DREYFUS EQUITY DIVIDEND FUND
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this annual report of the Dreyfus
Equity Dividend Fund for the one-year period ended October 31, 1997. Over
this period, your Fund produced a total return of 29.34%,* which compares
with a total return of 32.10% for the Standard and Poor's 500 Composite Stock
Price Index (the "S&P 500")** and 29.70% for the Standard and Poor's Barra
Value Index.***
While the performance results of the Fund during the measurement period
trailed those of the S&P 500 Index and the S&P Barra Value Index, it did,
however, outperform the majority of mutual funds in the Lipper Equity Income
Funds category. The Fund's ranking for the one-year period ended October 31,
1997 was 44 out of 177 funds in the category.**** We believed that the
valuation of these major market benchmarks was excessive during this period,
and so we constructed an investment portfolio with a relatively low
correlation to these indices. In doing so, we believed that the risk level
of the Fund was significantly lower in volatility than that of these
benchmarks.
Economic Review
The U.S. economy has registered a step-up in growth in 1997 and the
evidence coming in suggests that momentum is still building. Stronger growth
this year has helped keep corporate profits buoyant despite a substantially
tighter labor market. This is because nationwide shortages of labor so far
have not generated much wage inflation. Moreover, price inflation has
decelerated markedly during the year, suppressed by the strong dollar, import
competition and continued disinflation in health care.
Although the Federal Reserve Board (the "Fed") has held a tightening bias
since mid-1996, the central bank has raised interest rates only once this
year. Expectations for further hikes have been continually postponed. They
were first dampened by the surprising drop in this year's price inflation,
and more recently by unfolding crises in foreign economies. Both events have
helped to cap short-term rates and to pull long-term interest rates lower
since the spring.
Real GDP growth accelerated to about 4% this year from 3% in 1996.
Virtually all economic sectors have been strong so far. Consumer spending
has been supported by rising real incomes. Capital spending has been very
robust and new orders imply continued strength. Even housing demand,
typically slowing at this phase of the business cycle, has reached new highs.
Most incoming signals support sustained fast growth. The exception is that
exporters' new orders have marginally slowed in recent months, indicating
that economic turmoil overseas may be impacting this sector. By contrast,
imports have been very robust and, if their growth is sustained, could help
mitigate the economic weakness abroad.
Overall corporate profits have continued to trend higher, although some
companies have been hurt by events overseas and the stronger dollar.
Domestically generated profits have typically remained solid, helped by
strong growth and contained wages.
Market Overview
Even though the equity markets stumbled badly in late October, the fiscal
year ended October 31, 1997 saw solid gains. Measured by price changes
alone, excluding income, the Dow Jones Industrial Average gained 23.58% over
these 12 months, the S&P 500 Index 29.96%, Nasdaq Composite 30.43% and the
Russell 2000, 27.52%. These were the gains after the drop of the last week
in October, and before counting the rebounds that occurred in the first week
of November.
In retrospect, it is apparent that stock valuations had been riding for a
fall. There was weakness in March when the Federal Reserve raised interest
rates for the first time in two years. By early summer, equity prices
recovered and soared to new highs. Then, however, some nervousness set in,
related mainly to concern about high stock valuations and fears of
another Fed move to cool off the bubbling economy. Weakness was apparent
mainly in companies with large capitalization, while smaller companies, such
as those listed in the Russell 2000 Index, gained ground.
As autumn leaves began to turn, the stock market as a whole regained its
wind - but not for long. The relatively high valuations that had prevailed
were vulnerable to any major unpleasant surprise. That came in late October
from an unexpected source - the Far East. Severe market setbacks in Hong
Kong and Southeast Asia, together with drops in their foreign exchange rates,
triggered the fall in the U.S. market.
Richard Hoey, Chief Economist for The Dreyfus Corporation, reviewing the
recent events, said that the U.S. stock market had a selling panic, followed
by a buying panic. The underlying logic of it all was valuation, he
observed.
