of independent
pricing services, costs of maintaining the Company's existence, costs
attributable to investor services (including, without limitation, telephone
and personnel expenses), costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders, costs of shareholders' reports and
meetings, and any extraordinary expenses. Expenses attributable to the Fund
are charged against the assets of the Fund; other expenses of the Company are
allocated among the Company's portfolios on the basis determined by the
Board, including, but not limited to, proportionately in relation to the net
assets of each portfolio.
In allocating brokerage transactions for the Fund, The Dreyfus
Corporation seeks to obtain the best execution of orders at the most
favorable net price. Subject to this determination, The Dreyfus Corporation
may consider, among other things, the receipt of research services and/or the
sale of shares of the Fund or other funds advised by The Dreyfus Corporation
as factors in the selection of broker-dealers to execute portfolio
transactions for the Fund. See "Portfolio Transactions" in the Statement of
Additional Information.
The Dreyfus Corporation may pay the Fund's distributor for
shareholder services from The Dreyfus Corporation's own assets, including
past profits but not including the management fee paid by the Fund. The
Fund's distributor may use part or all of such payments to pay Service Agents
in respect of these services.

HOW TO BUY SHARES
Fund shares are sold without a sales charge. You may be charged a fee
if you effect transactions in Fund shares through a securities dealer, bank
or other financial institution (collectively, "Service Agents"). Share
certificates are issued only upon your written request. No certificates are
issued for fractional shares. The Fund reserves the right to reject any
purchase order.
The minimum initial investment is $2,500, or $1,000 if you are a
client of a Service Agent which maintains an omnibus account in the Fund and
has made an aggregate minimum initial purchase for its customers of $2,500.
Subsequent investments must be at least $100. However, the minimum initial
investment for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7)
Plans with only one participant is $750, with no minimum for subsequent
purchases. Individuals who open an IRA also may open a non-working spousal
IRA with a minimum initial investment of $250. Subsequent investments in a
spousal IRA must be at least $250. The initial investment must be accompanied
by the Account Application. For full-time or part-time employees of The
Dreyfus Corporation or any of its affiliates or subsidiaries, directors of
The Dreyfus Corporation, Board members of a fund advised by The Dreyfus
Corporation, including members of the Company's Board, or the spouse or minor
child of any of the foregoing, the minimum initial investment is $1,000. For
full-time or part-time employees of The Dreyfus Corporation or any of its
affiliates or subsidiaries who elect to have a portion of their pay directly
deposited into their Fund account, the minimum initial investment is $50. The
Fund reserves the right to offer Fund shares without regard to minimum
purchase requirements to employees participating in certain qualified or
non-qualified employee benefit plans or other programs where contributions or
account information can be transmitted in a manner and form acceptable to the
Fund. The Fund reserves the right to vary further the initial and subsequent
investment minimum requirements at any time. Fund shares also are offered
without regard to the minimum initial investment requirements through
Dreyfus-AUTOMATIC Asset BuilderRegistration Mark, Dreyfus Government Direct
Deposit Privilege or Dreyfus Payroll Savings Plan pursuant to the Dreyfus
Step Program described under "Shareholder Services." These services enable
you to make regularly scheduled investments and may provide you with a
convenient way to invest for long-term financial goals. You should be aware,
however, that periodic investment plans do not guarantee a profit and will
not protect an investor against loss in a declining market.
You may purchase Fund shares by check or wire, or through the Dreyfus
TELETRANSFER Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds," or, if for Dreyfus retirement plan accounts, to
"The Dreyfus Trust Company, Custodian" and should specify that you are
investing in the Fund. Payments to open new accounts which are mailed should
be sent to The Dreyfus Family of Funds, P.O. Box 9387, Providence, Rhode
Island 02940-9387, together with your Account Application. For subsequent
investments, your Fund account number should appear on the check and an invest
ment slip should be enclosed and sent to The Dreyfus Family of Funds, P.O.
Box 105, Newark, New Jersey 07101-0105. For Dreyfus retirement plan accounts,
both initial and subsequent investments should be sent to The Dreyfus Trust
Company, Custodian, P.O. Box 6427, Providence, Rhode Island 02940-6427.
Neither initial nor subsequent investments should be made by third party
check. Purchase orders may be delivered in person only to a Dreyfus Financial
Center. THESE ORDERS WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY
UPON RECEIPT THEREBY. For the location of the nearest Dreyfus Financial
Center, please call one of the telephone numbers listed under "General
Information."
Wire payments may be made if your bank account is in a commercial bank
that is a member of the Federal Reserve System or any other bank having a
correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, DDA #8900276398/Dreyfus Equity
Dividend Fund, for purchase of Fund shares in your name. The wire must include
your Fund account number (for new accounts, your Taxpayer Identification
Number ("TIN") should be included instead), account registration and dealer
number, if applicable. If your initial purchase of Fund shares is
Page 8

by wire, please call 1-800-645-6561 after completing your wire payment to
obtain your Fund account number. Please include your Fund account number on
the Account Application and promptly mail the Account Application to the
Fund, as no redemptions will be permitted until the Account Application is
received. You may obtain further information about remitting funds in this
manner from your bank. All payments should be made in U.S. dollars and, to
avoid fees and delays, should be drawn only on U.S. banks. A charge will be
imposed if any check used for investment in your account does not clear. The
Fund makes available to certain large institutions the ability to issue
purchase instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct the
institution to transmit immediately available funds through the Automated
Clearing House to The Bank of New York with instructions to credit your Fund
account. The instructions must specify your Fund account registration and
Fund account number PRECEDED BY THE DIGITS "1111."
Fund shares are sold on a continuous basis at the net asset value per
share next determined after an order in proper form is received by the
Transfer Agent or other agent. Net asset value per share is determined as of
the close of trading on the floor of the New York Stock Exchange (currently
4:00 p.m., New York time), on each day the New York Stock Exchange is open
for business. For purposes of determining net asset value, options and
futures contracts will be valued 15 minutes after the close of trading on the
floor of the New York Stock Exchange. Net asset value per share is computed
by dividing the value of the Fund's net assets (i.e., the value of its assets
less liabilities) by the total number of Fund shares outstanding. The Fund's
investments are valued generally at market value or, where market quotations
are not readily available, at fair value as determined by or under the
direction of the Company's Board. For further information regarding the
methods employed in valuing the Fund's investments, see "Determination of Net
Asset Value" in the Statement of Additional Information.
For certain institutions that have entered into agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted, and
must be received by the Transfer Agent, within three business days after the
order is placed. If such payment is not received within three business days
after the order is placed, the order may be canceled and the institution
could be held liable for resulting fees and/or losses.
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the Dreyfus
Family of Funds or certain other products made available by the Distributor
to such plans or programs exceeds $1,000,000 ("Eligible Benefit Plans").
Shares of funds in the Dreyfus Family of Funds then held by Eligible Benefit
Plans will be aggregated to determine the fee payable. The Distributor
reserves the right to cease paying these fees at any time. The Distributor
will pay such fees from its own funds, other than amounts received from the
Fund, including past profits or any other source available to it.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service (the "IRS").
DREYFUS TELETRANSFER PRIVILEGE -- You may purchase shares (minimum $500,
maximum $150,000 per day) by telephone if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds will
be transferred between the bank account designated in one of these documents
and your Fund
Page 9

account. Only a bank account maintained in a domestic financial institution
which is an Automated Clearing House member may be so designated. The Fund
may modify or terminate this Privilege at any time or charge a service fee
upon notice to shareholders. No such fee currently is contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of shares by telephoning
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES
FUND EXCHANGES
You may purchase, in exchange for shares of the Fund, shares of
certain other funds managed or administered by The Dreyfus Corporation, to
the extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, you should consult your Service Agent or
call 1-800-645-6561 to determine if it is available and whether any
conditions are imposed on its use.

To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. Before any exchange, you must
obtain and should review a copy of the current prospectus of the fund into
which the exchange is being made. Prospectuses may be obtained by calling
1-800-645-6561. Except in the case of personal retirement plans, the shares
being exchanged must have a current value of at least $500; furthermore, when
establishing a new account by exchange, the shares being exchanged must have
a value of at least the minimum initial investment required for the fund into
which the exchange is being made. The ability to issue exchange instructions
by telephone is given to all Fund shareholders automatically, unless you
check the applicable "No" box on the Account Application, indicating that you
specifically refuse this Privilege. The Telephone Exchange Privilege may be
established for an existing account by written request, signed by all
shareholders on the account, or by a separate signed Shareholder Services
Form, also available by calling 1-800-645-6561. If you have established the
Telephone Exchange Privilege, you may telephone exchange instructions
(including over The Dreyfus TouchRegistration Mark automated telephone
system) by calling 1-800-645-6561. If you are calling from overseas, call
516-794-5452. See "How to Redeem Shares _ Procedures." Upon an exchange into
a new account, the following shareholder services and privileges, as
applicable and where available, will be automatically carried over to the
fund into which the exchange is made: Telephone Exchange Privilege, Wire
Redemption Privilege, Telephone Redemption Privilege, Dreyfus TELETRANSFER
Privilege and the dividend/capital gain distribution option (except for
Dreyfus Dividend Sweep) selected by the investor.

Shares will be exchanged at the next determined net asset value;
however, a sales load may be charged with respect to exchanges into funds
sold with a sales load. If you are exchanging into a fund that charges a
sales load, you may qualify for share prices which do not include the sales
load or which reflect a reduced sales load, if the shares you are exchanging
were: (a) purchased with a sales load, (b) acquired by a previous exchange
from shares purchased with a sales load, or (c) acquired through reinvestment
of dividends or distributions paid with respect to the foregoing categories
of shares. To qualify, at the time of the exchange you must notify the
Transfer Agent or your Service Agent must notify the Distributor. Any such
qualification is subject to confirmation of your holdings through a check of
appropriate records. See "Shareholder Services" in the Statement of
Additional Information. No fees currently are charged shareholders directly
in connection with exchanges, although the Fund reserves the right, upon not
less than 60 days' written notice, to charge shareholders a nominal fee in
accordance with rules promulgated by the Securities and Exchange Commission.
The Fund reserves the right to reject any exchange request in whole or in
part. The availability of Fund Exchanges may be modified or terminated at any
time upon notice to shareholders. See "Dividends, Distributions and Taxes."
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
the Fund, in shares of certain other funds in the
Page 10

Dreyfus Family of Funds of which you are a shareholder. The amount you
designate, which can be expressed either in terms of a specific dollar or
share amount ($100 minimum), will be exchanged automatically on the first
and/or fifteenth day of the month according to the schedule you have selected.
Shares will be exchanged at the then-current net asset value; however, a sales
load may be charged with respect to exchanges into funds sold with a sales
load. See "Shareholder Services" in the Statement of Additional Information.
The right to exercise this Privilege may be modified or canceled by the Fund
or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. The Fund may charge
a service fee for the use of this Privilege. No such fee currently is
contemplated. For more information concerning this Privilege and the funds in
the Dreyfus Family of Funds eligible to participate in this Privilege, or to
obtain a Dreyfus Auto-Exchange Authorization Form, please call toll free
1-800-645-6561. See "Dividends, Distributions and Taxes."
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. Only an account maintained at a domestic
financial institution which is an Automated Clearing House member may be so
designated. To establish a Dreyfus-AUTOMATIC Asset Builder account, you must
file an authorization form with the Transfer Agent. You may obtain the
necessary authorization form by calling 1-800-645-6561. You may cancel your
participation in this Privilege or change the amount of purchase at any time
by mailing written notification to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus retirement plan
accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427, and the notification will be effective three
business days following receipt. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to purchase
Fund shares (minimum of $100 and maximum of $50,000 per transaction) by
having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into your
Fund account. You may deposit as much of such payments as you elect. To
enroll in Dreyfus Government Direct Deposit, you must file with the Transfer
Agent a completed Direct Deposit Sign-Up Form for each type of payment that
you desire to include in this Privilege. The appropriate form may be obtained
by calling 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency. The
Fund may terminate your participation upon 30 days' notice to you.
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase Fund shares
(minimum of $100 per transaction) automatically on a regular basis. Depending
upon your employer's direct deposit program, you may have part or all of your
paycheck transferred to your existing Dreyfus account electronically through
the Automated Clearing House system at each pay period. To establish a
Dreyfus Payroll Savings Plan account, you must file an authorization form
with your employer's payroll department. Your employer must complete the
reverse side of the form and return it to The Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may change the amount of
purchase or cancel the authorization only by written notification to your
employer. It is the sole responsibility of your employer, not
Page 11

the Distributor, The Dreyfus Corporation, the Fund, the Transfer Agent or any
other person, to arrange for transactions under the Dreyfus Payroll Savings
Plan. The Fund may modify or terminate this Privilege at any time or charge a
service fee. No such fee currently is contemplated.
DREYFUS STEP PROGRAM
Dreyfus Step Program enables you to purchase Fund shares without
regard to the Fund's minimum initial investment requirements through
Dreyfus-AUTOMATIC Asset BuilderRegistration Mark, Dreyfus Government Direct
Deposit Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step
Program account, you must supply the necessary information on the Account
Application and file the required authorization form(s) with the Transfer
Agent. For more information concerning this Program, or to request the
necessary authorization form(s), please call toll free 1-800-782-6620. You
may terminate your participation in this Program at any time by discontinuing
your participation in Dreyfus-AUTOMATIC Asset BuilderRegistration Mark,
Dreyfus Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan,
as the case may be, as provided under the terms of such Privilege(s). The
Fund may modify or terminate this Program at any time. Investors who wish to
purchase Fund shares through the Dreyfus Step Program in conjunction with a
Dreyfus-sponsored retirement plan may do so only for IRAs, SEP-IRAs and IRA
"Rollover Accounts."
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by the Fund in
shares of another fund in the Dreyfus Family of Funds of which you are a
shareholder. Shares of the other fund will be purchased at the then-current
net asset value; however, a sales load may be charged with respect to
investments in shares of a fund sold with a sales load. If you are investing
in a fund that charges a sales load, you may qualify for share prices which
do not include the sales load or which reflect a reduced sales load. If you
are investing in a fund that charges a contingent deferred sales charge, the
shares purchased will be subject on redemption to the contingent deferred
sales charge, if any, applicable to the purchased shares. See "Shareholder
Services" in the Statement of Additional Information. Dreyfus Dividend ACH
permits you to transfer electronically dividends or dividends and capital
gain distributions, if any, from the Fund to a designated bank account. Only
an account maintained at a domestic financial institution which is an
Automated Clearing House member may be so designated. Banks may charge a fee
for this service.
For more information concerning these privileges or to request a
Dividend Options Form, please call toll free 1-800-645-6561. You may cancel
these privileges by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. To select a new
fund after cancellation, you must submit a new Dividend Options Form.
Enrollment in or cancellation of these privileges is effective three business
days following receipt. These privileges are available only for existing
accounts and may not be used to open new accounts. Minimum subsequent
investments do not apply for Dreyfus Dividend Sweep. The Fund may modify or
terminate these privileges at any time or charge a service fee. No such fee
currently is contemplated. Shares held under Keogh Plans, IRAs or other
retirement plans are not eligible for Dreyfus Dividend Sweep.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account. An application for the Automatic
Withdrawal Plan can be obtained by calling 1-800-645-6561. The Automatic
Withdrawal Plan may be ended at any time by you, the Fund or the Transfer
Agent. Shares for which certificates have been issued may not be redeemed
through the Automatic Withdrawal Plan.
RETIREMENT PLANS
The Fund offers a variety of pension and profit-sharing plans,
including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts," 401(k)
Salary Reduction Plans and 403(b)(7) Plans. Plan support services also are
available. You can obtain details on the various plans by calling the
following numbers toll free: for
Page 12

Keogh Plans, please call 1-800-358-5566; for IRAs and IRA "Rollover Accounts,"
please call 1-800-645-6561; or for SEP-IRAs, 401(k) Salary Reduction Plans and
403(b)(7) Plans, please call 1-800-322-7880.
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value.
The Fund imposes no charges when shares are redeemed. Service Agents
may charge their clients a fee for effecting redemptions of Fund shares. Any
certificates representing Fund shares being redeemed must be submitted with
the redemption request. The value of the shares redeemed may be more or less
than their original cost, depending upon the Fund's then-current net asset
value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY DREYFUS
TELETRANSFER PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDERRegistration
Mark AND SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER
AGENT, THE REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK
CLEARANCE OF YOUR PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE OR
DREYFUS-AUTOMATIC ASSET BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS
DAYS OR MORE. IN ADDITION, THE FUND WILL REJECT REQUESTS TO REDEEM SHARES BY
WIRE OR TELEPHONE OR PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE FOR A
PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE
PURCHASE CHECK, THE DREYFUS TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC
ASSET BUILDER ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE
PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF
YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE
REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS
ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED TO
EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares will not be
redeemed until the Transfer Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 30 days' written notice if your account's net asset value is
$500 or less and remains so during the notice period.
PROCEDURES
You may redeem shares by using the regular redemption procedure
through the Transfer Agent, or, if you have checked the appropriate box and
supplied the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent, through the Wire Redemption
Privilege, the Telephone Redemption Privilege or the Dreyfus TELETRANSFER
Privilege. Other redemption procedures may be in effect for clients of
certain Service Agents. The Fund makes available to certain large
institutions the ability to issue redemption instructions through compatible
computer facilities. The Fund reserves the right to refuse any request made
by wire or telephone, including requests made shortly after a change of
address, and may limit the amount involved or the number of such requests.
The Fund may modify or terminate any redemption Privilege at any time or
charge a service fee upon notice to shareholders. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans,
and shares for which certificates have been issued, are not eligible for the
Wire or Telephone Redemption or Dreyfus TELETRANSFER Privileges.

sonably believed by the Transfer Agent to be genuine. The Fund will require
the Transfer Agent to employ reasonable procedures, such as requiring
a form of personal identification, to confirm that instructions are genuine
and, if it does not follow such procedures, the Fund or the Transfer Agent
may be liable for any losses due to unauthorized or fraudulent instructions.
Neither the Fund nor the Transfer Agent will be liable for following
telephone instructions reasonably believed to be genuine.

During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used. During the delay, the Fund's net asset value may fluctuate.
REGULAR REDEMPTION -- Under the regular redemption procedure, you may redeem
shares by written request mailed to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671, or, if a Dreyfus retirement plan
account, to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427. Redemption requests may be delivered in person only
to a Dreyfus Financial Center. THESE REQUESTS WILL BE FORWARDED TO THE FUND
AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For the location of the
nearest Dreyfus Financial Center, please call one of the telephone numbers
listed under "General Information." Redemption requests must be signed by
each shareholder, including each owner of a joint account, and each signature
must be guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP") and the Stock Exchanges Medallion Program. If you
have any questions with respect to signature-guarantees, please call one of
the telephone numbers listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE -- You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. You also may direct that redemption proceeds be paid by
check (maximum $150,000 per day) made out to the owners of record and mailed
to your address. Redemption proceeds of less than $1,000 will be paid
automatically by check. Holders of jointly registered Fund or bank accounts
may have redemption proceeds of not more than $250,000 wired within any
30-day period. You may telephone redemption requests by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. The
Statement of Additional Information sets forth instructions for transmitting
redemption requests by wire.
TELEPHONE REDEMPTION PRIVILEGE -- You may request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
DREYFUS TELETRANSFER PRIVILEGE -- You may request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an Automated Clearing House member may be
designated. Redemption proceeds will be on deposit in your account at an
Automated Clearing House member bank ordinarily two days after receipt of the
redemption request or, at your request, paid by check (maximum $150,000 per
day) and mailed to your address. Holders of jointly registered Fund or bank
accounts may redeem through the Dreyfus TELETRANSFER Privilege for transfer
to their bank account not more than $250,000 within any 30-day period.
Page 14

If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of shares by telephoning
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan, pursuant to which
it pays the Distributor for the provision of certain services to Fund
shareholders a fee at the 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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Under the Internal Revenue Code of 1986, as amended (the "Code"), the
Fund is treated as a separate entity for purposes of qualification and
taxation as a regulated investment company. The Fund ordinarily pays
dividends from its net investment income quarterly and distributes net
realized securities gains, if any, once a year, but it may make distributions
on a more frequent basis to comply with the distribution requirements of the
Code, in all events in a manner consistent with the provisions of the 1940
Act. The Fund will not make distributions from net realized securities gains
unless capital loss carryovers, if any, have been utilized or have expired.
You may choose whether to receive dividends and distributions in cash or to
reinvest in additional shares at net asset value. All expenses are accrued
daily and deducted before declaration of dividends to investors.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Fund will be taxable to U.S. shareholders
as ordinary income whether received in cash or reinvested in additional
shares. Depending upon the composition of the Fund's income, all or a portion
of the dividends derived from net investment income may qualify for the
dividends received deduction allowable to certain U.S. corporations.
Distributions from net realized long-term securities gains of the Fund will
be taxable to U.S. shareholders as long-term capital gains for Federal income
tax purposes, regardless of how long shareholders have held their Fund shares
and whether such distributions are received in cash or reinvested in Fund
shares. The Code provides that the net capital gain of an individual generally
will not be subject to Federal income tax at a rate in excess of 28%.
Dividends and distributions may be subject to state and local taxes.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Fund to a foreign investor generally are
subject to U.S. nonresident withholding taxes at the rate of 30%, unless the
foreign investor claims the benefit of a lower rate specified in a tax
treaty. Distributions from net realized long-term securities gains paid by
the Fund to a foreign investor as well as the proceeds of any redemptions
from a foreign investor's account, regardless of the extent to which gain or
loss may be realized, generally will not be subject to U.S. nonresident
withholding tax. However, such distributions may be subject to backup
withholding, as described below, unless the foreign investor certifies his
non-U.S. residency status.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
Notice as to the tax status of your dividends and distributions will
be mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year.
Page 15

Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends, distributions
from net realized securities gains and the proceeds of any redemption,
regardless of the extent to which gain or loss may be realized, paid to a
shareholder if such shareholder fails to certify either that the TIN
furnished in connection with opening an account is correct or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the IRS may
notify the Fund to institute backup withholding if the IRS determines a
shareholder's TIN is incorrect or if a shareholder has failed to properly
report taxable dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
record owner of the account, and may be claimed as a credit on the record
owner's Federal income tax return.
Management of the Company believes that the Fund has qualified for
the fiscal year ended October 31, 1996 as a "regulated investment company"
under the Code. The Fund intends to continue to so qualify if such
qualification is in the best interests of its shareholders. Such qualification
relieves the Fund of any liability for Federal income tax to the extent its
earnings are distributed in accordance with applicable provisions of the Code.
The Fund is subject to a non-deductible 4% excise tax, measured with respect
to certain undistributed amounts of taxable investment income and capital
gains.
You should consult your tax adviser regarding specific questions as
to Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance may be calculated on several
bases, including current yield, average annual total return and/or total
return.
Current yield refers to the Fund's annualized net investment income
per share over a 30-day period, expressed as a percentage of the net asset
value per share at the end of the period. For purposes of calculating current
yield, the amount of net investment income per share during that 30-day
period, computed in accordance with regulatory requirements, is compounded by
assuming that it is reinvested at a constant rate over a six-month period. An
identical result is then assumed to have occurred during a second six-month
period which, when added to the result for the first six months, provides an
"annualized" yield for an entire one-year period. Calculations of current
yield may reflect absorbed expenses pursuant to any undertaking that may be
in effect. See "Management of the Fund."
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment was purchased with an initial
payment of $1,000 and that the investment was redeemed at the end of a stated
period of time, after giving effect to the reinvestment of dividends and
distributions during the period. The return is expressed as a percentage rate
which, if applied on a compounded annual basis, would result in the
redeemable value of the investment at the end of the period. Advertisements
of the Fund's performance will include the Fund's average annual total return
for one, five and ten year periods, or for shorter periods depending upon the
length of time during which the Fund has operated.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the net asset
value per share at the beginning of the period. Advertisements may include
the percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes the
application of the percentage rate of total return.
Page 16

Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Standard & Poor's 500 Stock Index, The Dow Jones
Industrial Average, Morningstar, Inc. and other industry publications.
GENERAL INFORMATION
The Company was organized as an unincorporated business trust under
the laws of the Commonwealth of Massachusetts pursuant to an Agreement and
Declaration of Trust (the "Trust Agreement") dated July 24, 1985, and
commenced operations on October 1, 1986. Before January 1, 1996, the
Company's name was Dreyfus Strategic Income. The Company is authorized to
issue an unlimited number of shares of beneficial interest, par value $.001
per share. Each share has one vote.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of a
Massachusetts business trust. However, the Trust Agreement disclaims
shareholder liability for acts or obligations of the Company and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by the Company or a Trustee. The Trust
Agreement provides for indemnification from the Fund's property for all
losses and expenses of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder's incurring
financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations,
a possibility which management believes is remote. Upon payment of any
liability incurred by the Fund, the shareholder paying such liability will be
entitled to reimbursement from the general assets of the Fund. The Company
intends to conduct its operations in such a way so as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of the Fund.
The Company is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for
certain matters under the 1940 Act and for other purposes. A shareholder of
one portfolio is not deemed to be a shareholder of any other portfolio. For
certain matters shareholders vote together as a group; as to others they vote
separately by portfolio. By this Prospectus, shares of the Fund are being
offered. Other portfolios are sold pursuant to other offering documents.

APPENDIX
INVESTMENT TECHNIQUES
BORROWING MONEY -- The Fund is permitted to borrow to the extent permitted
under the 1940 Act, which permits an investment company to borrow in an
amount up to 33 1/3% of the value of its total assets. The Fund currently
intends to borrow money only for temporary or emergency (not leveraging)
purposes, in an amount up to 15% of the value of its total assets (including
the amount borrowed) valued at the lesser of cost or market, less liabilities
(not including the amount borrowed) at the time the borrowing is made. While
borrowings exceed 5% of the Fund's total assets, the Fund will not make any
additional investments.
SHORT-SELLING -- In these transactions, the Fund sells a security it does not
own in anticipation of a decline in the market value of the security. To
complete the transaction, the Fund must borrow the security to make delivery
to the buyer. The Fund is obligated to replace the security borrowed by
purchasing it subsequently at the market price at the time of replacement.
The price at such time may be more or less than the price at which the
security was sold by the Fund, which would result in a loss or gain,
respectively.
Securities will not be sold short if, after effect is given to any
such short sale, the total market value of all securities sold short would
exceed 25% of the value of the Fund's net assets. The Fund may not sell short
the securities of any single issuer listed on a national securities exchange
to the extent of more than 5% of the value of the Fund's net assets. The Fund
may not make a short sale which results in the Fund having sold short in the
aggregate more than 5% of the outstanding securities of any class of an
issuer.
The Fund also may make short sales "against the box," in which the
Fund enters into a short sale of a security it owns in order to hedge an
unrealized gain on the security. At no time will more than 15% of the value
of the Fund's net assets be in deposits on short sales against the box.
FOREIGN CURRENCY TRANSACTIONS -- Foreign currency transactions may be entered
into for a variety of purposes, including: to fix in U.S. dollars, between
trade and settlement date, the value of a security the Fund has agreed to buy
or sell; to hedge the U.S. dollar value of securities the Fund already owns,
particularly if it expects a decrease in the value of the currency in which
the foreign security is denominated; or to gain exposure to the foreign
currency in an attempt to realize gains.
Foreign currency transactions may involve, for example, the Fund's
purchase of foreign currencies for U.S. dollars or the maintenance of short
positions in foreign currencies, which would involve the Fund agreeing to
exchange an amount of a currency it did not currently own for another
currency at a future date in anticipation of a decline in the value of the
currency sold relative to the currency the Fund contracted to receive in the
exchange. The Fund's success in these transactions will depend principally on
The Dreyfus Corporation's ability to predict accurately the future exchange
rates between foreign currencies and the U.S. dollar.
USE OF DERIVATIVES -- The Fund may invest in the types of Derivatives
enumerated under "Description of the Fund -- Investment Considerations and
Risks -- Use of Derivatives." These instruments and certain related risks are
described more specifically under "Investment Objectives and Management
Policies -- Management Policies -- Derivatives" in the Statement of
Additional Information.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and the
portfolio as a whole. Derivatives permit the Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level
of risk, or change the character of the risk, of its portfolio by making
investments in specific securities.
Derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in Derivatives
could have a large potential impact on the Fund's performance.
Page 18

If the Fund invests in Derivatives at inappropriate times or judges
market conditions incorrectly, such investments may lower the Fund's return
or result in a loss. The Fund also could experience losses if it were unable
to liquidate its position because of an illiquid secondary market. The market
for many Derivatives is, or suddenly can become, illiquid. Changes in
liquidity may result in significant, rapid and unpredictable changes in the
prices for Derivatives.
Although the Fund will not be a commodity pool, Derivatives subject
the Fund to the rules of the Commodity Futures Trading Commission which limit
the extent to which the Fund can invest in certain Derivatives. The Fund may
invest in futures contracts and options with respect thereto for hedging
purposes without limit. However, the Fund may not invest in such contracts
and options for other purposes if the sum of the amount of initial margin
deposits and premiums paid for unexpired options with respect to such
contracts, other than for bona fide hedging purposes, exceed 5% of the
liquidation value of the Fund's assets, after taking into account unrealized
profits and unrealized losses on such contracts and options; provided,
however, that in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.
The Fund may invest up to 5% of its assets, represented by the
premium paid, in the purchase of call and put options. The Fund may write
(i.e., sell) covered call and put options contracts to the extent of 20% of
the value of its net assets at the time such options contracts are written.
When required by the Securities and Exchange Commission, the Fund will set
aside permissible liquid assets in a segregated account to cover its
obligations relating to its transactions in Derivatives. To maintain this
required cover, the Fund may have to sell portfolio securities at
disadvantageous prices or times since it may not be possible to liquidate a
Derivative position at a reasonable price.
FORWARD COMMITMENTS -- The Fund may purchase securities on a forward
commitment or when-issued basis, which means that delivery and payment take
place a number of days after the date of the commitment to purchase. The
payment obligation and the interest rate receivable on a forward commitment
or when-issued security are fixed when the Fund enters into the commitment,
but the Fund does not make payment until it receives delivery from the
counterparty. The Fund will commit to purchase such securities only with the
intention of actually acquiring the securities, but the Fund may sell these
securities before the settlement date if it is deemed advisable. A segregated
account of the Fund consisting of permissible liquid assets at least equal at
all times to the amount of the commitments will be established and maintained
at the Fund's custodian bank.
CERTAIN PORTFOLIO SECURITIES
CONVERTIBLE SECURITIES -- Convertible securities may be converted at either a
stated price or stated rate into underlying shares of common stock and,
therefore, are deemed to be Equity Securities for purposes of the Fund's
management policies. Convertible securities have characteristics similar to
both fixed-income and equity securities. Convertible securities generally are
subordinated to other similar but non-convertible securities of the same
issuer, although convertible bonds, as corporate debt obligations, enjoy
seniority in right of payment to all equity securities, and convertible
preferred stock is senior to common stock, of the same issuer. Because of the
subordination feature, however, convertible securities typically have lower
ratings than similar non-convertible securities.
AMERICAN DEPOSITARY RECEIPTS -- The Fund may invest in the securities of
foreign issuers in the form of American Depositary Receipts ("ADRs"). These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically
issued by a United States bank or trust company which evidence ownership of
underlying securities issued by a foreign corporation.
WARRANTS -- A warrant is an instrument issued by a corporation which gives
the holder the right to subscribe to a specified amount of the corporation's
capital stock at a set price for a specified period of time. The Fund may
invest up to 5% of its net assets in warrants, except that this limitation
does not
Page 19

apply to warrants purchased by the Fund that are sold in units with, or
attached to, other securities. Included in such amount, but not to exceed
2% of the value of the Fund's net assets, may be warrants which are not
listed on the New York or American Stock Exchange.
MONEY MARKET INSTRUMENTS -- The Fund may invest in the following types of
money market
instruments.
U.S. GOVERNMENT SECURITIES. Securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities include U.S. Treasury
securities that differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the Treasury;
others by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others only by the credit
of the agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. While the U.S. Government provides financial
support to such U.S. Government-sponsored agencies and instrumentalities, no
assurance can be given that it will always do so since it is not so obligated
by law.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Fund buys, and
the seller agrees to repurchase, a security at a mutually agreed upon time
and price (usually within seven days). The repurchase agreement thereby
determines the yield during the purchaser's holding period, while the
seller's obligation to repurchase is secured by the value of the underlying
security. Repurchase agreements could involve risks in the event of a default
or insolvency of the other party to the agreement, including possible delays
or restrictions upon the Fund's ability to dispose of the underlying
securities. The Fund may enter into repurchase agreements with certain banks
or non-bank dealers.
BANK OBLIGATIONS. The Fund may purchase certificates of deposit, time
deposits, bankers' acceptances and other short-term obligations issued by
domestic banks, foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions. With respect to such securities
issued by foreign subsidiaries or foreign branches of domestic banks, and
domestic and foreign branches of foreign banks, the Fund may be subject to
additional investment risks that are different in some respects from those
incurred by a fund which invests only in debt obligations of U.S. domestic
issuers. See "Description of the Fund--Investment Considerations and
Risks--Foreign Securities."
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period
of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven
days) at a stated interest rate.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments reflect
the obligation both of the bank and the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
COMMERCIAL PAPER. Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs. The commercial
paper purchased by the Fund will consist only of direct obligations which, at
the time of their purchase, are (a) rated not lower than Prime-1 by Moody's,
A-1 by S&P, F-1 by Fitch or Duff-1 by Duff, (b) issued by companies having an
outstanding unsecured debt issue currently rated at least A3 by Moody's or A-
by S&P, Fitch or Duff, or (c) if unrated, determined by The Dreyfus
Corporation to be of comparable quality to those rated obligations which may
be purchased by the Fund.
ILLIQUID SECURITIES -- The Fund may invest up to 15% of the value of its net
assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment
objective. Such securities may include securities that are not readily
marketable,
Page 20

such as certain securities that are subject to legal or contractual
restrictions on resale, repurchase agreements providing for settlement in
more than seven days after notice, and certain privately negotiated,
non-exchange traded options and securities used to cover such options. As to
these securities, the Fund is subject to a risk that should the Fund desire
to sell them when a ready buyer is not available at a price the Fund deems
representative of their value, the value of the Fund's net assets could be
adversely affected.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 21

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Page 22

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Page 23

Equity
Dividend
Fund
Prospectus

Registration Mark

Copy Rights 1997 Dreyfus Service Corporation
042p030397
Page 24

- ------------------------------------------------------------------------------

PROSPECTUS MARCH 3, 1997

DREYFUS HIGH YIELD SECURITIES FUND
- ------------------------------------------------------------------------------
DREYFUS HIGH YIELD SECURITIES FUND (THE "FUND") IS A SEPARATE
DIVERSIFIED PORTFOLIO OF DREYFUS INCOME FUNDS, AN OPEN-END, MANAGEMENT
INVESTMENT COMPANY (THE "COMPANY"), KNOWN AS A MUTUAL FUND. THE FUND'S
INVESTMENT OBJECTIVE IS TO MAXIMIZE TOTAL RETURN, CONSISTING OF CAPITAL
APPRECIATION AND CURRENT INCOME.
THE FUND SEEKS TO ACHIEVE ITS OBJECTIVE BY INVESTING UP TO ALL OF ITS
ASSETS IN LOWER RATED FIXED-INCOME SECURITIES, COMMONLY KNOWN AS "JUNK
BONDS." INVESTMENTS OF THIS TYPE ARE SUBJECT TO A GREATER RISK OF LOSS OF
PRINCIPAL AND NON-PAYMENT OF INTEREST. INVESTORS SHOULD CAREFULLY ASSESS THE
RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND. SEE "DESCRIPTION OF THE
FUND--MANAGEMENT POLICIES" AND "INVESTMENT CONSIDERATIONS AND RISKS--HIGH
YIELD-LOWER RATED SECURITIES."
YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING DREYFUS
TELETRANSFER.
IN SOME CASES, SHAREHOLDERS WILL BE CHARGED A REDEMPTION FEE WHICH
WILL BE DEDUCTED FROM REDEMPTION PROCEEDS ON SHARES HELD LESS THAN SIX
MONTHS.
THE DREYFUS CORPORATION PROFESSIONALLY MANAGES THE FUND'S PORTFOLIO.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.

TABLE OF CONTENTS
PAGE

ANNUAL FUND OPERATING EXPENSES.................... 4
CONDENSED FINANCIAL INFORMATION................... 5
DESCRIPTION OF THE FUND........................... 5
MANAGEMENT OF THE FUND............................ 8
HOW TO BUY SHARES................................. 9
SHAREHOLDER SERVICES.............................. 11
HOW TO REDEEM SHARES.............................. 14
SHAREHOLDER SERVICES PLAN......................... 16
DIVIDENDS, DISTRIBUTIONS AND TAXES................ 17
PERFORMANCE INFORMATION........................... 18
GENERAL INFORMATION............................... 18
APPENDIX.......................................... 20

Page 2

[This Page Intentionally Left Blank]
Page 3

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Redemption Fee (as a percentage of amount
redeemed for shares held less than six
months)...................................................................... 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees.............................................................. .65%
Other Expenses............................................................... .45%
Total Fund Operating Expenses ............................................... 1.10%
</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
EXAMPLE: 1 YEAR 3 YEARS
You would pay the following
expenses on a $1,000 invest-
ment, assuming (1) 5% annual
return and (2) redemption at
the end of each time period: $11 $35
</TABLE>

- ------------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL
RETURN GREATER OR LESS THAN 5%.
- ------------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in understanding
the costs and expenses borne by the Fund and investors, the payment of which
will reduce investors' annual return. The redemption fee is charged upon
certain redemptions or exchanges of Fund shares occurring less than six
months following the issuance of such shares and is retained by the Fund.
Other expenses are based on estimated amounts for the current fiscal year.
The information in the foregoing table does not reflect any fee waivers or
expense reimbursement arrangements that may be in effect. Certain Service
Agents (as defined below) may charge their clients direct fees for effecting
transactions in Fund shares; such fees are not reflected in the foregoing
table. For a further description of the various costs and expenses incurred
in the operation of the Fund, as well as expense reimbursement or waiver
arrangements, see "Management of the Fund," "How to Buy Shares," "How to
Redeem Shares" and "Shareholder Services Plan."
Page 4

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 March 25, 1996
(commencement of operations) through October 31, 1996. This information has
been derived from the Fund's financial statements.

