DREYFUS HIGH YIELD STRATEGIES FUND
- -----------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
Enclosed is the first report for the Dreyfus High Yield Strategies Fund. The
report covers the period from the Fund's inception on April 29, 1998, through
September 30, 1998. As you know, this was a time of unusual market turbulence.
Your Fund produced a total return, including share price changes and dividend
income generated, of -14.85%.* During the reporting period, the Fund produced
income dividends of $0.480 per share. This is equivalent to an annualized
distribution rate per share of 8.74%.**
THE ECONOMY
The risk of global recession loomed large by the end of the reporting period.
Since last summer, the international economic crisis has spread from Asia and
Russia into Latin America and its effects are evident in the U.S., as witnessed
by early signs of a slowing in our domestic economy. Second-quarter gross
domestic product grew at an annual rate of 1.8%, well below the 5.5% rate in the
first quarter, while the trade deficit has continued to widen, affected by
weakening foreign demand and low-priced imports. These developments have
heightened a sense of global economic interdependence and have resulted in a
shift in emphasis by the Federal Reserve Board whereby fighting inflation has
taken a subordinate role to that of maintaining stable U.S. economic growth. On
September 29, the Federal Open Market Committee cut interest rates for the first
time since January 1996. That quarter-point reduction in the Federal Funds
target rate to 5.25% was designed to cushion the adverse effects of the overseas
economic crisis on the domestic economy. The Federal Funds rate is the interest
rate that banks charge each other for overnight loans.
While the corporate sector wrestles with the economic implications of global
developments, consumers have powered the economy. The reasons for their optimism
are no surprise. Inflation remains tame, running at an annual rate comfortably
below 2% . After-tax income is growing and jobs are plentiful: the unemployment
rate has been at or near 30-year lows throughout the reporting period and new
jobs have been created at a robust pace. The consumer sector comprises
two-thirds of the activity in the $8 trillion U.S. economy and, with the
business sector slowing, any significant pullback in household spending could
trigger a recession. Up to now, the spillover effect from developments abroad
has been largely confined to the manufacturing sector, whose activity has
contracted of late due to the falloff in export demand. Aside from this "erosion
at the edges" as Fed Chairman Alan Greenspan describes it, layoffs on a broader
scale--a factor that could weaken consumer resolve to spend--so far have not
occurred. It is clear that the Fed is concerned about the possibility of
worldwide recession. The recent interest rate reduction was an initial step
toward mitigating the domestic effects of international financial turmoil and a
gesture meant to serve notice to the world of the seriousness of its purpose.
MARKET ENVIRONMENT/PORTFOLIO FOCUS
The high yield market is suffering an extreme case of illiquidity.
Fundamentally, the underlying credits have shown little change, but rather the
market technicals have been extremely negative. The basic story is a lack of
bids for high yield bonds, but generally this current illiquidity in the high
yield market is just the extension of that faced across all fixed income. With
fears of problems in Asia, Russia and Latin America spilling over into the
domestic markets, compounded by a worldwide credit squeeze, buyers of risk have
become scarce. As credit dries up, leveraged portfolios are liquidating, whether
they are hedge funds or trading positions of market makers. This creates a
difficult environment for sellers as bids are extremely scarce and prices drop
on almost no volume--in many cases quite out of line with the underlying credit
fundamentals.
Credit crunches and negative technicals generally do not last forever. The
credit fundamentals underlining the high yield market have changed little over
the last few months. The bankruptcy rate is at historically low levels around 2%
and credit downgrades do not seem to be accelerating, although all of the data
on that point is not yet in. Problems in Asia, Russia and to a lesser extent
Latin America have roiled the emerging market debt markets, but high yield
traditionally is a domestic asset class. In many cases, bonds have been marked
down without regard to foreign exposure, maturity, rating, or cash flow
potential. We believe that this is a key ingredient for a market recovery. When
high yield has been off historically, notably in 1990 and 1994, it has snapped
back strongly the next year. It is impossible to tell if high yield has bottomed
out, but it is significantly cheaper overall than earlier this year. Anecdotal
evidence indicates many high yield mutual funds are sitting on cash, but are
unwilling to commit on fears of continued price declines. Since fundamentals are
only tangentially involved, investor psychology seems to be the key to this
market turning. When it may turn is anybody' s guess.