When the Dow Jones Index peaked at above 8200 in early August, the stock
market was simply discounting favorable U.S. fundamentals into high stock
prices, said Hoey. The financial crisis in Asia was the trigger for a
correction of the major problem for the U.S. stock market: high valuation.
The market drop in Asia was caused by serious fundamental problems of
excess productive capacity, overvalued real estate and a banking system
crisis. European markets, of course, reacted to the Asian weakness, but less
severely because their economies are more stable. In the U.S., the sharp
price drop, followed by a vigorous rebound, reflected an economy with much
greater underlying strength.
The influx of investors into stocks when prices dipped augured well for
the future. The American investing public appears to be convinced that
equities are a good place to put money for the long range, when their prices
are attractive, despite the recent volatility of market averages.
Value Investing
We believe value stocks can be an important part of a well-diversified
investment portfolio for a number of reasons.
First, stocks with low valuations theoretically have by definition more
upside potential than downside risk. While growth of sales and earnings are
important, and we do believe in buying growing companies, the price paid for
this growth is critical as well. We want to buy this growth potential at
bargain prices.
Second, many analysts have low expectations for the earnings growth rate
of value stocks, resulting in the low valuations assigned to these
securities. Low growth expectations tend to be easier for management to meet
or even exceed than high expectations.
Third, value investors tend to work more with actual data and with
near-term projections when analyzing companies. Obviously, this type of data
can be more accurate than long-term forecasts. There are too many variables
which can impact the long term.
Fourth, value stocks generally possess a number of favorable
characteristics: higher dividends, more stock repurchases, more takeovers,
and more restructurings. Dividends are cash, usually paid out quarterly to
common stock shareholders. Dividends may be the only actual tangible return
to the common stock shareholder from the company. To realize more value than
the dividend, the stock must be sold to another investor. Theoretically, if
shareholders could not sell a stock (which of course they can), investors
would only buy stocks that paid a cash dividend. Next, companies selling at
low valuations usually have the option to repurchase their own stock with any
available cash and add to earnings in the process. When management
repurchases a company's stock, it provides demand for that stock, forcing the
price higher, everything else being equal. Regarding takeovers, these tend
to happen to inexpensively priced companies, in whatever way a potential
buyer might define this value. Finally, restructurings tend to occur with
value stocks because these companies
often tend to have a problem which needs to be fixed. An opportunity to fix
a problem arises and it is in the process of fixing this problem, usually
through some sort of restructuring of the company, that value is realized.
Value stocks are often ignored by Wall Street analysts. It is much easier
for analysts to promote a glamour stock with a simple story, even if that
story is already universally known and recognized in the stock price. This
lack of attention and focus by Wall Street provides a decided advantage for
relatively undiscovered or underfollowed value stocks.
Of course, value stock investing does involve risk. Despite the
potential downside protection offered by value stocks generally, price
volatility is inherent in all common stocks. In addition, value stocks
particularly are subject to the risk that the market will not recognize the
security's perceived intrinsic value for a long time, and to the risk that a
stock determined to be undervalued turns out to be appropriately priced due
to any number of factors.
Real money in the stock market is not made by following the herd of other
investors, copying what they have already done and going where money has
already been made. Real money is made leading this herd. As the herd
follows, demand for the security is increased, resulting in higher prices.
Portfolio Strategy
In order to identify value, we generally select securities for the Fund
based on a three-pronged approach. First, a computer screening model is used
to identify companies with a dividend yield (current dividend divided by the
current market price) that is greater than the dividend yield of the S&P 500.
Second, another computer model seeks to identify those companies that offer
the best exposure to the current market and economic environment. Third, we
review investments for selection with our team of Dreyfus security analysts
to identify a catalyst that could realize the value potential inherent in the
security and potentially increase the price of the stock.
In terms of constructing a portfolio of stocks, the Fund focuses on
selecting the potentially best securities. The Fund attempts to avoid trying
to decide which economic sector will be favored over the near term by the
stock market since we believe this preference is too often random.