<TABLE>
<CAPTION>
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period...................................... $12.50
-------
INVESTMENT OPERATIONS:
Investment income-net..................................................... .69
Net realized and unrealized gain on investments........................... 1.19
-------
TOTAL FROM INVESTMENT OPERATIONS.......................................... 1.88
-------
DISTRIBUTIONS:
Dividends from investment income-net...................................... (.55)
-------
Net asset value, end of period............................................ $13.83
-------
TOTAL INVESTMENT RETURN..................................................... 25.14%(1)
-------
-------
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses to average net assets......................... .02%(1)
Ratio of interest expense to average net assets........................... .27%(1)
Ratio of net investment income to average net assets...................... 11.33%(1)
Decrease reflected in above expense ratios due to undertakings by The
Dreyfus Corporation
(limited to the expense limitation provision of the management agreement). 1.55%(1)
Portfolio Turnover Rate................................................... 233.62%(2)
Net Assets, end of period (000's omitted)................................. $24,857

(1).Annualized.

(2).Not annualized.
</TABLE>

DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund's investment objective is to maximize total return,
consisting of capital appreciation and current income. It cannot be changed
without approval by the holders of a majority (as defined in the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Fund's outstanding
voting shares. There can be no assurance that the Fund's investment objective
will be achieved.
MANAGEMENT POLICIES
Under normal market conditions, the Fund will invest at least 65% of
the value of its net assets in bonds, debentures, notes and other debt
instruments (collectively, "Fixed-Income Securities") rated below investment
grade, or, if unrated, determined by The Dreyfus Corporation to be of
comparable quality. Fixed-Income Securities also include mortgage-related
securities, asset-backed securities, zero coupon securities, municipal
obligations, preferred stock, convertible debt obligations and convertible
preferred stock. The issuers of Fixed-Income Securities may include domestic
and foreign corporations, partnerships, trusts or similar entities, and
governmental entities or their political subdivisions, agencies
Page 5

or instrumentalities. The Fund may invest in companies in, or governments of,
developing countries. The Fund's portfolio will be invested without regard to
maturity.

Securities rated below investment grade are those rated lower than
Baa by Moody's Investors Service, Inc. ("Moody's") and BBB by Standard &
Poor's Ratings Group ("S&P"), Fitch Investors Service, L.P. ("Fitch") or Duff
& Phelps Credit Rating Co. ("Duff"). These securities carry a high degree of
risk and are considered speculative by the credit rating agencies. See
"Investment Considerations and Risks _ High Yield-Lower Rated Securities" and
"Appendix _ Certain Portfolio Securities _ High Yield-Lower Rated Securities"
below for a discussion of certain risks, and "Appendix" in the Statement of
Additional Information. The Fund may hold investment grade rated Fixed-Income
Securities (or unrated securities of comparable quality) when the yield
differential between below investment grade and investment grade securities
narrows and the risk of loss may be reduced with only a relatively small
reduction in yield. The Fund also may invest in investment grade rated
Fixed-Income Securities when The Dreyfus Corporation determines that a
defensive investment position is appropriate in light of market or economic
conditions.

The Fund may invest in money market instruments consisting of U.S.
Government securities, certificates of deposit, time deposits, bankers'
acceptances, short-term investment grade corporate bonds and other short-term
debt instruments, and repurchase agreements, as set forth under "Appendix
_Certain Portfolio Securities _ Money Market Instruments." Under normal
market conditions, the Fund does not expect to have a substantial portion of
its assets invested in money market instruments. However, when The Dreyfus
Corporation determines that adverse market conditions exist, the Fund may
adopt a temporary defensive posture and invest all of its assets in money
market instruments.
The Fund's annual portfolio turnover rate is not expected to exceed
200%. Higher portfolio turnover rates usually generate additional brokerage
commissions and expenses and the short-term gains realized from these
transactions are taxable to shareholders as ordinary income. The Fund
currently intends, to a limited extent, to engage in various investment
techniques, such as foreign currency transactions, options and futures
transactions, swaps, lending portfolio securities and short-selling. For a
discussion of the investment techniques and their related risks, see
"Investment Considerations and Risks" and "Appendix_Investment Techniques"
below and "Investment Objectives and Management Policies _ Management
Policies" in the Statement of Additional Information.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL -- The Fund's net asset value per share should be expected to
fluctuate. The Fund's investment in high yield Fixed-Income Securities may
cause the Fund's share price to be highly volatile at times. Investors should
consider the Fund as a supplement to an overall investment program and should
invest only if they are willing to undertake the risks involved. See
"Investment Objectives and Management Policies_Management Policies" in the
Statement of Additional Information for a further discussion of certain
risks.
HIGH YIELD-LOWER RATED SECURITIES -- The Fund generally will invest in
Fixed-Income Securities rated below investment grade such as those rated Ba
by Moody's and BB by S&P, Fitch and Duff or as low as the lowest rating
assigned by Moody's, S&P, Fitch or Duff (commonly known as junk bonds). They
may be subject to certain risks with respect to the issuing entity and to
greater market fluctuations than certain lower yielding, higher rated
Fixed-Income Securities. The retail secondary market for these securities may
be less liquid than that of higher rated securities; adverse conditions could
make it difficult at times for the Fund to sell certain securities or could
result in lower prices than those used in calculating the Fund's net asset
value.
Bond prices are inversely related to interest rate changes; however,
bond price volatility also is inversely related to coupon. Accordingly, below
investment grade Fixed-Income Securities may be relatively less sensitive to
interest rate changes than higher quality Fixed-Income Securities of
comparable
Page 6

maturity, because of their higher coupon. This higher coupon is
what the investor receives in return for bearing greater credit risk. The
higher credit risks associated with below investment grade Fixed-Income
Securities potentially can have greater affect on the value of such
securities than may be the case with higher quality issues of comparable
maturity. See "Appendix _ Certain Portfolio Securities _ High Yield-Lower
Rated Securities" below and "Appendix" in the Statement of Additional
Information.
FOREIGN SECURITIES -- Foreign securities markets generally are not as
developed or efficient as those in the United States. Securities of some
foreign issuers are less liquid and more volatile than securities of
comparable U.S. issuers. Similarly, volume and liquidity in most foreign
securities markets are less than in the United States and, at times,
volatility of price can be greater than in the United States.
Because evidences of ownership of such securities usually are held
outside the United States, the Fund will be subject to additional risks which
include possible adverse political and economic developments, seizure or
nationalization of foreign deposits and adoption of governmental restrictions
which might adversely affect the payment of principal and interest on the
foreign securities or restrict the payment of principal and interest to
investors located outside the country of the issuer, whether from currency
blockage or otherwise.
Developing countries have economic structures that are generally less
diverse and mature, and political systems that are less stable, than those of
developed countries. The markets of developing countries may be more volatile
than the markets of more mature economies; however, such markets may provide
higher rates of return to investors. Many developing countries providing
investment opportunities for the Fund have experienced substantial, and in
some periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had and may continue to have
adverse effects on the economies and securities markets of certain of these
countries.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in
U.S. dollars may be affected favorably or unfavorably by changes in currency
rates and exchange control regulations.
FOREIGN CURRENCY TRANSACTIONS -- Currency exchange rates may fluctuate
significantly over short periods of time. They generally are determined by
the forces of supply and demand in the foreign exchange markets and the
relative merits of investments in different countries, actual or perceived
changes in interest rates and other complex factors, as seen from an
international perspective. Currency exchange rates also can be affected
unpredictably by intervention by U.S. or foreign governments or central
banks, or the failure to intervene, or by currency controls or political
developments in the United States or abroad. See "Appendix _ Investment
Techniques _ Foreign Currency Transactions."
USE OF DERIVATIVES -- The Fund may invest, to a limited extent, in
derivatives ("Derivatives"). These are financial instruments which derive
their performance, at least in part, from the performance of an underlying
asset, index or interest rate. The Derivatives the Fund may use include
options and futures, mortgage-related securities, asset-backed securities and
swaps. While Derivatives can be used effectively in furtherance of the Fund's
investment objective, under certain market conditions, they can increase the
volatility of the Fund's net asset value, can decrease the liquidity of the
Fund's portfolio and make more difficult the accurate pricing of the Fund's
portfolio. See "Appendix _ Investment Techniques_Use of Derivatives" below
and "Investment Objectives and Management Policies _ Management Policies _
Derivatives" in the Statement of Additional Information.
SIMULTANEOUS INVESTMENTS -- Investment decisions for the Fund are made
independently from those of the other investment companies advised by The
Dreyfus Corporation. If, however, such other investment companies desire to
invest in, or dispose of, the same securities as the Fund, available
investments or opportunities for sales will be allocated equitably to each
investment company. In some cases, this procedure may adversely affect the
size of the position obtained for or disposed of by the Fund or the price
paid or received by the Fund.
Page 7

MANAGEMENT OF THE FUND

The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the
Company, subject to the authority of the Company's Board in accordance with
Massachusetts law. The Fund's primary portfolio manager is Roger King. He has
held that position since the Fund's inception, and has been employed by The
Dreyfus Corporation since February 1996. Prior thereto, Mr. King was a Vice
President of High Yield Research, and, most recently, Director of High Yield
Research at Citibank Securities, Inc. The Fund's other portfolio managers are
identified in the Statement of Additional Information. The Dreyfus
Corporation also provides research services for the Fund and for other funds
advised by The Dreyfus Corporation through a professional staff of portfolio
managers and securities analysts.

securities sold short, brokerage fees and commissions, if any, fees of Board
members who are not officers, directors, employees or holders of 5% or more
of the outstanding voting securities of The Dreyfus Corporation or any of its
affiliates, Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of independent
pricing services, costs of maintaining the Company's existence, costs
attributable to investor services (including, without limitation, telephone
and personnel expenses), costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders, costs of shareholders' reports and
meetings, and any extraordinary expenses. Expenses attributable to the Fund
are charged against the assets of the Fund; other expenses of the Company are
allocated among the Company's portfolios on the basis determined by the
Company's Board, including, but not limited to, proportionately in relation
to the net assets of each portfolio.
DISTRIBUTOR -- The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at 60 State Street, Boston, Massachusetts 02109.
The Distributor's ultimate parent is Boston Institutional Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN -- Dreyfus Transfer,
Inc., a wholly-owned subsidiary of The Dreyfus Corporation, P.O. Box 9671,
Providence, Rhode Island 02940-9671, is the Fund's Transfer and Dividend
Disbursing Agent (the "Transfer Agent"). Mellon Bank, N.A., located at One
Mellon Bank Center, Pittsburgh, Pennsylvania 15258, serves as the Fund's
Custodian.
HOW TO BUY SHARES
Fund shares are sold without a sales charge. You may be charged a fee
if you effect transactions in Fund shares through a securities dealer, bank
or other financial institution (collectively, "Service Agents"). Share
certificates are issued only upon your written request. No certificates are
issued for fractional shares. The Fund reserves the right to reject any
purchase order.
The minimum initial investment is $2,500, or $1,000 if you are a
client of a Service Agent which maintains an omnibus account in the Fund and
has made an aggregate minimum initial purchase for its customers of $2,500.
Subsequent investments must be at least $100. However, the minimum initial
investment for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7)
Plans with only one participant is $750, with no minimum for subsequent
purchases. Individuals who open an IRA also may open a non-working spousal
IRA with a minimum initial investment of $250. Subsequent investments in a
spousal IRA must be at least $250. The initial investment must be accompanied
by the Account Application. For full-time or part-time employees of The
Dreyfus Corporation or any of its affiliates or subsidiaries, directors of
The Dreyfus Corporation, Board members of a fund advised by The Dreyfus
Corporation, including members of the Company's Board, or the spouse or minor
child of any of the foregoing, the minimum initial investment is $1,000. For
full-time or part-time employees of The Dreyfus Corporation or any of its
affiliates or subsidiaries who elect to have a portion of their pay directly
deposited into their Fund account, the minimum initial investment is $50. The
Fund reserves the right to offer Fund shares without regard to minimum
purchase requirements to employees participating in certain qualified or
non-qualified employee benefit plans or other programs where contributions or
account information can be transmitted in a manner and form acceptable to the
Fund. The Fund reserves the right to vary further the initial and subsequent
investment minimum requirements at any time. Fund shares also are offered
without regard to the minimum initial investment requirements through
Dreyfus-AUTOMATIC Asset BuilderRegistration Mark, Dreyfus Government Direct
Deposit Privilege or Dreyfus Payroll Savings Plan pursuant to the Dreyfus
Step Program described under "Shareholder Services." These services enable
you to make regularly scheduled investments and may provide you with a
convenient way to invest for long-term financial goals. You should be aware,
however, that periodic investment plans do not guarantee a profit and will
not protect an investor against loss in a declining market.
Page 9

You may purchase Fund shares by check or wire, or through the Dreyfus
TELETRANSFER Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds," or, if for Dreyfus retirement plan accounts, to
"The Dreyfus Trust Company, Custodian" and should specify that you are
investing in the Fund. Payments to open new accounts which are mailed should
be sent to The Dreyfus Family of Funds, P.O. Box 9387, Providence, Rhode
Island 02940-9387, together with your Account Application. For subsequent
investments, your Fund account number should appear on the check and an invest
ment slip should be enclosed and sent to The Dreyfus Family of Funds, P.O.
Box 105, Newark, New Jersey 07101-0105. For Dreyfus retirement plan accounts,
both initial and subsequent investments should be sent to The Dreyfus Trust
Company, Custodian, P.O. Box 6427, Providence, Rhode Island 02940-6427.
Neither initial nor subsequent investments should be made by third party
check. Purchase orders may be delivered in person only to a Dreyfus Financial
Center. THESE ORDERS WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY
UPON RECEIPT THEREBY. For the location of the nearest Dreyfus Financial
Center, please call one of the telephone numbers listed under "General
Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, DDA# 8900276428/Dreyfus Income
Funds/Dreyfus High Yield Securities Fund, for purchase of Fund shares in your
name. The wire must include your Fund account number (for new accounts, your
Taxpayer Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If your initial purchase of
Fund shares is by wire, please call 1-800-645-6561 after completing your wire
payment to obtain your Fund account number. Please include your Fund account
number on the Account Application and promptly mail the Account Application
to the Fund, as no redemptions will be permitted until the Account
Application is received. You may obtain further information about remitting
funds in this manner from your bank. All payments should be made in U.S.
dollars and, to avoid fees and delays, should be drawn only on U.S. banks. A
charge will be imposed if any check used for investment in your account does
not clear. The Fund makes available to certain large institutions the ability
to issue purchase instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct the
institution to transmit immediately available funds through the Automated
Clearing House to The Bank of New York with instructions to credit your Fund
account. The instructions must specify your Fund account registration and
Fund account number PRECEDED BY THE DIGITS "1111."
Fund shares are sold on a continuous basis at the net asset value per
share next determined after an order in proper form is received by the
Transfer Agent or other agent. Net asset value per share is determined as of
the close of trading on the floor of the New York Stock Exchange (currently
4:00 p.m., New York time), on each day the New York Stock Exchange is open
for business. For purposes of determining net asset value, options and
futures contracts will be valued 15 minutes after the close of trading on the
floor of the New York Stock Exchange. Net asset value per share is computed
by dividing the value of the Fund's net assets (i.e., the value of its assets
less liabilities) by the total number of Fund shares outstanding. The Fund's
investments are valued generally at market value or, where market quotations
are not readily available, at fair value as determined by or under the
direction of the Company's Board. For further information regarding the
methods employed in valuing the Fund's investments, see "Determination of Net
Asset Value" in the Statement of Additional Information.
For certain institutions that have entered into agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted, and
must be received by the Transfer Agent, within three business days after the
order is placed. If such payment is not received within three business days
after the order is placed, the order may be canceled and the institution
could be held liable for resulting fees and/or losses.
Page 10
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the Dreyfus
Family of Funds or certain other products made available by the Distributor
to such plans or programs exceeds $1,000,000 ("Eligible Benefit Plans").
Shares of funds in the Dreyfus Family of Funds then held by Eligible Benefit
Plans will be aggregated to determine the fee payable. The Distributor
reserves the right to cease paying these fees at any time. The Distributor
will pay such fees from its own funds, other than amounts received from the
Fund, including past profits or any other source available to it.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service (the "IRS").
DREYFUS TELETRANSFER PRIVILEGE -- You may purchase shares (minimum $500,
maximum $150,000 per day) by telephone if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds will
be transferred between the bank account designated in one of these documents
and your Fund account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
The Fund may modify or terminate this Privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of shares by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES
FUND EXCHANGES
You may purchase, in exchange for shares of the Fund, shares of
certain other funds managed or administered by The Dreyfus Corporation, to
the extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, you should consult your Service Agent or
call 1-800-645-6561 to determine if it is available and whether any
conditions are imposed on its use.

To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. Before any exchange, you must
obtain and should review a copy of the current prospectus of the fund into
which the exchange is being made. Prospectuses may be obtained by calling
1-800-645-6561. Except in the case of personal retirement plans, the shares
being exchanged must have a current value of at least $500; furthermore, when
establishing a new account by exchange, the shares being exchanged must have
a value of at least the minimum initial investment required for the fund into
which the exchange is being made. The ability to issue exchange instructions
by telephone is given to all Fund shareholders automatically, unless you
check the applicable "No" box on the Account Application, indicating that you
specifically refuse this Privilege. The Telephone Exchange Privilege may be
established for an existing account by written request, signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-645-6561 or, by oral request from any of the
authorized signatories on the account, by calling 1-800-645-6561. If you have
established the Telephone Exchange Privilege, you may telephone exchange
instructions (including over The Dreyfus TouchRegistration Mark automated
telephone system) by calling 1-800-645-6561. If you are calling from
overseas, call 516-794-5452. See "How to Redeem Shares _ Procedures." Upon
an exchange into a new account, the following shareholder services and
privileges, as applicable and where available, will be automatically
Page 11

carried over to the fund into which the exchange is made: Telephone Exchange
Privilege, Wire Redemption Privilege, Telephone Redemption Privilege, Dreyfus
TELETRANSFER Privilege and the dividend/capital gain distribution option
(except for Dreyfus Dividend Sweep) selected by the investor.

The Fund will deduct a redemption fee equal to 1.00% of the net asset
value of Fund shares exchanged where the exchange occurs less than six months
following the issuance of such shares. See "How to Redeem Shares." Otherwise,
shares will be exchanged at the next determined net asset value; however, a
sales load may be charged with respect to exchanges into funds sold with a
sales load. If you are exchanging into a fund that charges a sales load, you
may qualify for share prices which do not include the sales load or which
reflect a reduced sales load, if the shares you are exchanging were: (a)
purchased with a sales load, (b) acquired by a previous exchange from shares
purchased with a sales load, or (c) acquired through reinvestment of
dividends or distributions paid with respect to the foregoing categories of
shares. To qualify, at the time of the exchange you must notify the Transfer
Agent or your Service Agent must notify the Distributor. Any such
qualification is subject to confirmation of your holdings through a check of
appropriate records. See "Shareholder Services" in the Statement of
Additional Information. No fees currently are charged shareholders directly
in connection with exchanges, although the Fund reserves the right, upon not
less than 60 days' written notice, to charge shareholders a nominal fee in
accordance with rules promulgated by the Securities and Exchange Commission.
The Fund reserves the right to reject any exchange request in whole or in
part. The availability of Fund Exchanges may be modified or terminated at any
time upon notice to shareholders. See "Dividends, Distributions and Taxes."
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
the Fund, in shares of certain other funds in the Dreyfus Family of Funds of
which you are currently a shareholder. The amount you designate, which can be
expressed either in terms of a specific dollar or share amount ($100
minimum), will be exchanged automatically on the first and/or fifteenth day
of the month according to the schedule you have selected. Shares will be
exchanged at the then-current net asset value; however, a sales load may be
charged with respect to exchanges into funds sold with a sales load. See
"Shareholder Services" in the Statement of Additional Information. The right
to exercise this Privilege may be modified or canceled by the Fund or the
Transfer Agent. You may modify or cancel your exercise of this Privilege at
any time by mailing written notification to The Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671. The Fund may charge a service
fee for the use of this Privilege. No such fee currently is contemplated. For
more information concerning this Privilege and the funds in the Dreyfus
Family of Funds eligible to participate in this Privilege, or to obtain a
Dreyfus Auto-Exchange Authorization Form, please call toll free
1-800-645-6561. See "Dividends, Distributions and Taxes."
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. Only an account maintained at a domestic
financial institution which is an Automated Clearing House member may be so
designated. To establish a Dreyfus-AUTOMATIC Asset Builder account, you must
file an authorization form with the Transfer Agent. You may obtain the
necessary authorization form by calling 1-800-645-6561. You may cancel your
participation in this Privilege or change the amount of purchase at any time
by mailing written notification to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus retirement plan
accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427, and the notification will be effective three
business days follow-
Page 12

ing receipt. The Fund may modify or terminate this Privilege at any time or
charge a service fee. No such fee currently is contemplated.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to purchase
Fund shares (minimum of $100 and maximum of $50,000 per transaction) by
having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into your
Fund account. You may deposit as much of such payments as you elect. To
enroll in Dreyfus Government Direct Deposit, you must file with the Transfer
Agent a completed Direct Deposit Sign-Up Form for each type of payment that
you desire to include in this Privilege. The appropriate form may be obtained
by calling 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency. The
Fund may terminate your participation upon 30 days' notice to you.
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase Fund shares
(minimum of $100 per transaction) automatically on a regular basis. Depending
upon your employer's direct deposit program, you may have part or all of your
paycheck transferred to your existing Dreyfus account electronically through
the Automated Clearing House system at each pay period. To establish a
Dreyfus Payroll Savings Plan account, you must file an authorization form
with your employer's payroll department. Your employer must complete the
reverse side of the form and return it to The Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may change the amount of
purchase or cancel the authorization only by written notification to your
employer. It is the sole responsibility of your employer, not the
Distributor, The Dreyfus Corporation, the Fund, the Transfer Agent or any
other person, to arrange for transactions under the Dreyfus Payroll Savings
Plan. The Fund may modify or terminate this Privilege at any time or charge a
service fee. No such fee currently is contemplated.
DREYFUS STEP PROGRAM
Dreyfus Step Program enables you to purchase Fund shares without
regard to the Fund's minimum initial investment requirements through
Dreyfus-AUTOMATIC Asset BuilderRegistration Mark, Dreyfus Government Direct
Deposit Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step
Program account, you must supply the necessary information on the Account
Application and file the required authorization form(s) with the Transfer
Agent. For more information concerning this Program, or to request the
necessary authorization form(s), please call toll free 1-800-782-6620. You
may terminate your participation in this Program at any time by discontinuing
your participation in Dreyfus-AUTOMATIC Asset Builder, Dreyfus Government
Direct Deposit Privilege or Dreyfus Payroll Savings Plan, as the case may be,
as provided under the terms of such Privilege(s). The Fund may modify or
terminate this Program at any time. Investors who wish to purchase Fund
shares through the Dreyfus Step Program in conjunction with a
Dreyfus-sponsored retirement plan may do so only for IRAs, SEP-IRAs and IRA
"Rollover Accounts."
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by the Fund in
shares of another fund in the Dreyfus Family of Funds of which you are a
shareholder. Shares of the other fund will be purchased at the then-current
net asset value; however, a sales load may be charged with respect to
investments in shares of a fund sold with a sales load. If you are investing
in a fund that charges a sales load, you may qualify for share prices which
do not include the sales load or which reflect a reduced sales load. If you
are investing in a fund that charges a contingent deferred sales charge, the
shares purchased will be subject on redemption to the contingent deferred
sales charge, if any, applicable to the purchased shares. See "Shareholder
Services" in the Statement of Additional Information. Dreyfus Dividend ACH
permits you to transfer electroni-
Page 13

cally dividends or dividends and capital gain distributions, if any, from the
Fund to a designated bank account. Only an account maintained at a domestic
financial institution which is an Automated Clearing House member may be so
designated. Banks may charge a fee for this service.
For more information concerning these privileges or to request a
Dividend Options Form, please call toll free 1-800-645-6561. You may cancel
these privileges by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. To select a new
fund after cancellation, you must submit a new Dividend Options Form.
Enrollment in or cancellation of these privileges is effective three business
days following receipt. These privileges are available only for existing
accounts and may not be used to open new accounts. Minimum subsequent
investments do not apply for Dreyfus Dividend Sweep. The Fund may modify or
terminate these privileges at any time or charge a service fee. No such fee
currently is contemplated. Shares held under Keogh Plans, IRAs or other
retirement plans are not eligible for Dreyfus Dividend Sweep.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account. An application for the Automatic
Withdrawal Plan can be obtained by calling 1-800-645-6561. The Automatic
Withdrawal Plan may be ended at any time by you, the Fund or the Transfer
Agent. Shares for which certificates have been issued may not be redeemed
through the Automatic Withdrawal Plan.
RETIREMENT PLANS
The Fund offers a variety of pension and profit-sharing plans,
including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts," 401(k)
Salary Reduction Plans and 403(b)(7) Plans. Plan support services also are
available. You can obtain details on the various plans by calling the
following numbers toll free: for Keogh Plans, please call 1-800-358-5566;
for IRAs and IRA "Rollover Accounts," please call 1-800-645-6561; or for
SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans, please call
1-800-322-7880.
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value.

The Fund will deduct a redemption fee equal to 1.00% of the net asset
value of Fund shares redeemed (including redemptions through use of the Fund
Exchanges service) where the redemption or exchange occurs less than six
months following the issuance of such shares. The purpose of the redemption
fee is to discourage short-term trading. The fee will be retained by the Fund
and used primarily to offset the transaction costs that short-term trading
imposes on the Fund and its shareholders. For purposes of computing the
six-month period, any issuance of Fund shares during a month will be deemed
to occur on the first day of such month. The Fund will employ the "first-in,
first-out" method, which assumes that the shares you are redeeming or
exchanging are the ones you have held the longest. No redemption fee will be
charged on the redemption or exchange of shares (1) through the Fund's
Automatic Withdrawal Plan or Dreyfus Auto-Exchange Privilege, (2) through
accounts that are reflected on the records of the Transfer Agent as omnibus
accounts approved by Dreyfus Service Corporation, (3) through accounts
established by securities dealers, banks or other financial institutions
approved by Dreyfus Service Corporation that utilize the National Securities
Clearing Corporation's networking system, or (4) acquired through the
reinvestment of dividends or capital gains distributions. The redemption fee
may be waived, modified or discontinued at any time or from time to time. In
addition, Service Agents may charge their clients a fee for effecting
redemptions of Fund shares. Any certificates representing Fund shares being
redeemed must be submitted with the redemption request. The value of the
shares redeemed may be more or less than their original cost, depending upon
the Fund's then-current net asset value.

Page 14

The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY DREYFUS
TELETRANSFER PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDERRegistration
Mark AND SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER
AGENT, THE REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK
CLEARANCE OF YOUR PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE OR
DREYFUS-AUTOMATIC ASSET BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS
DAYS OR MORE. IN ADDITION, THE FUND WILL REJECT REQUESTS TO REDEEM SHARES BY
WIRE OR TELEPHONE OR PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE FOR A
PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE
PURCHASE CHECK, THE DREYFUS TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC
ASSET BUILDER ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE
PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR
IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER
THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE,
DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED
TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares will not be
redeemed until the Transfer Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 30 days' written notice if your account's net asset value is
$500 or less and remains so during the notice period.
PROCEDURES
You may redeem shares by using the regular redemption procedure
through the Transfer Agent, or, if you have checked the appropriate box and
supplied the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent, through the Wire Redemption
Privilege, the Telephone Redemption Privilege or the Dreyfus TELETRANSFER
Privilege. Other redemption procedures may be in effect for clients of
certain Service Agents. The Fund makes available to certain large
institutions the ability to issue redemption instructions through compatible
computer facilities. The Fund reserves the right to refuse any request made
by wire or telephone, including requests made shortly after a change of
address, and may limit the amount involved or the number of such requests.
The Fund may modify or terminate any redemption Privilege at any time or
charge a service fee upon notice to shareholders. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans,
and shares for which certificates have been issued, are not eligible for the
Wire Redemption, Telephone Redemption or Dreyfus TELETRANSFER Privilege.

REGULAR REDEMPTION -- Under the regular redemption procedure, you may redeem
shares by written request mailed to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus retirement plan
accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427. Redemption requests may be delivered in person only
to a Dreyfus Financial Center. THESE REQUESTS WILL BE FORWARDED TO THE FUND
AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For the location of the
nearest Dreyfus Financial Center, please call one of the telephone numbers
listed under "General Information." Redemption requests must be signed by
each shareholder, including each owner of a joint account, and each signature
must be guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP") and the Stock Exchanges Medallion Program. If you
have any questions with respect to signature-guarantees, please call one of
the telephone numbers listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE -- You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. You also may direct that redemption proceeds be paid by
check (maximum $150,000 per day) made out to the owners of record and mailed
to your address. Redemption proceeds of less than $1,000 will be paid
automatically by check. Holders of jointly registered Fund or bank accounts
may have redemption proceeds of not more than $250,000 wired within any
30-day period. You may telephone redemption requests by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. The
Statement of Additional Information sets forth instructions for transmitting
redemption requests by wire.
TELEPHONE REDEMPTION PRIVILEGE -- You may request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
DREYFUS TELETRANSFER PRIVILEGE -- You may request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an Automated Clearing House member may be
designated. Redemption proceeds will be on deposit in your account at an
Automated Clearing House member bank ordinarily two days after receipt of the
redemption request or, at your request, paid by check (maximum $150,000 per
day) and mailed to your address. Holders of jointly registered Fund or bank
accounts may redeem through the Dreyfus TELETRANSFER Privilege for transfer
to their bank account not more than $250,000 within any 30-day period.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of shares by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan, pursuant to which
it pays the Distributor for the provision of certain services to Fund
shareholders a fee at the 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.
Page 16

DIVIDENDS, DISTRIBUTIONS AND TAXES
Under the Internal Revenue Code of 1986, as amended (the "Code"), the
Fund is treated as a separate entity for purposes of qualification and
taxation as a regulated investment company. The Fund ordinarily declares and
pays dividends from its net investment income quarterly, and distributes net
realized securities gains, if any, once a year, but it may make distributions
more regularly to comply with the distribution requirements of the Code, in
all events in a manner consistent with the provisions of the 1940 Act. The
Fund will not make distributions from net realized securities gains unless
capital loss carryovers, if any, have been utilized or have expired. You may
choose whether to receive dividends and distributions in cash or to reinvest
in additional shares at net asset value. All expenses are accrued daily and
deducted before declaration of dividends to investors.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Fund will be taxable to U.S. shareholders
as ordinary income whether received in cash or reinvested in additional
shares. No dividend paid by the Fund will qualify for the dividends received
deduction allowable to certain U.S. corporations. Distributions from net
realized long-term securities gains of the Fund will be taxable to U.S.
shareholders as long-term capital gains for Federal income tax purposes,
regardless of how long shareholders have held their Fund shares and whether
such distributions are received in cash or reinvested in Fund shares. The
Code provides that the net capital gain of an individual generally will not
be subject to Federal income tax at a rate in excess of 28%. Dividends and
distributions may be subject to state and local taxes.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Fund to a foreign investor generally are
subject to U.S. nonresident withholding taxes at the rate of 30%, unless the
foreign investor claims the benefit of a lower rate specified in a tax
treaty. Distributions from net realized long-term securities gains paid by
the Fund to a foreign investor as well as the proceeds of any redemptions
from a foreign investor's account, regardless of the extent to which gain or
loss may be realized, generally will not be subject to U.S. nonresident
withholding tax. However, such distributions may be subject to backup
withholding, as described below, unless the foreign investor certifies his
non-U.S. residency status.
Notice as to the tax status of your dividends and distributions will
be mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends, distributions
from net realized securities gains and the proceeds of any redemption,
regardless of the extent to which gain or loss may be realized, paid to a
shareholder if such shareholder fails to certify either that the TIN furnished
in connection with opening an account is correct or that such shareholder has
not received notice from the IRS of being subject to backup withholding as a
result of a failure to properly report taxable dividend or interest income on
a Federal income tax return. Furthermore, the IRS may notify the Fund to
institute backup withholding if the IRS determines a shareholder's TIN is
incorrect or if a shareholder has failed to properly report taxable dividend
and interest income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax
Page 17

imposed on the record owner of the account, and may be claimed as a credit on
the record owner's Federal income tax return.

Management of the Company believes that the Fund has qualified for
the fiscal year ended October 31, 1996 as a "regulated investment company"
under the Code. The Fund intends to continue to so qualify if such
qualification is in the best interests of its shareholders. Such
qualification relieves the Fund of any liability for Federal income tax to
the extent its earnings are distributed in accordance with applicable
provisions of the Code. The Fund is subject to a non-deductible 4% excise
tax, measured with respect to certain undistributed amounts of taxable
investment income and capital gains.

You should consult your tax adviser regarding specific questions as
to Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance may be calculated on several
bases, including current yield, average annual total return and/or total
return.
Current yield refers to the Fund's annualized net investment income
per share over a 30-day period, expressed as a percentage of the net asset
value per share at the end of the period. For purposes of calculating current
yield, the amount of net investment income per share during that 30-day
period, computed in accordance with regulatory requirements, is compounded by
assuming that it is reinvested at a constant rate over a six-month period. An
identical result is then assumed to have occurred during a second six-month
period which, when added to the result for the first six months, provides an
"annualized" yield for an entire one-year period. Calculations of current
yield may reflect absorbed expenses pursuant to any undertaking that may be
in effect. See "Management of the Fund."
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment was purchased with an initial
payment of $1,000 and that the investment was redeemed at the end of a stated
period of time, after giving effect to the reinvestment of dividends and
distributions during the period. The return is expressed as a percentage rate
which, if applied on a compounded annual basis, would result in the
redeemable value of the investment at the end of the period. Advertisements
of the Fund's performance will include the Fund's average annual total return
for one, five and ten year periods, or for shorter periods depending upon the
length of time during which the Fund has operated.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the net asset
value per share at the beginning of the period. Advertisements may include
the percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes the
application of the percentage rate of total return.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Moody's Bond Survey Bond Index, Bond Buyer's
20-Bond Index, Morningstar, Inc. and other industry publications.
GENERAL INFORMATION
The Company was organized as an unincorporated business trust under
the laws of the Commonwealth of Massachusetts pursuant to an Agreement and
Declaration of Trust (the "Trust Agreement") dated July 24, 1985, and
commenced operations on October 1, 1986. Before January 2,
Page 18

1996, the Company's name was Dreyfus Strategic Income. The Company is
authorized to issue an unlimited number of shares of beneficial interest, par
value $.001 per share. Each share has one vote.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of a
Massachusetts business trust. However, the Trust Agreement disclaims
shareholder liability for acts or obligations of the Company and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by the Company or a Trustee. The Trust
Agreement provides for indemnification from the Fund's property for all
losses and expenses of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder's incurring
financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations
, a possibility which management believes is remote. Upon payment of any
liability incurred by the Fund, the shareholder paying such liability will be
entitled to reimbursement from the general assets of the Fund. The Company
intends to conduct its operations in such a way so as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of the Fund.
The Company is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for
certain matters under the 1940 Act and for other purposes. A shareholder of
one portfolio is not deemed to be a shareholder of any other portfolio. For
certain matters shareholders vote together as a group; as to others they vote
separately by portfolio. By this Prospectus, shares of the Fund are being
offered. Other portfolios are sold pursuant to other offering documents.
To date, the Board has authorized the creation of four series of
shares. All consideration received by the Company for shares of one of the
series and all assets in which such consideration is invested will belong to
that series (subject only to the rights of creditors of the Company) and will
be subject to the liabilities related thereto. The income attributable to,
and the expenses of, one series are treated separately from those of the
other series. The Company has the ability to create, from time to time, new
series without shareholder approval.
The Transfer Agent maintains a record of your ownership and sends you
confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561. In New York City, call 1-718-895-1206; outside the U.S. and
Canada, call 516-794-5452.
Page 19

APPENDIX
INVESTMENT TECHNIQUES
FOREIGN CURRENCY TRANSACTIONS -- Foreign currency transactions may be entered
into for a variety of purposes, including: to fix in U.S. dollars, between
trade and settlement date, the value of a security the Fund has agreed to buy
or sell; to hedge the U.S. dollar value of securities the Fund already owns,
particularly if it expects a decrease in the value of the currency in which
the foreign security is denominated; or to gain exposure to the foreign
currency in an attempt to realize gains.
Foreign currency transactions may involve, for example, the Fund's
purchase of foreign currencies for U.S. dollars or the maintenance of short
positions in foreign currencies, which would involve the Fund agreeing to
exchange an amount of a currency it did not currently own for another
currency at a future date in anticipation of a decline in the value of the
currency sold relative to the currency the Fund contracted to receive in the
exchange. The Fund's success in these transactions will depend principally on
The Dreyfus Corporation's ability to predict accurately the future exchange
rates between foreign currencies and the U.S. dollar.
SHORT-SELLING -- In these transactions, the Fund sells a security it does not
own in anticipation of a decline in the market value of the security. To
complete the transaction, the Fund must borrow the security to make delivery
to the buyer. The Fund is obligated to replace the security borrowed by
purchasing it subsequently at the market price at the time of replacement.
The price at such time may be more or less than the price at which the
security was sold by the Fund, which would result in a loss or gain,
respectively.
Securities will not be sold short if, after effect is given to any
such short sale, the total market value of all securities sold short would
exceed 25% of the value of the Fund's net assets. The Fund may not sell short
the securities of any single issuer listed on a national securities exchange
to the extent of more than 5% of the value of the Fund's net assets. The Fund
may not make a short sale which results in the Fund having sold short in the
aggregate more than 5% of the outstanding securities of any class of an
issuer.
The Fund also may make short sales "against the box," in which the
Fund enters into a short sale of a security it owns in order to hedge an
unrealized gain on the security. At no time will more than 15% of the value
of the Fund's net assets be in deposits on short sales against the box.
LENDING PORTFOLIO SECURITIES -- The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to be
entitled to payments in amounts equal to the interest or other distributions
payable on the loaned securities which affords the Fund an opportunity to
earn interest on the amount of the loan and at the same time to earn income
on the loaned securities' collateral. Loans of portfolio securities may not
exceed 33 1/3% of the value of the Fund's total assets, and the Fund will
receive collateral consisting of cash, U.S. Government securities or
irrevocable letters of credit which will be maintained at all times in an
amount equal to at least 100% of the current market value of the loaned
securities. Such loans are terminable by the Fund at any time upon specified
notice. The Fund might experience risk of loss if the institution with which
it has engaged in a portfolio loan transaction breaches its agreement with
the Fund.
LEVERAGE -- Leveraging will exaggerate the effect on net asset value of any
increase or decrease in the market value of the Fund's portfolio. Money
borrowed for leveraging will be limited to 33 1/3% of the value of the Fund's
total assets. These borrowings will be subject to interest costs which may or
may not be recovered by appreciation of the securities purchased; in certain
cases, interest costs may exceed the return received on the securities
purchased.
The Fund may enter into reverse repurchase agreements with banks,
brokers or dealers. This form of borrowing involves the transfer by the Fund
of an underlying debt instrument in return for cash proceeds based on a
percentage of the value of the security. The Fund retains the right to
receive interest and principal payments on the security. At an agreed upon
future date, the Fund repurchases
Page 20

the security at principal plus accrued interest. Except for these
transactions, the Fund's borrowings generally will be unsecured.
USE OF DERIVATIVES -- The Fund may invest in the types of Derivatives
enumerated under "Description of the Fund -- Investment Considerations and
Risks -- Use of Derivatives." These instruments and certain related risks are
described more specifically under "Investment Objectives and Management
Policies -- Derivatives" in the Statement of Additional Information.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and the
portfolio as a whole. Derivatives permit the Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level
of risk, or change the character of the risk, of its portfolio by making
investments in specific securities.
Derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in Derivatives
could have a large potential impact on the Fund's performance.
If the Fund invests in Derivatives at inappropriate times or judges
market conditions incorrectly, such investments may lower the Fund's return
or result in a loss. The Fund also could experience losses if it were unable
to liquidate its position because of an illiquid secondary market. The market
for many Derivatives is, or suddenly can become, illiquid. Changes in
liquidity may result in significant, rapid and unpredictable changes in the
prices for Derivatives.
Although the Fund will not be a commodity pool, Derivatives subject
the Fund to the rules of the Commodity Futures Trading Commission which limit
the extent to which the Fund can invest in certain Derivatives. The Fund may
invest in futures contracts and options with respect thereto for hedging
purposes without limit. However, the Fund may not invest in such contracts
and options for other purposes if the sum of the amount of initial margin
deposits and premiums paid for unexpired options with respect to such
contracts, other than for bona fide hedging purposes, exceed 5% of the
liquidation value of the Fund's assets, after taking into account unrealized
profits and unrealized losses on such contracts and options; provided,
however, that in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.
The Fund may invest up to 5% of its assets, represented by the
premium paid, in the purchase of call and put options. The Fund may write
(i.e, sell) covered call and put option contracts to the extent of 20% of the
value of its net assets at the time such option contracts are written. When
required by the Securities and Exchange Commission, the Fund will set aside
permissible liquid assets in a segregated account to cover its obligations
relating to its transactions in Derivatives. To maintain this required cover,
the Fund may have to sell portfolio securities at disadvantageous prices or
times since it may not be possible to liquidate a Derivative position at a
reasonable price.