The High Yield Strategies Fund has recently underperformed the high yield
market for four reasons: 1) the primary investment goal of high current income;
2) leverage; 3) issue selection; and 4) industry concentration.
The primary investment goal of the Fund is high current income. We have chosen
to maintain the dividend rather than move the portfolio into higher grade, but
lower yielding, credits as the high yield market deteriorated. This negatively
affected the Fund' s total return as the prices of better quality high yield
bonds did not drop as much proportionally.
The use of leverage is important, because it allows the Fund to maintain a
given level of yield without having to utilize lower quality credits. The
downside of leverage is that it can magnify changes in net asset value ("NAV"),
good on the upside but bad in down markets like the current one. The initial
leverage of the Fund was 25% , but it reached 30% as the NAV declined. It
currently is anticipated that leverage will be maintained within this range.
The portfolio is broadly diversified by issuer and industry. There are over
130 different issues in the portfolio, and no one issuer accounts for more than
1.5% of total assets. Of course, portfolio composition is subject to change.
Several have performed poorly, but the Fund has experienced only one default.
The top sectors currently are telecommunications and energy. Despite their
defensive characteristics, telecommunications issues tend to be volatile. In the
energy sector, the portfolio is concentrated in natural gas and coal producers.
However, positive outlooks for both fuels combined with more stable long-term
commodity pricing than oil, have not been able to keep the sector from trading
in line with volatile worldwide oil prices. We believe that the underlying
fundamentals in these two industries should help them rebound.
The portfolio is currently adding to its dividend reserve as the assets are
earning a little more than the dividend. Emerging market exposure is now at only
1% , and it is with affiliates of Kansas City Southern and Loral Space and
Communications. Total foreign holdings currently are less than 10% with most of
the issuers from Canada. All foreign issues are denominated in U.S. dollars.
Non-cash coupon issues comprise a similarly small percentage of the portfolio.
The initial investment guidelines are still in place: 1) high current income;
2) average rating, single B; 3) low emerging market exposure; and 4) low
percentage of deferred interest bonds. No changes in these guidelines are
expected at this time. The Fund currently intends to retain its broadly
diversified, domestic high yield nature. Worldwide economic conditions remain
troubling, though. If we deem that fundamental or other changes to the high
yield market occur, the Fund will endeavor to respond to them accordingly.
Very truly yours,
[Roger King signature logo]
Roger King
Portfolio Manager
October 28, 1998
New York, N.Y.
*Total return includes reinvestment of dividends and any capital gains paid,
based on net asset value per share.
**Distribution rate per share is based upon dividends per share paid from net
investment income during the period (annualized), divided by the market price
per share at the end of the period.