The Fund typically sells a stock when its dividend yield falls below the
dividend yield of the Standard & Poor's Industrials Index (which excludes the
generally higher dividend paying financials and utilities of the S&P 500),
when a stock appears to be poorly exposed to the current market or economic
environment, when the portfolio manager, working with our analysts, believes
it represents a potentially deteriorating investment based on our fundamental
research, or when the stock market emphatically indicates that our investment
thesis is incorrect.
Portfolio Review
The Fund's stock selection process played a key factor in the Fund's
performance over the past 12 months. Investment results during this annual
period benefited from holdings such as Canadian National Railway, Ogden, Dean
Foods, Northrop Grumman, Sun, Beacon Properties, BankAmerica, Bankers Trust
New York, Bristol-Myers Squibb, Dana, and Xerox. Relative performance
results were penalized by holdings including UST, Hollinger International,
Bank United, Cl.A, Weyerhauser, Tenneco, Caterpillar, May Department Stores,
Northeast Utilities, and Entergy.
Thank you for entrusting Dreyfus with the management of your investments.
Sincerely,
[Timothy M. Ghriskey signature logo]
Timothy M. Ghriskey
Senior Portfolio Manager
November 18, 1997
New York, N.Y.
* Total return includes reinvestment of dividends and any capital
gains paid.
** SOURCE: LIPPER ANALYTICAL SERVICES, INC. - Reflects the reinvestment
of income dividends and, where applicable, capital gain distributions. The
Standard & Poor's 500 Composite Stock Price Index is a widely accepted
unmanaged index of U.S. stock market performance.
*** The Standard & Poor's Barra Value Index is a capitalization-weighted
index of all the stocks in the Standard & Poor's 500 Composite Stock Price
Index that have low price-to-book ratios. It is designed so that
approximately 50% of the S&P 500's market capitalization is in the Value
Index.
**** SOURCE: LIPPER ANALYTICAL SERVICES, INC. Past performance is no
guarantee of future results. Share price and investment return fluctuate and
an investor may receive more or less than original cost upon redemption.
DREYFUS EQUITY DIVIDEND FUND OCTOBER 31, 1997
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS EQUITY
DIVIDEND FUND
AND THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX
[Exhibit A:
Dollars
$15,406
Standard & Poor's 500
Composite Stock
Price Index*
$14,607
Dreyfus Equity
Dividend Fund
*Source: Lipper Analytical Services, Inc.]
<TABLE>
<CAPTION>
Average Annual Total Returns
One Year Ended From Inception (12/29/95)
October 31, 1997 to October 31, 1997
---------------------- -------------------------
<S> <C>
29.34% 22.86%
</TABLE>
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Dreyfus Equity Dividend
Fund on 12/29/95 (Inception Date) to a $10,000 investment made in the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500") on that
date. All dividends and capital gain distributions are reinvested.
The Fund's performance shown in the line graph takes into account all
applicable fees and expenses. The S&P 500 Composite Stock Price Index is a
widely accepted, unmanaged index of overall stock market performance, which
does not take into account charges, fees and other expenses. Further
information relating to Fund performance, including expense reimbursements,
if applicable, is contained in the Financial Highlights section of the
Prospectus and elsewhere in this report.