FORWARD COMMITMENTS -- The Fund may purchase securities on a forward
commitment or when-issued basis, which means that delivery and payment take
place a number of days after the date of the commitment to purchase. The
payment obligation and the interest rate that will be received on a forward
commitment or when-issued security are fixed when the Fund enters into the
commitment, but the Fund does not make a payment until it receives delivery
from the counterparty. The Fund will commit to purchase such securities only
with the intention of actually acquiring the securities, but the Fund may
sell these securities before the settlement date if it is deemed advisable. A
segregated account of the Fund consisting of permissible liquid assets at
least equal at all times to the amount of the commitments will be established
and maintained at the Fund's custodian bank.

predominantly speculative characteristics and, while such obligations
have less near-term vulnerability to default than other speculative grade
debt, they face major ongoing uncertainties or exposure to adverse business,
financial or economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments. Securities rated C by Moody's
are regarded as having extremely poor prospects of ever attaining any real
investment standing. Securities rated D by S&P, Fitch and Duff are in default
and the payment of interest and/or repayment of principal is in arrears. Such
securities, though high yielding, are characterized by great risk. See
"Appendix" in the Statement of Additional Information for a general
description of securities ratings.
These securities may be particularly susceptible to economic
downturns. It is likely that an economic recession could disrupt severely the
market for such securities and may have an adverse impact on the value of
such securities. In addition, it is likely that any such economic downturn
could adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon and increase the incidence of default for
such securities.
The ratings of Moody's, S&P, Fitch or Duff represent their opinions
as to the quality of the obligations which they undertake to rate. Ratings
are relative and subjective and, although ratings may be useful in evaluating
the safety or interest and principal payments, they do not evaluate the
market value risk of such obligations. Although these ratings may be an
initial criterion for selection of portfolio investments, The Dreyfus
Corporation also will evaluate these securities and the ability of the issuers
of such securities to pay interest and principal. The Fund's ability to
achieve its investment objective may be more dependent on The Dreyfus
Corporation's credit analysis than might be the case for a fund that invested
in higher rated securities.

The average distribution of investments of the Fund in corporate
bonds (excluding preferred stock, convertible preferred stock and convertible
bonds) by ratings for the period from March 25, 1996 (commencement of
operations) to October 31, 1996, calculated monthly on a dollar weighted
basis, was as follows:

<TABLE>
<CAPTION>
MOODY'S OR S&P, FITCH OR DUFF PERCENTAGE
------------- -------------------------- -----------------
<S> <C> <C>
Aaa AAA 7.2%
Baa BBB 3.3%
Ba BB 8.9%
B B 58.2%
Caa CCC 6.1%
NR NR 11.0%*
--------
94.7%**
--------
--------
</TABLE>

* These unrated securities (11.0%) have been determined by The Dreyfus
Corporation to be of comparable quality to securities:
B (3.2%) and CCC (7.8%).

** The Fund also owns preferred stock (5.0%), convertible bonds_BBB (1.0%)
and convertible bonds_B (2.8%). Approximately (3.5%) of the Fund's
assets were invested in cash or cash equivalents.

CONVERTIBLE SECURITIES -- Convertible securities may be converted at either a
stated price or stated rate into underlying shares of common stock.
Convertible securities have characteristics similar to both fixed-income and
equity securities. Convertible securities generally are subordinated to other
similar but non-convertible securities of the same issuer, although
convertible bonds, as corporate debt obligations, enjoy seniority in right of
payment to all equity securities, and convertible preferred stock is senior
to common stock, of the same issuer. Because of the subordination feature,
however, convertible securities typically have lower ratings than similar
non-convertible securities.
Page 22

PARTICIPATION INTERESTS. The Fund may invest in corporate obligations,
denominated in U.S. dollars or foreign currencies, that are originated,
negotiated and structured by a syndicate of lenders ("Co-Lenders") consisting
of commercial banks, thrift institutions, insurance companies, finance
companies or other financial institutions one or more of which administers
the security on behalf of the syndicate (the "Agent Bank"). Co-Lenders may
sell such securities to third parties called "Participants." The Fund may
invest in such securities either by participating as a Co-Lender at
origination or by acquiring an interest in the security from a Co-Lender or a
Participant (collectively, "participation interests"). Co-Lenders and
Participants interposed between the Fund and the corporate borrower (the
"Borrower"), together with Agent Banks, are referred to herein as
"Intermediate Participants." The Fund also may purchase a participation
interest in a portion of the rights of an Intermediate Participant. The Fund
will not act as an Agent Bank, guarantor, sole negotiator or sole structuror
with respect to securities that are the subject of a participation interest.
A participation interest gives the Fund an undivided interest in the security
in the proportion that the Fund's participation interest bears to the total
principal amount of the security. These instruments may have fixed, floating
or variable rates of interest. For certain participation interests, the Fund
will have the right to demand payment, on not more than seven days' notice,
for all or any part of the Fund's participation interest in the security,
plus accrued interest. As to these instruments, the Fund intends to exercise
its right to demand payment only upon a default under the terms of the
security, as needed to provide liquidity to meet redemptions, or to maintain
or improve the quality of its investment portfolio. The Fund will not invest
more than 15% of the value of its net assets in participation interests
maturing in more than seven days that do not have this demand feature, and in
other securities that are illiquid.
MORTGAGE-RELATED SECURITIES -- Mortgage-related securities are a form of
Derivative collateralized by pools of mortgages. The mortgage-related
securities which may be purchased include those with fixed, floating and
variable interest rates, those with interest rates that change based on
multiples of changes in interest rates and those with interest rates that
change inversely to changes in interest rates, as well as stripped
mortgage-backed securities. Stripped mortgage-backed securities usually are
structured with two classes that receive different proportions of interest
and principal distributions on a pool of mortgage-backed securities or whole
loans. A common type of stripped mortgage-backed security will have one class
receiving some of the interest and most of the principal from the mortgage
collateral, while the other class will receive most of the interest and the
remainder of the principal. Although certain mortgage-related securities are
guaranteed by a third party or otherwise similarly secured, the market value
of the security, which may fluctuate, is not secured. If a mortgage-related
security is purchased at a premium, all or part of the premium may be lost if
there is a decline in the market value of the security, whether resulting
from changes in interest rates or prepayments on the underlying mortgage
collateral.
As with other interest-bearing securities, the prices of certain
mortgage-related securities are inversely affected by changes in interest
rates. However, although the value of a mortgage-related security may decline
when interest rates rise, the converse is not necessarily true, since in
periods of declining interest rates the mortgages underlying the security are
more likely to be prepaid. For this and other reasons, a mortgage-related
security's stated maturity may be shortened by unscheduled prepayments on the
underlying mortgages, and, therefore, it is not possible to predict
accurately the security's return to the Fund. Moreover, with respect to
stripped mortgage-backed securities, if the underlying mortgage securities
experience greater than anticipated prepayments of principal, the Fund may
fail to fully recoup its initial investment even if the securities are rated
in the highest rating category by a nationally recognized statistical rating
organization.
The mortgage-related securities in which the Fund may invest also
include multi-class pass-through certificates secured principally by mortgage
loans on commercial properties. These mortgage-related securities are
structured similarly to mortgage-related securities secured by pools of
residential mortgages. Commercial lending, however, generally is viewed as
exposing the lender to a greater risk of loss than one- to four-family
Page 23

residential lending. Commercial lending, for example, typically involves
larger loans to single borrowers or groups of related borrowers than
residential one- to four-family mortgage loans. In addition, the repayment of
loans secured by income producing properties typically is dependent upon the
successful operation of the related real estate project and the cash flow
generated there-from. Consequently, adverse changes in economic conditions
and circumstances are more likely to have an adverse impact on
mortgage-related securities secured by loans on commercial properties than on
those secured by loans on residential properties.
During periods of rapidly rising interest rates, prepayments of
mortgage-backed securities may occur at slower than expected rates. Slower
prepayments effectively may change a mortgage-backed security that was
considered short- or intermediate-term at the time of purchase into a
long-term security. The values of long-term securities generally fluctuate
more in response to changes in interest rates than short- or
intermediate-term securities. Were the prepayments on the Fund's
mortgage-backed securities to decrease broadly, the Fund's effective
duration, and thus sensitivity to interest rate fluctuations, would increase.
ASSET-BACKED SECURITIES -- Asset-backed securities are a form of Derivative.
The securitization techniques used for asset-backed securities are similar to
those used for mortgage-related securities. The collateral for these
securities has included home equity loans, automobile and credit card
receivables, boat loans, computer leases, airplane leases, mobile home loans,
recreational vehicle loans and hospital account receivables. The Fund may
invest in these and other types of asset-backed securities that may be
developed in the future.
Asset-backed securities present certain risks that are not presented
by mortgage-backed securities. Primarily, these securities may provide the
Fund with a less effective security interest in the related collateral than
do mortgage-backed securities. Therefore, there is the possibility that
recoveries on the underlying collateral may not, in some cases, be available
to support payments on these securities.
MUNICIPAL OBLIGATIONS -- Municipal obligations are debt obligations issued by
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities, or
multistate agencies or authorities. Municipal obligations bear fixed,
floating or variable rates of interest. Certain municipal obligations are
subject to redemption at a date earlier than their stated maturity pursuant
to call options, which may be separated from the related municipal
obligations and purchased and sold separately. The Fund also may acquire call
options on specific municipal obligations. The Fund generally would purchase
these call options to protect the Fund from the issuer of the related
municipal obligation redeeming, or other holder of the call option from
calling away, the municipal obligation before maturity.
While, in general, municipal obligations are tax exempt securities
having relatively low yields as compared to taxable, non-municipal
obligations of similar quality, certain municipal obligations are taxable
obligations, offering yields comparable to, and in some cases greater than,
the yields available on other permissible Fund investments. Dividends
received by shareholders on Fund shares which are attributable to interest
income received by the Fund from municipal obligations generally will be
subject to Federal income tax. The Fund may invest in municipal obligations,
the ratings of which correspond with the ratings of other permissible Fund
investments. The Fund currently intends to invest no more than 25% of its
assets in municipal obligations. However, this percentage may be varied from
time to time without shareholder approval.
ZERO COUPON SECURITIES -- The Fund may invest in zero coupon U.S. Treasury
securities, which are Treasury Notes and Bonds that have been stripped of
their unmatured interest coupons, the coupons themselves and receipts or
certificates representing interests in such stripped debt obligations and
coupons. Zero coupon securities also are issued by corporations and financial
institutions which constitute a proportionate ownership of the issuer's pool
of underlying U.S. Treasury securities. A zero coupon security pays no
interest to its holder during its life and is sold at a discount to its face
value at maturity. The market prices of zero coupon securities generally are
more volatile than the market prices
Page 24

of securities that pay interest periodically and are likely to respond to a
greater degree to changes in interest rates than non-zero coupon securities
having similar maturities and credit qualities.
FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL ENTITIES -- The
Fund may invest in obligations issued or guaranteed by one or more foreign
governments or any of their political subdivisions, agencies or
instrumentalities that are determined by The Dreyfus Corporation to be of
comparable quality to the other obligations in which the Fund may invest.
Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the World Bank), the European Coal and Steel Community, the
Asian Development Bank and the InterAmerican Development Bank.
MONEY MARKET INSTRUMENTS -- The Fund may invest in the following types of
money market instruments.
U.S. GOVERNMENT SECURITIES. Securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities include U.S. Treasury
securities that differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the Treasury;
others by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others only by the credit
of the agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. While the U.S. Government provides financial
support to such U.S. Government-sponsored agencies and instrumentalities, no
assurance can be given that it will always do so since it is not so obligated
by law.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Fund buys, and
the seller agrees to repurchase, a security at a mutually agreed upon time
and price (usually within seven days). The repurchase agreement thereby
determines the yield during the purchaser's holding period, while the
seller's obligation to repurchase is secured by the value of the underlying
security. Repurchase agreements could involve risks in the event of a default
or insolvency of the other party to the agreement, including possible delays
or restrictions upon the Fund's ability to dispose of the underlying
securities. The Fund may enter into repurchase agreements with certain banks
or non-bank dealers.
BANK OBLIGATIONS. The Fund may purchase certificates of deposit, time
deposits, bankers' acceptances and other short-term obligations issued by
domestic banks, foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions. With respect to such securities
issued by foreign subsidiaries or foreign branches of domestic banks, and
domestic and foreign branches of foreign banks, the Fund may be subject to
additional investment risks that are different in some respects from those
incurred by a fund which invests only in debt obligations of U.S. domestic
issuers. See "Description of the Fund -- Investment Considerations and Risks
- -- Foreign Securities."
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period
of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven
days) at a stated interest rate.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments reflect
the obligation both of the bank and the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
COMMERCIAL PAPER. Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs. The commercial
paper purchased by the Fund will consist only of direct obligations which, at
the time of their purchase, are (a) rated not lower than Prime-1 by Moody's,
Page 25

A-1 by S&P, F-1 by Fitch or Duff-1 by Duff, (b) issued by companies having an
outstanding unsecured debt issue currently rated at least A3 by Moody's or A-
by S&P, Fitch or Duff, or (c) if unrated, determined by The Dreyfus
Corporation to be of comparable quality to those rated obligations which may
be purchased by the Fund.
ILLIQUID SECURITIES -- The Fund may invest up to 15% of the value of its net
assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment
objective. Such securities may include securities that are not readily
marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, repurchase agreements providing for
settlement in more than seven days after notice, and certain privately
negotiated, non-exchange traded options and securities used to cover such
options. As to these securities, the Fund is subject to a risk that should
the Fund desire to sell them when a ready buyer is not available at a price
the Fund deems representative of their value, the value of the Fund's net
assets could be adversely affected.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 26

[This Page Intentionally Left Blank]
Page 27

High Yield
Securities Fund

Prospectus

Registration Mark

Copy Rights 1997 Dreyfus Service Corporation
043p030397
Page 28

- ------------------------------------------------------------------------------

PROSPECTUS MARCH 3, 1997

DREYFUS SHORT TERM HIGH YIELD FUND
- ------------------------------------------------------------------------------
DREYFUS SHORT TERM HIGH YIELD FUND (THE "FUND") IS A SEPARATE
DIVERSIFIED PORTFOLIO OF DREYFUS INCOME FUNDS, AN OPEN-END, MANAGEMENT
INVESTMENT COMPANY (THE "COMPANY"), KNOWN AS A MUTUAL FUND. THE FUND'S
INVESTMENT OBJECTIVE IS TO PROVIDE HIGH CURRENT INCOME. UNDER NORMAL MARKET
CONDITIONS, THE FUND WILL INVEST IN A PORTFOLIO OF SECURITIES THAT HAS AN
EFFECTIVE DURATION AND EFFECTIVE AVERAGE PORTFOLIO MATURITY OF THREE YEARS OR
LESS.
THE FUND SEEKS TO ACHIEVE ITS OBJECTIVE BY INVESTING UP TO ALL OF ITS
ASSETS IN LOWER RATED FIXED-INCOME SECURITIES, COMMONLY KNOWN AS "JUNK
BONDS." INVESTMENTS OF THIS TYPE ARE SUBJECT TO A GREATER RISK OF LOSS OF
PRINCIPAL AND NON-PAYMENT OF INTEREST. INVESTORS SHOULD CAREFULLY ASSESS THE
RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND. SEE "DESCRIPTION OF THE
FUND--MANAGEMENT POLICIES" AND "INVESTMENT CONSIDERATIONS AND RISKS--HIGH
YIELD-LOWER RATED SECURITIES."
YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING DREYFUS
TELETRANSFER.
THE DREYFUS CORPORATION WILL PROFESSIONALLY MANAGE THE FUND'S
PORTFOLIO.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.

FEE TABLE....................................................... 4
DESCRIPTION OF THE FUND......................................... 5
MANAGEMENT OF THE FUND........................................... 7
HOW TO BUY SHARES................................................ 9
SHAREHOLDER SERVICES............................................ 11
HOW TO REDEEM SHARES.............................. ............... 14
SHAREHOLDER SERVICES PLAN......................................... 16
DIVIDENDS, DISTRIBUTIONS AND TAXES............................... 16
PERFORMANCE INFORMATION.......................................... 17
GENERAL INFORMATION.............................................. 18
APPENDIX......................................................... 20

Page 2

[This Page Intentionally Left Blank]
Page 3

<TABLE>
<CAPTION>
FEE TABLE
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
<S> <C>
Management Fees.............................................................. .65%
Other Expenses............................................................... .40%
Total Fund Operating Expenses ............................................... 1.05%
</TABLE>

- ------------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL
RETURN GREATER OR LESS THAN 5%.
- ------------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in understanding
the costs and expenses borne by the Fund and investors, the payment of which
will reduce investors' annual return. Other expenses are based on estimated
amounts for the current fiscal year. The information in the foregoing table
does not reflect any fee waivers or expense reimbursement arrangements that
may be in effect. Certain Service Agents (as defined below) may charge their
clients direct fees for effecting transactions in Fund shares; such fees are
not reflected in the foregoing table. For a further description of the
various costs and expenses incurred in the operation of the Fund, as well as
expense reimbursement or waiver arrangements, see "Management of the Fund,"
"How to Buy Shares," "How to Redeem Shares" and "Shareholder Services Plan."
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 August 16, 1996
(commencement of operations) through October 31, 1996. This information has
been derived from the Fund's financial statements.

<TABLE>
<CAPTION>
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period...................................... $12.50
-------
INVESTMENT OPERATIONS:
Investment income-net..................................................... .26
Net realized and unrealized gain (loss)
on investments............................................................ .19
-------
TOTAL FROM INVESTMENT OPERATIONS.......................................... .45
-------
DISTRIBUTIONS:
Dividends from investment income-net...................................... (.26)
-------
Net asset value, end of period............................................ $12.69
-------
TOTAL INVESTMENT RETURN..................................................... 17.02%(1)
-------
-------
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets................................... .92%(1)
Ratio of net investment income
to average net assets..................................................... 9.76%(1)
Decrease reflected in above expense ratios due to undertakings by the Manager 1.62%(1)
Portfolio Turnover Rate................................................... 77.79%(2)
Net Assets, end of period (000's omitted)................................. $18,779

(1) Annualized.

(2) Not annualized.
</TABLE>

Page 4

DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund's investment objective is to provide high current income. It
cannot be changed without approval by the holders of a majority (as defined
in the Investment Company Act of 1940, as amended (the "1940 Act")) of the
Fund's outstanding voting shares. There can be no assurance that the Fund's
investment objective will be achieved.
MANAGEMENT POLICIES
Under normal market conditions, the Fund will invest at least 65% of
the value of its net assets in bonds, debentures, notes and other debt
instruments (collectively, "Fixed-Income Securities") rated below investment
grade, or, if unrated, determined by The Dreyfus Corporation to be of
comparable quality. Fixed-Income Securities also include mortgage-related
securities, asset-backed securities, zero coupon securities, municipal
obligations, preferred stock, convertible debt obligations and convertible
preferred stock. The issuers of Fixed-Income Securities may include domestic
and foreign corporations, partnerships, trusts or similar entities, and
governmental entities or their political subdivisions, agencies or
instrumentalities. The Fund may invest in companies in, or governments of,
developing countries. See "Investment Considerations and Risks -- Foreign
Securities."
Under normal market conditions, the Fund will invest in a portfolio
of securities that has an effective duration of three years or less. As a
measure of a fixed-income security's cash flow, duration is an alternative to
the concept of "term to maturity" in assessing the price volatility
associated with changes in interest rates. Generally, the longer the
duration, the more volatility an investor should expect. The market price of
a bond with a duration of four years would be expected to increase or decline
twice as much as the market price of a bond with a two-year duration.
Duration is a way of measuring a security's maturity in terms of the average
time required to receive the present value of all interest and principal
payments as opposed to its term to maturity. The maturity of a security
measures only the time until final payment is due; it does not take account
of the pattern of a security's cash flows over time, which would include how
cash flow is affected by prepayments and by changes in interest rates.
Incorporating a security's yield, coupon interest payments, final maturity
and option features into one measure, duration is computed by determining the
weighted average maturity of a bond's cash flows, where the present values of
the cash flows serve as weights. In computing the duration of the Fund, The
Dreyfus Corporation will estimate the duration of obligations that are
subject to features such as prepayment or redemption by the issuer, put
options retained by the investor or other imbedded options, taking into
account the influence of interest rates on prepayments and coupon flows. This
method of computing duration is known as option-adjusted duration. See
"Appendix _ Certain Portfolio Securities _ Mortgage-Related Securities".

rated Fixed-Income Securities when The Dreyfus Corporation determines that a
defensive investment position is appropriate in light of market or economic
conditions.

The Fund may invest in money market instruments consisting of U.S.
Government securities, certificates of deposit, time deposits, bankers'
acceptances, short-term investment grade corporate bonds and other short-term
debt instruments, and repurchase agreements, as set forth under "Appendix
_Certain Portfolio Securities _ Money Market Instruments." Under normal
market conditions, the Fund does not expect to have a substantial portion of
its assets invested in money market instruments. However, when The Dreyfus
Corporation determines that adverse market conditions exist, the Fund may
adopt a temporary defensive posture and invest all of its assets in money
market instruments.
The Fund's annual portfolio turnover rate is not expected to exceed
200%. Higher portfolio turnover rates usually generate additional brokerage
commissions and expenses and the short-term gains realized from these
transactions are taxable to shareholders as ordinary income. The Fund
currently intends to engage in foreign currency transactions, options and
futures transactions, swaps, lending portfolio securities and short-selling.
For a discussion of the investment techniques and their related risks, see
also "Investment Considerations and Risks" and "Appendix_Investment
Techniques" below and "Investment Objectives and Management Policies _
Management Policies" in the Statement of Additional Information.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL -- The Fund's net asset value per share should be expected to
fluctuate. The Fund's investment in high yield Fixed-Income Securities may
cause the Fund's share price to be highly volatile at times. Investors should
consider the Fund as a supplement to an overall investment program and should
invest only if they are willing to undertake the risks involved. See
"Investment Objectives and Management Policies_Management Policies" in the
Statement of Additional Information for a further discussion of certain
risks.
HIGH YIELD-LOWER RATED SECURITIES -- The Fund generally will invest in
Fixed-Income Securities rated below investment grade such as those rated Ba
by Moody's and BB by S&P, Fitch and Duff or as low as the lowest rating
assigned by Moody's, S&P, Fitch or Duff (commonly known as junk bonds). They
generally are not meant for short-term investing and may be subject to
certain risks with respect to the issuing entity and to greater market
fluctuations than certain lower yielding, higher rated Fixed-Income
Securities. The retail secondary market for these securities also may be less
liquid than that of higher rated securities; adverse conditions could make it
difficult at times for the Fund to sell certain securities or could result in
lower prices than those used in calculating the Fund's net asset value.
Bond prices are inversely related to interest rate changes; however,
bond price volatility also is inversely related to coupon. Accordingly, below
investment grade Fixed Income Securities may be relatively less sensitive to
interest rate changes than higher quality Fixed Income Securities of
comparable maturity, because of their higher coupon. This higher coupon is
what the investor receives in return for bearing greater credit risk. The
higher credit risks associated with below investment grade Fixed Income
Securities potentially can have greater affect on the value of such
securities than may be the case with higher quality issues of comparable
maturity. See "Appendix _ Certain Portfolio Securities _ High Yield-Lower
Rated Securities" below and "Appendix" in the Statement of Additional
Information.
FOREIGN SECURITIES -- Foreign securities markets generally are not as
developed or efficient as those in the United States. Securities of some
foreign issuers are less liquid and more volatile than securities of
comparable U.S. issuers. Similarly, volume and liquidity in most foreign
securities markets are less than in the United States and, at times,
volatility of price can be greater than in the United States.
Because evidences of ownership of such securities usually are held
outside the United States, the Fund will be subject to additional risks which
include possible adverse political and economic developments, seizure or
nationalization of foreign deposits and adoption of governmental restrictions
which
Page 6

might adversely affect the payment of principal and interest on the
foreign securities or restrict the payment of principal and interest to
investors located outside the country of the issuer, whether from currency
blockage or otherwise.
Developing countries have economic structures that are generally less
diverse and mature, and political systems that are less stable, than those of
developed countries. The markets of developing countries may be more volatile
than the markets of more mature economies; however, such markets may provide
higher rates of return to investors. Many developing countries providing
investment opportunities for the Fund have experienced substantial, and in
some periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had and may continue to have
adverse effects on the economies and securities markets of certain of these
countries.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in
U.S. dollars may be affected favorably or unfavorably by changes in currency
rates and exchange control regulations.
FOREIGN CURRENCY TRANSACTIONS -- Currency exchange rates may fluctuate
significantly over short periods of time. They generally are determined by
the forces of supply and demand in the foreign exchange markets and the
relative merits of investments in different countries, actual or perceived
changes in interest rates and other complex factors, as seen from an
international perspective. Currency exchange rates also can be affected
unpredictably by intervention by U.S. or foreign governments or central
banks, or the failure to intervene, or by currency controls or political
developments in the United States or abroad. See "Appendix _ Investment
Techniques _ Foreign Currency Transactions."
USE OF DERIVATIVES -- The Fund may invest, to a limited extent, in
derivatives ("Derivatives"). These are financial instruments which derive
their performance, at least in part, from the performance of an underlying
asset, index or interest rate. The Derivatives the Fund may use include
options and futures, mortgage-related securities, asset-backed securities and
swaps. While Derivatives can be used effectively in furtherance of the Fund's
investment objective, under certain market conditions, they can increase the
volatility of the Fund's net asset value, can decrease the liquidity of the
Fund's portfolio and make more difficult the accurate pricing of the Fund's
portfolio. See "Appendix _ Investment Techniques_Use of Derivatives" below
and "Investment Objectives and Management Policies _ Management Policies _
Derivatives" in the Statement of Additional Information.
SIMULTANEOUS INVESTMENTS -- Investment decisions for the Fund are made
independently from those of the other investment companies advised by The
Dreyfus Corporation. If, however, such other investment companies desire to
invest in, or dispose of, the same securities as the Fund, available
investments or opportunities for sales will be allocated equitably to each
investment company. In some cases, this procedure may adversely affect the
size of the position obtained for or disposed of by the Fund or the price
paid or received by the Fund.
MANAGEMENT OF THE FUND

The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the
Company, subject to the authority of the Company's Board in accordance with
Massachusetts law. The Fund's primary portfolio manager is Roger King. He has
held that position since the Fund's inception, and has been employed by The
Dreyfus Corporation since February 1996. Prior thereto, Mr. King was a Vice
President of High Yield Research, and, most recently, Director of High Yield
Research, at Citibank Securities, Inc. The Fund's other portfolio managers
Page 7

are identified in the Statement of Additional Information. The Dreyfus
Corporation also provides research services for the Fund and for other funds
advised by The Dreyfus Corporation through a professional staff of portfolio
managers and securities analysts.

Under the terms of the Management Agreement, the Fund has agreed to
pay The Dreyfus Corporation a monthly fee at the annual rate of .65 of 1% of
the value of the Fund's average daily net assets. From time to time, The
Dreyfus Corporation may waive receipt of its fees and/or voluntarily assume
certain expenses of the Fund, which would have the effect of lowering the
expense ratio of the Fund and increasing yield to investors. The Fund will
not pay The Dreyfus Corporation at a later time for any amounts it may waive,
nor will the Fund reimburse The Dreyfus Corporation for any amounts it may
assume.
In allocating brokerage transactions for the Fund, The Dreyfus
Corporation seeks to obtain the best execution of orders at the most
favorable net price. Subject to this determination, The Dreyfus Corporation
may consider, among other things, the receipt of research services and/or the
sale of shares of the Fund or other funds managed, advised or administered by
The Dreyfus Corporation as factors in the selection of broker-dealers to
execute portfolio transactions for the Fund. See "Portfolio Transactions" in
the Statement of Additional Information.
The Dreyfus Corporation may pay the Fund's distributor for
shareholder services from The Dreyfus Corporation's own assets, including
past profits but not including the management fee paid by the Fund. The
Fund's distributor may use part or all of such payments to pay Service Agents
in respect of these services.
EXPENSES -- All expenses incurred in the operation of the Company are borne
by the Company, except to the extent specifically assumed by The Dreyfus
Corporation. The expenses borne by the Company include: organizational costs,
taxes, interest, loan commitment fees, interest and distributions paid on
securities sold short, brokerage fees and commissions, if any, fees of Board
members who are not officers, directors, employees or holders of 5% or more
of the outstanding voting securities of The Dreyfus Corporation or any of its
affiliates, Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of independent
pricing services, costs of maintaining the Company's existence, costs
attributable to investor services (including, without limitation, telephone
and personnel expenses), costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders, costs of shareholders' reports and
meetings, and any extraordinary expenses. Expenses attributable to the Fund
are charged against the assets of the Fund; other expenses of the Company are
allocated among the Company's portfolios on the basis determined by the
Company's Board, including, but not limited to, proportionately in relation
to the net assets of each portfolio.
Page 8

TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN -- Dreyfus Transfer,
Inc., a wholly-owned subsidiary of The Dreyfus Corporation, P.O. Box 9671,
Providence, Rhode Island 02940-9671, is the Fund's Transfer and Dividend
Disbursing Agent (the "Transfer Agent"). Mellon Bank, N.A., located at One
Mellon Bank Center, Pittsburgh, Pennsylvania 15258, serves as the Fund's
Custodian.
HOW TO BUY SHARES
Fund shares are sold without a sales charge. You may be charged a fee
if you effect transactions in Fund shares through a securities dealer, bank
or other financial institution (collectively, "Service Agents"). Share
certificates are issued only upon your written request. No certificates are
issued for fractional shares. The Fund reserves the right to reject any
purchase order.
The minimum initial investment is $2,500, or $1,000 if you are a
client of a Service Agent which maintains an omnibus account in the Fund and
has made an aggregate minimum initial purchase for its customers of $2,500.
Subsequent investments must be at least $100. However, the minimum initial
investment for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7)
Plans with only one participant is $750, with no minimum for subsequent
purchases. Individuals who open an IRA also may open a non-working spousal
IRA with a minimum initial investment of $250. Subsequent investments in a
spousal IRA must be at least $250. The initial investment must be accompanied
by the Account Application. For full-time or part-time employees of The
Dreyfus Corporation or any of its affiliates or subsidiaries, directors of
The Dreyfus Corporation, Board members of a fund advised by The Dreyfus
Corporation, including members of the Company's Board, or the spouse or minor
child of any of the foregoing, the minimum initial investment is $1,000. For
full-time or part-time employees of The Dreyfus Corporation or any of its
affiliates or subsidiaries who elect to have a portion of their pay directly
deposited into their Fund account, the minimum initial investment is $50. The
Fund reserves the right to offer Fund shares without regard to minimum
purchase requirements to employees participating in certain qualified or
non-qualified employee benefit plans or other programs where contributions or
account information can be transmitted in a manner and form acceptable to the
Fund. The Fund reserves the right to vary further the initial and subsequent
investment minimum requirements at any time. Fund shares also are offered
without regard to the minimum initial investment requirements through
Dreyfus-AUTOMATIC Asset BuilderRegistration Mark, Dreyfus Government Direct
Deposit Privilege or Dreyfus Payroll Savings Plan pursuant to the Dreyfus
Step Program described under "Shareholder Services." These services enable
you to make regularly scheduled investments and may provide you with a
convenient way to invest for long-term financial goals. You should be aware,
however, that periodic investment plans do not guarantee a profit and will
not protect an investor against loss in a declining market.
You may purchase Fund shares by check or wire, or through the Dreyfus
TELETRANSFER Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds," or, if for Dreyfus retirement plan accounts, to
"The Dreyfus Trust Company, Custodian" and should specify that you are
investing in the Fund. Payments to open new accounts which are mailed should
be sent to The Dreyfus Family of Funds, P.O. Box 9387, Providence, Rhode
Island 02940-9387, together with your Account Application. For subsequent
investments, your Fund account number should appear on the check and an
investment slip should be enclosed and sent to The Dreyfus Family of Funds,
P.O. Box 105, Newark, New Jersey 07101-0105. For Dreyfus retirement plan
accounts, both initial and subsequent investments should be sent to The
Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence, Rhode Island
02940-6427. Neither initial nor subsequent investments should be made by
third party check. Purchase orders may be delivered in person only to a
Dreyfus Financial Center. THESE ORDERS WILL BE FORWARDED
Page 9

TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For the location
of the nearest Dreyfus Financial Center, please call one of the telephone
numbers listed under "General Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, DDA# 8900312033/Dreyfus Income
Funds/Dreyfus Short Term High Yield Fund, for purchase of Fund shares in your
name. The wire must include your Fund account number (for new accounts, your
Taxpayer Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If your initial purchase of
Fund shares is by wire, please call 1-800-645-6561 after completing your wire
payment to obtain your Fund account number. Please include your Fund account
number on the Account Application and promptly mail the Account Application
to the Fund, as no redemptions will be permitted until the Account
Application is received. You may obtain further information about remitting
funds in this manner from your bank. All payments should be made in U.S.
dollars and, to avoid fees and delays, should be drawn only on U.S. banks. A
charge will be imposed if any check used for investment in your account does
not clear. The Fund makes available to certain large institutions the ability
to issue purchase instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct the
institution to transmit immediately available funds through the Automated
Clearing House to The Bank of New York with instructions to credit your Fund
account. The instructions must specify your Fund account registration and
Fund account number PRECEDED BY THE DIGITS "1111."
Fund shares are sold on a continuous basis at the net asset value per
share next determined after an order in proper form is received by the
Transfer Agent or other agent. Net asset value per share is determined as of
the close of trading on the floor of the New York Stock Exchange (currently
4:00 p.m., New York time), on each day the New York Stock Exchange is open
for business. For purposes of determining net asset value, options and
futures contracts will be valued 15 minutes after the close of trading on the
floor of the New York Stock Exchange. Net asset value per share is computed
by dividing the value of the Fund's net assets (i.e., the value of its assets
less liabilities) by the total number of Fund shares outstanding. The Fund's
investments are valued generally at market value or, where market quotations
are not readily available, at fair value as determined by or under the
direction of the Company's Board. For further information regarding the
methods employed in valuing the Fund's investments, see "Determination of Net
Asset Value" in the Statement of Additional Information.
For certain institutions that have entered into agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted, and
must be received by the Transfer Agent, within three business days after the
order is placed. If such payment is not received within three business days
after the order is placed, the order may be canceled and the institution
could be held liable for resulting fees and/or losses.
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs or (ii) such plan's or program's aggregate investment in the Dreyfus
Family of Funds or certain other products made available by the Distributor
to such plans or programs exceeds $1,000,000 ("Eligible Benefit Plans").
Shares of funds in the Dreyfus Family of Funds then held by Eligible Benefit
Plans will be aggregated to determine the fee payable. The Distributor
reserves the right to cease paying these fees at any time. The Distributor
will pay such fees from its own funds, other than amounts received from the
Fund, including past profits or any other source available to it.
Page 10

Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service (the "IRS").
DREYFUS TELETRANSFER PRIVILEGE -- You may purchase shares (minimum $500,
maximum $150,000 per day) by telephone if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds will
be transferred between the bank account designated in one of these documents
and your Fund account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
The Fund may modify or terminate this Privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of shares by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES
FUND EXCHANGES
You may purchase, in exchange for shares of the Fund, shares of
certain other funds managed or administered by The Dreyfus Corporation, to
the extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, you should consult your Service Agent or
call 1-800-645-6561 to determine if it is available and whether any
conditions are imposed on its use.