<TABLE>
DREYFUS HIGH YIELD STRATEGIES FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS SEPTEMBER 30, 1998 (UNAUDITED)
Principal
Bonds and Notes--136.6% Amount Value
- ---------------------------------------------------- _______________ _______________
<S> <C> <C>
Aircraft & Aerospace--4.2% American Pacific,
Sr. Notes, 9.25%, 2005 . . . . . . . . . . . . $ 9,125,000 $ 8,965,312
Burke Industries,
Sr. Notes, 10%, 2007 . . . . . . . . . . . . . 12,895,000 (a) 12,895,000
Stellex Industries,
Sr. Sub. Notes, Ser. B, 9.50%, 2007 . . . . . 11,000,000 10,175,000
_______________
32,035,312
_______________
Automotive--10.1% Advanced Accessory Systems, LLC/Capital,
Gtd. Sr. Sub. Notes, Ser. B, 9.75%, 2007 . . . 7,000,000 6,650,000
Aetna Industries,
Sr. Notes, 11.875%, 2006 . . . . . . . . . . . 13,195,000 (a) 13,722,800
Envirotest Systems,
Gtd. Sr. Sub. Notes, 9.625%, 2003 . . . . . . 10,860,000 10,805,700
J.H. Heafner,
Sr. Notes, 10%, 2008 . . . . . . . . . . . . . 10,000,000 (b) 9,700,000
Penda,
Sr. Notes, Ser. B, 10.75%, 2004 . . . . . . . 2,091,000 2,038,725
United Auto Group:
Gtd. Sr. Sub. Notes, Ser. B, 11%, 2007 . . . . 1,000,000 840,000
Sr. Sub. Notes, Ser. A, 11%, 2007 . . . . . . 12,000,000 (a) 10,080,000
Venture Holdings Trust:
Sr. Notes, Ser. B, 9.50%, 2005 . . . . . . . . 10,000,000 (a) 9,750,000
Sr. Sub. Notes, 9.75%, 2004 . . . . . . . . . 4,000,000 3,800,000
Walbro,
Sr. Notes, 10.125%, 2007 . . . . . . . . . . . 10,000,000 (a) 9,300,000
_______________
76,687,225
_______________
Broadcasting--2.2% ACME Intermediate Holdings/Finance,
Sr. Discount Notes, Ser. B, Zero Coupon, 2002 . 4,800,000 (c) 2,856,000
ACME Television, LLC/Finance,
Sr. Discount Notes, Ser. B, Zero Coupon, 2000 . 4,400,000 (c) 3,454,000
Tri-State Outdoor Media Group,
Sr. Notes, 11%, 2008 . . . . . . . . . . . . . 10,400,000 (b) 10,192,000
_______________
16,502,000
_______________
Building Materials--1.2% American Builders & Contractors,
Gtd. Sr. Sub. Deb., Ser. B, 10.625%, 2007 . . 10,000,000 9,212,500
_______________
Cable Television--3.8% Adelphia Communications,
Sr. Notes, Ser. B, 9.50%, 2004 . . . . . . . . 16,500,000 (a) 16,964,063
OpTel,
Sr. Notes, 13%, 2005 . . . . . . . . . . . . . 11,722,000 11,956,440
_______________
28,920,503
_______________
Casinos & Gaming--1.6% Ameristar Casinos,
Gtd. Sr. Sub. Notes, Ser. B, 10.50%, 2004 . . 10,500,000 (a) 9,712,500
Majestic Star Casino, LLC,
Sr. Secured Notes, 12.75%, 2003 . . . . . . . 2,500,000 2,575,000
_______________
12,287,500
_______________
DREYFUS HIGH YIELD STRATEGIES FUND
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STATEMENT OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1998 (UNAUDITED)
Principal
Bonds and Notes (continued) Amount Value
- ---------------------------------------------------- _______________ _______________