<TABLE>
<CAPTION>
DREYFUS EQUITY DIVIDEND FUND
STATEMENT OF INVESTMENTS OCTOBER 31, 1997
Common Stocks-98.0% Shares Value
____________ ____________
<S> <C> <C> <C>
Commercial Services-2.3% Ogden.................................. 3,900 $ 98, 475
___________
Consumer Durables-5.3% General Motors......................... 1,100 70,606
Goodyear Tire & Rubber................. 1,200 75,150
Jostens................................ 3,600 83,925
___________
229,681
___________
Consumer Non-Durables-11.3% Dean Foods............................. 1,800 85,163
Flowers Industries..................... 4,200 79,800
Kimberly-Clark......................... 1,800 93,487
Philip Morris.......................... 1,800 71,325
Quaker Oats............................ 1,700 81,388
RJR Nabisco Holdings................... 2,400 76,050
___________
487,213
___________
Electronic Technology-5.6% AMP.................................... 1,700 76,500
EG&G................................... 4,000 82,750
General Dynamics....................... 1,000 81,188
___________
240,438
___________
Energy Minerals-7.5% Exxon................................... 1,200 73,725
Mobil.................................. 1,000 72,813
Phillips Petroleum..................... 1,600 77,400
Sun.................................... 2,500 100,156
___________
324,094
___________
Finance-16.1% BankAmerica............................ 1,200 85,800
Bankers Trust New York................. 900 106,200
Beacon Properties...................... 2,000 84,250
Chase Manhattan........................ 700 80,763
Chelsea GCA Realty..................... 2,200 89,925
NationsBank............................ 1,500 89,812
Simon DeBartolo Group.................. 2,500 77,344
Transamerica........................... 800 80,750
___________
694,844
___________
Health Technology-5.9% American Home Products................. 1,100 81,538
Bristol-Myers Squibb................... 1,100 96,525
Glaxo Wellcome, A.D.R.................. 1,800 77,062
___________
255,125
___________
Non-Energy Minerals-4.8% Georgia-Pacific........................ 900 76,331
Reynolds Metals........................ 1,100 67,031
Southern Peru Copper................... 4,000 63,000
___________
206,362
___________
Process Industries-12.7% Chesapeake............................. 2,300 72,881
duPont (E.I.) de Nemours & Co.......... 1,200 68,250
Goodrich (B.F.)........................ 2,000 89,125
Millennium Chemicals................... 3,700 86,950
Olin................................... 1,800 81,788
DREYFUS EQUITY DIVIDEND FUND
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1997
Common Stocks (continued) Shares Value
____________ ____________
Process Industries (continued) Temple-Inland.......................... 1,300 $ 74,587
Tenneco................................ 1,700 76,394
___________
549,975
___________
Producer Manufacturing-11.4% Caterpillar............................ 1,600 82,000
Dana................................... 2,000 93,625
Masco.................................. 1,800 78,975
Minnesota Mining & Manufacturing....... 800 73,200
Thomas & Betts......................... 1,400 69,650
Xerox.................................. 1,200 95,175
___________
492,625
___________
Retail Trade-2.0% Penney (J.C.).......................... 1,500 88,031
___________
Transportation-3.8% CSX.................................... 1,500 82,031
Teekay Shipping........................ 2,500 80,000
___________
162,031
___________
Utilities-9.3% El Paso Natural Gas.................... 1,311 78,578
Empresa Nacional de Electricidad, A.D.R 3,700 74,463
Entergy................................ 3,500 85,531
Hong Kong Telecommunications, A.D.R.... 4,300 82,506
US West Communications Group........... 2,000 79,625
___________
400,703
___________
TOTAL COMMON STOCKS
(cost $3,544,346).................... $ 4,229,597
===========
Preferred Stocks-1.3%
Energy Minerals; Petroleo Brasileiro
(cost $52,779)....................... 300,000 $ 55,777
===========
TOTAL INVESTMENTS (cost $3,597,125)......................................... 99.3% $ 4,285,374
======= ===========
CASH AND RECEIVABLES (NET).................................................. .7% $ 28,584
======= ===========
NET ASSETS.................................................................. 100.0% $ 4,313,958
======= ===========
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS EQUITY DIVIDEND FUND
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1997
Cost Value
__________ __________
ASSETS: Investments in securities-See Statement of Investments $3,597,125 $4,285,374
Cash....................................... 29,315
Dividends and interest receivable.......... 9,679
Prepaid expenses........................... 13,563
Due from The Dreyfus Corporation and affiliates 43
___________
4,337,974
___________
LIABILITIES: Due to Distributor......................... 958
Accrued expenses........................... 23,058
___________
24,016
___________
NET ASSETS.................................................................. $4,313,958
===========
REPRESENTED BY: Paid-in capital............................ $3,294,651
Accumulated undistributed investment income-net3,087
Accumulated net realized gain (loss) on investments
and foreign currency transactions.......... 328,027
Accumulated net unrealized appreciation (depreciation)
on investments and foreign currency transactions 688,193
___________
NET ASSETS.................................................................. $4,313,958
===========
SHARES OUTSTANDING
(UNLIMITED NUMBER OF $.001 PAR VALUE SHARES OF BENEFICIAL INTEREST AUTHORIZED) 249,643
NET ASSET VALUE, offering and redemption price per share.................... $17.28
=======