To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. Before any exchange, you must
obtain and should review a copy of the current prospectus of the fund into
which the exchange is being made. Prospectuses may be obtained by calling
1-800-645-6561. Except in the case of personal retirement plans, the shares
being exchanged must have a current value of at least $500; furthermore, when
establishing a new account by exchange, the shares being exchanged must have
a value of at least the minimum initial investment required for the fund into
which the exchange is being made. The ability to issue exchange instructions
by telephone is given to all Fund shareholders automatically, unless you
check the applicable "No" box on the Account Application, indicating that you
specifically refuse this Privilege. The Telephone Exchange Privilege may be
established for an existing account by written request, signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-645-6561 or, by oral request from any of the
authorized signatories on the account, also by calling 1-800-645-6561. If you
have established the Telephone Exchange Privilege, you may telephone exchange
instructions (including over The Dreyfus TouchRegistration Mark automated
telephone system) by calling 1-800-645-6561. If you are calling from
overseas, call 516-794-5452. See "How to Redeem Shares _ Procedures." Upon
an exchange into a new account, the following shareholder services and
privileges, as applicable and where available, will be automatically carried
over to the fund into which the exchange is made: Telephone Exchange
Privilege, Wire Redemption Privilege, Telephone Redemption Privilege, Dreyfus
TELETRANSFER Privilege and the dividend/capital gain distribution option
(except for Dreyfus Dividend Sweep) selected by the investor.

Distributor. Any such qualification is subject to confirmation of your
holdings through a check of appropriate records. See "Shareholder Services" in
the Statement of Additional Information. No fees currently are charged
shareholders directly in connection with exchanges, although the Fund reserves
the right, upon not less than 60 days' written notice, to charge shareholders
a nominal fee in accordance with rules promulgated by the Securities and
Exchange Commission. The Fund reserves the right to reject any exchange
request in whole or in part. The availability of Fund Exchanges may be
modified or terminated at any time upon notice to shareholders. See
"Dividends, Distributions and Taxes."
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
the Fund, in shares of certain other funds in the Dreyfus Family of Funds of
which you are a shareholder. The amount you designate, which can be expressed
either in terms of a specific dollar or share amount ($100 minimum), will be
exchanged automatically on the first and/or fifteenth day of the month
according to the schedule you have selected. Shares will be exchanged at the
then-current net asset value; however, a sales load may be charged with
respect to exchanges into funds sold with a sales load. See "Shareholder
Services" in the Statement of Additional Information. The right to exercise
this Privilege may be modified or canceled by the Fund or the Transfer Agent.
You may modify or cancel your exercise of this Privilege at any time by
mailing written notification to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. The Fund may charge a service fee for
the use of this Privilege. No such fee currently is contemplated. For more
information concerning this Privilege and the funds in the Dreyfus Family of
Funds eligible to participate in this Privilege, or to obtain a Dreyfus
Auto-Exchange Authorization Form, please call toll free 1-800-645-6561. See
"Dividends, Distributions and Taxes."
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. Only an account maintained at a domestic
financial institution which is an Automated Clearing House member may be so
designated. To establish a Dreyfus-AUTOMATIC Asset Builder account, you must
file an authorization form with the Transfer Agent. You may obtain the
necessary authorization form by calling 1-800-645-6561. You may cancel your
participation in this Privilege or change the amount of purchase at any time
by mailing written notification to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus retirement plan
accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427, and the notification will be effective three
business days following receipt. The Fund may modify or terminate this
Privilege at any time or charge a service fee. No such fee currently is
contemplated.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to purchase
Fund shares (minimum of $100 and maximum of $50,000 per transaction) by
having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into your
Fund account. You may deposit as much of such payments as you elect. To
enroll in Dreyfus Government Direct Deposit, you must file with the Transfer
Agent a completed Direct Deposit Sign-Up Form for each type of payment that
you desire to include in this Privilege. The appropriate form may be obtained
by calling 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency. The
Fund may terminate your participation upon 30 days' notice to you.
Page 12

DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase Fund shares
(minimum of $100 per transaction) automatically on a regular basis. Depending
upon your employer's direct deposit program, you may have part or all of your
paycheck transferred to your existing Dreyfus account electronically through
the Automated Clearing House system at each pay period. To establish a
Dreyfus Payroll Savings Plan account, you must file an authorization form
with your employer's payroll department. Your employer must complete the
reverse side of the form and return it to The Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may change the amount of
purchase or cancel the authorization only by written notification to your
employer. It is the sole responsibility of your employer, not the
Distributor, The Dreyfus Corporation, the Fund, the Transfer Agent or any
other person, to arrange for transactions under the Dreyfus Payroll Savings
Plan. The Fund may modify or terminate this Privilege at any time or charge a
service fee. No such fee currently is contemplated.
DREYFUS STEP PROGRAM
Dreyfus Step Program enables you to purchase Fund shares without
regard to the Fund's minimum initial investment requirements through
Dreyfus-AUTOMATIC Asset BuilderRegistration Mark, Dreyfus Government Direct
Deposit Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step
Program account, you must supply the necessary information on the Account
Application and file the required authorization form(s) with the Transfer
Agent. For more information concerning this Program, or to request the
necessary authorization form(s), please call toll free 1-800-782-6620. You
may terminate your participation in this Program at any time by discontinuing
your participation in Dreyfus-AUTOMATIC Asset Builder, Dreyfus Government
Direct Deposit Privilege or Dreyfus Payroll Savings Plan, as the case may be,
as provided under the terms of such Privilege(s). The Fund may modify or
terminate this Program at any time. Investors who wish to purchase Fund
shares through the Dreyfus Step Program in conjunction with a
Dreyfus-sponsored retirement plan may do so only for IRAs, SEP-IRAs and IRA
"Rollover Accounts."
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by the Fund in
shares of another fund in the Dreyfus Family of Funds of which you are a
shareholder. Shares of the other fund will be purchased at the then-current
net asset value; however, a sales load may be charged with respect to
investments in shares of a fund sold with a sales load. If you are investing
in a fund that charges a sales load, you may qualify for share prices which
do not include the sales load or which reflect a reduced sales load. If you
are investing in a fund that charges a contingent deferred sales charge, the
shares purchased will be subject on redemption to the contingent deferred
sales charge, if any, applicable to the purchased shares. See "Shareholder
Services" in the Statement of Additional Information. Dreyfus Dividend ACH
permits you to transfer electronically dividends or dividends and capital
gain distributions, if any, from the Fund to a designated bank account. Only
an account maintained at a domestic financial institution which is an
Automated Clearing House member may be so designated. Banks may charge a fee
for this service.
For more information concerning these privileges or to request a
Dividend Options Form, please call toll free 1-800-645-6561. You may cancel
these privileges by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. To select a new
fund after cancellation, you must submit a new Dividend Options Form.
Enrollment in or cancellation of these privileges is effective three business
days following receipt. These privileges are available only for existing
accounts and may not be used to open new accounts. Minimum subsequent
investments do not apply for Dreyfus Dividend Sweep. The Fund may modify or
terminate these privileges at any time or charge a service fee. No such fee
currently is contemplated. Shares held under Keogh Plans, IRAs or other
retirement plans are not eligible for Dreyfus Dividend Sweep.
Page 13

AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account. An application for the Automatic
Withdrawal Plan can be obtained by calling 1-800-645-6561. The Automatic
Withdrawal Plan may be ended at any time by you, the Fund or the Transfer
Agent. Shares for which certificates have been issued may not be redeemed
through the Automatic Withdrawal Plan.
RETIREMENT PLANS
The Fund offers a variety of pension and profit-sharing plans,
including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts," 401(k)
Salary Reduction Plans and 403(b)(7) Plans. Plan support services also are
available. You can obtain details on the various plans by calling the
following numbers toll free: for Keogh Plans, please call 1-800-358-5566;
for IRAs and IRA "Rollover Accounts," please call 1-800-645-6561; or for
SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7) Plans, please call
1-800-322-7880.
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value.
Service Agents may charge their clients a fee for effecting
redemptions of Fund shares. Any certificates representing Fund shares being
redeemed must be submitted with the redemption request. The value of the
shares redeemed may be more or less than their original cost, depending upon
the Fund's then-current net asset value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY DREYFUS
TELETRANSFER PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDERRegistration
Mark AND SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER
AGENT, THE REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK
CLEARANCE OF YOUR PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE OR
DREYFUS-AUTOMATIC ASSET BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS
DAYS OR MORE. IN ADDITION, THE FUND WILL REJECT REQUESTS TO REDEEM SHARES BY
WIRE OR TELEPHONE OR PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE FOR A
PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE
PURCHASE CHECK, THE DREYFUS TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC
ASSET BUILDER ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE
PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF
YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE
REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS
ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED TO
EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares will not be
redeemed until the Transfer Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 30 days' written notice if your account's net asset value is
$500 or less and remains so during the notice period.
PROCEDURES
You may redeem shares by using the regular redemption procedure
through the Transfer Agent, or, if you have checked the appropriate box and
supplied the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent, through the Wire Redemption
Privilege, the Telephone Redemption Privilege or the Dreyfus TELETRANSFER
Privilege. Other redemption procedures may be in effect for clients of
certain Service Agents. The Fund makes available
Page 14

to certain large institutions the ability to issue redemption instructions
through compatible computer facilities. The Fund reserves the right to refuse
any request made by wire or telephone, including requests made shortly after a
change of address, and may limit the amount involved or the number of such
requests. The Fund may modify or terminate any redemption Privilege at any
time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated. Shares held under Keogh Plans, IRAs or other
retirement plans, and shares for which certificates have been issued, are not
eligible for the Wire Redemption, Telephone Redemption or Dreyfus TELETRANSFER
Privilege.

During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used. During the delay, the Fund's net asset value may fluctuate.
REGULAR REDEMPTION -- Under the regular redemption procedure, you may redeem
shares by written request mailed to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus retirement plan
accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427. Redemption requests may be delivered in person only
to a Dreyfus Financial Center. THESE REQUESTS WILL BE FORWARDED TO THE FUND
AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For the location of the
nearest Dreyfus Financial Center, please call one of the telephone numbers
listed under "General Information." Redemption requests must be signed by
each shareholder, including each owner of a joint account, and each signature
must be guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP") and the Stock Exchanges Medallion Program. If you
have any questions with respect to signature-guarantees, please call one of
the telephone numbers listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
WIRE REDEMPTION PRIVILEGE -- You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. You also may direct that redemption proceeds be paid by
check (maximum $150,000 per day) made out to the owners of record and mailed
to your address. Redemption proceeds of less than $1,000 will be paid
automatically by check. Holders of jointly registered Fund or bank accounts
may have redemption proceeds of not more than $250,000 wired within any
30-day period. You may telephone redemption requests by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. The
Statement of Additional Information sets forth instructions for transmitting
redemption requests by wire.
Page 15

TELEPHONE REDEMPTION PRIVILEGE -- You may request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
DREYFUS TELETRANSFER PRIVILEGE -- You may request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an Automated Clearing House member may be
designated. Redemption proceeds will be on deposit in your account at an
Automated Clearing House member bank ordinarily two days after receipt of the
redemption request or, at your request, paid by check (maximum $150,000 per
day) and mailed to your address. Holders of jointly registered Fund or bank
accounts may redeem through the Dreyfus TELETRANSFER Privilege for transfer
to their bank account not more than $250,000 within any 30-day period.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of shares by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan, pursuant to which
it pays the Distributor for the provision of certain services to Fund
shareholders a fee at the 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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Under the Internal Revenue Code of 1986, as amended (the "Code"), the
Fund is treated as a separate entity for purposes of qualification and
taxation as a regulated investment company. The Fund ordinarily declares
dividends from its net investment income on each day the New York Stock
Exchange is open for business. Dividends usually are paid on the last
business day of each month. The Fund's earnings for Saturdays, Sundays and
holidays are declared as dividends on the next business day. If you redeem all
shares in your account at any time during the month, all dividends to which
you are entitled will be paid to you along with the proceeds of the
redemption. If you are an omnibus accountholder and indicate in a partial
redemption request that a portion of any accrued dividends to which such
account is entitled belongs to an underlying accountholder who has redeemed
all shares in his or her account, such portion of the accrued dividends will
be paid to you along with the proceeds of the redemption. Distributions from
net realized securities gains, if any, generally are declared and paid once a
year, but the Fund may make distributions more regularly to comply with the
distribution requirements of the Code, in all events in a manner consistent
with the provisions of the 1940 Act. The Fund will not make distributions
from net realized securities gains unless capital loss carryovers, if any,
have been utilized or have expired. You may choose whether to receive
dividends and distributions in cash or to reinvest in additional shares at
net asset value. All expenses are accrued daily and deducted before
declaration of dividends to investors.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Fund will be taxable to U.S. shareholders
as ordinary income whether received in cash or reinvested in additional
shares. No dividend paid by the Fund will qualify for the dividends received
deduction allowable to certain U.S. corporations. Distributions from net
realized long-term securities gains of the Fund will be taxable to U.S.
shareholders as long-term capital gains for Federal income tax purposes,
regardless of how long shareholders have held their Fund shares and whether
such distributions are received in cash or reinvested in Fund shares. The
Code provides
Page 16

that the net capital gain of an individual generally will not be subject to
Federal income tax at a rate in excess of 28%. Dividends and distributions
may be subject to state and local taxes.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Fund to a foreign investor generally are
subject to U.S. nonresident withholding taxes at the rate of 30%, unless the
foreign investor claims the benefit of a lower rate specified in a tax
treaty. Distributions from net realized long-term securities gains paid by
the Fund to a foreign investor as well as the proceeds of any redemptions
from a foreign investor's account, regardless of the extent to which gain or
loss may be realized, generally will not be subject to U.S. nonresident
withholding tax. However, such distributions may be subject to backup
withholding, as described below, unless the foreign investor certifies his
non-U.S. residency status.
Notice as to the tax status of your dividends and distributions will
be mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends, distributions
from net realized securities gains and the proceeds of any redemption,
regardless of the extent to which gain or loss may be realized, paid to a
shareholder if such shareholder fails to certify either that the TIN furnished
in connection with opening an account is correct or that such shareholder has
not received notice from the IRS of being subject to backup withholding as a
result of a failure to properly report taxable dividend or interest income on
a Federal income tax return. Furthermore, the IRS may notify the Fund to
institute backup withholding if the IRS determines a shareholder's TIN is
incorrect or if a shareholder has failed to properly report taxable dividend
and interest income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
record owner of the account, and may be claimed as a credit on the record
owner's Federal income tax return.
Management of the Company believes that the Fund has qualified for
the fiscal year ended October 31, 1996 as a "regulated investment company"
under the Code. The Fund intends to continue to so qualify if such
qualification is in the best interests of its shareholders. Such
qualification relieves the Fund of any liability for Federal income tax to
the extent its earnings are distributed in accordance with applicable
provisions of the Code. The Fund is subject to a non-deductible 4% excise
tax, measured with respect to certain undistributed amounts of taxable
investment income and capital gains.
You should consult your tax adviser regarding specific questions as
to Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance may be calculated on several
bases, including current yield, average annual total return and/or total
return.
Current yield refers to the Fund's annualized net investment income
per share over a 30-day period, expressed as a percentage of the net asset
value per share at the end of the period. For purposes of calculating current
yield, the amount of net investment income per share during that 30-day
period, computed in accordance with regulatory requirements, is compounded by
assuming that it is reinvested at a constant rate over a six-month period. An
identical result is then assumed to have occurred during a second six-month
period which, when added to the result for the first six months, provides an
"annual-
Page 17

ized" yield for an entire one-year period. Calculations of current yield may
reflect absorbed expenses pursuant to any undertaking that may be in effect.
See "Management of the Fund."
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment was purchased with an initial
payment of $1,000 and that the investment was redeemed at the end of a stated
period of time, after giving effect to the reinvestment of dividends and
distributions during the period. The return is expressed as a percentage rate
which, if applied on a compounded annual basis, would result in the
redeemable value of the investment at the end of the period. Advertisements
of the Fund's performance will include the Fund's average annual total return
for one, five and ten year periods, or for shorter periods depending upon the
length of time during which the Fund has operated.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the net asset
value per share at the beginning of the period. Advertisements may include
the percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes the
application of the percentage rate of total return.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Moody's Bond Survey Bond Index, Bond Buyer's
20-Bond Index, Morningstar, Inc. and other industry publications.
GENERAL INFORMATION
The Company was organized as an unincorporated business trust under
the laws of the Commonwealth of Massachusetts pursuant to an Agreement and
Declaration of Trust (the "Trust Agreement") dated July 24, 1985, and
commenced operations on October 1, 1986. Before January 2, 1996, the
Company's name was Dreyfus Strategic Income. The Company is authorized to
issue an unlimited number of shares of beneficial interest, par value $.001
per share. Each share has one vote.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of a
Massachusetts business trust. However, the Trust Agreement disclaims
shareholder liability for acts or obligations of the Company and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by the Company or a Trustee. The Trust
Agreement provides for indemnification from the Fund's property for all
losses and expenses of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder's incurring
financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations
, a possibility which management believes is remote. Upon payment of any
liability incurred by the Fund, the shareholder paying such liability will be
entitled to reimbursement from the general assets of the Fund. The Company
intends to conduct its operations in such a way so as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of the Fund.
The Company is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for
certain matters under the 1940 Act and for other purposes. A shareholder of
one portfolio is not deemed to be a shareholder of any other portfolio. For
certain matters shareholders vote together as a group; as to others they vote
separately by portfolio. By this Prospectus, shares of the Fund are being
offered. Other portfolios are sold pursuant to other offering documents.
Page 18

To date, the Board has authorized the creation of four series of
shares. All consideration received by the Company for shares of one of the
series and all assets in which such consideration is invested will belong to
that series (subject only to the rights of creditors of the Company) and will
be subject to the liabilities related thereto. The income attributable to,
and the expenses of, one series are treated separately from those of the
other series. The Company has the ability to create, from time to time, new
series without shareholder approval.
The Transfer Agent maintains a record of your ownership and sends you
confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561. In New York City, call 1-718-895-1206; outside the U.S. and
Canada, call 516-794-5452.
Page 19

APPENDIX
INVESTMENT TECHNIQUES
FOREIGN CURRENCY TRANSACTIONS -- Foreign currency transactions may be entered
into for a variety of purposes, including: to fix in U.S. dollars, between
trade and settlement date, the value of a security the Fund has agreed to buy
or sell; to hedge the U.S. dollar value of securities the Fund already owns,
particularly if it expects a decrease in the value of the currency in which
the foreign security is denominated; or to gain exposure to the foreign
currency in an attempt to realize gains.
Foreign currency transactions may involve, for example, the Fund's
purchase of foreign currencies for U.S. dollars or the maintenance of short
positions in foreign currencies, which would involve the Fund agreeing to
exchange an amount of a currency it did not currently own for another
currency at a future date in anticipation of a decline in the value of the
currency sold relative to the currency the Fund contracted to receive in the
exchange. The Fund's success in these transactions will depend principally on
The Dreyfus Corporation's ability to predict accurately the future exchange
rates between foreign currencies and the U.S. dollar.
SHORT-SELLING -- In these transactions, the Fund sells a security it does not
own in anticipation of a decline in the market value of the security. To
complete the transaction, the Fund must borrow the security to make delivery
to the buyer. The Fund is obligated to replace the security borrowed by
purchasing it subsequently at the market price at the time of replacement.
The price at such time may be more or less than the price at which the
security was sold by the Fund, which would result in a loss or gain,
respectively.
Securities will not be sold short if, after effect is given to any
such short sale, the total market value of all securities sold short would
exceed 25% of the value of the Fund's net assets. The Fund may not sell short
the securities of any single issuer listed on a national securities exchange
to the extent of more than 5% of the value of the Fund's net assets. The Fund
may not make a short sale which results in the Fund having sold short in the
aggregate more than 5% of the outstanding securities of any class of an
issuer.
The Fund also may make short sales "against the box," in which the
Fund enters into a short sale of a security it owns in order to hedge an
unrealized gain on the security. At no time will more than 15% of the value
of the Fund's net assets be in deposits on short sales against the box.
LENDING PORTFOLIO SECURITIES -- The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to be
entitled to payments in amounts equal to the interest or other distributions
payable on the loaned securities which affords the Fund an opportunity to
earn interest on the amount of the loan and at the same time to earn income
on the loaned securities' collateral. Loans of portfolio securities may not
exceed 33 1/3% of the value of the Fund's total assets, and the Fund will
receive collateral consisting of cash, U.S. Government securities or
irrevocable letters of credit which will be maintained at all times in an
amount equal to at least 100% of the current market value of the loaned
securities. Such loans are terminable by the Fund at any time upon specified
notice. The Fund might experience risk of loss if the institution with which
it has engaged in a portfolio loan transaction breaches its agreement with
the Fund.
LEVERAGE -- Leveraging will exaggerate the effect on net asset value of any
increase or decrease in the market value of the Fund's portfolio. Money
borrowed for leveraging will be limited to 33 1/3% of the value of the Fund's
total assets. These borrowings will be subject to interest costs which may or
may not be recovered by appreciation of the securities purchased; in certain
cases, interest costs may exceed the return received on the securities
purchased.
The Fund may enter into reverse repurchase agreements with banks,
brokers or dealers. This form of borrowing involves the transfer by the Fund
of an underlying debt instrument in return for cash proceeds based on a
percentage of the value of the security. The Fund retains the right to
receive interest and principal payments on the security. At an agreed upon
future date, the Fund repurchases the security at principal plus accrued
interest. Except for these transactions, the Fund's borrowings generally will
be unsecured.
Page 20

USE OF DERIVATIVES -- The Fund may invest in the types of Derivatives
enumerated under "Description of the Fund -- Investment Considerations and
Risks -- Use of Derivatives." These instruments and certain related risks are
described more specifically under "Investment Objectives and Management
Policies -- Derivatives" in the Statement of Additional Information.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and the
portfolio as a whole. Derivatives permit the Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level
of risk, or change the character of the risk, of its portfolio by making
investments in specific securities.
Derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in Derivatives
could have a large potential impact on the Fund's performance.
If the Fund invests in Derivatives at inappropriate times or judges
market conditions incorrectly, such investments may lower the Fund's return
or result in a loss. The Fund also could experience losses if it were unable
to liquidate its position because of an illiquid secondary market. The market
for many Derivatives is, or suddenly can become, illiquid. Changes in
liquidity may result in significant, rapid and unpredictable changes in the
prices for Derivatives.
Although the Fund will not be a commodity pool, Derivatives subject
the Fund to the rules of the Commodity Futures Trading Commission which limit
the extent to which the Fund can invest in certain Derivatives. The Fund may
invest in futures contracts and options with respect thereto for hedging
purposes without limit. However, the Fund may not invest in such contracts
and options for other purposes if the sum of the amount of initial margin
deposits and premiums paid for unexpired options with respect to such
contracts, other than for bona fide hedging purposes, exceed 5% of the
liquidation value of the Fund's assets, after taking into account unrealized
profits and unrealized losses on such contracts and options; provided,
however, that in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.
The Fund may invest up to 5% of its assets, represented by the
premium paid, in the purchase of call and put options. The Fund may write
(i.e, sell) covered call and put option contracts to the extent of 20% of the
value of its net assets at the time such option contracts are written. When
required by the Securities and Exchange Commission, the Fund will set aside
permissible liquid assets in a segregated account to cover its obligations
relating to its transactions in Derivatives. To maintain this required cover,
the Fund may have to sell portfolio securities at disadvantageous prices or
times since it may not be possible to liquidate a Derivative position at a
reasonable price.

CERTAIN PORTFOLIO SECURITIES
HIGH YIELD-LOWER RATED SECURITIES -- Securities rated Ba by Moody's are
judged to have speculative elements; their future cannot be considered as
well assured and often the protection of interest and principal payments may
be very moderate. Securities rated BB by S&P, Fitch or Duff are regarded as
having predominantly speculative characteristics and, while such obligations
have less near-term vulnerability to default than other speculative grade
debt, they face major ongoing uncertainties or exposure to adverse
Page 21

business, financial or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payments. Securities rated C by
Moody's are regarded as having extremely poor prospects of ever attaining any
real investment standing. Securities rated D by S&P, Fitch and Duff are in
default and the payment of interest and/or repayment of principal is in
arrears. Such securities, though high yielding, are characterized by great
risk. See "Appendix" in the Statement of Additional Information for a general
description of securities ratings.
These securities may be particularly susceptible to economic
downturns. It is likely that an economic recession could disrupt severely the
market for such securities and may have an adverse impact on the value of
such securities. In addition, it is likely that any such economic downturn
could adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon and increase the incidence of default for
such securities.
The ratings of Moody's, S&P, Fitch or Duff represent their opinions
as to the quality of the obligations which they undertake to rate. Ratings
are relative and subjective and, although ratings may be useful in evaluating
the safety or interest and principal payments, they do not evaluate the
market value risk of such obligations. Although these ratings may be an
initial criterion for selection of portfolio investments, The Dreyfus
Corporation also will evaluate these securities and the ability of the issuers
of such securities to pay interest and principal. The Fund's ability to
achieve its investment objective may be more dependent on The Dreyfus
Corporation's credit analysis than might be the case for a fund that invested
in higher rated securities.

The average distribution of investments of the Fund in corporate
bonds (excluding preferred stock, convertible preferred stock and convertible
bonds) by ratings for the period from August 16, 1996 (commencement of
operations) to October 31, 1996, calculated monthly on a dollar weighted
basis, was as follows:

<TABLE>
<CAPTION>
MOODY'S OR S&P, FITCH OR DUFF PERCENTAGE
------------- -------------------------- -----------------
<S> <C> <C>
Aaa AAA 7.0%
Baa BBB 1.4%
Ba BB 20.4%
B B 68.5%
Caa CCC 6.9%
NR NR 3.9%*
--------
108.1%**
--------
--------
</TABLE>

* These unrated securities have been determined by The Dreyfus
Corporation to be of comparable quality to securities rated B.

** The Fund also owns preferred stock (.76%). Approximately (8.8%) of the
Fund's assets were invested in cash or cash equivalents.

consisting of commercial banks, thrift institutions, insurance companies,
finance companies or other financial institutions one or more of which
administers the security on behalf of the syndicate (the "Agent Bank").
Co-Lenders may sell such securities to third parties called "Participants."
The Fund may invest in such securities either by participating as a Co-Lender
at origination or by acquiring an interest in the security from a Co-Lender
or a Participant (collectively, "participation interests"). Co-Lenders and
Participants interposed between the Fund and the corporate borrower (the
"Borrower"), together with Agent Banks, are referred to herein as
"Intermediate Participants." The Fund also may purchase a participation
interest in a portion of the rights of an Intermediate Participant. The Fund
will not act as an Agent Bank, guarantor, sole negotiator or sole structuror
with respect to securities that are the subject of a participation interest.
A participation interest gives the Fund an undivided interest in the security
in the proportion that the Fund's participation interest bears to the total
principal amount of the security. These instruments may have fixed, floating
or variable rates of interest. For certain participation interests, the Fund
will have the right to demand payment, on not more than seven days' notice,
for all or any part of the Fund's participation interest in the security,
plus accrued interest. As to these instruments, the Fund intends to exercise
its right to demand payment only upon a default under the terms of the
security, as needed to provide liquidity to meet redemptions, or to maintain
or improve the quality of its investment portfolio. The Fund will not invest
more than 15% of the value of its net assets in participation interests
maturing in more than seven days that do not have this demand feature, and in
other securities that are illiquid.
MORTGAGE-RELATED SECURITIES -- Mortgage-related securities are a form of
Derivative collateralized by pools of mortgages. The mortgage-related
securities which may be purchased include those with fixed, floating and
variable interest rates, those with interest rates that change based on
multiples of changes in interest rates and those with interest rates that
change inversely to changes in interest rates, as well as stripped
mortgage-backed securities. Stripped mortgage-backed securities usually are
structured with two classes that receive different proportions of interest
and principal distributions on a pool of mortgage-backed securities or whole
loans. A common type of stripped mortgage-backed security will have one class
receiving some of the interest and most of the principal from the mortgage
collateral, while the other class will receive most of the interest and the
remainder of the principal. Although certain mortgage-related securities are
guaranteed by a third party or otherwise similarly secured, the market value
of the security, which may fluctuate, is not secured. If a mortgage-related
security is purchased at a premium, all or part of the premium may be lost if
there is a decline in the market value of the security, whether resulting
from changes in interest rates or prepayments on the underlying mortgage
collateral.
As with other interest-bearing securities, the prices of certain
mortgage-related securities are inversely affected by changes in interest
rates. However, although the value of a mortgage-related security may decline
when interest rates rise, the converse is not necessarily true, since in
periods of declining interest rates the mortgages underlying the security are
more likely to be prepaid. For this and other reasons, a mortgage-related
security's stated maturity may be shortened by unscheduled prepayments on the
underlying mortgages, and, therefore, it is not possible to predict
accurately the security's return to the Fund. Moreover, with respect to
stripped mortgage-backed securities, if the underlying mortgage securities
experience greater than anticipated prepayments of principal, the Fund may
fail to fully recoup its initial investment even if the securities are rated
in the highest rating category by a nationally recognized statistical rating
organization.
The mortgage-related securities in which the Fund may invest also
include multi-class pass-through certificates secured principally by mortgage
loans on commercial properties. These mortgage-related securities are
structured similarly to mortgage-related securities secured by pools of
residential mortgages. Commercial lending, however, generally is viewed as
exposing the lender to a greater risk of loss than one- to four-family
residential lending. Commercial lending, for example, typically involves
larger
Page 23

loans to single borrowers or groups of related borrowers than residential
one- to four-family mortgage loans. In addition, the repayment of loans
secured by income producing properties typically is dependent upon the
successful operation of the related real estate project and the cash flow
generated therefrom. Consequently, adverse changes in economic conditions and
circumstances are more likely to have an adverse impact on mortgage-related
securities secured by loans on commercial properties than on those secured by
loans on residential properties.
During periods of rapidly rising interest rates, prepayments of
mortgage-backed securities may occur at slower than expected rates. Slower
prepayments effectively may change a mortgage-backed security that was
considered short or intermediate-term at the time of purchase into a
long-term security. The values of long-term securities generally fluctuate
more widely in response to changes in interest rates than short or
intermediate-term securities. Were the prepayments on a Fund's
mortgage-backed securities to decrease broadly, the Fund's effective
duration, and thus sensitivity to increase rate fluctuations, would increase.
Therefore, depending on the circumstances, such an increase could result in
an effective duration of more than three years.
ASSET-BACKED SECURITIES -- Asset-backed securities are a form of Derivative.
The securitization techniques used for asset-backed securities are similar to
those used for mortgage-related securities. The collateral for these
securities has included home equity loans, automobile and credit card
receivables, boat loans, computer leases, airplane leases, mobile home loans,
recreational vehicle loans and hospital account receivables. The Fund may
invest in these and other types of asset-backed securities that may be
developed in the future.
Asset-backed securities present certain risks that are not presented
by mortgage-backed securities. Primarily, these securities may provide the
Fund with a less effective security interest in the related collateral than
do mortgage-backed securities. Therefore, there is the possibility that
recoveries on the underlying collateral may not, in some cases, be available
to support payments on these securities.
MUNICIPAL OBLIGATIONS -- Municipal obligations are debt obligations issued by
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities, or
multistate agencies or authorities. Municipal obligations bear fixed,
floating or variable rates of interest. Certain municipal obligations are
subject to redemption at a date earlier than their stated maturity pursuant
to call options, which may be separated from the related municipal
obligations and purchased and sold separately. The Fund also may acquire call
options on specific municipal obligations. The Fund generally would purchase
these call options to protect the Fund from the issuer of the related
municipal obligation redeeming, or other holder of the call option from
calling away, the municipal obligation before maturity.
While, in general, municipal obligations are tax exempt securities
having relatively low yields as compared to taxable, non-municipal
obligations of similar quality, certain municipal obligations are taxable
obligations, offering yields comparable to, and in some cases greater than,
the yields available on other permissible Fund investments. Dividends
received by shareholders on Fund shares which are attributable to interest
income received by the Fund from municipal obligations generally will be
subject to Federal income tax. The Fund may invest in municipal obligations,
the ratings of which correspond with the ratings of other permissible Fund
investments. The Fund currently intends to invest no more than 25% of its
assets in municipal obligations. However, this percentage may be varied from
time to time without shareholder approval.
ZERO COUPON SECURITIES -- The Fund may invest in zero coupon U.S. Treasury
securities, which are Treasury Notes and Bonds that have been stripped of
their unmatured interest coupons, the coupons themselves and receipts or
certificates representing interests in such stripped debt obligations and
coupons. Zero coupon securities also are issued by corporations and financial
institutions which constitute a proportionate ownership of the issuer's pool
of underlying U.S. Treasury securi-
Page 24

ties. A zero coupon security pays no interest to its holder during its life
and is sold at a discount to its face value at maturity. The market prices of
zero coupon securities generally are more volatile than the market prices of
securities that pay interest periodically and are likely to respond to a
greater degree to changes in interest rates than non-zero coupon securities
having similar maturities and
credit qualities.
FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL ENTITIES -- The
Fund may invest in obligations issued or guaranteed by one or more foreign
governments or any of their political subdivisions, agencies or
instrumentalities that are determined by The Dreyfus Corporation to be of
comparable quality to the other obligations in which the Fund may invest.
Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the World Bank), the European Coal and Steel Community, the
Asian Development Bank and the InterAmerican Development Bank.
MONEY MARKET INSTRUMENTS -- The Fund may invest in the following types of
money market instruments.
U.S. GOVERNMENT SECURITIES. Securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities include U.S. Treasury
securities that differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the Treasury;
others by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others only by the credit
of the agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. While the U.S. Government provides financial
support to such U.S. Government-sponsored agencies and instrumentalities, no
assurance can be given that it will always do so since it is not so obligated
by law.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Fund buys, and
the seller agrees to repurchase, a security at a mutually agreed upon time
and price (usually within seven days). The repurchase agreement thereby
determines the yield during the purchaser's holding period, while the
seller's obligation to repurchase is secured by the value of the underlying
security. Repurchase agreements could involve risks in the event of a default
or insolvency of the other party to the agreement, including possible delays
or restrictions upon the Fund's ability to dispose of the underlying
securities. The Fund may enter into repurchase agreements with certain banks
or non-bank dealers.
BANK OBLIGATIONS. The Fund may purchase certificates of deposit, time
deposits, bankers' acceptances and other short-term obligations issued by
domestic banks, foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions. With respect to such securities
issued by foreign subsidiaries or foreign branches of domestic banks, and
domestic and foreign branches of foreign banks, the Fund may be subject to
additional investment risks that are different in some respects from those
incurred by a fund which invests only in debt obligations of U.S. domestic
issuers. See "Description of the Fund -- Investment Considerations and Risks
- -- Foreign Securities."
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period
of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven
days) at a stated interest rate.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments reflect
the obligation both of the bank and the drawer to pay the
Page 25

face amount of the instrument upon maturity. The other short-term obligations
may include uninsured, direct obligations bearing fixed, floating or variable
interest rates.
COMMERCIAL PAPER. Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs. The commercial
paper purchased by the Fund will consist only of direct obligations which, at
the time of their purchase, are (a) rated not lower than Prime-1 by Moody's,
A-1 by S&P, F-1 by Fitch or Duff-1 by Duff, (b) issued by companies having an
outstanding unsecured debt issue currently rated at least A3 by Moody's or A-
by S&P, Fitch or Duff, or (c) if unrated, determined by The Dreyfus
Corporation to be of comparable quality to those rated obligations which may
be purchased by the Fund.
ILLIQUID SECURITIES -- The Fund may invest up to 15% of the value of its net
assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment
objective. Such securities may include securities that are not readily
marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, repurchase agreements providing for
settlement in more than seven days after notice, and certain privately
negotiated, non-exchange traded options and securities used to cover such
options. As to these securities, the Fund is subject to a risk that should
the Fund desire to sell them when a ready buyer is not available at a price
the Fund deems representative of their value, the value of the Fund's net
assets could be adversely affected.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 26

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Page 27

Short Term
High Yield
Fund

Prospectus

Registration Mark

Copy Rights 1997 Dreyfus Service Corporation
044p030397
Page 28

DREYFUS INCOME FUNDS

DREYFUS EQUITY DIVIDEND FUND
DREYFUS HIGH YIELD SECURITIES FUND
DREYFUS SHORT TERM HIGH YIELD FUND
DREYFUS STRATEGIC INCOME FUND

PART B
(STATEMENT OF ADDITIONAL INFORMATION)

MARCH 3, 1997

This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus Equity Dividend Fund dated March 3, 1997, Dreyfus High Yield
Securities Fund dated March 3, 1997, Dreyfus Short Term High Yield Fund
dated March 3, 1997, and Dreyfus Strategic Income Fund dated March 3, 1997
(each, a "Fund" and collectively, the "Funds") of Dreyfus Income Funds (the
"Company"), respectively, as each may be revised from time to time. To
obtain a copy of the relevant Fund's Prospectus, please write to a Fund at
144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or call the
following numbers:

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

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

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

TABLE OF CONTENTS
Page

Investment Objectives and Management Policies B-2
Management of the Company B-18
Management Agreement B-23
Purchase of Shares B-25
Shareholder Services Plan B-25
Redemption of Shares B-27
Shareholder Services B-29
Determination of Net Asset Value B-32
Dividends, Distributions and Taxes B-33
Portfolio Transactions B-35
Performance Information B-36
Information About the Funds B-37
Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors B-38
Appendix B-39
Financial Statements B-48
Report of Independent Auditors B-59

INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES

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

Portfolio Securities

American Depository Receipts. (Dreyfus Equity Dividend Fund only) The
Fund may invest in American Depository Receipts, through "sponsored" or
"unsponsored" facilities. A sponsored facility is established jointly by
the issuer of the underlying security and a depositary, whereas a depositary
may establish an unsponsored facility without participation by the issuer of
the deposited security. Holders of unsponsored depositary receipts
generally bear all the costs of such facilities and the depositary of an
unsponsored facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the deposited
security or to pass through voting rights to the holders of such receipts in
respect of the deposited securities.