Chemicals--6.5% GNI Group,
Sr. Notes, 10.875%, 2005 . . . . . . . . . . . $ 9,000,000 (b) $ 9,000,000
Laroche Industries,
Sr. Sub. Notes, Ser. B, 9.50%, 2007 . . . . . 14,750,000 (a) 12,906,250
Octel Developments, PLC,
Gtd. Sr. Notes, 10%, 2006 . . . . . . . . . . 8,500,000 (a,b) 8,542,500
Sterling Chemicals:
Sr. Sub. Notes, 11.75%, 2006 . . . . . . . . . 2,000,000 1,740,000
Sr. Sub. Notes, Ser. A, 11.25%, 2007 . . . . . 8,450,000 7,267,000
Trans-Resources:
Sr. Discount Notes, Zero Coupon, 2003 . . . . 7,000,000 (a,c) 3,745,000
Sr. Notes, Ser. B, 10.75%, 2008 . . . . . . . 6,500,000 (a) 6,305,000
_______________
49,505,750
_______________
Construction--2.3% American Eco,
Sr. Notes, 9.625%, 2008 . . . . . . . . . . . 8,000,000 6,480,000
FWT,
Sr. Sub. Notes, 9.875%, 2007 . . . . . . . . . 12,300,000 (a) 7,441,500
Great Lakes Dredge & Dock,
Sr. Sub. Notes, 11.25%, 2008 . . . . . . . . . 3,500,000 (b) 3,447,500
_______________
17,369,000
_______________
Consumer--8.7% BPC Holding,
Sr. Secured Notes, 12.50%, 2006 . . . . . . . 5,432,000 5,540,640
Carson,
Gtd. Sr. Sub. Notes, Ser. B, 10.375%, 2007 . . 10,000,000 (a) 8,050,000
Concord Camera,
Sr. Notes, 11%, 2005 . . . . . . . . . . . . . 15,000,000 14,850,000
Corning Consumer Products,
Sr. Sub. Notes, 9.625%, 2008 . . . . . . . . . 9,000,000 (b) 7,380,000
Decora Industries,
Sr. Secured Notes, 11%, 2005 . . . . . . . . . 10,000,000 (b) 8,850,000
E & S Holdings,
Sr. Sub. Notes, Ser. B, 10.375%, 2006 . . . . 4,500,000 2,722,500
Revlon Worldwide,
Sr. Secured Discount Notes, Zero Coupon, 2001 . 12,000,000 (a) 9,240,000
Sparkling Spring Water,
Sr. Sub. Notes, 11.50%, 2007 . . . . . . . . . 10,000,000 9,850,000
_______________
66,483,140
_______________
Energy--10.9% AEI Holding,
Sr. Notes, 10%, 2007 . . . . . . . . . . . . . 10,000,000 (a,b) 9,550,000
Anker Coal Group,
Sr. Notes, Ser. B, 9.75%, 2007 . . . . . . . . 8,350,000 5,469,250
Belden & Blake,
Sr. Sub. Notes, 9.875%, 2007 . . . . . . . . . 12,000,000 (a) 10,020,000
Chesapeake Energy,
Gtd. Sr. Notes, Ser. B, 9.625%, 2005 . . . . . 3,000,000 (a) 2,655,000
DREYFUS HIGH YIELD STRATEGIES FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1998 (UNAUDITED)
Principal
Bonds and Notes (continued) Amount Value
- ---------------------------------------------------- _______________ _______________
Energy (continued) Chiles Offshore, LLC/Finance,
Sr. Notes, 10%, 2008 . . . . . . . . . . . . . $ 9,500,000 (a) $ 7,837,500
Costilla Energy,
Sr. Notes, 10.25%, 2006 . . . . . . . . . . . 5,400,000 4,698,000
Magnum Hunter,
Gtd. Sr. Notes, 10%, 2007 . . . . . . . . . . 11,500,000 (a) 9,257,500
Michael Petroleum,
Sr. Notes, 11.50%, 2005 . . . . . . . . . . . 6,500,000 5,622,500
Northern Offshore ASA,
Sr. Notes, 10%, 2005 . . . . . . . . . . . . . 10,000,000 (a,b) 7,450,000
P & L Coal Holdings,