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS EQUITY DIVIDEND FUND
STATEMENT OF OPERATIONS YEAR ENDED OCTOBER 31, 1997
INVESTMENT INCOME
INCOME: Cash dividends (net of $757 foreign taxes
withheld at source).................... $115,876
Interest................................... 3,959
_________
Total Income......................... $119,835
EXPENSES: Management fee-Note 3(a)................... 27,673
Auditing fees.............................. 25,659
Registration fees.......................... 20,174
Prospectus and shareholders' reports....... 8,750
Shareholder servicing costs-Note 3(b)...... 8,391
Custodian fees-Note 3(b)................... 2,477
Legal fees................................. 2,182
Trustees' fees and expenses-Note 3(c)...... 499
Loan commitment fees-Note 2................ 31
Miscellaneous.............................. 1,047
_________
Total Expenses....................... 96,883
Less-expense reimbursement from Manager due to
undertaking-Note 3(a).................. (50,197)
_________
Net Expenses......................... 46,686
_________
INVESTMENT INCOME-NET....................................................... 73,149
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-Note 4:
Net realized gain (loss) on investments and
foreign currency transactions.......... $328,523
Net unrealized appreciation (depreciation) on investments
and foreign currency transactions...... 489,186
_________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...................... 817,709
_________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $890,858
=========
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS EQUITY DIVIDEND FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
October 31, 1997 October 31, 1996*
________________ ________________
<S> <C> <C>
OPERATIONS:
Investment income-net.................................................. $ 73,149 $ 43,777
Net realized gain (loss) on investments................................ 328,523 58,919
Net unrealized appreciation (depreciation) on investments.............. 489,186 199,007
___________ ____________
Net Increase (Decrease) in Net Assets Resulting from Operations...... 890,858 301,703
___________ ____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net.................................................. (72,235) (41,604)
Net realized gain on investments....................................... (59,415) -
___________ ____________
Total Dividends...................................................... (131,650) (41,604)
___________ ____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold.......................................... 685,376 2,686,354
Dividends reinvested................................................... 127,388 40,843
Cost of shares redeemed................................................ (115,946) (129,364)
___________ ____________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions 696,818 2,597,833
___________ ____________
Total Increase (Decrease) in Net Assets............................ 1,456,026 2,857,932
NET ASSETS:
Beginning of Period.................................................... 2,857,932 ----
___________ ____________
End of Period.......................................................... $4,313,958 $2,857,932
=========== ============
UNDISTRIBUTED INVESTMENT INCOME-NET...................................... $ 3,087 $ 2,173
___________ ____________
Shares Shares
___________ ____________
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................ 43,022 212,527
Shares issued for dividends reinvested................................. 8,374 3,055
Shares redeemed........................................................ (7,551) (9,784)
___________ ____________
Net Increase (Decrease) in Shares Outstanding...................... 43,845 205,798
=========== ============
* From December 29, 1995 (commencement of operations) to October 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS EQUITY DIVIDEND FUND
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Fund's financial statements.
Year Ended October 31,
__________________________
PER SHARE DATA: 1997 1996(1)
_______ _______
<S> <C> <C>
Net asset value, beginning of period.................................... $13.89 $12.50
_______ _______
Investment Operations:
Investment income-net................................................... .32 .23
Net realized and unrealized gain (loss)
on investments........................................................ 3.67 1.38
_______ _______
Total from Investment Operations........................................ 3.99 1.61
_______ _______
Distributions:
Dividends from investment income-net.................................... (.32) (.22)
Dividends from net realized gain on investments......................... (.28) -
_______ _______
Total Distributions..................................................... (.60) (.22)
_______ _______
Net asset value, end of period.......................................... $17.28 $13.89
======= =======
TOTAL INVESTMENT RETURN..................................................... 29.34% 12.93%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets................................. 1.27% 1.08%(2)
Ratio of net investment income to average net assets.................... 1.98% 1.76%(2)
Decrease reflected in above expense ratios
due to undertakings by the Manager.................................... 1.36% 1.05%(2)
Portfolio Turnover Rate................................................. 80.43% 98.84%(2)
Average commission rate paid (3)........................................ $.0546 $.0483
Net Assets, end of period (000's Omitted)............................... $4,314 $2,858
(1) From December 29, 1995 (commencement of operations) to October 31, 1996.