Repurchase Agreements. (All Funds) The Fund's custodian or sub-
custodian will have custody of, and will hold in a segregated account,
securities acquired by a Fund under a repurchase agreement. Repurchase
agreements are considered by the staff of the Securities and Exchange
Commission to be loans by the Fund. In an attempt to reduce the risk of
incurring a loss on a repurchase agreement, each Fund will enter into
repurchase agreements only with domestic banks with total assets in excess
of $1 billion, or primary government securities dealers reporting to the
Federal Reserve Bank of New York, with respect to securities of the type in
which the Fund may invest, and will require that additional securities be
deposited with it if the value of the securities purchased should decrease
below the resale price.

Commercial Paper and Other Short-Term Corporate Obligations. (All
Funds) These instruments include variable amount master demand notes, which
are obligations that permit a Fund to invest fluctuating amounts at varying
rates of interest pursuant to direct arrangements between the Fund, as
lender, and the borrower. These notes permit daily changes in the amounts
borrowed. Because these obligations are direct lending arrangements between
the lender and borrower, it is not contemplated that such instruments
generally will be traded, and there generally is no established secondary
market for these obligations, although they are redeemable at face value,
plus accrued interest, at any time. Accordingly, where these obligations
are not secured by letters of credit or other credit support arrangements,
the Fund's right to redeem is dependent on the ability of the borrower to
pay principal and interest on demand. Such obligations frequently are not
rated by credit rating agencies, and a Fund may invest in them only if at
the time of an investment the borrower meets the criteria set forth in the
Fund's Prospectus for other commercial paper issuers.

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

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

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

Warrants. (Dreyfus High Yield Securities Fund, Dreyfus Short Term High
Yield Fund (collectively, "Dreyfus High Yield Funds"), and Dreyfus Strategic
Income Fund only). A warrant is an instrument issued by a corporation which
gives the holder the right to subscribe to a specified amount of the
corporations's capital stock at a set price for a specified period of time.
The Fund may invest up to 5% of its net assets in warrants, except that this
limitation does not apply to warrants purchased by the Fund that are sold in
units with, or attached to, other securities.

Common Stock. (Dreyfus High Yield Funds and Dreyfus Strategic Income
Fund only). From time to time, the Fund may hold common stock sold in units
with, or attached to, debt securities purchased by the Fund. The Fund also
may hold common stock received upon the conversion of convertible
securities.

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

Participation Interests. (Dreyfus High Yield Funds only) The Fund may
invest in short-term corporate obligations denominated in U.S. and foreign
currencies that are originated, negotiated and structured by a syndicate of
lenders ("Co-Lenders") consisting of commercial banks, thrift institutions,
insurance companies, financial companies or other financial institutions one
or more of which administers the security on behalf of the syndicate (the
"Agent Bank"). Co-Lenders may sell such securities to third parties called
"Participants." The Fund may invest in such securities either by
participating as a Co-Lender at origination or by acquiring an interest in
the security from a Co-Lender or a Participant (collectively, "participation
interests"). Co-Lenders and Participants interposed between the Fund and
the corporate borrower (the "Borrower"), together with Agent Banks, are
referred herein as "Intermediate Participants." The Fund also may purchase
a participation interest in a portion of the rights of an Intermediate
Participant, which would not establish any direct relationship between the
Fund and the Borrower. In such cases, the Fund would be required to rely on
the Intermediate Participant that sold the participation interest not only
for the enforcement of the Fund's rights against the Borrower but also for
the receipt and processing of payments due to the Fund under the security.
Because it may be necessary to assert through an Intermediate Participant
such rights as may exist against the Borrower, in the event the Borrower
fails to pay principal and interest when due, the Fund may be subject to
delays, expenses and risks that are greater than those that would be
involved if the Fund would enforce its rights directly against the Borrower.
Moreover, under the terms of a participation interest, the Fund may be
regarded as a creditor of the Intermediate Participant (rather than of the
Borrower), so that the Fund may also be subject to the risk that the
Intermediate Participant may become insolvent. Similar risks may arise with
respect to the Agent Bank if, for example, assets held by the Agent Bank for
the benefit of the Fund were determined by the appropriate regulatory
authority or court to be subject to the claims of the Agent Bank's
creditors. In such case, the Fund might incur certain costs and delays in
realizing payment in connection with the participation interest or suffer a
loss of principal and/or interest. Further, in the event of the bankruptcy
or insolvency of the Borrower, the obligation of the Borrower to repay the
loan may be subject to certain defenses that can be asserted by such
Borrower as a result of improper conduct by the Agent Bank or Intermediate
Participant.

Municipal Obligations. (Dreyfus High Yield Funds and Dreyfus Strategic
Income Fund only) Municipal obligations generally include debt obligations
issued to obtain funds for various public purposes as well as certain
industrial development bonds issued by or on behalf of public authorities.
Municipal obligations are classified as general obligation bonds, revenue
bonds and notes. General obligation bonds are secured by the issuer's
pledge of its faith, credit and taxing power for the payment of principal
and interest. Revenue bonds are payable from the revenue derived from a
particular facility or class of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source, but not from
the general taxing power. Industrial development bonds, in most cases, are
revenue bonds that generally do not carry the pledge of the credit of the
issuing municipality, but generally are guaranteed by the corporate entity
on whose behalf they are issued. Notes are short-term instruments which are
obligations of the issuing municipalities or agencies and are sold in
anticipation of a bond sale, collection of taxes or receipt of other
revenues. Municipal obligations include municipal lease/purchase agreements
which are similar to installment purchase contracts for property or
equipment issued by municipalities.

Mortgage-Related Securities. (Dreyfus High Yield Funds and Dreyfus
Strategic Income Fund only)

Government-Agency Securities--Mortgage-related securities issued by the
Government National Mortgage Association ("GNMA") include GNMA Mortgage Pass-
Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee
is backed by the full faith and credit of the United States. GNMA is a
wholly-owned U.S. Government corporation within the Department of Housing
and Urban Development. GNMA certificates also are supported by the
authority of GNMA to borrow funds from the U.S. Treasury to make payments
under its guarantee.

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

Mortgage-related securities issued by the Federal Home Loan Mortgage
Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates
(also known as "Freddie Macs" or "Pcs"). FHLMC is a corporate
instrumentality of the United States created pursuant to an Act of Congress,
which is owned entirely by Federal Home Loan Banks. Freddie Macs are not
guaranteed by the United States or by any Federal Home Loan Bank and do not
constitute a debt or obligation of the United States or of any Federal Home
Loan Bank. Freddie Macs entitle the holder to timely payment of interest,
which is guaranteed by FHLMC. FHLMC guarantees either ultimate collection
or timely payment of all principal payments on the underlying mortgage
loans. When FHLMC does not guarantee timely payment of principal, FHLMC may
remit the amount due on account of its guarantee of ultimate payment of
principal at any time after default on an underlying mortgage, but in no
event later than one year after it becomes payable.

Private Entity Securities--These mortgage-related securities are issued by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other non-governmental issuers. Timely
payment of principal and interest on mortgage-related securities backed by
pools created by non-governmental issuers often is supported partially by
various forms of insurance or guarantees, including individual loan, title,
pool and hazard insurance. The insurance and guarantees are issued by
government entities, private insurers and the mortgage poolers. There can
be no assurance that the private insurers or mortgage poolers can meet their
obligations under the policies, so that if the issuers default on their
obligations the holders of the security could sustain a loss. No insurance
or guarantee covers the Fund or the price of the Fund's shares. Mortgage-
related securities issued by non-governmental issuers generally offer a
higher rate of interest than government-agency and government-related
securities because there are no direct or indirect government guarantees of
payment.

Foreign Government Obligations; Securities of Supranational Entities.
(Dreyfus High Yield Funds and Dreyfus Strategic Income Fund only) The Fund
may invest in obligations issued or guaranteed by one or more foreign
governments or any of their political subdivisions, agencies or
instrumentalities that are determined by the Manager to be of comparable
quality to the other obligations in which the Fund may invest. Such
securities also include debt obligations of supranational entities.
Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the World Bank), the European Coal and Steel Community, the
Asian Development Bank and the InterAmerican Development Bank.

Zero Coupon Securities. (Dreyfus High Yield Funds and Dreyfus
Strategic Income Fund only) The Fund may invest in zero coupon U.S.
Treasury securities, which are Treasury Notes and Bonds that have been
stripped of their unmatured interest coupons, the coupons themselves and
receipts or certificates representing interests in such stripped debt
obligations and coupons. Zero coupon securities also are issued by
corporations and financial institutions which constitute a proportionate
ownership of the issuer's pool of underlying U.S. Treasury securities. A
zero coupon security pays no interest to its holder during its life and is
sold at a discount to its face value at maturity. The market prices of zero
coupon securities generally are more volatile than the market prices of
securities that pay interest periodically and are likely to respond to a
greater degree to changes in interest rates than non-zero coupon securities
having similar maturities and credit qualities.

Management Policies

Portfolio Maturity. (Dreyfus Short Term High Yield Fund only) Under
normal market conditions, the average effective portfolio maturity of the
Fund is expected to be three years to less. For purposes of calculating
average effective portfolio maturity, a security that is subject to
redemption at the option of the issuer on a particular date (the "call
date") which is prior to the security's stated maturity may be deemed to
mature on the call date rather than on its stated maturity date. The call
date of a security will be used to calculate average effective portfolio
maturity when the Manager reasonably anticipates, based upon information
available to it, that the issuer will exercise its right to redeem the
security. The Manager may base its conclusion on such factors as the
interest rate paid on the security compared to prevailing market rates, the
amount of cash available to the issuer of the security, events affecting the
issuer of the security, and other factors that may compel or make it
advantageous for the issuer to redeem a security prior to its stated
maturity.

Leverage. (Dreyfus High Yield Funds and Dreyfus Strategic Income Fund
only) For borrowings for investment purposes, the Investment Company Act of
1940, as amended (the "1940 Act"), requires the Fund to maintain continuous
asset coverage (that is, total assets including borrowings, less liabilities
exclusive of borrowings) of 300% of the amount borrowed. If the required
coverage should decline as a result of market fluctuations or other reasons,
the Fund may be required to sell some of its portfolio securities within
three days to reduce the amount of its borrowings and restore the 300% asset
coverage, even though it may be disadvantageous from an investment
standpoint to sell securities at that time. The Fund also may be required
to maintain minimum average balances in connection with such borrowing or
pay a commitment or other fee to maintain a line of credit; either of these
requirements would increase the cost of borrowing over the stated interest
rate. To the extent the Fund enters into a reverse repurchase agreement,
the Fund will maintain in a segregated custodial account cash or U.S.
Government securities or other liquid debt securities at least equal to the
aggregate amount of its reverse repurchase obligations, plus accrued
interest, in certain cases, in accordance with releases promulgated by the
Securities and Exchange Commission. The Securities and Exchange Commission
views reverse repurchase transactions as collateralized borrowings by the
Fund.

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

Securities will not be sold short if, after effect is given to any such
short sale, the total market value of all securities sold short would exceed
25% of the value of a Fund's net assets. The Fund may not sell short the
securities of any single issuer listed on a national securities exchange to
the extent of more than 5% of the value of the Fund's net assets. The Fund
may not make a short sale which results in the Fund having sold short in the
aggregate more than 5% of the outstanding securities of any class of an
issuer.

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

Until the Fund closes its short position or replaces the borrowed
security, it will: (a) maintain a segregated account, containing cash or
U.S. Government securities, at such a level that the amount deposited in the
account plus the amount deposited with the broker as collateral always
equals the current value of the security sold short; or (b) otherwise cover
its short position.

Lending Portfolio Securities. (Dreyfus High Yield Funds and Dreyfus
Strategic Income Fund only) The Fund may lend securities from its portfolio
to brokers, dealers and other financial institutions needing to borrow
securities to complete certain transactions. The Fund continues to be
entitled to payments in amounts equal to the interest, dividends or other
distributions payable on the loaned securities, which affords the Fund an
opportunity to earn interest on the amount of the loan and on the loaned
securities' collateral. Loans of portfolio securities may not exceed 33-
1/3% of the value of the Fund's total assets, and the Fund will receive
collateral consisting of cash, U.S. Government securities or irrevocable
letters of credit which will be maintained at all times in an amount equal
to at least 100% of the current market value of the loaned securities. Such
loans are terminable by the Fund at any time upon specified notice. The
Fund might experience risk of loss if the institution with which it has
engaged in a portfolio loan transaction breaches its agreement with the
Fund. In connection with its securities lending transactions, the Fund may
return to the borrower or a third party which is unaffiliated with the Fund,
and which is acting as a "placing broker," a part of the interest earned
from the investment of collateral received for securities loaned.

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

Derivatives. (All Funds) A Fund may invest in Derivatives (as defined
in the relevant Fund's Prospectus) for a variety of reasons, including to
hedge certain market risks, to provide a substitute for purchasing or
selling particular securities or to increase potential income gain.
Derivatives may provide a cheaper, quicker or more specifically focused way
for the Fund to invest than "traditional" securities would.

Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and
the portfolio as a whole. Derivatives permit a Fund to increase or decrease
the level of risk, or change the character of the risk, to which its
portfolio is exposed in much the same way as the Fund can increase or
decrease the level of risk, or change the character of the risk, of its
portfolio by making investments in specific securities.

Derivatives may entail investment exposures that are greater than their
cost would suggest, meaning that a small investment in Derivatives could
have a large potential impact on a Fund's performance.

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

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

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

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

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

Pursuant to regulations and/or published positions of the Securities
and Exchange Commission, a Fund may be required to segregate cash or high
quality money market instruments in connection with its commodities
transactions in an amount generally equal to the value of the underlying
commodity. The segregation of such assets will have the effect of limiting
a Fund's ability otherwise to invest those assets.

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

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

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

Interest Rate Swaps. (Dreyfus High Yield Funds only) Interest rate swaps
involve the exchange by the Fund with another party of their respective
commitments to pay or receive interest (for example, an exchange of floating
rate payments for fixed-rate payments). The exchange commitments can
involve payments to be made in the same currency or in different currencies.
The use of interest rate swaps is a highly specialized activity which
involves investment techniques and risks different from those associated
with ordinary portfolio security transactions. If the Manager is incorrect
in its forecasts of market values, interest rates and other applicable
factors, the investment performance of the Fund would diminish compared with
what it would have been if these investment techniques were not used.
Moreover, even if the Manager is correct in its forecasts, there is a risk
that the swap position may correlate imperfectly with the price of the asset
or liability being hedged. There is no limit on the amount of interest rate
swap transactions that may be entered into by the Fund. These transactions
do not involve the delivery of securities or other underlying assets or
principal. Accordingly, the risk of loss with respect to interest rate
swaps is limited to the net amount of interest payments that the Fund is
contractually obligated to make. If the other party to an interest rate
swap defaults, the Fund's risk of loss consists of the net amount of
interest payments that the Fund contractually is entitled to receive.

Credit Derivatives. (Dreyfus High Yield Funds only) The Fund may engage in
credit derivative transactions. There are two broad categories of credit
derivatives: default price risk derivatives and market spread derivatives.
Default price risk derivatives are linked to the price of reference
securities or loans after a default by the issuer or borrower, respectively.
Market spread derivatives are based on the risk that changes in market
factors, such as credit spreads, can cause a decline in the value of a
security, loan or index. There are three basic transactional forms for
credit derivatives: swaps, options and structured instruments. The use of
credit derivatives is a highly specialized activity which involves
strategies and risks different from those associated with ordinary portfolio
security transactions. If the Manager is incorrect in its forecasts of
default risks, market spreads or other applicable factors, the investment
performance of the Fund would diminish compared with what it would have been
if these techniques were not used. Moreover, even if the Manager is correct
in its forecasts, there is a risk that a credit derivative position may
correlate imperfectly with the price of the asset or liability being hedged.
There is no limit on the amount of credit derivative transactions that may
be entered into by the Fund. The Fund's risk of loss in a credit derivative
transaction varies with the form of the transaction. For example, if the
Fund purchases a default option on a security, and if no default occurs with
respect to the security, the Fund's loss is limited to the premium it paid
for the default option. In contrast, if there is a default by the grantor
of a default option, the Fund's loss will include both the premium that it
paid for the option and the decline in value of the underlying security that
the default option hedged.

Options--In General. (All Funds) A Fund may purchase and write (i.e.,
sell) call or put options with respect to specific securities. A call
option gives the purchaser of the option the right to buy, and obligates the
writer to sell, the underlying security or securities at the exercise price
at any time during the option period, or at a specific date. Conversely, a
put option gives the purchaser of the option the right to sell, and
obligates the writer to buy, the underlying security or securities at the
exercise price at any time during the option period, or at a specific date.

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

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

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

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

Dreyfus Equity Dividend Fund and Dreyfus High Yield Funds also may
purchase cash-settled options on equity index swaps and interest rate swaps,
respectively, in pursuit of its investment objective. Equity index swaps
involve the exchange by the Fund with another party of cash flows based upon
the performance of an index or a portion of an index of securities which
usually includes dividends. A cash-settled option on a swap gives the
purchaser the right, but not the obligation, in return for the premium paid,
to receive an amount of cash equal to the value of the underlying swap as of
the exercise date. These options typically are purchased in privately
negotiated transactions from financial institutions, including securities
brokerage firms.

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

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

Forward Commitments. (All Funds) A Fund may purchase securities on a
forward commitment or when-issued basis, which means that delivery and
payment take place a number of days after the date of the commitment to
purchase. The payment obligation and the interest rate receivables on a
forward commitment or when-issued security are fixed when the Fund enters
into the commitment, but a Fund does not make payment until it receives
delivery from the counterparty. A Fund will commit to purchase such
securities only with the intention of actually acquiring the securities, but
the Fund may sell these securities before the settlement date if it is
deemed advisable. A segregated account of the Fund consisting of cash, cash
equivalents or U.S. Government securities or other liquid debt securities at
least equal at all times to the amount of the commitments will be
established and maintained at the Fund's custodian bank.

Securities purchased on a forward commitment or when-issued basis are
subject to changes in value (generally changing in the same way, i.e.,
appreciating when interest rates decline and depreciating when interest
rates rise) based upon the public's perception of the creditworthiness of
the issuer and changes, real or anticipated, in the level of interest rates.
Securities purchased on a forward commitment or when-issued basis may expose
a Fund to risks because they may experience such fluctuations prior to their
actual delivery. Purchasing securities on a when-issued basis can involve
the additional risk that the yield available in the market when the delivery
takes place actually may be higher than that obtained in the transaction
itself. Purchasing securities on a forward commitment or when-issued basis
when a Fund is fully or almost fully invested may result in greater
potential fluctuation in the value of the Fund's net assets and its net
asset value per share.

Investment Considerations and Risks

Lower Rated Securities. (Dreyfus High Yield Funds and Dreyfus
Strategic Income Fund only) Each of these Funds is permitted to invest in
securities rated Ba or lower by Moody's Investors Service, Inc. ("Moody's")
or BB or lower by Standard & Poor's Ratings Group ("S&P"), Fitch Investors
Service, L.P. ("Fitch") and Duff & Phelps Credit Rating Co. ("Duff" and with
Moody's, S&P and Fitch, the "Rating Agencies"). Dreyfus Strategic Income
Fund is permitted to invest in securities rated as low as Caa by Moody's or
CCC by S&P. Dreyfus High Yield Funds each are permitted to invest in
securities as low as the lowest rating assigned by the Rating Agencies.
Such securities, though higher yielding, are characterized by risk. See
"Description of the Fund--Investment Considerations and Risks--High Yield-
Lower Rated Securities" in each Prospectus for Dreyfus High Yield Funds and
"Description of the Fund--Risk Factors--Lower Rated Securities" in
the Prospectus for Dreyfus Strategic Income Fund for a discussion of certain
risks and the "Appendix" for a general description of the Rating Agencies'
ratings. Although ratings may be useful in evaluating the safety of
interest and principal payments, they do not evaluate the market value risk
of these securities. The Fund will rely on the Manager's judgment, analysis
and experience in evaluating the creditworthiness of an issuer.

Investors should be aware that the market values of many of these
securities tend to be more sensitive to economic conditions than are higher
rated securities. These securities generally are considered by the Rating
Agencies to be predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation
and generally will involve more credit risk than securities in the higher
rating categories.

Companies that issue certain of these securities often are highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of
such issuers generally is greater than is the case with the higher rated
securities. For example, during an economic downturn or a sustained period
of rising interest rates, highly leveraged issuers of these securities may
not have sufficient revenues to meet their interest payment obligations.
The issuer's ability to service its debt obligations also may be affected
adversely by specific corporate developments, forecasts, or the
unavailability of additional financing. The risk of loss because of default
by the issuer is significantly greater for the holders of these securities
because such securities generally are unsecured and often are subordinated
to other creditors of the issuer.

Because there is no established retail secondary market for many of
these securities, the Fund anticipates that such securities could be sold
only to a limited number of dealers or institutional investors. To the
extent a secondary trading market for these securities does exist, it
generally is not as liquid as the secondary market for higher rated
securities. The lack of a liquid secondary market may have an adverse
impact on market price and yield and the Fund's ability to dispose of
particular issues when necessary to meet the Fund's liquidity needs or in
response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. The lack of a liquid secondary market for
certain securities also may make it more difficult for the Fund to obtain
accurate market quotations for purposes of valuing the Fund's portfolio and
calculating its net asset value. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of these securities. In such cases, judgment may play
a greater role in valuation because less reliable, objective data may be
available.

These securities may be particularly susceptible to economic downturns.
It is likely that an economic recession could disrupt severely the market
for such securities and may have an adverse impact on the value of such
securities. In addition, it is likely that any such economic downturn could
adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon and increase the incidence of default for
such securities.

A Fund may acquire these securities during an initial offering. Such
securities may involve special risks because they are new issues. No Fund
has an arrangement with any person concerning the acquisition of such
securities, and the Manager will review carefully the credit and other
characteristics pertinent to such new issues.

Investment Restrictions

Dreyfus Equity Dividend Fund and Dreyfus High Yield Funds only. Each
of these Funds has adopted investment restrictions numbered 1 through 10 as
fundamental policies, which cannot be changed, as to a Fund, without
approval by the holders of a majority (as defined in the 1940 Act) of the
Fund's outstanding voting shares. Investment restrictions numbered 11
through 16 are not fundamental policies and may be changed by vote of a
majority of the Company's Board members at any time. None of these Funds
may:

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

2. Hold more than 10% of the outstanding voting securities of any single
issuer. This Investment Restriction applies only with respect to 75%
of the Fund's total assets.

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

4. Invest in commodities, except that the Fund may purchase and sell
options, forward contracts, futures contracts, including those related to
indices, and options on futures contracts or indices.

5. Purchase, hold or deal in real estate, or oil, gas or other mineral
leases or exploration or development programs, but the Fund may
purchase and sell securities that are secured by real estate or issued by
companies that invest or deal in real estate or real estate investment
trusts.

6. Borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowing to no more than 33 1/3% of the value of
the Fund's total assets). For purposes of this Investment Restriction, the
entry into options, forward contracts, futures contracts, including those
relating to indices, and options on futures contracts or indices shall not
constitute borrowing.

7. Make loans to others, except through the purchase of debt obligations
and the entry into repurchase agreements. However, the Fund may
lend its portfolio securities in an amount not to exceed 33-1/3% of the
value of its total assets. Any loans of portfolio securities will be made
according to guidelines established by the Securities and Exchange
Commission and the Company's Board.

8. Act as an underwriter of securities of other issuers, except to the
extent the Fund may be deemed an underwriter under the Securities Act of 1933,
as amended, by virtue of disposing of portfolio securities.

9. Issue any senior security (as such term is defined in Section 18(f)
of the 1940 Act), except to the extent the activities permitted in Investment
Restriction Nos. 4, 6, 13 and 14 may be deemed to give rise to a senior
security.

10. Purchase securities on margin, but the Fund may make margin deposits
in connection with transactions in options, forward contracts, futures
contracts, and options on futures contracts.

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

12. Invest in the securities of a company for the purpose of exercising
management or control, but the Fund will vote the securities it
owns in its portfolio as a shareholder in accordance with its views.

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

14. Purchase, sell or write puts, calls or combinations thereof, except
as described in the relevant Fund's Prospectus and Statement of Additional
Information.

15. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid, if,
in the aggregate, more than 15% of the value of the Fund's net assets would
be so invested.

16. Purchase securities of other investment companies, except to the
extent permitted under the 1940 Act.

* * *

Dreyfus Strategic Income Fund only. The Fund has adopted investment
restrictions numbered 1 through 14 as fundamental policies, which cannot be
changed without approval by the holders of a majority (as defined in the
1940 Act) of the Fund's outstanding voting shares. Investment restriction
number 15 is not a fundamental policy and may be changed by vote of a
majority of the Company's Board members at any time. The Fund may not:

1. Purchase the securities of any issuer (other than a bank) if such
purchase would cause more than 5% of the value of its total assets to be
invested in securities of such issuer, or invest more than 15% of its assets
in the obligations of any one bank, except that up to 25% of the value of
the Fund's total assets may be invested, and securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities may be
purchased, without regard to such limitations. Notwithstanding the
foregoing, based on rules of the Securities and Exchange Commission, the
Fund will not invest more than 5% of its assets in the obligations of any
one bank, except as otherwise provided in such rules.

2. Purchase the securities of any issuer if such purchase would cause
the Fund to hold more than 10% of the outstanding voting securities of such
issuer. This restriction applies only with respect to 75% of the Fund's
assets.

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

4. Purchase securities of closed-end investment companies except (a)
in the open market where no commission except the ordinary broker's
commission is paid, which purchases are limited to a maximum of (i) 3% of
the total voting stock of any one closed-end investment company, (ii) 5% of
its net assets with respect to any one closed-end investment company and
(iii) 10% of its net assets in the aggregate, or (b) those received as part
of a merger or consolidation. The Fund may not purchase the securities of
open-end investment companies other than itself.

5. Purchase or retain the securities of any issuer if the officers,
Trustees or Directors of the Fund or the Manager individually own
beneficially more than 1/2 of 1% of the securities of such issuer or
together own beneficially more than 5% of the securities of such issuer.

6. Purchase, hold or deal in real estate, or oil and gas interests,
but the Fund may purchase and sell securities that are secured by real
estate and may purchase and sell securities issued by companies that invest
or deal in real estate.

7. Invest in commodities, except that the Fund may purchase and sell
futures contracts, including those relating to indices, and options on
futures contracts or indices.

8. Borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowing to no more than 33-1/3% of the value of
the Fund's total assets). For purposes of this investment restriction, the
entry into options, futures contracts, including those relating to indices,
and options on futures contracts or indices shall not constitute borrowing.

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

10. Make loans to others except through the purchase of debt
obligations or the entry into repurchase agreements. However, the Fund may
lend its portfolio securities in an amount not to exceed 33-1/3% of the
value of its total assets. Any loans of portfolio securities will be made
according to guidelines established by the Securities and Exchange
Commission and the Fund's Board members.

11. Act as an underwriter of securities of other issuers except to the
extent the Fund may be deemed an underwriter under the Securities Act of
1933, as amended, by virtue of disposing of portfolio securities.

12. Invest in the securities of a company for the purpose of
exercising management or control, but the Fund will vote the securities it
owns in its portfolio as a shareholder in accordance with its views.

13. Purchase, sell or write puts, calls or combinations thereof,
except as described in the Fund's Prospectus and this Statement of
Additional Information.

14. Invest more than 25% of its assets in investments in any
particular industry or industries (including banking), provided that, when
the Fund has adopted a temporary defensive posture, there shall be no
limitation on the purchase of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.

While not fundamental policies, Dreyfus Strategic Income Fund has
undertaken, so as to permit the sale of Fund shares in certain states, not
to invest in oil, gas and other mineral leases or in real estate limited
partnerships, and to treat securities of foreign issuers which are not
listed on a recognized domestic or foreign exchange and for which a bona
fide market does not exist at the time of purchase or subsequent valuation
as not readily marketable.

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

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

MANAGEMENT OF THE COMPANY

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

Board Members of the Company

*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman
of the Board of various funds in the Dreyfus Family of Funds. He is
also Chairman of the Board of Directors of Noel Group, Inc., a venture
capital company; and a director of The Muscular Dystrophy Association,
HealthPlan Services Corporation, Belding Heminway Company, Inc., a
manufacturer and marketer of industrial threads and buttons, Curtis
Industries, Inc., a national distributor of security products,
chemicals, and automotive and other hardware, and Staffing Resources,
Inc. For more than five years prior to January 1995, he was President,
a director and, until August 1994, Chief Operating Officer of the
Manager and Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of the Manager and, until August
24, 1994, the Company's distributor. From August 1994 until December
31, 1994, he was a director of Mellon Bank Corporation. He is 53 years
old and his address is 200 Park Avenue, New York, New York 10166.

*DAVID W. BURKE, Board Member. Chairman of the Broadcasting Board of
Governors, an independent board within the United States Information
Agency, since August 1995. From 1994 to February 1995, Mr. Burke was a
Consultant to the Manager, and from October 1990 to August 1994, he was
a Vice President and Chief Administrative Officer of the Manager. From
1977 to 1990, Mr. Burke was involved in the management of national
television news, as Vice President and Executive Vice President of ABC
News, and subsequently as President of CBS News. He is 60 years old
and his address is Box 654, Eastham, Massachusetts 02642.

ROSALIND GERSTEN JACOBS, Board Member. Director of Merchandise and
Marketing for Corporate Property Investors, a real estate investment
company. From 1974 to 1976, she was owner and manager of a merchandise
and marketing consulting firm. Prior to 1974, she was a Vice President
of Macy's, New York. She is 71 years old and her address is c/o
Corporate Property Investors, 305 East 47th Street, New York, New York
10017.

DIANE DUNST, Board Member. Since January 1992, President of Diane Dunst
Promotion, Inc., a full service promotion agency. From January 1989 to
January 1992, Director of Promotion Services, Lear's Magazine. From
1985 to January 1989, she was Sales Promotion Manager of Elle Magazine.
Ms. Dunst is 57 years old and her address is 1172 Park Avenue,
New York, New York 10128.

JAY I. MELTZER, Board Member. Physician engaged in private practice
specializing in internal medicine. He is also a member of the Advisory
Board of the Section of Society and Medicine, College of Physicians and
Surgeons, Columbia University and a Clinical Professor of Medicine,
Department of Medicine, Columbia University College of Physicians and
Surgeons. He is 68 years old and his address is 903 Park Avenue, New
York, New York 10021.

DANIEL ROSE, Board Member. President and Chief Executive Officer of Rose
Associates, Inc., a New York based real estate development and
management firm. In July 1994, Mr. Rose received a Presidential
appointment to serve as a Director of the Baltic-American Enterprise
Fund, which will make equity investments and loans and provide
technical business assistance to new business concerns in the Baltic
states. He is also Chairman of the Housing Committee of the Real
Estate Board of New York, Inc., and a Board Member of Corporate
Property Investors, a real estate investment company. He is 67 years
old and his address is c/o Rose Associates, Inc., 200 Madison Avenue,
New York, New York 10016.

WARREN B. RUDMAN, Board Member. Since January 1993, Partner in the law firm
Paul, Weiss, Rifkind, Wharton & Garrison, and since May 1995, a
director of Collins & Aikman Corporation. Also, since January 1993,
Mr. Rudman has served as a director of Chubb Corporation and of the
Raytheon Company, and as Vice Chairman of the President's Foreign
Intelligence Advisory Board. From January 1981 to January 1993, Mr.
Rudman served as a United States Senator from the State of New
Hampshire. From January 1993 to December 1994, Mr. Rudman served as
Chairman of the Federal Reserve Bank of Boston. Since 1988, Mr. Rudman
has served as a trustee of Boston College and since 1986 as a member of
the Senior Advisory Board of the Institute of Politics of the Kennedy
School of Government at Harvard University. He is 66 years old and his
address is c/o Paul, Weiss, Rifkind, Wharton & Garrison, 1615 L Street,
N.W., Suite 1300, Washington, D.C. 20036.

SANDER VANOCUR, Board Member. Since January 1994, Mr. Vanocur has served as
Visiting Professional Scholar at the Freedom Forum First Amendment
Center at Vanderbilt University. Since January 1992, Mr. Vanocur has
been the President of Old Owl Communications, a full-service
communications firm and, since November 1989, he has served as a
Director of the Damon Runyon-Walter Winchell Cancer Research Fund.
From June 1986 to December 1991, he was a Senior Correspondent of ABC
News and, from October 1977 to December 1991, he was Anchor of the ABC
News program "Business World," a weekly business program on the ABC
television network. Mr. Vanocur joined ABC News in 1977. He is 68
years old and his address is 2928 P Street, N.W., Washington, D.C.
20007.

Ordinarily, meetings of shareholders for the purpose of electing Board
members will not be held unless and until such time as less than a majority
of the Board members holding office have been elected by shareholders, at
which time the Board members then in office will call a shareholders'
meeting for the election of Board members. Under the 1940 Act, shareholders
of record of not less than two-thirds of the outstanding shares of the Fund
may remove a Board member through a declaration in writing or by vote cast
in person or by proxy at a meeting called for that purpose. The Board will
call a meeting of shareholders for the purpose of voting upon the question
of removal of any Board member when requested in writing to do so by the
shareholders of record of not less than 10% of the Fund's outstanding
shares.

For so long as the Company's plan described in the section captioned
"Shareholder Services Plan" remains in effect, the Board members who are not
"interested persons" of the Company, as defined in the 1940 Act, will be
selected and nominated by the Board members who are not "interested persons"
of the Company.

The Company typically pays its Board members an annual retainer and a
per meeting fee and reimburses them for their expenses. The Chairman of the
Board receives an additional 25% of such compensation. Emeritus Board
members would be entitled to receive an annual retainer and a per meeting
fee of one-half the amount paid to them as Board members. The aggregate
amount of compensation paid to each Board member by the Company for the
fiscal year ended October 31, 1996, and by all other funds in the Dreyfus
Family of Funds for which such person is a Board member (the number of which
is set forth in parenthesis next to each Board member's total compensation)
for the year ended December 31, 1996, were as follows:

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

Joseph S. DiMartino $6,875 $448,618 (94)

David W. Burke $5,500 $253,654 (51)

Rosalind Gersten Jacobs $5,500 $ 92,500 (20)

Diane Dunst $5,500 $ 39,000 (10)

Jay I. Meltzer $5,500 $ 37,500 (10)

Daniel Rose $5,500 $ 80,250 (21)

Warren B. Rudman $5,500 $ 85,500 (17)

Sander Vanocur $5,500 $ 79,750 (21)

* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $24 (Dreyfus Equity Dividend Fund), $154
(Dreyfus High Yield Securities Fund), $21 (Dreyfus Short Term High
Yield Fund) and $1,240 (Dreyfus Strategic Income Fund) for all Board
members as a group.

Officers of the Company

MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive
Officer and a director of the Distributor and an officer of other
investment companies advised or administered by the Manager. From
December 1991 to July 1994, she was President and Chief Compliance
Officer of Funds Distributor, Inc., the ultimate parent of which is
Boston Institutional Group, Inc. She is 39 years old.

JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President and
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From February 1992
to July 1994, he served as Counsel for The Boston Company Advisors,
Inc. He is 32 years old.

ELIZABETH A. KEELEY, Vice President and Assistant Secretary. Assistant Vice
President of the Distributor and an officer of other investment
companies advised or administered by the Manager. She is 27 years old.

MARK A. KARPE, Vice President and Assistant Secretary. Senior Paralegal of
the Distributor and an officer of other investment companies advised or
administered by the Manager. From August 1993 to May 1996, he attended
Hofstra University School of Law. Prior to August 1993, he was
employed as an Associate Examiner at the National Association of
Securities Dealers. He is 27 years old.

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

RICHARD W. INGRAM, Vice President and Assistant Treasurer. Senior Vice
President and Director of Client Services and Treasury Operations of
Funds Distributor, Inc. and an officer of other investment companies
advised or administered by the Manager. From March 1994 to November
1995, Mr. Ingram was Vice President and Division Manager for First Data
Investor Services Group. From 1989 to 1994, Mr. Ingram was Vice
President, Assistant Treasurer and Tax Director - Mutual Funds of The
Boston Company. He is 40 years old.