Sr. Sub. Notes, 9.625%, 2008 . . . . . . . . . 7,000,000 (b) 7,035,000
Petsec Energy,
Sr. Sub. Notes, 9.50%, 2007 . . . . . . . . . 15,250,000 (a) 13,648,750
_______________
83,243,500
_______________
Entertainment--3.8% Booth Creek Ski Holdings,
Sr. Notes, Ser. B, 12.50%, 2007 . . . . . . . 10,000,000 (a) 9,850,000
Fox Family Worldwide,
Sr. Notes, 9.25%, 2007 . . . . . . . . . . . . 6,150,000 6,027,000
Livent,
Sr. Notes, 9.375%, 2004 . . . . . . . . . . . 6,200,000 4,247,000
Production Resources,
Sr. Sub. Notes, 11.50%, 2008 . . . . . . . . . 9,000,000 (a) 8,595,000
_______________
28,719,000
_______________
Finance--4.6% Amresco:
Sr. Sub. Notes, Ser. 97-A, 10%, 2004 . . . . . 6,325,000 5,091,625
Sr. Sub. Notes, Ser. 98-A, 9.875%, 2005 . . . 13,000,000 (a) 10,465,000
Dollar Financial,
Sr. Notes, 10.875%, 2006 . . . . . . . . . . . 6,000,000 5,790,000
Imperial Credit Industries,
Sr. Notes, 9.875%, 2007 . . . . . . . . . . . 4,750,000 3,681,250
Southern Pacific Funding,
Gtd. Sr. Notes, 11.50%, 2004 . . . . . . . . . 13,500,000 (a) 2,565,000
Superior National Capital Trust I,
Gtd. Trust Preferred Securities,
10.75%, 2017 (Units) . . . . . . . . . . . . . 6,965,000 (d) 7,104,300
_______________
34,697,175
_______________
Foods, Beverages
and Tobacco--4.5% Cuddy International,
Sr. Notes, 10.75%, 2007 . . . . . . . . . . . 11,100,000 (a) 9,712,500
Envirodyne Industries,
Sr. Notes, 10.25%, 2001 . . . . . . . . . . . 4,019,000 3,838,145
North Atlantic Trading,
Sr. Notes, Ser. B, 11%, 2004 . . . . . . . . . 16,000,000 (a) 15,120,000
Specialty Foods,
Sr. Notes, Ser. B, 10.25%, 2001 . . . . . . . 6,890,000 5,753,150
_______________
34,423,795
_______________
DREYFUS HIGH YIELD STRATEGIES FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1998 (UNAUDITED)
Principal
Bonds and Notes (continued) Amount Value
- ---------------------------------------------------- _______________ _______________
Forest Products--1.3% U.S. Timberlands Klamath Falls, LLC/Finance,
Sr. Notes, 9.625%, 2007 . . . . . . . . . . . $ 9,750,000 $ 9,603,750
_______________
Industrial--13.7% Alliance Laundry Systems,
Sr. Sub. Notes, 9.625%, 2008 . . . . . . . . . 13,000,000 (a,b) 12,350,000
Anchor Lamina,
Sr. Sub. Notes, 9.875%, 2008 . . . . . . . . . 11,025,000 (a) 9,095,625
Elgin National Industries,
Gtd. Sr. Notes, Ser. B, 11%, 2007 . . . . . . 12,250,000 12,740,000
HCC Industries,
Gtd. Sr. Sub. Notes, 10.75%, 2007 . . . . . . 11,750,000 11,397,500
International Knife & Saw,
Sr. Sub. Notes, 11.375%, 2006 . . . . . . . . 11,500,000 11,845,000
Key Components, LLC/Finance,
Sr. Notes, 10.50%, 2008 . . . . . . . . . . . 14,000,000 (b) 13,230,000
Numatics,
Gtd. Sr. Sub. Notes, Ser. B, 9.625%, 2008 . . 12,375,000 11,199,375
Precise Technology,
Gtd. Sr. Sub. Notes, Ser. B, 11.125%, 2007 . . 12,650,000 12,207,250
United Rentals,