(2) Not annualized.
(3)Reflects the average commission rate paid per share for purchases and sales of investment securities.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS EQUITY DIVIDEND FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Equity Dividend Fund (the "Fund") is a series of Dreyfus Income
Funds (the "Company") which 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 five series, including the
Fund. 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., which is a wholly-owned
subsidiary of Mellon Bank Corporation. Premier Mutual Fund Services, Inc.
(the "Distributor") is 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, 1997, APT Holdings Corporation, an indirect subsidiary
of Mellon Bank Corporation, held 169,057 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 and 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 and 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.
(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
DREYFUS EQUITY DIVIDEND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 $600 million
redemption credit facility ("Facility") to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the Fund has agreed to pay commitment fees on its pro rata portion
of the Facility. Interest is charged to the Fund at rates based on prevailing
market rates in effect at the time of borrowings. For the period ended
October 31, 1997, the Fund did not borrow under the Facility.
NOTE 3-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(a) Pursuant to a management 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 Manager had undertaken from November 1, 1996 through October 31,
1997 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 taxes, brokerage, interest on borrowings, commitment fees and
extraordinary expenses) 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 $50,197 during the period ended October 31, 1997.
(b) Under the 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, 1997, the Fund was charged $9,224
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. During the
period ended October 31, 1997, the Fund was charged $576 pursuant to the
transfer agency agreement.
The Fund compensates Mellon under a custody agreement to provide
custodial services for the Fund. During the period ended October 31, 1997,
the Fund was charged $2,477 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.
NOTE 4-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the period ended October 31, 1997
amounted to $3,624,592 and $2,887,754, respectively.
At October 31, 1997, accumulated net unrealized appreciation on
investments was $688,249, consisting of $734,663 gross unrealized
appreciation and $46,414 gross unrealized depreciation.
At October 31, 1997, 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, 1997, 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 and financial highlights. Our procedures included
verification by examination of securities held by the custodian as of October
31, 1997 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 Equity Dividend Fund at October 31, 1997, 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 & YOUNG LLP signature logo]
New York, New York
December 17, 1997
DREYFUS EQUITY DIVIDEND FUND
IMPORTANT TAX INFORMATION (UNAUDITED)
In accordance with Federal tax law, the Fund hereby designates 39.49% of
the ordinary dividends paid during the fiscal year ended October 31, 1997 as
qualifying for the corporate dividends received deduction. Shareholders will
receive notification in January 1998 of the percentage applicable to the
preparation of their 1997 income tax returns.
Registration Mark
[Dreyfus lion "d" logo]
DREYFUS EQUITY DIVIDEND FUND
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 042AR9710
Equity Dividend
Fund
Annual Report
October 31, 1997
Registration Mark
[Dreyfus logo]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN DREYFUS EQUITY DIVIDEND FUND AND THE STANDARD
AND POOR'S 500 COMPOSITE STOCK PRICE INDEX
EXHIBIT A:
DREYFUS STANDARD & POOR'S
EQUITY 500 COMPOSITE
PERIOD DIVIDEND STOCK PRICE
FUND INDEX*
12/29/95 10,000 10,000
1/31/96 10,368 10,340
4/30/96 10,621 10,692
7/31/96 10,293 10,523
10/31/96 11,293 11,662
1/31/97 12,113 13,062
4/30/97 12,669 13,378
7/31/97 15,246 16,007
10/31/97 14,607 15,406
*Source: Lipper Analytical Services, Inc.