MARY A. NELSON, Vice President and Assistant Treasurer. Vice President and
Manager of Treasury Services and Administration of Funds Distributor,
Inc. and an officer of other investment companies advised or
administered by the Manager. From September 1989 to July 1994, Ms.
Nelson was an Assistant Vice President and Client Manager for The
Boston Company, Inc. She is 32 years old.

DOUGLAS C. CONROY, Vice President and Assistant Treasurer. Supervisor of
Treasury Services and Administration of Funds Distributor, Inc. and an
officer of other investment companies advised or administered by the
Manager. From April 1993 to January 1995, Mr. Conroy was a Senior Fund
Accountant for Investors Bank & Trust Company. From December 1991 to
March 1993, Mr. Conroy was employed as a Fund Accountant at The Boston
Company, Inc. He is 27 years old.

MICHAEL S. PETRUCELLI, Vice President and Treasurer. Director of Strategic
Client Initiatives for Funds Distributor, Inc. From December 1989
through November 1996 he was employed with GE Investments where he held
various financial, business development and compliance positions. He
is 35 years old.

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

The Company's Board members and officers, as a group, owned less than
1% of each Fund's voting securities outstanding on February 18, 1997.

As of February 18, 1997, the following entity was known by the Company
to own 5% or more of the outstanding voting securities of Dreyfus Equity
Dividend Fund: Apt Holding Corporation, 4500 New Linden Hill Road,
Wilmington, DE 19808-2922 (75.20%). Also as of such date, the following
person was known by the Company to own beneficially 5% or more of the
outstanding voting securities of Dreyfus Equity Dividend Fund: Mr. M.N.
Jacobs, Short Hills, NJ (7.17%). As of such date, the following entity was
known by the Company to own beneficially 5% or more of the outstanding
voting securities of Dreyfus High Yield Securities Fund: Donaldson Lufkin
Jenrette, Securities Corporation Inc., Jersey City, NJ 07303-9998 (22.84%).
Also as of such date, the following person was known by the Company to own
beneficially 5% or more of the outstanding voting securities of Dreyfus
Short Term High Yield Fund: James A. Alexander as Trustee of the James A.
Alexander Revocable Trust, Lithonia, GA (5.17%). A shareholder who
beneficially owns, directly or indirectly, more than 25% of a Fund's voting
securities may be deemed a "control person" (as defined in the 1940 Act) of
the Fund.

MANAGEMENT AGREEMENT

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

Management Agreement. The Manager provides management services
pursuant to the Management Agreement (the "Agreement") dated August 24,
1994, as revised August 5, 1996, with the Company. As to each Fund, the
Agreement is subject to annual approval by (i) the Company's Board or (ii)
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of such Fund, provided that in either event the continuance also
is approved by a majority of the Board members who are not "interested
persons" (as defined in the 1940 Act) of the Company or the Manager, by vote
cast in person at a meeting called for the purpose of voting on such
approval. The Agreement was approved by shareholders of Dreyfus Strategic
Income Fund on August 3, 1994, and was last approved by the Company's Board,
including a majority of the Board members who are not "interested persons"
of any party to the Agreement, at a meeting held on August 5, 1996. As to
each Fund, the Agreement is terminable without penalty, on 60 days' notice,
by the Company's Board or by vote of the holders of a majority of such
Fund's shares, or, on not less than 90 days' notice, by the Manager. The
Agreement will terminate automatically, as to the relevant Fund, in the
event of its assignment (as defined in the 1940 Act).

The following persons are officers and/or directors of the Manager: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E.
Canter, Vice Chairman, Chief Investment Officer and a director; Lawrence S.
Kash, Vice Chairman--Distribution and a director; William T. Sandalls, Jr.,
Senior Vice President and Chief Financial Officer; William F. Glavin, Jr.,
Vice President--Corporate Development; Mark N. Jacobs, Vice President,
General Counsel and Secretary; Patrice M. Kozlowski, Vice President--
Corporate Communications; Mary Beth Leibig, Vice President--Human Resources;
Jeffrey N. Nachman, Vice President--Mutual Fund Accounting; Andrew S.
Wasser, Vice President--Information Systems; Elvira Oslapas, Assistant
Secretary; and Mandell L. Berman, Burton Borgelt and Frank V. Cahouet,
directors.

The Manager manages each Fund's investments in accordance with the
stated policies of such Fund, subject to the approval of the Company's
Board. The Manager is responsible for investment decisions, and provides
the Funds with portfolio managers who are authorized by the Board to execute
purchases and sales of securities. Dreyfus Equity Dividend Fund's portfolio
managers are Timothy Ghriskey and Donald Geogerian. The portfolio managers
for each Dreyfus High Yield Fund are Roger King and Kevin McClintock.
Dreyfus Strategic Income Fund's portfolio managers are Kevin McClintock and
Roger King. The Manager also maintains a research department with a
professional staff of portfolio managers and securities analysts who provide
research services for each Fund as well as for other funds advised by the
Manager. All purchases and sales are reported for the Board's review at the
meeting subsequent to such transactions.

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

Expenses. All expenses incurred in the operation of the Company are
borne by the Company, except to the extent specifically assumed by the
Manager. The expenses borne by the Company include: organizational costs,
taxes, interest, loan commitment fees, interest and distributions paid on
securities sold short, brokerage fees and commissions, if any, fees of Board
members who are not officers, directors, employees or holders of 5% or more
of the outstanding voting securities of the Manager or any of its
affiliates, Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of maintaining
the Company's existence, costs of independent pricing services, costs
attributable to investor services (including, without limitation, telephone
and personnel expenses), costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders, costs of shareholders' reports and
meetings, and any extraordinary expenses. Expenses attributable to a
particular Fund are charged against the assets of that Fund; other expenses
of the Company are allocated among the Funds on the basis determined by the
Board, including, but not limited to, proportionately in relation to the net
assets of each Fund.

As compensation for the Manager's services to the Company, the Company
has agreed to pay the Manager a monthly management fee at the annual rate of
.75 of 1% of the value of Dreyfus Equity Dividend Fund's average daily net
assets, .65 of 1% of the value of the average daily net assets of each
Dreyfus High Yield Fund, and .60 of 1% of the value of Dreyfus Strategic
Income Fund's average daily net assets. For the fiscal years ended October
31, 1994, 1995 and 1996, the management fees payable by the Company for
Dreyfus Strategic Income Fund amounted to $2,157,631, $1,898,849 and
$1,829,326, respectively. For the fiscal year ended October 31, 1996, the
management fees payable by the Company for Dreyfus Equity Dividend Fund
amounted to $15,722 which amount was reduced, pursuant to various
undertakings in effect, resulting in no fee being paid for fiscal 1996. For
the fiscal year ended October 31, 1996, the management fees payable by the
Company for Dreyfus High Yield Securities and Dreyfus Short Term High Yield
Securities were $72,715 and $18,501, respectively; which amount for fiscal
1996 was reduced, pursuant to various undertakings in effect resulting in no
fee being paid for either of the Dreyfus High Yield Funds for fiscal 1996.

As to each Fund, the Manager has agreed that if in any fiscal year the
aggregate expenses of the Fund, exclusive of taxes, brokerage, interest on
borrowings and (with the prior written consent of the necessary state
securities commissions) extraordinary expenses, but including the management
fee, exceed the expense limitation of any state having jurisdiction over the
Fund, the Fund may deduct from the payment to be made to the Manager under
the Agreement, or the Manager will bear, such excess expense. Such
deduction or payment, if any, will be estimated daily, and reconciled and
effected or paid, as the case may be, on a monthly basis.

The aggregate of the fees payable to the Manager is not subject to
reduction as the value of a Fund's net assets increases.

PURCHASE OF SHARES

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

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

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

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

SHAREHOLDER SERVICES PLAN

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

The Company has adopted a Shareholder Services Plan, pursuant to which
the Company pays the Distributor for the provision of certain services to
each Fund's shareholders. The services provided may include personal
services relating to shareholder accounts, such as answering shareholder
inquiries regarding the Company and providing reports and other information,
and services related to the maintenance of such shareholder accounts. Under
the Shareholder Services Plan, the Distributor may make payments to certain
securities dealers, financial institutions and other financial industry
professionals (collectively, "Service Agents") in respect of these services.

A quarterly report of the amounts expended under the Shareholder
Services Plan, and the purposes for which such expenditures were incurred,
must be made to the Board for its review. In addition, the Shareholder
Services Plan provides that material amendments must be approved by the
Company's Board, and by the Board members who are not "interested persons"
(as defined in the 1940 Act) of the Company and have no direct or indirect
financial interest in the operation of the Shareholder Services Plan or in
any agreements entered into in connection with the Shareholder Services
Plan, by vote cast in person at a meeting called for the purpose of
considering such amendments. As to each Fund, the Shareholder Services Plan
is subject to annual approval by such vote of the Board members cast in
person at a meeting called for the purpose of voting on the Shareholder
Services Plan. The Shareholder Services Plan was so approved on July 19,
1995. The Shareholder Services Plan is terminable with respect to each Fund
at any time by vote of a majority of the Board members who are not
"interested persons" and who have no direct or indirect financial interest
in the operation of the Shareholder Services Plan or in any agreements
entered into in connection with the Shareholder Services Plan.

For the period from July 19, 1995 (effective date of Shareholder
Services Plan) through October 31, 1996, $762,219 was charged the Company
with respect to Dreyfus Strategic Income Fund pursuant to the Shareholder
Services Plan. For the fiscal year ended October 31, 1996, $5,241, $27,967,
and $7,116 was charged the company with respect to Dreyfus Equity Dividend,
Dreyfus High Yield Securities Fund and Dreyfus Short Term High Yield Fund,
respectively, pursuant to the Shareholder Services Plan.

Prior Service Plan. As of July 19, 1995, the Company terminated its
then-existing Service Plan with respect to Dreyfus Strategic Income Fund.
That Service Plan, adopted pursuant to Rule 12b-1 under the 1940 Act,
provided that the Company (a) reimburse the Distributor for payments to
certain Service Agents for distributing Dreyfus Strategic Income Fund shares
and servicing shareholder accounts ("Servicing") and (b) pay the Manager,
Dreyfus Service Corporation and any affiliate of either of them for
advertising or marketing relating to Dreyfus Strategic Income Fund and for
Servicing at the aggregate annual rate of .25% of the value of the Fund's
average daily net assets. For the period from November 1, 1994 through July
19, 1995, $580,600 was charged to the Company with respect to Dreyfus
Strategic Income Fund pursuant to such plan, of which $496,033 was charged
for advertising or marketing, $77,557 was charged for distributing shares
and servicing, and $7,010 was charged for preparing, printing and
distributing prospectuses and statements of additional information.

REDEMPTION OF SHARES

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

Redemption Fee. (Dreyfus High Yield Securities Fund only) The Fund
will deduct a redemption fee equal to 1.00% of the net asset value of Fund
shares redeemed (including redemptions through use of the Fund Exchanges
service) where the redemption or exchange occurs less than six months
following the issuance of such shares. For purposes of computing the six-
month period, any issuance of Fund shares during a month will be deemed to
occur on the first day of such month. The redemption fee will be deducted
from redemption proceeds and retained by the respective Fund.

No redemption fee will be charged on the redemption or exchange of
shares (1) through the Fund's Automatic Withdrawal Plan or Dreyfus Auto-
Exchange Privilege, (2) through accounts that are reflected on the records
of the Transfer Agent as omnibus accounts approved by Dreyfus Service
Corporation, (3) through accounts established by securities dealers, banks
or other financial institutions approved by Dreyfus Service Corporation that
utilize the National Securities Clearing Corporation's networking system, or
(4) acquired through the reinvestment of dividends or capital gains
distributions.

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

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

Transfer Agent's
Transmittal Code Answer Back Sign

144295 144295 TSSG PREP

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

To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Share Certificates; Signatures."

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

Share Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP") and the Stock Exchanges Medallion Program.
Guarantees must be signed by an authorized signatory of the guarantor and
"Signature-Guaranteed" must appear with the signature. The Transfer Agent
may request additional documentation from corporations, executors,
administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular
verification. For more information with respect to signature-guarantees,
please call one of the telephone numbers listed on the cover.

Redemption Commitment. The Company has committed itself to pay in cash
all redemption requests by any shareholder of record of a Fund, limited in
amount during any 90-day period to the lesser of $250,000 or 1% of the value
of such Fund's net assets at the beginning of such period. Such commitment
is irrevocable without the prior approval of the Securities and Exchange
Commission. In the case of requests for redemption in excess of such
amount, the Board reserves the right to make payments in whole or in part in
securities (which may include non-marketable securities) or other assets in
case of an emergency or any time a cash distribution would impair the
liquidity of the Fund to the detriment of the existing shareholders. In
such event, the securities would be valued in the same manner as the Fund's
securities are valued. If the recipient sold such securities, brokerage
charges would be incurred.

Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (b)
when trading in the markets the relevant Fund ordinarily utilizes is
restricted, or when an emergency exists as determined by the Securities and
Exchange Commission so that disposal of the Fund's investments or
determination of its net asset value is not reasonably practicable, or (c)
for such other periods as the Securities and Exchange Commission by order
may permit to protect the Fund's shareholders.

SHAREHOLDER SERVICES

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

Fund Exchanges. Dreyfus High Yield Securities Fund will deduct a
redemption fee equal to 1.00% of the net asset value of Fund shares
exchanged where the exchange occurs less than six months following the
issuance of such shares. Shares of other funds purchased by exchange will
be purchased on the basis of relative net asset value per share as follows:

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

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

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

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

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

To request an exchange, shareholders must give exchange instructions to
the Transfer Agent in writing or by telephone. The ability to issue
exchange instructions by telephone is given to all Fund shareholders
automatically, unless the investor checks the applicable "No" box on the
Account Application, indicating that the investor specifically refuses this
Privilege. By using the Telephone Exchange Privilege, the investor
authorizes the Transfer Agent to act on telephonic instructions from any
person representing himself or herself to be the investor, and reasonably
believed by the Transfer Agent to be genuine. Telephone exchanges may be
subject to limitations as to the amount involved or the number of telephone
exchanges permitted. Shares issued in certificate form are not eligible for
telephone exchange.

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

Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of a Fund, shares of
another fund in the Dreyfus Family of Funds. This Privilege is available
only for existing accounts. Shares will be exchanged on the basis of
relative net asset value as described above under "Fund Exchanges."
Enrollment in or modification or cancellation of this Privilege is effective
three business days following notification by the investor. An investor
will be notified if the investor's account falls below the amount designated
to be exchanged under this Privilege. In this case, an investor's account
will fall to zero unless additional investments are made in excess of the
designated amount prior to the next Auto-Exchange transaction. Shares held
under IRA and other retirement plans are eligible for this Privilege.
Exchanges of IRA shares may be made between IRA accounts and from regular
accounts to IRA accounts, but not from IRA accounts to regular accounts.
With respect to all other retirement accounts, exchanges may be made only
among those accounts.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

DETERMINATION OF NET ASSET VALUE

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

Valuation of Portfolio Securities. Substantially all of each Fund's
fixed-income investments (excluding short-term investments) are valued each
business day by one or more independent pricing services (the "Service")
approved by the Board. Securities valued by the Service for which quoted
bid prices in the judgment of the Service are readily available and are
representative of the bid side of the market are valued at the mean between
the quoted bid prices (as obtained by the Service from dealers in such
securities) and asked prices (as calculated by the Service based upon its
evaluation of the market for such securities). Other investments valued by
the Service are carried at fair value as determined by the Service, based on
methods which include consideration of: yields or prices of securities of
comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions. Short-term investments are not
valued by the Service and are valued at the mean price or yield equivalent
for such securities or for securities of comparable maturity, quality and
type as obtained from market makers. Other investments that are not valued
by the Service (including the Equity Securities (as defined in the
Prospectus) purchased by Dreyfus Equity Dividend Fund) are valued at the
last sales price for securities traded primarily on an exchange or the
national securities market or otherwise at the average of the most recent
bid and asked prices. Bid price is used when no asked price is available.
Any assets or liabilities initially expressed in terms of foreign currency
will be translated into U.S. dollars at the midpoint of the New York
interbank market spot exchange rate as quoted on the day of such translation
by the Federal Reserve Bank of New York or, if no such rate is quoted on
such date, at the exchange rate previously quoted by the Federal Reserve
Bank of New York or at such other quoted market exchange rate as may be
determined to be appropriate by the Manager. Expenses and fees, including
the management fee (reduced by the expense limitation, if any), are accrued
daily and taken into account for the purpose of determining the net asset
value of a Fund's shares.

Restricted securities, as well as securities or other assets for which
recent market quotations are not readily available, or are not valued by the
Service, are valued at fair value as determined in good faith by the Board.
The Board will review the method of valuation on a current basis. In making
their good faith valuation of restricted securities, the Board members
generally will take the following factors into consideration: restricted
securities which are, or are convertible into, securities of the same class
of securities for which a public market exists usually will be valued at
market value less the same percentage discount at which purchased. This
discount will be revised periodically by the Board if it believes that the
discount no longer reflects the value of the restricted securities.
Restricted securities not of the same class as securities for which a public
market exists usually will be valued initially at cost. Any subsequent
adjustment from cost will be based upon considerations deemed relevant by
the Board.

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

DIVIDENDS, DISTRIBUTIONS AND TAXES

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

Management of the Company believes that each of the Funds qualified for
the fiscal year ended October 31, 1996 as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"). Each Fund
intends to continue to so qualify if such qualification is in the best
interests of its shareholders. As a regulated investment company, each Fund
will pay no Federal income tax on net investment income and net realized
securities gains to the extent that such income and gains are distributed to
shareholders in accordance with applicable provisions of the Code. The term
"regulated investment company" does not imply the supervision of management
or investment practices or policies by any government agency.

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

Depending upon the composition of a Fund's income, the entire amount or
a portion of the dividends paid by such Fund from net investment income may
qualify for the dividends received deduction allowable to qualifying U.S.
corporate shareholders ("dividends received deduction"). In general,
dividend income of a Fund distributed to qualifying corporate shareholders
will be eligible for the dividends received deduction only to the extent
that such Fund's income consists of dividends paid by U.S. corporations.
However, Section 246(c) of the Code provides that if a qualifying corporate
shareholder has disposed of Fund shares not held for 46 days or more and has
received a dividend from net investment income with respect to such shares,
the portion designated by the Fund as qualifying for the dividends received
deduction will not be eligible for such shareholder's dividends received
deduction. In addition, the Code provides other limitations with respect to
the ability of a qualifying corporate shareholder to claim the dividends
received deduction in connection with holding Fund shares. The Company
anticipates that no dividend paid by the Dreyfus High Yield Funds or Dreyfus
Strategic Income Fund will qualify for the dividends-received deduction.

A Fund may qualify for and may make an election permitted under Section
853 of the Code so that shareholders may be eligible to claim a credit or
deduction on their Federal income tax returns for, and will be required to
treat as part of the amounts distributed to them, their pro rata portion of
qualified taxes paid or incurred by the Fund to foreign countries (which
taxes relate primarily to investment income). A Fund may make an election
under Section 853 of the Code, provided that more than 50% of the value of
the Fund's total assets at the close of the taxable year consists of
securities in foreign corporations, and the Fund satisfies the applicable
distribution provisions of the Code. The foreign tax credit available to
shareholders is subject to certain limitations imposed by the Code.

Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gains and losses. However, a portion of the gain or
loss realized from the disposition of foreign currencies (including foreign
currency denominated bank deposits) and non-U.S. dollar denominated
securities (including debt instruments and certain forward contracts and
options) may be treated as ordinary income or loss under Section 988 of the
Code. In addition, all or a portion of any gains realized from the sale or
other disposition of certain market discount bonds will be treated as
ordinary income under Section 1276 of the Code. Finally, all or a portion
of the gain realized from engaging in "conversion transactions" may be
treated as ordinary income under Section 1258 of the Code. "Conversion
transactions" are defined to include certain forward, futures, option and
straddle transactions, transactions marketed or sold to produce capital
gains, or transactions described in Treasury regulations to be issued in the
future.

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

Offsetting positions held by a Fund involving certain foreign currency
forward contracts or options may constitute "straddles." "Straddles" are
defined to include "offsetting positions" in actively traded personal
property. The tax treatment of "straddles" is governed by Sections 1092 and
1258 of the Code, which, in certain circumstances, overrides or modifies the
provisions of Sections 1256 and 988 of the Code. As such, all or a portion
of any short or long-term capital gain from certain "straddle" transactions
may be recharacterized to ordinary income.

If a Fund were treated as entering into "straddles" by reason of its
engaging in certain forward contracts or options transactions, such
"straddles" would be characterized as "mixed straddles" if the forward
contracts or options transactions comprising a part of such "straddles" were
governed by Section 1256 of the Code. A Fund may make one or more elections
with respect to "mixed straddles." Depending on which election is made, if
any, the results to a Fund may differ. If no election is made, to the
extent the "straddle" and conversion transaction rules apply to positions
established by a Fund, losses realized by a Fund will be deferred to the
extent of unrealized gain in the offsetting position. Moreover, as a result
of the "straddle" and conversion transaction rules, short-term capital loss
on "straddle" positions may be recharacterized as long-term capital loss,
and long-term capital gains may be treated as short-term capital gains or
ordinary income.

Investment by a Fund in securities issued or acquired at a discount, or
providing for deferred interest or for payment of interest in the form of
additional obligations could under special tax rules affect the amount,
timing and character of distributions to shareholders by causing a Fund to
recognize income prior to the receipt of cash payments. For example, a Fund
could be required to accrue a portion of the discount (or deemed discount)
at which the securities were issued each year and to distribute such income
in order to maintain its qualification as a regulated investment company.
In such case, a Fund may have to dispose of securities which it might
otherwise have continued to hold in order to generate cash to satisfy these
distribution requirements.

PORTFOLIO TRANSACTIONS

The Manager assumes general supervision over placing orders on behalf
of the Company for the purchase or sale of portfolio securities. Allocation
of brokerage transactions, including their frequency, is made in the best
judgment of the Manager and in a manner deemed fair and reasonable to
shareholders. The primary consideration is prompt execution of orders at
the most favorable net price. Subject to this consideration, the brokers
selected will include those that supplement the Manager's research
facilities with statistical data, investment information, economic facts and
opinions. Information so received is in addition to and not in lieu of
services required to be performed by the Manager and the Manager's fees are
not reduced as a consequence of the receipt of such supplemental
information. Such information may be useful to the Manager in serving both
the Company and other funds which it advises and, conversely, supplemental
information obtained by the placement of business of other clients may be
useful to the Manager in carrying out its obligations to the Company.

Sales of Fund shares by a broker may be taken into consideration, and
brokers also will be selected because of their ability to handle special
executions such as are involved in large block trades or broad
distributions, provided the primary consideration is met. Large block
trades may, in certain cases, result from two or more funds advised or
administered by the Manager being engaged simultaneously in the purchase or
sale of the same security. Certain of a Fund's transactions in securities
of foreign issuers may not benefit from the negotiated commission rates
available to a Fund for transactions in securities of domestic issuers.
When transactions are executed in the over-the-counter market, each Fund
will deal with the primary market makers unless a more favorable price or
execution otherwise is obtainable. Foreign exchange transactions are made
with banks or institutions in the interbank market at prices reflecting a
mark-up or mark-down and/or commission.

Portfolio turnover may vary from year to year as well as within a year.
It is anticipated that in any fiscal year the turnover rate of Dreyfus
Equity Dividend Fund will be less than 100% and the turnover rate of each
Dreyfus High Yield Fund and Dreyfus Strategic Income Fund may approach the
200% level, respectively. In periods in which extraordinary market
conditions prevail, the Manager will not be deterred from changing a Fund's
investment strategy as rapidly as needed, in which case higher turnover
rates can be anticipated which would result in greater brokerage expenses.
The overall reasonableness of brokerage commissions paid is evaluated by the
Manager based upon its knowledge of available information as to the general
level of commissions paid by other institutional investors for comparable
services.

For the fiscal year ended October 31, 1994, Dreyfus Strategic Income
Fund paid $25,618 in brokerage commissions. For the fiscal year ended
October 31, 1995, no brokerage commissions were paid by Dreyfus Strategic
Income Fund. For the fiscal year ended October 31, 1996, Dreyfus Equity
Dividend, Dreyfus High Yield Securities Fund, Dreyfus Short Term High Yield
Fund and Dreyfus Strategic Income Fund paid $10,205, $5,740, $250 and
$28,188, respectively. Gross spreads and concessions on principal
transactions, where determinable, amounted to $664,750, $633,150 and
$1,421,838 for the fiscal years ended October 31, 1994, 1995 and 1996,
respectively, for Dreyfus Strategic Income Fund none of which was paid to
the Distributor. Gross spreads and concessions on principal transactions,
where determinable, amounted to $2,875, $133,234 and $18,500 for Dreyfus
Equity Dividend, Dreyfus High Yield Securities Fund and Dreyfus Short Term
High Yield Fund, respectively, for the fiscal year ended October 31, 1996,
none of which was paid to the Distributor.

PERFORMANCE INFORMATION

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

Dreyfus Strategic Income Fund's current yield for the 30-day period
ended October 31, 1996 was 7.36%. Dreyfus High Yield Securities Fund's
current yield for the 30-day period ended October 31, 1996 was 13.58%.
During this period, the Manager was waiving receipt of the management fee
and absorbing expenses of the Dreyfus High Yield Securities Fund, without
which the Fund's 30-day yield would have been 12.62%. Dreyfus Short Term
High Yield Fund's 30-day net yield for the period ended October 31, 1996 was
10.99%. Current yield for a Fund is computed pursuant to a formula which
operates as follows: the amount of the Fund's expenses accrued for the 30-
day period (net of reimbursements) is subtracted from the amount of the
dividends and interest earned (computed in accordance with regulatory
requirements) by the Fund during the period. That result is then divided by
the product of: (a) the average daily number of shares outstanding during
the period that were entitled to receive dividends, and (b) the net asset
value per share on the last day of the period less any undistributed earned
income per share reasonably expected to be declared as a dividend shortly
thereafter. The quotient is then added to 1, and that sum is raised to the
6th power, after which 1 is subtracted. The current yield is then arrived
at by multiplying the result by 2.

Dreyfus Strategic Income Fund's average annual return for the one and
five year periods ended October 31, 1996, and for the period October 1, 1986
(commencement of operations) through October 31, 1996, was 7.27, 9.17% and
9.67%, respectively. Dreyfus High Yield Securities Fund average annual
return for the period March 25, 1996 (commencement of operations) through
October 31, 1996 was 26.39%. Dreyfus Equity Dividend Fund's average annual
return for the period December 29, 1995 (commencement of operations) through
October 31, 1996 was 15.72%. Average annual total return is calculated by
determining the ending redeemable value of an investment purchased with a
hypothetical $1,000 payment made at the beginning of the period (assuming
the reinvestment of dividends and distributions), dividing by the amount of
the initial investment, taking the "n"th root of the quotient (where "n" is
the number of years in the period) and subtracting 1 from the result.

Dreyfus Strategic Income Fund's total return for the period October 1,
1986 (commencement of operations) through October 31, 1996 was 152.73%.
Dreyfus Equity Dividend Fund's total return for the period December 29, 1995
(commencement of operations) through October 31, 1996 was 12.93%. Dreyfus
High Yield Securities Fund's total return for the period March 25, 1996
(commencement of operations) through October 31, 1996 was 15.22% (reflecting
the applicable redemption fee). During these periods, receipt of certain
fees were being waived, and operating expenses were borne, by the Manager,
without which total returns for Dreyfus Equity Dividend Fund and Dreyfus
High Yield Securities Fund would have been lower. Total return for a Fund
is calculated by subtracting the amount of the Fund's net asset value per
share at the beginning of a stated period from the net asset value per share
at the end of the period (after giving effect to the reinvestment of
dividends and distributions during the period), and dividing the result by
the net asset value per share at the beginning of the period.

From time to time, advertising materials for each Fund may include (i)
biographical information relating to its portfolio manager, including honors
or awards received, and may refer to or include commentary by the Fund's
portfolio manager relating to investment strategy, asset growth, current or
past business, political, economic or financial conditions and other matters
of general interest to investors; (ii) information concerning retirement and
investing for retirement, including statistical data or general discussions
about the growth and development of Dreyfus Retirement Services (in terms of
new customers, assets under management, market share, etc.) and its presence
in the defined contribution plan market; (iii) the approximate number of
then-current Fund shareholders; (iv) Lipper or Morningstar ratings and
related analysis supporting the ratings; (v) discussions of the risk and
reward potential of the high yield securities markets and its comparative
performance in the overall securities markets; and (vi) as to Dreyfus Short
Term High Yield Fund, that as of its inception date the Fund was the first
short-term, high yield fund in the mutual fund industry.

From time to time, the Company may compare a fund's performance against
inflation with the performance of other instruments against inflation, such
as short-term Treasury Bills (which are direct obligations of the U.S.
Government), bonds, stocks, and FDIC-insured bank money market accounts.

INFORMATION ABOUT THE FUNDS

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

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

Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an
investment company, such as the Company, will not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each series affected by such matter. Rule 18f-2
further provides that a series shall be deemed to be affected by a matter
unless it is clear that the interests of each series in the matter are
identical or that the matter does not affect any interest of such series.
However, the Rule exempts the selection of independent accountants and the
election of Board members from the separate voting requirements of the Rule.

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

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

Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, P.O.
Box 9671, Providence, Rhode Island 02940-9671, is the Company's transfer and
dividend disbursing agent. Under a transfer agency agreement with the
Company, Dreyfus Transfer, Inc. arranges for the maintenance of shareholder
account records for the Fund, the handling of certain communications between
shareholders and the Fund, and the payment of dividends and distributions
payable by the Fund. For these services, Dreyfus Transfer, Inc. receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Company during the month, and is reimbursed for certain
out-of-pocket expenses. For the period December 1, 1995 (effective date of
Transfer Agency agreement) through October 31, 1996, the Funds paid the
Transfer Agent the following amounts: Dreyfus Equity Dividend Fund ($351);
Dreyfus High Yield Securities Fund ($2,535); Dreyfus Short Term High Yield
Fund ($488); and Dreyfus Strategic Income Fund ($210,083).

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

Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038, as counsel for the Company, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the
shares being sold pursuant to each Fund's Prospectus.

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

Description of S&P, Moody's, Fitch and Duff ratings:

S&P

Bond Ratings

AAA

Bonds rated AAA have the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.

Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.

Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations in
higher rated categories.

BBB

Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than for bonds in higher rated
categories.

Bonds rated BB have less near-term vulnerability to default than other
speculative grade debt. However, they face major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.

Bonds rated B have a greater vulnerability to default but presently
have the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions would likely impair
capacity or willingness to pay interest and repay principal.

CCC

Bonds rated CCC have a current identifiable vulnerability to default
and are dependent upon favorable business, financial and economic conditions
to meet timely payments of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, they are not
likely to have the capacity to pay interest and repay principal.

The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.

The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating.

Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.

S&P's letter ratings may be modified by the addition of a plus (+) or a
minus (-) sign designation, which is used to show relative standing within
the major rating categories, except in the AAA (Prime Grade) category.

Commercial Paper Rating

An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days. Issues assigned an A rating are regarded as having the
greatest capacity for timely payment. Issues in this category are
delineated with the numbers 1, 2 and 3 to indicate the relative degree of
safety.

A-1

This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+)
designation.

A-2

Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues
designated A-1.

A-3

Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.

Issues carrying this designation are regarded as having only
speculative capacity for timely payment.

This designation is assigned to short-term obligations with doubtful
capacity for payment.

Issues carrying this designation are in default, and payment of
interest and/or repayment of principal is in arrears.

Moody's

Bond Ratings
Aaa

Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and generally are referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.

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

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

Baa

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

Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and, therefore, not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.

Caa

Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.

Bonds which are rated Ca present obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.

Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and
in the categories below B. The modifier 1 indicates a ranking for the
security in the higher end of a rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower
end of a rating category.

Commercial Paper Rating

The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity for
repayment of short-term promissory obligations, and ordinarily will be
evidenced by leading market positions in well established industries, high
rates of return on funds employed, conservative capitalization structures
with moderate reliance on debt and ample asset protection, broad margins in
earnings coverage of fixed financial charges and high internal cash
generation, and well established access to a range of financial markets and
assured sources of alternate liquidity.

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

Issuers (or related supporting institutions) rated Prime-3 (P-3) have
an acceptable capacity for repayment of short-term promissory obligations.
The effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes
in the level of debt protection measurements and the requirements for
relatively high financial leverage. Adequate alternate liquidity is
maintained.

Issuers (or related supporting institutions) rated Not Prime do not
fall within any of the Prime rating categories.

Fitch

Bond Ratings

The ratings represent Fitch's assessment of the issuer's ability to
meet the obligations of a specific debt issue or class of debt. The ratings
take into consideration special features of the issue, its relationship to
other obligations of the issuer, the current financial condition and
operative performance of the issuer and of any guarantor, as well as the
political and economic environment that might affect the issuer's future
financial strength and credit quality.

AAA

Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.

Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.

Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.

BBB

Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have an adverse
impact on these bonds and, therefore, impair timely payment. The likelihood
that the ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.

Bonds rated BB are considered speculative. The obligor's ability to
pay interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt service
requirements.

Bonds rated B are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.

CCC

Bonds rated CCC have certain identifiable characteristics, which, if
not remedied, may lead to default. The ability to meet obligations requires
an advantageous business and economic environment.

Bonds rated CC are minimally protected. Default in payment of interest
and/or principal seems probable over time.

Bonds rated C are in imminent default in payment of interest or
principal.

DDD, DD and D

Bonds rated DDD, DD and D are in actual default of interest and/or
principal payments. Such bonds are extremely speculative and should be
valued on the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. DDD represents the highest potential for
recovery on these bonds and D represents the lowest potential for recovery.

Plus (+) and minus (-) signs are used with a rating symbol to indicate
the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category covering 12-36
months.

Short-Term Ratings

Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.

Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.

F-1+

Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1

Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-
1+.

F-2

Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payments, but the margin of safety is not as
great as the F-1+ and F-1 categories.

F-3

Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate;
however, near-term adverse changes could cause these securities to be rated
below investment grade.

F-S

Weak Credit Quality. Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are
vulnerable to near-term adverse changes in financial and economic
conditions.

Default. Issues assigned this rating are in actual or imminent payment
default.

Duff

Bond Ratings

AAA

Bonds rated AAA are considered highest credit quality. The risk
factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.

Bonds rated AA are considered high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because
of economic conditions.

Bonds rated A have protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.

BBB

Bonds rated BBB are considered to have below average protection factors
but still considered sufficient for prudent investment. There may be
considerable variability in risk for bonds in this category during economic
cycles.

Bonds rated BB are below investment grade but are deemed by Duff as
likely to meet obligations when due. Present or prospective financial
protection factors fluctuate according to industry conditions or company
fortunes. Overall quality may move up or down frequently within the
category.

Bonds rated B are below investment grade and possess the risk that
obligations will not be met when due. Financial protection factors will
fluctuate widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in quality rating
within this category or into a higher or lower quality rating grade.

CCC

Bonds rated CCC are well below investment grade securities. Such bonds
may be in default or have considerable uncertainty as to timely payment of
interest, preferred dividends and/or principal. Protection factors are
narrow and risk can be substantial with unfavorable economic or industry
conditions and/or with unfavorable company developments.

Defaulted debt obligations. Issuer has failed to meet scheduled
principal and/or interest payments.

Plus (+) and minus (-) signs are used with a rating symbol (except AAA)
to indicate the relative position of a credit within the rating category.

Commercial Paper Rating

The rating Duff-1 is the highest commercial paper rating assigned by
Duff. Paper rated Duff-1 is regarded as having very high certainty of
timely payment with excellent liquidity factors which are supported by ample
asset protection. Risk factors are minor. Paper rated Duff-2 is regarded
as having good certainty of timely payment, good access to capital markets
and sound liquidity factors and company fundamentals. Risk factors are
small. Paper rated Duff 3 is regarded as having satisfactory liquidity and
other protection factors. Risk factors are larger and subject to more
variation. Nevertheless, timely payment is expected. Paper rated Duff 4 is
regarded as having speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service. Operating factors
and market access may be subject to a high degree of variation. Paper rated
Duff 5 is in default. The issuer has failed to meet scheduled principal
and/or interest payments.

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.
</TABLE>

DREYFUS EQUITY DIVIDEND FUND
FINANCIAL HIGHLIGHTS
Reference is made to page 4 of the Fund's Prospectus dated March 3, 1997.