Sr. Sub. Notes, 9.50%, 2008 . . . . . . . . . 10,000,000 (a,b) 10,025,000
_______________
104,089,750
_______________
Metals--7.8% JTM Industries,
Sr. Sub. Notes, 10%, 2008 . . . . . . . . . . 10,050,000 (b) 10,200,750
Kaiser Aluminum & Chemical,
Sr. Notes, Ser. D, 10.875%, 2006 . . . . . . . 14,500,000 14,282,500
Metallurg,
Gtd. Sr. Notes, Ser. B, 11%, 2007 . . . . . . 5,000,000 4,775,000
Recycling Industries,
Sr. Sub. Notes, 13%, 2005 . . . . . . . . . . 10,000,000 9,750,000
Renco Steel Holdings:
Sr. Notes, 11.50%, 2003 . . . . . . . . . . . 6,900,000 7,141,500
Sr. Notes, Ser. B, 10.875%, 2005 . . . . . . . 7,750,000 (a) 6,626,250
WHX,
Sr. Notes, 10.50%, 2005 . . . . . . . . . . . 3,500,000 (a) 3,237,500
Weirton Steel,
Sr. Notes, 11.375%, 2004 . . . . . . . . . . . 3,500,000 3,202,500
_______________
59,216,000
_______________
Packaging--3.5% Fonda Group,
Sr. Sub. Notes, Ser. B, 9.50%, 2007 . . . . . 3,000,000 2,715,000
Gaylord Container,
Sr. Sub. Notes, Ser. B, 9.875%, 2008 . . . . . 10,000,000 5,050,000
Indesco International,
Sr. Sub. Notes, 9.75%, 2008 . . . . . . . . . 10,000,000 (a) 9,350,000
Riverwood International:
Gtd. Sr. Notes, 10.25%, 2006 . . . . . . . . . 2,000,000 1,830,000
Gtd. Sr. Notes, 10.625%, 2007 . . . . . . . . 8,000,000 7,400,000
_______________
26,345,000
_______________
DREYFUS HIGH YIELD STRATEGIES FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1998 (UNAUDITED)
Principal
Bonds and Notes (continued) Amount Value
- ---------------------------------------------------- _______________ _______________
Personnel Services--1.2% Employee Solutions,
Sr. Notes, 10%, 2004 . . . . . . . . . . . . . $ 10,000,000 $ 9,075,000
_______________
Publishing--1.2% Day International Group,
Gtd. Sr. Sub. Notes, 9.50%, 2008 . . . . . . . 10,000,000 9,200,000
_______________
Real Estate--1.2% LNR Property,
Sr. Sub. Notes, 9.375%, 2008 . . . . . . . . . 10,000,000 (a,b) 9,450,000
_______________
Restaurants--1.4% Ameriking,
Sr. Notes, 10.75%, 2006 . . . . . . . . . . . 1,500,000 1,545,000
FRD Acquisition,
Sr. Notes, Ser. B, 12.50%, 2004 . . . . . . . 7,500,000 7,500,000
Planet Hollywood,
Sr. Sub. Notes, 12%, 2005 . . . . . . . . . . 3,000,000 1,695,000
_______________
10,740,000
_______________
Retail--3.4% Amazon.com,
Sr. Discount Notes, Zero Coupon, 2003 . . . . 9,500,000 (a,c) 5,747,500
J Crew Operating,
Sr. Sub. Notes, 10.375%, 2007 . . . . . . . . 8,000,000 6,440,000
Pamida,
Gtd. Sr. Sub. Notes, 11.75%, 2003 . . . . . . 6,000,000 5,955,000
TM Group Holdings, PLC,
Sr. Notes, 11%, 2008 . . . . . . . . . . . . . 8,000,000 (b) 7,760,000
_______________
25,902,500
_______________
Shipping--2.5% Cenargo International, PLC,
First Preferred Ship Mortgage Notes, 9.75%, 2008 10,000,000 (b) 8,225,000
Holt Group,
Sr. Notes, 9.75%, 2006 . . . . . . . . . . . . 9,500,000 (a,b) 7,457,500
TBS Shipping International Ltd.,