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

<TABLE>
<CAPTION>
DREYFUS HIGH YIELD SECURITIES FUND
STATEMENT OF INVESTMENTS OCTOBER 31, 1996
Principal
Bonds and Notes-106.0% Amount Value
______ ______
<S> <C> <C>
Aircraft & Aerospace-10.7% Aircraft Lease Portfolio Securitisation 96-1
Pass Through Trust, Ctfs.,
Cl. D, 12 3/4%, 2006................. $ 1,000,000 (a) $ 1,035,000
Fairchild,
Sub. Deb., 12%, 2001................. 1,500,000 1,522,500
RHI Holdings,
Sr. Sub. Deb., 11 7/8%, 1999......... 100,000 100,000
__________
2,657,500
__________
Auto Parts-1.0% Aetna Industries,
Sr. Notes, 11 7/8%, 2006............. 240,000 (a) 247,800
__________
Broadcasting-2.1% Spanish Broadcasting System,
Sr. Notes, 7 1/2%, 2002.............. 500,000 (b) 523,750
__________
Building Materials-4.9% Associated Materials,
Sr. Sub. Notes, 11 1/2%, 2003........ 1,250,000 1,212,500
__________
Cable Television-.4% CS Wireless Systems,
Sr. Discount Notes, Zero Coupon, 2001 (Units) 200,000 (a,c,d) 94,000
__________
Chemicals-1.0% Astor,
Sr. Sub. Notes, 10 1/2%, 2006........ 250,000 (a) 250,313
__________
Commercial Mortgage
Backed-5.8% Structured Asset Securities:
Mortgage Pass-Through Ctfs., REMIC,
Ser. Greenpoint 1996-A:
Cl.B5, 8.441%, 2027................. 289,252 (a) 190,545
Cl.B6, 8.441%, 2027................. 362,124 (a) 83,289
Multiclass Pass-Through Ctfs., REMIC,
Ser. 1996-CFL,
Cl. H, 7 3/4%, 2028................. 1,750,000 1,164,023
__________
1,437,857
__________
Consumer-9.7% BPC Holding,
Sr. Secured Notes, 12 1/2%, 2006..... 750,000 (a) 783,750
Hosiery Corp. of America,
Sr. Sub. Exchange Notes, 13 3/4%, 2002 (Units) 500,000 (c) 587,500
Keebler,
Sr. Sub. Notes, 10 3/4%, 2006........ 400,000 (a) 430,000
Remington Arms,
Sr. Sub. Notes, 10%, 2003............ 750,000 (a) 618,750
__________
2,420,000
__________
Energy-2.3% DeepTech International,
Sr. Secured Notes, 12%, 2000......... 500,000 522,500
Falcon Drilling,
Sr. Notes, Ser. B, 8 7/8%, 2003...... 50,000 50,250
__________
572,750
__________
Entertainment/Media-3.7% Alliance Entertainment,
Sr. Sub. Notes, 11 1/4%, 2005........ 1,000,000 915,000
_________

DREYFUS HIGH YIELD SECURITIES FUND
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1996
Principal
Bonds and Notes (continued) Amount Value
______ ______
Financial-2.0% Outsourcing Solutions,
Sr. Sub. Notes, 11%, 2006............ $ 500,000 (a) $ 509,688
__________
Foreign-12.8% Comunicacion Celular SA,
Bonds, Zero Coupon, 2000 (Units)..... 1,000,000 (e,f) 692,500
Dynacare,
Sr. Notes, 10 3/4%, 2006............. 500,000 508,750
Occidente y Caribe Celular S.A.,
Sr. Discount Notes, Zero Coupon, 2001 (Units) 2,910,000 (a,f,g) 1,484,100
Uniforet,
Sr. Notes, 11 1/8%, 2006............. 500,000 (a) 492,500
__________
3,177,850
__________
Gaming-10.2% Casino Magic of Louisiana,
First Mortgage Notes, 13%, 2003...... 750,000 (a) 761,250
Mohegan Tribal Gaming Authority,
Sr. Secured Notes, Ser. B, 13 1/2%, 2002 1,000,000 1,280,000
Riviera Holdings,
First Mortgage Notes, 11%, 2002...... 500,000 502,500
__________
2,543,750
__________
Office Equipment-6.1% Anacomp,
Sr. Secured Notes, 11 5/8%, 1999..... 433,000 438,412
Pierce Leahy,
Sr. Sub. Notes, 11 1/8%, 2006........ 1,000,000 (a) 1,067,500
__________
1,505,912
__________
Residential Mortgage
Backed-13.7% Chase Mortgage Finance,
Multiclass Mortgage Pass-Through Ctfs.,
Ser. 1994-E, Cl.B6, 6 1/4%, 2010..... 450,199 (a) 162,072
Citicorp Mortgage Securities,
REMIC Pass-Through Ctfs.,
Ser. 1994-9, Cl. B2, 5 3/4%, 2009.... 534,455 (a) 192,404
GE Capital Mortgage Services,
Multiclass Pass-Through Ctfs. REMIC:
Ser. 1993-13, Cl.B5, 6%, 2008........ 518,664 (a) 186,719
Ser. 1994-15, Cl.B5, 6%, 2009........ 810,304 (a) 291,710
Ser. 1994-21, Cl.B5, 6 1/2%, 2009.... 1,060,374 (a) 381,735
Ser. 1996-10, Cl.B4, 6 3/4%, 2011.... 307,975 (a) 224,245
Ser. 1996-10, Cl.B5, 6 3/4%, 2011.... 369,887 (a) 133,159
Ser. 1996-12, Cl.B4, 7 1/4%, 2011.... 184,281 (a) 138,442
Ser. 1996-12, Cl.B5, 7 1/4%, 2011.... 431,349 (a) 155,286
Ser. 1996-14, Cl.2B4, 7 1/4%, 2011... 165,509 (a) 123,666
Ser. 1996-14, Cl.2B5, 7 1/4%, 2011... 441,031 (a) 158,771
MORSERV,
Multi-Class Mortgage Pass-Through Ctfs.:
Ser. 1996-1, Cl.B4, 7%, 2011......... 358,414 (a) 275,755
Ser. 1996-1, Cl.B5, 7%, 2011......... 538,591 (a) 193,893

DREYFUS HIGH YIELD SECURITIES FUND
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1996
Principal
Bonds and Notes (continued) Amount Value
______ ______
Residential Mortgage
Backed (continued) Norwest Asset Securities,
Sub. Bond, REMIC,
Ser. 1996-2, Cl.B4, 7%, 2011......... $ 611,092 (a) $ 450,108
Prudential Home Mortgage Securities,
Mortgage Pass-Through Ctfs., REMIC,
Ser. 1996-7, Cl.B5, 6 3/4%, 2011..... 912,549 (a) 328,518
__________
3,396,483
__________
Shipping-1.9% Moran Transportation,
First Preferred Ship Mortgage Notes,
11 3/4%, 2004........................ 450,000 479,250
__________
Supermarkets-1.8% Fleming Cos.,
Floating Rate Sr. Notes, 7 15/16%, 2001 500,000 (h) 447,500
__________
Telecommunications-10.4% American Communications Services,
Sr. Discount Notes, Zero Coupon, 2000 200,000 (i) 114,000
Microcell Telecommunications,
Sr. Discount Notes, Zero Coupon, 2001 (Units) 1,500,000 (a,f,j) 853,125
RSL Communications Ltd.,
Sr. Notes, 12 1/4%, 2006 (Units)..... 500,000 (a,f) 502,500
Shared Technologies Fairchild Communications,
Sr. Sub. Notes, Zero Coupon, 1999.... 700,000 (k) 553,000
Sprint Spectrum L.P.
Sr. Discount Notes, Zero Coupon, 2001 1,000,000 (l) 578,750
__________
2,601,375
_________
Transportation-5.5% Great Dane Holdings,
Sr. Sub. Deb., 12 3/4%, 2001......... 750,000 737,812
TRISM,
Sr. Sub. Notes, 10 3/4%, 2000........ 650,000 627,250
_________
1,365,062
_________
TOTAL BONDS AND NOTES
(cost $25,386,105)................... $26,358,340
============
Convertible Securities-3.8%
Notes-3.4%
Industrial-2.0% MagneTek,
Sub. Notes, 8%, 2001................. $ 500,000 $ 496,250
_________
Retail-1.4% Michaels Stores,
Sub. Notes, 6 3/4%, 2003............. 500,000 350,000
_________
Total Notes............................ 846,250
_________
Subordinated Debentures-.4%
Consumer; Outboard Marine,
7%, 2002............................. 100,000 95,625
_________
TOTAL CONVERTIBLE SECURITIES
(cost $991,476)...................... $941,875
============
DREYFUS HIGH YIELD SECURITIES FUND
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1996
Preferred Stocks-5.4% Shares Value
______ ______
Gaming-1.4% Alliance Gaming, Ser. B,
Cum., $15.00......................... 3,648 $ 342,000
Media/Entertainment-2.9% Paxson Communications,
Cum., $125.00........................ 750 716,250
Supermarkets-1.1% Supermarkets General,
Cum. $3.52........................... 10,000 (m) 278,750
_________
TOTAL PREFERRED STOCK
(cost $1,301,126).................... $ 1,337,000
============
Principal
Short-Term Investments-.5% Amount Value
__________ __________
U.S. Treasury Bills; 4.84%, 12/12/1996 $ 66,000 (n) $ 65,624
5%, 1/9/1997........................... 56,000 (n) 55,466
_________
TOTAL SHORT-TERM INVESTMENTS
(cost $121,100)...................... $ 121,090
============
TOTAL INVESTMENTS (cost $27,799,807)........................................ 115.7% $28,758,305
======= ============
LIABILITIES, LESS CASH AND RECEIVABLES...................................... (15.7%) $ (3,901,455)
======= ============
NET ASSETS.................................................................. 100.0% $24,856,850
======= ============
</TABLE>
Notes to Statement of Investments:
(a)Securities exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31,
1996, these securities amounted to $12,016,843 or 48.3% of net assets.
(b)7 1\2% coupon rate until 6/15/1997, date on which a stated coupon rate of
12 1\2% becomes effective.
(c)With Common Stock attached.
(d)Zero coupon until 3/1/2001, date on which a stated coupon rate of 11 3\8%
becomes effective; the stated maturity is 3/1/2006.
(e)Zero coupon until 11/15/2000, date on which a stated coupon rate of 13 1\8%
becomes effective; the stated maturity is 11/15/2003.
(f)With warrants to purchase Common Stock.
(g)Zero coupon until 3/15/2001, date on which a stated coupon rate of 14%
becomes effective; the stated maturity is 3/15/2004.
(h)Variable rate security-interest rate subject to periodic change.
(i)Zero coupon until 11/1/2000, date on which a stated coupon rate of 13%
becomes effective; the stated maturity is 11/1/2005.
(j)Zero coupon until 12/1/2001, date on which a stated coupon rate of 14%
becomes effective; the stated maturity is 6/1/2006.
(k)Zero coupon until 3/1/1999, date on which a stated coupon rate of 12 1\4%
becomes effective; the stated maturity is 3/1/2006.
(l)Zero coupon until 8/15/2001, date on which a stated coupon rate of
12 1\2% becomes effective; the stated maturity is 8/15/2006.
(m)Non-income producing.
(n)Held by the custodian in a segregated account as collateral for open
Financial Futures positions.
<TABLE>
<CAPTION>
STATEMENT OF FINANCIAL FUTURES OCTOBER 31, 1996
______________________
Market Value Unrealized
Covered (Depreciation)
Issuer Contracts by Contracts Expiration at 10/31/96
___ ________ _____________ ___________ ______________
<S> <C> <C> <C> <C>
U.S. Treasury 10yr Note (Short).............. 40 $4,385,000 December `96 $(48,750)
===========

SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS HIGH YIELD SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1996
Cost Value
__________ __________
<S> <C> <C> <C>
ASSETS: Investments in securities-See Statement of Investments $27,799,807 $28,758,305
Cash....................................... 34,833
Interest receivable........................ 539,197
Receivable for investment securities sold.. 224,767
Prepaid expenses........................... 2,699
Due from The Dreyfus Corporation and affiliates 257
__________
29,560,058
__________
LIABILITIES: Due to Distributor......................... 4,838
Bank loans payable-Note 2.................. 4,146,000
Payable for investment securities purchased 500,000
Interest payable........................... 30,222
Accrued expenses........................... 22,148
__________
4,703,208
__________
NET ASSETS.................................................................. $24,856,850
=============
REPRESENTED BY: Paid-in capital............................ $23,094,481
Accumulated undistributed investment income-net 254,443
Accumulated net realized gain (loss) on investments 598,178
Accumulated net unrealized appreciation (depreciation)
on investments [including $48,750 net unrealized
(depreciation) on financial futures]-Note 4............ 909,748
__________
NET ASSETS............................................................................. $24,856,850
=============
SHARES OUTSTANDING
(UNLIMITED NUMBER OF $.001 PAR VALUE SHARES OF BENEFICIAL INTEREST AUTHORIZED)......... 1,796,871
NET ASSET VALUE, offering and redemption price per share.................... $13.83
=============

SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS HIGH YIELD SECURITIES FUND
STATEMENT OF OPERATIONS
FROM MARCH 25, 1996 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1996
INVESTMENT INCOME
<S> <C> <C> <C>
INCOME: Interest Income............................ $1,252,518
Dividend Income............................ 50,773 $1,303,291
__________
EXPENSES: Management fee-Note 3(a)................... 72,715
Legal fees................................. 38,476
Shareholder servicing costs-Note 3(b)...... 30,944
Interest-Note 2............................ 30,222
Audit fees................................. 12,000
Registration fees.......................... 7,385
Custodian fees-Note 3(b)................... 6,525
Prospectus and shareholders' reports....... 3,782
Trustees' fees and expenses-Note 3(c)...... 1,821
Miscellaneous.............................. 2,769
__________
Total Expenses....................... 206,639
Less-expense reimbursement from the Manager due to
undertakings-Note 3(a)................. (174,066)
__________
Net Expenses......................... 32,573
__________
INVESTMENT INCOME-NET....................................................... 1,270,718
__________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-Note 4:
Net realized gain (loss) on investments.... $ 637,825
Net realized gain (loss) on financial futures (39,647)
__________
Net Realized Gain (Loss)............. 598,178
Net unrealized appreciation (depreciation) on investments
[including $48,750 unrealized (depreciation)
on financial futures].................. 909,748
__________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.......................... 1,507,926
__________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $2,778,644
============

SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS HIGH YIELD SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
FROM MARCH 25, 1996 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1996
<S> <C>
OPERATIONS:
Investment income-net....................................................................... $ 1,270,718
Net realized gain (loss) on investments..................................................... 598,178
Net unrealized appreciation (depreciation) on investments................................... 909,748
__________
Net Increase (Decrease) in Net Assets Resulting from Operations......................... 2,778,644
__________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net....................................................................... (1,016,275)
__________
BENEFICIAL INTEREST TRANSACTIONS :
Net proceeds from shares sold............................................................... 35,821,078
Dividends reinvested........................................................................ 662,219
Cost of shares redeemed..................................................................... (13,388,816)
__________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions................. 23,094,481
__________
Total Increase (Decrease) in Net Assets............................................... 24,856,850
NET ASSETS:
Beginning of Period......................................................................... __
__________
End of Period............................................................................... $ 24,856,850
=============
UNDISTRIBUTED INVESTMENT INCOME-NET........................................................... $ 254,443
__________
CAPITAL SHARE TRANSACTIONS:
Shares
__________
Shares sold................................................................................. 2,722,666
Shares issued for dividends reinvested...................................................... 49,314
Shares redeemed............................................................................. (975,109)
__________
Net Increase (Decrease) in Shares Outstanding........................................... 1,796,871
=============

SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS HIGH YIELD SECURITIES FUND
FINANCIAL HIGHLIGHTS
Reference is made to page 5 of the Fund's Prospectus dated March 3, 1997.

DREYFUS HIGH YIELD SECURITIES 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 series,
including the Dreyfus High Yield Securities Fund (the "Fund") which commenced
operations on March 25, 1996. The Fund's investment objective is to maximize
total return, consisting of capital appreciation and current income. 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.
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: The Fund's investments (excluding short-term
investments and U.S. Government obligations) are valued each business day by
an independent pricing service ("Service") approved by the Board of Trustees.
Investments for which quoted bid prices are readily available and are
representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the
Service from dealers in such securities) and asked prices (as calculated by
the Service based upon its evaluation of the market for such securities).
Other investments (which constitute a majority of the portfolio securities)
are carried at fair value as determined by the Service, based on methods
which include consideration of: yields or prices of securities of comparable
quality, coupon, maturity and type; indications as to values from dealers;
and general market conditions. Securities for which there are no such
valuations are valued at fair value as determined in good faith under the
direction of the Board of Trustees. Investments in U.S. Government obligations
are valued at the mean between quoted bid and asked prices. Short-term
investments are carried at amortized cost, which approximates value.
Investments denominated in foreign currencies are translated to U.S. dollars
at the prevailing rates of exchange.
(b) Securities transactions and investment income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis.
(c) Dividends to shareholders: It is the policy of the Fund to declare
and pay dividends quarterly from investment income-net. 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 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.

DREYFUS HIGH YIELD SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2-BANK LINE OF CREDIT:
The Fund may borrow up to $10 million for leveraging purposes under a
short-term unsecured line of credit and 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. Outstanding
borrowings under both agreements on October 31, 1996, amounted to $4,146,000.
The average daily amount of borrowings outstanding under both
arrangements during the period ended October 31, 1996 was approximately
$492,000, with a related weighted average annualized interest rate of 6.14%.
The maximum amount borrowed at any time during the period ended October 31,
1996 was $9,600,000.
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 .65 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, 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 value of the Fund's average net assets in accordance with
California "blue sky" regulations. However, the Manager had undertaken from
March 25, 1996 through September 30, 1996 to reimburse all fees and expenses
of the Fund (exclusive of certain expenses as described above), and
thereafter, had undertaken through October 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 expenses exceeded specified annual percentages of
the Fund's average daily net assets. The Manager has currently undertaken
from November 1, 1996 through December 31, 1996, to waive receipt of the
management fee and shareholder services plan fee (exclusive of certain
expenses as described above) payable to it by the Fund. The expense
reimbursement, pursuant to the undertakings, amounted to $174,066 for the
period ended October 31, 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) Pursuant to the Fund's Shareholder Services Plan, the Fund pays the
Distributor at an annual rate of .25 of 1% of the value of the Fund's average
daily net assets for the provision of certain services. 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. During the period ended October 31, 1996, $27,967 was charged to the
Fund by the Distributor 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 $2,535 during the period ended 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, $6,525 was charged by Mellon pursuant to
the custody agreement.

DREYFUS HIGH YIELD SECURITIES 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.
(d) A 1% redemption fee is charged on certain redemptions of Fund
shares (including redemptions through the Exchange Privilege service) where
the redemption or exchange occurs within a six-month period following the
date of issuance. During the period ended October 31, 1996, no redemption
fees were charged by the Fund.
NOTE 4-SECURITIES TRANSACTIONS:
(a) The aggregate amount of purchases and sales (including paydowns) of
investment securities, excluding short-term securities, during the period
ended October 31, 1996, amounted to $65,727,099 and $38,916,180,
respectively.
The Fund may invest in financial futures contracts in order to gain
exposure to or protect against changes in the market. The Fund is exposed to
market risk as a result of changes in the value of the underlying financial
instruments (see the Statement of Financial Futures). Investments in
financial futures require the Fund to "mark to market" on a daily basis,
which reflects the change in market value of the contracts at the close of
each day's trading. Accordingly, variation margin payments are received or
made to reflect daily realized gains or losses. When the contracts are
closed, the Fund recognizes a realized gain or loss. These investments
require initial margin deposits with a custodian, which consist of cash or
cash equivalents, up to approximately 10% of the contracts amount. The amount
of these deposits is determined by the exchange or Board of Trade on which
the contract is traded and is subject to change. Contracts open at October
31, 1996, and their related unrealized depreciation are set forth in the
Statement of Financial Futures.
(b) At October 31, 1996, accumulated net unrealized appreciation on
investments was $909,748, consisting of $1,246,452 gross unrealized
appreciation and $336,704 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 HIGH YIELD SECURITIES FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Trustees
Dreyfus High Yield Securities Fund
We have audited the accompanying statement of assets and liabilities,
including the statements of investments and financial futures, of Dreyfus
High Yield Securities 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 March 25,
1996 (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 High Yield Securities 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 March 25, 1996 to October 31, 1996, in
conformity with generally accepted accounting principles.

[Ernst & Young LLP signature logo}

New York, New York
December 10, 1996

<TABLE>

DREYFUS SHORT TERM HIGH YIELD FUND
STATEMENT OF INVESTMENTS OCTOBER 31, 1996
Principal
Bonds and Notes-103.4% Amount Value
______ ______
<S> <C> <C> <C>
Aircraft & Aerospace-16.1% Aircraft Lease Portfolio Securitisation 96-1
Pass Through Trust, Ctfs.,
Cl. D, 12 3/4%, 2006................. $ 600,000 (a) $ 621,000
Fairchild,
Sub. Deb., 12%, 2001................. 869,000 882,035
GPA Delaware,
Gtd. Notes, 8 3/4%, 1998............. 500,000 508,125
RHI Holdings,
Sr. Sub. Deb., 11 7/8%, 1999......... 900,000 900,000
Tracor,
Sr. Sub. Notes, 10 7/8%, 2001........ 100,000 106,500
______
3,017,660
______
Auto Related-3.6% Exide,
Sr. Sub. Deb., Zero Coupon, 1997..... 750,000 (b) 679,687
______
Broadcasting-5.3% NWCG Holdings,
Sr. Secured Discount Notes, Ser. B,
Zero Coupon, 1999.................... 500,000 410,000
Park Broadcasting,
Sr. Notes, Ser. B, 11 3/4%, 2004..... 500,000 577,500
______
987,500
______
Chemicals-1.3% Astor,
Sr. Sub. Notes, 10 1/2%, 2006........ 250,000 (a) 250,312
______
Consumer-21.1% Coleman Holdings,
Sr. Secured Discount Notes, Ser. B,
Zero Coupon, 1998.................... 750,000 648,750
Health o meter,
Sr. Sub. Notes, 13%, 2002 (Units).... 500,000 (c) 552,500
MacAndrews & Forbes,
Sr. Sub. Notes, 11 7/8%, 2002........ 500,000 532,500
MagneTek,
Sr. Sub. Deb., 10 3/4%, 1998......... 800,000 826,000
Plastic Containers,
Sr. Secured Notes, 10 3/4%, 2001..... 500,000 528,750
Revlon Worldwide,
Sr. Secured Discount Notes, Zero Coupon, 1998 1,000,000 886,250
______
3,974,750
______
Energy-13.3% AmeriGas Partners, L.P.,
Sr. Notes, Ser. B, 10 1/8%, 2007..... 300,000 312,000
DeepTech International,
Sr. Secured Notes, 12%, 2000......... 1,000,000 1,045,000
Flores & Rucks,
Sr. Notes, 13 1/2%, 2004............. 500,000 591,250
Santa Fe Energy Resources,
Sr. Sub. Deb., 11%, 2004............. 500,000 552,500
______
2,500,750
______

DREYFUS SHORT TERM HIGH YIELD FUND
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1996
Principal
Bonds and Notes (continued) Amount Value
______ ______
Entertainment/Media-2.9% Katz,
Sr. Sub. Notes, 12 3/4%, 2002........ $ 500,000 $ 552,500
______
Foods and Beverages-2.7% Foodmaker,
Sr. Notes, 9 1/4%, 1999.............. 500,000 503,750
______
Foreign-8.2% Net Sat Servicos Ltda.,
Sr. Secured Notes, 12 3/4%, 2001..... 500,000 (a,d) 523,750
Rogers Communications,
Deb., 10 7/8%, 2004.................. 500,000 517,500
Russel Metals,
Sr. Notes, 10 1/4%, 2000............. 500,000 493,750
______
1,535,000
______
Gaming-3.6% Resorts International,
11 3/8%, 2004 (Units)................ 675,000 (e) 673,050
______
Industrial-6.5% Figgie International,
Sr. Notes, 9 7/8%, 1999.............. 500,000 518,125
Republic Engineered Steels,
First Mortgage Notes, 9 7/8%, 2001... 750,000 701,250
______
1,219,375
______
Paper & Paper Related-5.2% Gaylord Container,
Sr. Sub. Discount Deb., 12 3/4%, 2005 500,000 548,750
Stone Container,
Sr. Notes, 12 5/8%, 1998............. 400,000 426,000
______
974,750
______
Retail-3.4% K Mart,
Medium-Term Notes, 7.01%, 2000....... 700,000 638,882
______
Steel-4.4% Weirton Steel,
Sr. Notes:
11 1/2%, 1998......................... 500,000 517,500
10 7/8%, 1999......................... 300,000 310,500
______
828,000
______
Supermarkets-3.2% Fleming Cos.,
Sr. Floating Rate Notes, 7 15/16%, 2001 675,000 (f) 604,125
______
Transportation-2.6% Trism,
Sr. Sub. Notes, 10 3/4%, 2000........ 500,000 482,500
______
TOTAL BONDS AND NOTES
(cost $19,288,310)................... $19,422,591
======

Preferred Stocks-.6% Shares
______
Auto Related; Harvard Industries, Cum., $3.5625
(cost $110,625)...................... 5,000 $ 103,750
======

DREYFUS SHORT TERM HIGH YIELD FUND
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1996
Principal
Short-Term Investments-7.8% Amount Value
______ ______
U.S. Government Agency-7.6% Federal Home Loan Banks,
5.52%, 11/1/1996..................... $ 1,425,000 $ 1,425,000
______
U.S. Treasury Bills-.2%.... 4.84%, 12/12/1996 26,000 (g) 25,852
4.95%, 1/9/1997........................ 10,000 (g) 9,905
______
35,757
______
Total Short-Term Investments
(cost $1,460,762).................... $ 1,460,757
======
TOTAL INVESTMENTS (cost $20,859,697)........................................ 111.8% $20,987,098
==== ======
LIABILITIES, LESS CASH AND RECEIVABLES...................................... (11.8%) $ (2,208,143)
==== ======
NET ASSETS.................................................................. 100.0% $18,778,955
==== ======

Notes to Statement of Investments:
(a) Securities exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31,
1996, these securities amounted to $1,395,062 or 7.4% of net assets.
(b) Zero coupon until 12/15/1997, date on which a stated coupon rate of 12
1/4% becomes effective; the stated maturity is 12/15/2004.
(c) With warrants to purchase Common Stock.
(d) Reflects date security can be redeemed at
holders' option; the stated maturity date is 8/5/2004.
(e) With Common Stock attached.
(f) Variable rate security-interest rate subject to periodic change.
(g) Held by the custodian in a segregated
account as collateral for open Financial Futures positions.
</TABLE>
<TABLE>

STATEMENT OF FINANCIAL FUTURES OCTOBER 31, 1996
Market Value Unrealized
Covered (Depreciation)
Financial Futures Sold Short Contracts by Contracts Expiration at 10/31/96
_____________ ______ _______ _______ _______
<S> <C> <C> <C> <C>
U.S. Treasury 5yr Note....................... 5 $536,172 December `96 $(4,062)

</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
<TABLE>

DREYFUS SHORT TERM HIGH YIELD FUND
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1996
Cost Value
______ ______
<S> <C> <C> <C>
ASSETS: Investments in securities-See Statement of Investments $20,859,697 $20,987,098
Cash....................................... 638,690
Interest receivable........................ 499,230
Prepaid expenses and other assets.......... 2,522
Due from The Dreyfus Corporation........... 19,166
______
22,146,706
______
LIABILITIES: Due to Distributor......................... 3,041
Payable for investment securities purchased 3,185,242
Payable for shares of Beneficial Interest redeemed 160,126
Accrued expenses and other liabilities..... 19,342
______
3,367,751
______
NET ASSETS.................................................................. $18,778,955
======
REPRESENTED BY: Paid-in capital............................ $18,548,629
Accumulated net realized gain (loss) on investments 106,987
Accumulated net unrealized appreciation (depreciation)
on investments [including $4,062 net unrealized
(depreciation) on financial futures]-Note 4(b) 123,339
______
NET ASSETS.................................................................. $18,778,955
======
SHARES OUTSTANDING
(UNLIMITED NUMBER OF $.001 PAR VALUE SHARES OF BENEFICIAL INTEREST AUTHORIZED)
........................................................................... 1,479,536
NET ASSET VALUE, offering and redemption price per share.................... $12.69
======

</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
<TABLE>

DREYFUS SHORT TERM HIGH YIELD FUND
STATEMENT OF OPERATIONS
FROM AUGUST 16, 1996 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1996
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME Interest Income............................ $304,981
EXPENSES: Management fee-Note 3(a)................... $ 18,501
Legal fees................................. 23,092
Audit fees................................. 12,000
Shareholder servicing costs-Note 3(b)...... 7,839
Registration fees.......................... 5,749
Prospectus and shareholders' reports....... 2,567
Custodian fees............................. 1,457
Trustees' fees and expenses-Note 3(c)...... 488
Miscellaneous.............................. 830
_____
Total Expenses....................... 72,523
Less-expense reimbursement from the Manager due to
undertaking-Note 3 (a)................. (46,180)
_____
Net Expenses......................... 26,343
_____
INVESTMENT INCOME-NET....................................................... 278,638
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-Note 4:
Net realized gain (loss) on investments.... $119,375
Net realized gain (loss) on financial futures (12,388)
_____
Net Realized Gain (Loss)............. 106,987
_____
Net unrealized appreciation (depreciation) on investments
[including $4,062 unrealized (depreciation) on
financial futures]..................... 123,339
_____
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.......................... 230,326
_____
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $508,964
=====
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
<TABLE>

DREYFUS SHORT TERM HIGH YIELD FUND
STATEMENT OF CHANGES IN NET ASSETS
FROM AUGUST 16, 1996 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1996
<S> <C> <C>
OPERATIONS:
Investment income-net................................................................... $ 278,638
Net realized gain (loss) on investments................................................. 106,987
Net unrealized appreciation (depreciation) on investments............................... 123,339
______
Net Increase (Decrease) in Net Assets Resulting from Operations..................... 508,964
______
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net................................................................... (278,638)
______
BENEFICIAL INTEREST TRANSACTIONS :
Net proceeds from shares sold........................................................... 25,885,033
Dividends reinvested.................................................................... 258,303
Cost of shares redeemed................................................................. (7,594,707)
______
Increase (Decrease) in Net Assets from Beneficial Interest Transactions............. 18,548,629
______
Total Increase (Decrease) in Net Assets........................................... 18,778,955
NET ASSETS:
Beginning of Period..................................................................... __
______
End of Period........................................................................... $18,778,955
======
CAPITAL SHARE TRANSACTIONS: Shares
______
Shares sold............................................................................. 2,058,351
Shares issued for dividends reinvested.................................................. 20,416
Shares redeemed......................................................................... (599,231)
______
Net Increase (Decrease) in Shares Outstanding....................................... 1,479,536
======

</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

DREYFUS SHORT TERM HIGH YIELD FUND
FINANCIAL HIGHLIGHTS
Reference is made to page 4 of the Fund's Prospectus dated March 3, 1997.

DREYFUS SHORT TERM HIGH YIELD 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 Short Term High Yield Fund (the "Fund") which commenced
operations on August 16, 1996. The Fund's investment objective is to provide
high current income. 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 October 31, 1996, Allomon Corporation, a subsidiary of Mellon Bank
Investments Corporation, the parent company of which is Mellon Bank, held
547,312 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: The Fund's investments (excluding short-term
investments and U.S. Government obligations) are valued each business day by
an independent pricing service ("Service") approved by the Board of Trustees.
Investments for which quoted bid prices are readily available and are
representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the
Service from dealers in such securities) and asked prices (as calculated by
the Service based upon its evaluation of the market for such securities).
Other investments (which constitute a majority of the portfolio securities)
are carried at fair value as determined by the Service, based on methods
which include consideration of: yields or prices of securities of comparable
quality, coupon, maturity and type; indications as to values from dealers;
and general market conditions. Securities for which there are no such
valuations are valued at fair value as determined in good faith under the
direction of the Board of Trustees. Investments in U.S. Government obligations
are valued at the mean between quoted bid and asked prices. Short-term
investments are carried at amortized cost, which approximates value.
Investments denominated in foreign currencies are translated into U.S.
dollars at the prevailing rates of exchange.
(b) Securities transactions and investment income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis.
(c) Dividends to shareholders: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
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, 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.

DREYFUS SHORT TERM HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2-BANK LINE OF CREDIT:
The Fund may borrow up to $10 million for leveraging purposes under a
short-term unsecured line of credit and 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 either 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 .65 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 value of the Portfolio's average net assets in
accordance with California "blue sky" regulations. The Manager has undertaken
from August 16, 1996 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% of the value of the Fund's
average daily net assets. The expense reimbursement pursuant to the
undertaking, amounted to $46,180 for the period ended October 31, 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 the Distributor, for the provision of certain services to Fund
shareholders a fee 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 $7,116 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 $488 for the period from August 16, 1996 through
October 31, 1996.
The Fund has entered into a custody agreement with Mellon to provide
custodial services for the Fund. During the period ended October 31, 1996,
$1,457 was charged by Mellon pursuant to the custody agreement.
(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.

DREYFUS SHORT TERM HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4-SECURITIES TRANSACTIONS:
(a) The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the period ended October 31, 1996
amounted to $26,948,968 and $8,393,826, respectively.
The Fund may invest in financial futures contracts in order to gain
exposure to or protect against changes in the market. The Fund is exposed to
market risk as a result of changes in the value of the underlying financial
instruments (see the Statement of Financial Futures). Investments in
financial futures require the Fund to "mark to market" on a daily basis,
which reflects the change in market value of the contracts at the close of
each day's trading. Accordingly, variation margin payments are received or
made to reflect daily realized gains or losses. When the contracts are
closed, the Fund recognizes a realized gain or loss. These investments
require initial margin deposits with a custodian, which consist of cash or
cash equivalents, up to approximately 10% of the contracts amount. The amount
of these deposits is determined by the exchange or Board of Trade on which
the contract is traded and is subject to change. Contracts open at October
31, 1996, and their related unrealized depreciation are set forth in the
Statement of Financial Futures.
(b) At October 31, 1996, accumulated net unrealized appreciation on
investments was $123,339, consisting of $168,336 gross unrealized
appreciation and $44,997 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 SHORT TERM HIGH YIELD FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Trustees
Dreyfus Short Term High Yield Fund
We have audited the accompanying statement of assets and liabilities,
including the statement of investments and financial futures, of Dreyfus
Short Term High Yield 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 August 16,
1996 (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 Short Term High Yield 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 August 16, 1996 to October 31, 1996, in
conformity with generally accepted accounting principles.

[ERNST & YOUNG LLP signature logo]

New York, New York
December 10, 1996

<TABLE>
<CAPTION>
DREYFUS STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS OCTOBER 31, 1996
Principal
Bonds and Notes-89.2% Amount Value
_______ _______
<S> <C> <C>
Aircraft & Aerospace-2.6% Fairchild,
Sub. Deb., 12%, 2001............... $ 7,500,000 $ 7,612,500
_______
Broadcasting-.5% Spanish Broadcasting System,
Sr. Notes, 7 1/2%, 2002............ 1,500,000 (a) 1,571,250
_______
Commercial Mortgage
Backed-12.1% Asset Securitization Corp., Commercial
Mortgage Pass-Through Ctfs., Ser. 1996-D3:
Cl. A4, 7.822%, 2026........... 5,000,000 (b) 5,152,344
Cl. A5, 8.165%, 2026........... 2,500,000 (b) 2,585,938
Structured Asset Securities:
Mortgage Pass-Through Ctfs.,
REMIC, Ser. Greenpoint 1996-A:
Cl. B-1, 8.441%, 2027.......... 1,810,063 1,812,044
Cl. B-2, 8.441%, 2027.......... 723,627 754,834
Cl. B-4, 8.441%, 2027.......... 434,375 (c) 371,527
Multiclass Pass-Through Ctfs., REMIC, Ser. 1996-CFL:
Cl. B, 6.303%, 2028............ 7,200,000 7,015,500
Cl. C, 6.525%, 2028............ 7,192,927 6,969,272
Cl. F, 7 3/4%, 2028............ 9,000,000 (c) 8,021,250
Cl. H, 7 3/4%, 2028............ 4,750,000 (c) 3,159,492
_______
35,842,201
_______
Consumer-1.4% Avondale Mills,
Gtd. Sr. Sub. Notes, 10 1/4%, 2006. 1,000,000 1,027,500
BPC Holding,
Sr. Secured Notes, 12 1/2%, 2006... 1,250,000 1,306,250
Hosiery Corp. of America,
Sr. Sub. Exchange Notes, 13 3/4%, 2002 (Units) 445,000 (d) 522,875
Microcell Telecommunications,
Sr. Discount Notes, Zero Coupon, 2001 (Units). 2,000,000 (c,e,f) 1,137,500
_______
3,994,125
_______
Energy-4.2% DeepTech International,
Sr. Secured Notes, 12%, 2000....... 4,850,000 5,068,250
Flores & Rucks,
Sr. Sub. Notes, 9 3/4%, 2006....... 1,500,000 1,545,000
Louisiana Land & Exploration,
Deb., 7.65%, 2023.................. 5,450,000 5,468,138
Maxus Energy,
Sinking Fund Deb., 11 1/4%, 2013... 254,000 261,620
_______
12,343,008
_______
Entertainment/Media-.5% Alliance Entertainment,
Sr. Sub. Notes, 11 1/4%, 2005...... 1,500,000 1,372,500
_______
Finance-.7% McDonnell Douglas Finance,
Medium-Term Notes, 9.90%, 2000..... 2,000,000 2,035,736
_______

DREYFUS STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1996
Principal
Bonds and Notes (continued) Amount Value
_______ _______
Foreign-6.6% Corporacion Andina de Fomento,
Bonds, 7.10%, 2003................. $ 3,850,000 $ 3,842,177
Dynacare,
Sr. Notes, 10 3/4%, 2006........... 2,000,000 2,035,000
Occidente Y Caribe Celular S.A.,
Sr. Discount Notes, Zero Coupon, 2001 (Units) 8,281,000 (c,f,g) 4,223,310
Petroleos Mexicanos,
Gtd. Notes, 8%, 1998............... 4,500,000 (c) 4,511,250
Teekay Shipping,
First Preferred Ship Mortgage Notes,
8.32%, 2008........................ 5,000,000 4,850,000
_______
19,461,737
_______
Foreign/Governmental-7.5% Province of Newfoundland,
Sinking Fund Deb., 10%, 2020....... 1,000,000 1,273,520
Republic of Argentina (BOTE),
Floating Rate Notes, Ser. 10, 5 9/16%, 2000 2,659,200 (b) 2,534,419
Republic of Colombia, Notes:
7 1/4%, 2/15/2003.................. 5,000,000 4,814,465
7 1/4%, 2/23/2004.................. 4,800,000 4,559,909
United Mexican States,
Floating Rate Notes, 7 11/16%, 2001 9,000,000 (b,c) 9,029,700
_______
22,212,013
_______
Gaming-1.0% Casino Magic of Louisiana,
First Mortgage Notes, 13%, 2003.... 2,250,000 (c) 2,283,750
Riviera Holdings,
First Mortgage Notes, 11%, 2002.... 750,000 753,750
_______
3,037,500
_______
Hospital Related-1.2% HMC Acquisition Properties,
Sr. Notes, 9%, 2007................ 3,500,000 3,395,000
_______
Industrial-.2% Remington Arms,
Sr. Sub. Notes, 10%, 2003.......... 750,000 (c) 618,750
_______
Office Equipment-.9% Anacomp,
Sr. Secured Notes, 11 5/8%, 1999... 433,000 438,413
Pierce Leahy,
Sr. Sub. Notes, 11 1/8%, 2006...... 2,000,000 (c) 2,135,000
_______
2,573,413
_______
Residential Mortgage
Backed-7.4% GE Capital Mortgage Services,
REMIC Multiclass Pass-Through Ctfs.:
Ser. 1993-11, Cl. B4, 6%, 2008.... 170,238 (c) 144,011
Ser. 1993-15, Cl. B3, 6%, 2008.... 472,684 (c) 397,203
Ser. 1996-10, Cl. B3, 6 3/4%, 2011 553,962 (c) 466,886

DREYFUS STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1996
Principal
Bonds and Notes (continued) Amount Value
_______ _______
Residential Mortgage
Backed (continued) GE Capital Mortgage Services,
REMIC Multiclass Pass-Through Ctfs.
(continued):
Ser. 1996-12, Cl. B2, 7 1/4%, 2011 $ 860,971 (c) $ 835,412
Ser. 1996-12, Cl. B3, 7 1/4%, 2011 368,563 (c) 320,074
Ser. 1996-14, Cl. 2B3, 7 1/4%, 2011 275,183 (c) 238,292
MORSERV,
Sub. Multi-Class Mortgage Pass-Through Ctfs.,
Ser. 1996-1:
Cl. B2, 7%, 2011 897,509 866,096
..Cl. B3, 7%, 2011 448,754 (c) 392,660
Prudential Home Mortgage Securities,
Mortgage Pass-Through Ctfs., REMIC:
Ser. 1996-7:
..Cl. B2, 6 3/4%, 2011 513,486 483,961
Cl. B3, 6 3/4%, 2011 1,975,251 (c) 1,662,915
Cl. B4, 6 3/4%, 2011 910,898 (c) 661,824
Ser. 1996-8:
Cl. B1, 6 3/4%, 2026 2,685,939 2,471,064
Cl. B2, 6 3/4%, 2026 1,611,364 1,443,682
Cl. B3, 6 3/4%, 2026 1,826,478 (c) 1,351,594
Cl. B4, 6 3/4%, 2026 967,017 (c) 528,234
Residential Funding Mortgage Securities I,
Mortgage Pass-Through Ctfs., REMIC,
Ser. 1996-S7, Cl. A-12, 7%, 2026... 10,045,919 9,656,640
_______
21,920,548
_______
Telecommunications-2.3% American Communications Services,
Sr. Discount Notes, Zero Coupon, 2000 800,000 (h) 456,000
CS Wireless Systems,
Sr. Discount Notes, Zero Coupon, 2001 (Units). 800,000 (c,d,i) 376,000
Shared Technologies Fairchild Communications,
Sr. Sub. Notes, Zero Coupon, 1999.. 4,750,000 (j) 3,752,500
Sprint Spectrum L.P.,
Sr. Discount Notes, Zero Coupon, 2001 4,000,000 (k) 2,315,000
_______
6,899,500
_______
Transportation-.8% Great Dane Holdings,
Sr. Sub. Deb., 12 3/4%, 2001....... 1,250,000 1,229,688
Moran Transportation,
First Preferred Ship Mortgage Notes,
11 3/4%, 2004...................... 800,000 852,000
TRISM,
Sr. Sub. Notes, 10 3/4%, 2000...... 165,000 159,225
_______
2,240,913
_______

DREYFUS STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1996
Principal
Bonds and Notes (continued) Amount Value
_______ _______
Utilities-2.3% Indiantown Cogeneration,
First Mortgage, Ser. A-10, 9.77%, 2020 $ 6,000,000 $ 6,903,870
_______
U.S. Government
and Agencies-37.0% Federal National Mortgage Association,
9%, 8/1/2026....................... 8,358,365 8,799,770
Government National Mortgage Association I:
7%, 12/15/2008..................... 12,646,126 12,784,349
7 1/2%, 1/15/2002-5/15/2024........ 36,609,190 37,254,370
8%, 8/15/2024-9/15/2024............ 18,458,869 18,960,155
9%, 11/15/2017..................... 15,284,018 16,411,215
Government National Mortgage Association II,
Adjustable Rate Mortgage, 5 1/2%,
10/20/2026 9,900,000 9,810,108
U.S. Treasury Bond,
6%, 2/15/2026...................... 5,500,000 5,019,610
_______
109,039,577
_______
TOTAL BONDS AND NOTES
(cost $260,182,158)................ $263,074,141
=======
Convertible Securities-5.9%
Notes-5.8%
Entertainment/Media-1.3% Thomas Nelson,
Sub. Notes, 5 3/4%, 1999........... $ 4,000,000 (c) $ 3,870,000
_______
Foreign-.6% Scandinavian Broadcasting,
Sub. Deb., 7 1/4%, 2005............ 1,700,000 1,714,875
_______
Industrial-2.9% INAMED,
Notes, 11%, 1999................... 6,650,000 (n) 6,650,000
MagneTek,
Sub. Notes, 8%, 2001............... 1,956,000 1,941,330
_______
8,591,330
_______
Retail-1.0% Michaels Stores,
Sub. Notes, 6 3/4%, 2003........... 4,000,000 2,800,000
_______
Total Notes.......................... $ 16,976,205
=======
Subordinated Debentures-.1%
Industrial; Outboard Marine,
7%, 2002........................... 358,000 342,338
_______
TOTAL CONVERTIBLE SECURITIES
(cost $17,909,920)................. $ 17,318,543
=======

DREYFUS STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1996

Preferred Stocks-2.6% Shares Value
_______ _______

Consumer-1.7% Cablevision Systems, Depositary Shares, Ser. M,
Cum., $11.125...................... 53,570 $ 4,928,440
_______
Media/Entertainment-.9% Paxson Communications,
Cum., $125.00...................... 2,750 2,626,250
_______
TOTAL PREFERRED STOCKS
(cost $8,076,603).................. $ 7,554,690
=======
Principal
Short-Term Investments-1.1% Amount
_______
Foreign Treasury Bills-1.0% Republic of Mexico (Cetes),
32%, 2/13/1997..................... $ 3,273,433 (l) $ 2,946,090
_______
U.S. Treasury Bills-.1% 4.97%, 11/21/1996 308,000 (m) 307,171
4.85%, 12/12/1996.................... 60,000 (m) 59,658
_______
366,829
_______
TOTAL SHORT-TERM INVESTMENTS
(cost $3,564,051).................. $ 3,312,919
=======
TOTAL INVESTMENTS (cost $289,732,732)..................................... 98.8% $291,260,293
==== =======
CASH AND RECEIVABLES (NET)................................................ 1.2% $ 3,650,574
==== =======
NET ASSETS................................................................ 100.0% $294,910,867
==== =======
</TABLE>

DREYFUS STRATEGIC INCOME FUND
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1996
Notes to Statement of Investments:
(a) 7 1/2% coupon rate until 6/15/1997, date on which a stated coupon rate of
12 1/2% becomes effective.
(b) Variable rate security - interest rate subject to periodic change.
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31,
1996, these securities amounted to $46,736,634 or 15.8% of net assets.
(d) With Common Stock attached.
(e) Zero coupon until 12/1/2001, date on which a stated coupon rate of 14%
becomes effective; the stated maturity date is 6/1/2006.
(f) With warrants to purchase Common Stock.
(g) Zero coupon until 3/15/2001, date on which a stated coupon rate of 14%
becomes effective; the stated maturity date is 3/15/2004.
(h) Zero coupon until 11/1/2000, date on which a stated coupon rate of 13%
becomes effective; the stated maturity date is 11/1/2005.
(i) Zero coupon until 3/1/2001, date on which a stated coupon rate of 11 3/8%
becomes effective; the stated maturity date is 3/1/2006.
(j) Zero coupon until 3/1/1999, date on which a stated coupon rate of 12 1/4%
becomes effective; the stated maturity date is 3/1/2006.
(k) Zero coupon until 8/15/2001, date on which a stated coupon rate of 12 1/2%
becomes effective; the stated maturity date is 8/15/2006.
(l) Denominated in Mexican Pesos.
(m) Held by the custodian in a segregated account as collateral for open
Financial Futures positions.
(n) Security restricted as to public resale. Investment in a restricted
security, with a value of $6,650,000 represents approximately 2.3% of net
assets;
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Acquisition Purchase Percentage of
Issuer Date Price Net Assets Valuation*
___ ______ _____ ________ ______
INAMED, Conv. Notes, 11%, 3/31/1999........ 1/23/1996 $100 2.3% cost
*The valuation of this security has been determined in good faith under the
direction of the Board of Trustees.

STATEMENT OF FINANCIAL FUTURES OCTOBER 31, 1996
Market Value Unrealized
Covered (Depreciation)
Issuer Contracts by Contracts Expiration at 10/31/96
___ _______ ______ ________ _______
U.S. Treasury 10yr Note (Short).............. 130 $14,251,250 December '96 $(173,750)
======

SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS STRATEGIC INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1996
Cost Value
_______ _______
<S> <C> <C> <C>
ASSETS: Investments in securities-See Statement of Investments $289,732,732 $291,260,293
Cash....................................... 518,822
Interest receivable........................ 3,398,846
Receivable for investment securities sold.. 2,662,689
Prepaid expenses and other assets.......... 22,947
_______
297,863,597
_______
LIABILITIES: Due to The Dreyfus Corporation and affiliates 188,146
Due to Distributor......................... 62,337
Payable for investment securities purchased 2,331,289
Payable for shares of Beneficial Interest redeemed 246,892
Interest Payable........................... 26,822
Accrued expenses and other liabilities..... 97,244
_______
2,952,730
_______
NET ASSETS.................................................................. $294,910,867
=======
REPRESENTED BY: Paid-in capital............................ $302,453,250
Accumulated undistributed investment income-net 34,078
Accumulated net realized gain (loss) on investments (8,930,272)
Accumulated net unrealized appreciation
(depreciation) on investments
[including $173,750 net unrealized (depreciation)
on financial futures]-Note 4(b) 1,353,811
_______
NET ASSETS.................................................................. $294,910,867
=======
SHARES OUTSTANDING
(unlimited number of $ .001 par value shares of Beneficial Interest authorized) 20,705,566
NET ASSET VALUE, offering and redemption price per share.................... $14.24
====

SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS STRATEGIC INCOME FUND
STATEMENT OF OPERATIONS YEAR ENDED OCTOBER 31, 1996
INVESTMENT INCOME
<S> <C> <C> <C>
INCOME: Interest Income............................ $23,787,638
Dividend Income............................ 445,867 $ 24,233,505
_______
EXPENSES: Management fee-Note 3(a)................... 1,829,326
Shareholder servicing costs-Note 3(b)...... 1,097,471
Interest-Note 2............................ 75,937
Professional fees.......................... 67,143
Custodian fees-Note 3(b)................... 49,811
Trustees' fees and expenses-Note 3(c)...... 49,070
Registration fees.......................... 26,291
Prospectus and shareholders' reports....... 21,497
Miscellaneous.............................. 19,101
_______
Total Expenses....................... 3,235,647
_______
INVESTMENT INCOME-NET....................................................... 20,997,858
_______
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-Note 4:
Net realized gain (loss) on investments.... $ 13,303,174
Net realized gain (loss) on financial futures 58,476
_______
Net Realized Gain (Loss)............. 13,361,650
Net unrealized appreciation (depreciation) on investments
[including $173,750 unrealized (depreciation)
on financial futures].................. (13,110,345)
_______
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.......................... 251,305
_______
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 21,249,163
=======

SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS STRATEGIC INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
October 31, 1996 October 31, 1995
_________ _________
<S> <C> <C>
OPERATIONS:
Investment income-net.................................................... $ 20,997,858 $ 21,735,685
Net realized gain (loss) on investments.................................. 13,361,650 (8,706,304)
Net unrealized appreciation (depreciation) on investments................ (13,110,345) 38,489,861
_______ _______
Net Increase (Decrease) in Net Assets Resulting from Operations...... 21,249,163 51,519,242
_______ _______
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net.................................................... (20,963,780) (21,735,685)
_______ _______
BENEFICIAL INTEREST TRANSACTIONS :
Net proceeds from shares sold............................................ 27,107,019 17,545,801
Dividends reinvested..................................................... 15,493,693 15,878,061
Cost of shares redeemed.................................................. (68,320,151) (65,349,244)
_______ _______
Increase (Decrease) in Net Assets from Beneficial Interest Transactions (25,719,439) (31,925,382)
_______ _______
Total Increase (Decrease) in Net Assets............................ (25,434,056) (2,141,825)
NET ASSETS:
Beginning of Period...................................................... 320,344,923 322,486,748
_______ _______
End of Period............................................................ $294,910,867 $320,344,923
======= =======
Undistributed investment income-net........................................ $ 34,078 -
_______
CAPITAL SHARE TRANSACTIONS: Shares Shares
_______ _______
Shares sold.............................................................. 1,909,503 1,300,295
Shares issued for dividends reinvested................................... 1,092,669 1,172,881
Shares redeemed.......................................................... (4,816,766) (4,864,735)
_______ _______
Net Increase (Decrease) in Shares Outstanding........................ (1,814,594) (2,391,559)
======= =======

SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>

DREYFUS STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS
Reference is made to page 4 of the Fund's Prospectus dated March 3, 1997.

DREYFUS STRATEGIC INCOME 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 series,
including the Dreyfus Strategic Income Fund (the "Fund"). The Fund's
investment objective is to maximize current income by investing principally
in debt securities of domestic and foreign issuers. 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 load.
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.
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: The Fund's investments (excluding short-term
investments and U.S. Government obligations) are valued each business day by
an independent pricing service ("Service") approved by the Board of Trustees.
Investments for which quoted bid prices are readily available and are
representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the
Service from dealers in such securities) and asked prices (as calculated by
the Service based upon its evaluation of the market for such securities).
Other investments (which constitute a majority of the portfolio securities)
are carried at fair value as determined by the Service, based on methods
which include consideration of: yields or prices of securities of comparable
quality, coupon, maturity and type; indications as to values from dealers;
and general market conditions. Securities for which there are no such
valuations are valued at fair value as determined in good faith under the dire
ction of the Board of Trustees. Investments in U.S. Government obligations
are valued at the mean between quoted bid and asked prices. Short-term
investments are carried at amortized cost, which approximates value.
Investments denominated in foreign currencies are translated to U.S. dollars
at the prevailing rates of exchange.
(b) Securities transactions and investment income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Dividend
Income is recognized on the ex-dividend date and interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis.
(c) Dividends to shareholders: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
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, it is the policy of the Fund not to distribute such gain.
(d) Federal income taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with 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.
The Fund has an unused capital loss carryover of approximately $9,221,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to October 31, 1996. If not
applied, $622,000 of the carryover expires in fiscal 2002, and $8,599,000
expires in fiscal 2003.

DREYFUS STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 2-BANK LINE OF CREDIT:
The Fund may borrow up to $10 million for leveraging purposes under a
short-term unsecured line of credit and 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. At October 31,
1996, there were no outstanding borrowings under either line of credit.
The average daily amount of borrowings outstanding under both
arrangements during the period ended October 31, 1996 was approximately $1.2
million, with a related weighted average annualized interest rate of 6.32%.
The maximum amount borrowed at any time during the period ended October 31,
1996 was $18.8 million.
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 .60 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, 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 value of the Fund's average net assets in accordance with
California "blue sky" regulations. There was no expense reimbursement for the
period ended October 31, 1996.
(b) Pursuant to the Fund's Shareholder Services Plan, the Fund pays the
Distributor, at an annual rate of .25 of 1% of the value of the Fund's
average daily net assets for the provision of certain services. 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. During the period ended October 31, 1996, $762,219 was charged to the
Fund by the Distributor pursuant to the Shareholder Services Plan.
Effective December 1, 1995, 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 $210,083 during the period from
December 1, 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, $20,223 was charged by Mellon pursuant to
the custody agreement.
(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.

DREYFUS STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 4-SECURITIES TRANSACTIONS:
(a) The aggregate amount of purchases and sales (including paydowns) of
investment securities, excluding short-term securities, during the year ended
October 31, 1996, amounted to $638,501,318 and $664,920,199, respectively.
The Fund may invest in financial futures contracts in order to gain
exposure to or protect against changes in the market. The Fund is exposed to
market risk as a result of changes in the value of the underlying financial
instruments (see the Statement of Financial Futures). Investments in
financial futures require the Fund to "mark to market" on a daily basis,
which reflects the change in market value of the contracts at the close of
each day's trading. Accordingly, variation margin payments are received or
made to reflect daily realized gains or losses. When the contracts are
closed, the Fund recognizes a realized gain or loss. These investments
require initial margin deposits with a custodian, which consist of cash or
cash equivalents, up to approximately 10% of the contracts amount. The amount
of these deposits is determined by the exchange or Board of Trade on which
the contract is traded and is subject to change. Contracts open at October
31, 1996 and their related unrealized depreciation are set forth in the
Statement of Financial Futures.
(b) At October 31, 1996, accumulated net unrealized appreciation on
investments was $1,353,811, consisting of $4,705,802 gross unrealized
appreciation and $3,351,991 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 STRATEGIC INCOME FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Trustees
Dreyfus Strategic Income Fund
We have audited the accompanying statement of assets and liabilities,
including the statements of investments and financial futures, of Dreyfus
Strategic Income Fund, one of the Funds constituting Dreyfus Income Funds, as
of October 31, 1996, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years
in the period then ended, and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included 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 audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Dreyfus Strategic Income Fund at October 31, 1996, the results of
its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.

[Ernst and Young LLP signature logo]

New York, New York
December 10, 1996

DREYFUS INCOME FUNDS

PART C. OTHER INFORMATION
_________________________

Item 24. Financial Statements and Exhibits. - List
_______ _________________________________________

(a) Financial Statements:

Included in Part B of the Registration Statement:

Dreyfus Equity Dividend Fund.

Statement of Investments--as of October 31, 1996.

Statement of Assets and Liabilities--as of October 31,
1996.

Statement of Operations--from December 29, 1995
(commencement of operations) to October 31, 1996.

Statement of Changes in Net Assets--from December 29,
1995 (commencement of operations) to October 31, 1996.

Notes to Financial Statements.

Dreyfus High Yield Securities Fund.

Statement of Investments--as of October 31, 1996.

Statement of Financial Futures--as of October 31, 1996.

Statement of Assets and Liabilities--as of October 31,
1996.

Statement of Operations--from March 25, 1996
(commencement of operations) to October 31, 1996.

Statement of Changes in Net Assets--from March 25, 1996
(commencement of operations) to October 31, 1996.

Notes to Financial Statements.

Dreyfus Short Term High Yield Fund.

Statement of Investments--as of October 31, 1996.

Statement of Financial Futures--as of October 31, 1996.

Statement of Assets and Liabilities--as of October 31,
1996.

Statement of Operations--from August 16, 1996
(commencement of operations) to October 31, 1996.

Statement of Changes in Net Assets--from August 16, 1996
(commencement of operations) to October 31, 1996.

Notes to Financial Statements.

Dreyfus Strategic Income Fund.

Statement of Investments--as of October 31, 1996.

Statement of Financial Futures--as of October 31, 1996.

Statement of Assets and Liabilities--as of October 31,
1996.

Statement of Operations--for the year ended October 31,
1996.

Statement of Changes in Net Assets--for the two years
ended October 31, 1996 and 1995.

Notes to Financial Statements.

Report of Ernst & Young LLP, Independent Auditors, dated
December 10, 1996.

Schedules No. I through VII and other financial statement information, for
which provision is made in the applicable accounting regulations of the
Securities and Exchange Commission are either omitted because they are not
required under the related instructions, they are inapplicable, or the
required information is presented in the financial statements or notes which
are included in Part B of the Registration Statement.

Item 24. Financial Statements and Exhibits. - List (continued)
_______ _____________________________________________________

(b) Exhibits:

(1)(a) Registrant's Amended and Restated Agreement and Declaration of
Trust, dated June 25, 1992, is incorporated by reference to
Exhibit (1)(a) of Post-Effective Amendment No. 13 to the
Registration Statement, filed on December 29, 1995.

(1)(b) Registrant's Articles of Amendment dated December 6, 1995, are
incorporated by reference to Exhibit (1)(b) of Post-Effective
Amendment No. 13 to the Registration Statement, filed on December
29, 1995.

(2) Registrant's By-Laws, as amended December 6, 1995, are
incorporated by reference to Exhibit (2) of Post-Effective
Amendment No. 13 to the Registration Statement, filed on December
29, 1995.

(5) Management Agreement dated August 24, 1994, as amended December 6,
1995 is incorporated by reference to Exhibit (5) of Post-Effective
Amendment No. 13 to the Registration Statement, filed on December
29, 1995.

(6) Distribution Agreement dated August 24, 1994, as amended December
6, 1995 is incorporated by reference to Exhibit (6) of Post-
Effective Amendment No. 13 to the Registration Statement, filed on
December 29, 1995.

(6)(b) Forms of Service Agreement are incorporated by reference to
Exhibit (6)(b) and (6)(c) of Post-Effective Amendment No. 10 to
the Registration Statement, filed on December 30, 1994.

(8)(a) Registrant's Amended and Restated Custody Agreement is
incorporated by reference to Exhibit (8) of Post-Effective
Amendment No. 13 to the Registration Statement, filed on December
29, 1995.

(9) Shareholder Services Plan dated August 24, 1994, as amended
December 6, 1995 is incorporated by reference to Exhibit (9) of
Post-Effective Amendment No. 13 to the Registration Statement,
filed on December 29, 1995.

(10) Opinion and Consent of Stroock & Stroock & Lavan, Registrant's
counsel is incorporated by reference to Exhibit (10) of Pre-
Effective Amendment No. 1 to the Registration Statement on Form N-
1A, filed on October 2, 1986.

(11) Consent of Ernst & Young LLP.

(16) Schedule of Computation of Performance Data as to Dreyfus
Strategic Income Fund is incorporated by reference to Exhibit (16)
of Post-Effective Amendment No. 9 to the Registration Statement,
filed on January 20, 1994; and as to Dreyfus Equity Dividend Fund
to Post-Effective Amendment No. 14, filed on May 30, 1996.

(17) Financial Data Schedules.

Other Exhibits
______________

(a) Power of Attorney for the Trustees and officers are
incorporated by reference to the Other Exhibits (a) of
Post-Effective Amendments Nos. 7 and 9 to the
Registration Statement, filed on December 31, 1991, and
January 20, 1994.

Item 24. Financial Statements and Exhibits. - List (continued)
_______ _____________________________________________________

(b) Certificate of Assistant Secretary is incorporated by
reference to the Other Exhibits (b) of Post-Effective
Amendment No. 10 to the Registration Statement, filed on
December 30, 1994.

Item 25. Persons Controlled by or under Common Control with Registrant.
_______ ______________________________________________________________

Not Applicable

Item 26. Number of Holders of Securities.
_______ ________________________________

(1) (2)

Number of Record Holders
Title of Class (as of February 18, 1997)
______________ _______________________________

Beneficial Interest Dreyfus Strategic Income Fund - 11,491
(Par value $.001)
Dreyfus Equity Dividend Fund - 45

Dreyfus High Yield Securities Fund - 1,483

Dreyfus Short Term High Yield Fund - 1,509

Item 27. Indemnification
_______ _______________

Reference is made to Article EIGHTH of the Registrant's Amended and
Restated Agreement and Declaration of Trust, dated June 25, 1992,
and the laws of the State of Maryland. The application of these
provisions is limited by Article VIII of the Registrant's By-Laws
and by the following undertaking set forth in the rules promulgated
by the Securities and Exchange Commission:

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted Board members, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
such Act and will be governed by the final adjudication of such
issue.

Reference is also made to the Distribution Agreement incorporated by
reference to Exhibit (6) of Post-Effective Amendment No. 13 to the
Registration Statement on Form N-1A, filed on December 29,
1995.

Item 28. Business and Other Connections of Investment Adviser.
_______ ____________________________________________________

The Dreyfus Corporation ("Dreyfus") and subsidiary
companies comprise a financial service organization whose
business consists primarily of providing investment management
services as the investment adviser and manager for sponsored
investment companies registered under the Investment Company Act
of 1940 and as an investment adviser to institutional and
individual accounts. Dreyfus also serves as sub-investment
adviser to and/or administrator of other investment companies.
Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus, is a registered broker-dealer. Dreyfus Investment
Advisors, Inc., another wholly-owned subsidiary, provides
investment management services to various pension plans,
institutions and individuals.

Item 28. Business and Other Connections of Investment Adviser (continued)
________ ________________________________________________________________

Officers and Directors of Investment Adviser
____________________________________________

Name and Position
with Dreyfus Other Businesses
_________________ ________________

MANDELL L. BERMAN Real estate consultant and private investor
Director 29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034;
Past Chairman of the Board of Trustees:
Skillman Foundation;
Member of The Board of Vintners Intl.

BURTON C. BORGELT Chairman Emeritus of the Board and
Director Past Chairman, Chief Executive Officer and
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
Director:
DeVlieg-Bullard, Inc.
1 Gorham Island
Westport, Connecticut 06880
Mellon Bank Corporation***;
Mellon Bank, N.A.***

FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation***;
Mellon Bank, N.A.***
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067

W. KEITH SMITH Chairman and Chief Executive Officer:
Chairman of the Board The Boston Company****;
Vice Chairman of the Board:
Mellon Bank Corporation***;
Mellon Bank, N.A.***;
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405

CHRISTOPHER M. CONDRON Vice Chairman:
President, Chief Mellon Bank Corporation***;
Executive Officer, The Boston Company****;
Chief Operating Deputy Director:
Officer and a Mellon Trust***;
Director Chief Executive Officer:
The Boston Company Asset Management,
Inc.****;
President:
Boston Safe Deposit and Trust Company****

STEPHEN E. CANTER Director:
Vice Chairman and The Dreyfus Trust Company++;
Chief Investment Officer, Formerly, Chairman and Chief Executive Officer:
and a Director Kleinwort Benson Investment Management
Americas Inc.*

LAWRENCE S. KASH Chairman, President and Chief
Vice Chairman-Distribution Executive Officer:
and a Director The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
Executive Vice President and Director:
Dreyfus Service Organization, Inc.**;
Director:
Dreyfus America Fund
The Dreyfus Consumer Credit Corporation*;
The Dreyfus Trust Company++;
Dreyfus Service Corporation*;
President:
The Boston Company****;
Laurel Capital Advisors***;
Boston Group Holdings, Inc.;
Executive Vice President:
Mellon Bank, N.A.***;
Boston Safe Deposit and Trust
Company****;

WILLIAM T. SANDALLS, JR. Director:
Senior Vice President and Dreyfus Partnership Management, Inc.*;
Chief Financial Officer Seven Six Seven Agency, Inc.*;
President and Director:
Lion Management, Inc.*;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.*;
Vice President, Chief Financial Officer and
Director:
Dreyfus Acquisition Corporation*;
Dreyfus America Fund
Vice President and Director:
The Dreyfus Consumer Credit Corporation*;
The Truepenny Corporation*;
Treasurer, Financial Officer and Director:
The Dreyfus Trust Company++;
Treasurer and Director:
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Service Corporation*;
Major Trading Corporation*;
Formerly, President and Director:
Sandalls & Co., Inc.

WILLIAM F. GLAVIN, JR. Executive Vice President:
Vice President-Corporate Dreyfus Service Corporation*;
Development Senior Vice President:
The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109

MARK N. JACOBS Vice President, Secretary and Director:
Vice President, Lion Management, Inc.*;
General Counsel Secretary:
and Secretary The Dreyfus Consumer Credit Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.**;
Major Trading Corporation*;
The Truepenny Corporation*

PATRICE M. KOZLOWSKI None
Vice President-
Corporate Communications

MARY BETH LEIBIG None
Vice President-
Human Resources

JEFFREY N. NACHMAN President and Director:
Vice President-Mutual Fund Dreyfus Transfer, Inc.
Accounting One American Express Plaza
Providence, Rhode Island 02903

ANDREW S. WASSER Vice President:
Vice President-Information Mellon Bank Corporation***
Services

ELVIRA OSLAPAS Assistant Secretary:
Assistant Secretary Dreyfus Service Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Acquisition Corporation, Inc.*;
The Truepenny Corporation+

______________________________________

* The address of the business so indicated is 200 Park Avenue, New
York, New York 10166.
** The address of the business so indicated is 131 Second Street, Lewes,
Delaware 19958.
*** The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
**** The address of the business so indicated is One Boston Place, Boston,
Massachusetts 02108.
+ The address of the business so indicated is Atrium Building, 80 Route
4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.

Item 29. Principal Underwriters
________ ______________________

(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or
exclusive distributor:

1) Comstock Partners Funds, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC GNMA Fund
7) Dreyfus BASIC Money Market Fund, Inc.
8) Dreyfus BASIC Municipal Fund, Inc.
9) Dreyfus BASIC U.S. Government Money Market Fund
10) Dreyfus California Intermediate Municipal Bond Fund
11) Dreyfus California Tax Exempt Bond Fund, Inc.
12) Dreyfus California Tax Exempt Money Market Fund
13) Dreyfus Cash Management
14) Dreyfus Cash Management Plus, Inc.
15) Dreyfus Connecticut Intermediate Municipal Bond Fund
16) Dreyfus Connecticut Municipal Money Market Fund, Inc.
17) Dreyfus Florida Intermediate Municipal Bond Fund
18) Dreyfus Florida Municipal Money Market Fund
19) The Dreyfus Fund Incorporated
20) Dreyfus Global Bond Fund, Inc.
21) Dreyfus Global Growth Fund
22) Dreyfus GNMA Fund, Inc.
23) Dreyfus Government Cash Management
24) Dreyfus Growth and Income Fund, Inc.
25) Dreyfus Growth and Value Funds, Inc.
26) Dreyfus Growth Opportunity Fund, Inc.
27) Dreyfus Income Funds
28) Dreyfus Institutional Money Market Fund
29) Dreyfus Institutional Short Term Treasury Fund
30) Dreyfus Insured Municipal Bond Fund, Inc.
31) Dreyfus Intermediate Municipal Bond Fund, Inc.
32) Dreyfus International Funds, Inc.
33) Dreyfus Investment Grade Bond Funds, Inc.
34) The Dreyfus/Laurel Funds, Inc.
35) The Dreyfus/Laurel Funds Trust
36) The Dreyfus/Laurel Tax-Free Municipal Funds
37) Dreyfus LifeTime Portfolios, Inc.
38) Dreyfus Liquid Assets, Inc.
39) Dreyfus Massachusetts Intermediate Municipal Bond Fund
40) Dreyfus Massachusetts Municipal Money Market Fund
41) Dreyfus Massachusetts Tax Exempt Bond Fund
42) Dreyfus MidCap Index Fund
43) Dreyfus Money Market Instruments, Inc.
44) Dreyfus Municipal Bond Fund, Inc.
45) Dreyfus Municipal Cash Management Plus
46) Dreyfus Municipal Money Market Fund, Inc.
47) Dreyfus New Jersey Intermediate Municipal Bond Fund
48) Dreyfus New Jersey Municipal Bond Fund, Inc.
49) Dreyfus New Jersey Municipal Money Market Fund, Inc.
50) Dreyfus New Leaders Fund, Inc.
51) Dreyfus New York Insured Tax Exempt Bond Fund
52) Dreyfus New York Municipal Cash Management
53) Dreyfus New York Tax Exempt Bond Fund, Inc.
54) Dreyfus New York Tax Exempt Intermediate Bond Fund
55) Dreyfus New York Tax Exempt Money Market Fund
56) Dreyfus 100% U.S. Treasury Intermediate Term Fund
57) Dreyfus 100% U.S. Treasury Long Term Fund
58) Dreyfus 100% U.S. Treasury Money Market Fund
59) Dreyfus 100% U.S. Treasury Short Term Fund
60) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
61) Dreyfus Pennsylvania Municipal Money Market Fund
62) Dreyfus S&P 500 Index Fund
63) Dreyfus Short-Intermediate Government Fund
64) Dreyfus Short-Intermediate Municipal Bond Fund
65) The Dreyfus Socially Responsible Growth Fund, Inc.
66) Dreyfus Stock Index Fund, Inc.
67) Dreyfus Tax Exempt Cash Management
68) The Dreyfus Third Century Fund, Inc.
69) Dreyfus Treasury Cash Management
70) Dreyfus Treasury Prime Cash Management
71) Dreyfus Variable Investment Fund
72) Dreyfus Worldwide Dollar Money Market Fund, Inc.
73) General California Municipal Bond Fund, Inc.
74) General California Municipal Money Market Fund
75) General Government Securities Money Market Fund, Inc.
76) General Money Market Fund, Inc.
77) General Municipal Bond Fund, Inc.
78) General Municipal Money Market Fund, Inc.
79) General New York Municipal Bond Fund, Inc.
80) General New York Municipal Money Market Fund
81) Premier Insured Municipal Bond Fund
82) Premier California Municipal Bond Fund
83) Premier Equity Funds, Inc.
84) Premier Global Investing, Inc.
85) Premier GNMA Fund
86) Premier Growth Fund, Inc.
87) Premier Municipal Bond Fund
88) Premier New York Municipal Bond Fund
89) Premier State Municipal Bond Fund
90) Premier Strategic Growth Fund
91) Premier Value Fund

(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
__________________ ___________________________ _____________

Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Compliance Treasurer
Officer

Joseph F. Tower, III+ Senior Vice President, Treasurer Vice President
and Chief Financial Officer and Assistant
Treasurer

John E. Pelletier+ Senior Vice President, General Vice President
Counsel, Secretary and Clerk and Secretary

Roy M. Moura+ First Vice President None

Dale F. Lampe+ Vice President None

Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer

Paul Prescott+ Vice President None

Elizabeth A. Keeley++ Assistant Vice President Vice President
and Assistant
Secretary

Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk

John W. Gomez+ Director None

William J. Nutt+ Director None

Mark A. Karpe Vice President Vice President
and Assistant
Secretary

Douglas C. Conroy Vice President Vice President
and Assistant
Secretary

Michael S. Petrucelli Vice President Vice President
and Assistant
Treasurer

________________________________

+ Principal business address is 60 State Street, Boston, Massachusetts
02109.

++ Principal business address is 200 Park Avenue, New York, New York
10166.

Item 30. Location of Accounts and Records
________________________________

1. First Data Investor Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671

2. The Bank of New York
90 Washington Street
New York, New York 10286

3. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671

4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166

Item 31. Management Services
_______ ___________________

Not Applicable

Item 32. Undertakings
________ ____________

(1) To call a meeting of shareholders for the purpose of voting upon
the question of removal of a Board member or Board members when
requested in writing to do so by the holders of at least 10% of
the Registrant's outstanding shares and in connection with such
meeting to comply with the provisions of Section 16(c) of the
Investment Company Act of 1940 relating to shareholder
communications.

(2) To furnish each person to whom a prospectus is delivered with a
copy of the Fund's latest Annual Report to Shareholders, upon
request and without charge.

SIGNATURES
__________

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, and State
of New York on the 26th day of February 1997.

DREYFUS INCOME FUNDS

BY: /s/Marie E. Connolly*
-----------------------------------
Marie E. Connolly, PRESIDENT

Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.

Signatures Title Date
__________________________ ______________________________ __________

/s/Marie E. Connolly* President and Treasurer 2/26/97
- --------------------------- (Principal Executive,
Marie E. Connolly Accounting and Financial Officer)

/s/David W. Burke* Board Member 2/26/97
- ---------------------------
David W. Burke

/s/Joseph S. DiMartino* Board Member 2/26/97
- ---------------------------
Joseph S. DiMartino

/s/Diane Dunst* Board Member 2/26/97
- ---------------------------
Diane Dunst

/s/Rosalind Gersten Jacobs* Board Member 2/26/97
- ---------------------------
Rosalind Gersten Jacobs

/s/Jay I. Meltzer* Board Member 2/26/97
- ---------------------------
Jay I. Meltzer

/s/Daniel Rose* Board Member 2/26/97
- ---------------------------
Daniel Rose

/s/Warren B. Rudman* Board Member 2/26/97
- ---------------------------
Warren B. Rudman

/s/Sander Vanocur* Board Member 2/26/97
- ---------------------------
Sander Vanocur

*BY:
---------------------------
Elizabeth A. Keeley,
Attorney-in-Fact

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Condensed
Financial Information" and "Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors" and to the use of our reports
dated December 10, 1996 Dreyfus Income Funds (comprising Dreyfus Equity Dividend
Fund, Dreyfus High Yield Securities Fund, Dreyfus Short Term High Yield Fund
and Dreyfus Strategic Income Fund)in this Registration Statement (Form N-1A
No. 33-7172) of Dreyfus Income Funds.

ERNST & YOUNG LLP

New York, New York
February 27, 1997

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<NET-INVESTMENT-INCOME> 44
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<PER-SHARE-NAV-END> 13.89
<EXPENSE-RATIO> .011
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000797073
<NAME> DREYFUS INCOME FUNDS
<SERIES>
<NUMBER> 4
<NAME> DREYFUS SHORT-TERM HIGH YIELD FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 20860
<INVESTMENTS-AT-VALUE> 20987
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<PAYABLE-FOR-SECURITIES> 3185
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<PAID-IN-CAPITAL-COMMON> 18549
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<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> 107
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 123
<NET-ASSETS> 18779
<DIVIDEND-INCOME> 0
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<NUMBER-OF-SHARES-SOLD> 2058
<NUMBER-OF-SHARES-REDEEMED> (599)
<SHARES-REINVESTED> 20
<NET-CHANGE-IN-ASSETS> 18779
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 19
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 73
<AVERAGE-NET-ASSETS> 13529
<PER-SHARE-NAV-BEGIN> 12.50
<PER-SHARE-NII> .26
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<PER-SHARE-NAV-END> 12.69
<EXPENSE-RATIO> .009
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>