First Preferred Ship Mortgage Notes, 10%, 2005 5,000,000 (b) 3,725,000
_______________
19,407,500
_______________
Technology--10.4% Axiohm Transaction Solutions,
Gtd. Sr. Sub. Notes, 9.75%, 2007 . . . . . . . 10,000,000 9,000,000
Details,
Sr. Sub. Notes, Ser. B, 10%, 2005 . . . . . . 9,000,000 (a) 8,595,000
Entex Information Services,
Sr. Sub. Notes, 12.50%, 2006 . . . . . . . . . 10,000,000 (b) 9,550,000
Fairchild Semiconductor,
Sr. Sub. Notes, 10.125%, 2007 . . . . . . . . 3,510,000 3,176,550
Hadco,
Sr. Sub. Notes, 9.50%, 2008 . . . . . . . . . 10,000,000 (b) 8,850,000
Orbital Imaging:
Sr. Notes, Ser. B, 11.625%, 2005 . . . . . . . 5,000,000 4,425,000
Sr. Notes, Ser. B, 11.625%, 2005 (Units) . . . 3,950,000 (d) 3,614,250
Packard Bioscience,
Sr. Sub. Notes, Ser. B, 9.375%, 2007 . . . . . 15,895,000 (a) 14,623,400
DREYFUS HIGH YIELD STRATEGIES FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1998 (UNAUDITED)
Principal
Bonds and Notes (continued) Amount Value
- ---------------------------------------------------- _______________ _______________
Technology (continued) Samsung Electronics America,
Gtd. Notes, 9.75%, 2003 . . . . . . . . . . . $ 10,000,000 (a,b) $ 7,850,000
Viasystems:
Sr. Sub. Notes, 9.75%, 2007 . . . . . . . . . 7,000,000 6,160,000
Sr. Sub. Notes, Ser. B, 9.75%, 2007 . . . . . 3,960,000 3,484,800
_______________
79,329,000
_______________
Telecommunication/
Carriers--5.7% FirstWorld Communications,
Sr. Discount Notes, Zero Coupon,
2003 (Units) . . . . . . . . . . . . . . . . . 18,660,000 (b,c,d) 5,784,600
GST Equipment,
Sr. Notes, 13.25%, 2007 . . . . . . . . . . . 7,000,000 7,245,000
Level 3 Communications,
Sr. Notes, 9.125%, 2008 . . . . . . . . . . . 10,000,000 (a) 9,450,000
MGC Communications,
Sr. Secured Notes, Ser. B, 13%, 2004 . . . . . 11,000,000 8,360,000
RSL Communications, PLC,
Gtd. Notes, 9.125%, 2008 . . . . . . . . . . . 15,000,000 12,900,000
_______________
43,739,600
_______________
Textiles--1.1% Sassco Fashions,
Sr. Notes, 12.75%, 2004 . . . . . . . . . . . 8,500,000 8,797,500
_______________
Transportation--5.0% American Commercial Lines, LLC,
Sr. Notes, 10.25%, 2008 . . . . . . . . . . . 6,000,000 (b) 5,940,000
Canadian Airlines,
Sr. Notes, 12.25%, 2006 . . . . . . . . . . . 10,000,000 8,850,000
Fine Air Services,
Sr. Notes, 9.875%, 2008 . . . . . . . . . . . 10,000,000 (a,b) 9,100,000
TFM, S.A. de C.V.,
Sr. Notes, 10.25%, 2007 . . . . . . . . . . . 8,000,000 6,660,000
ValuJet,
Sr. Notes, 10.25%, 2001 . . . . . . . . . . . 9,000,000 (a) 7,605,000
_______________
38,155,000
_______________
Wireless
Communications--12.8% Dolphin Telecom, plc,
Sr. Discount Notes, Zero Coupon, 2003 . . . . 15,250,000 (b,c) 7,091,250
Globalstar, L.P./Capital,
Sr. Notes, 11.375%, 2004 . . . . . . . . . . . 10,000,000 6,800,000
Golden Sky Systems,
Sr. Sub. Notes, 12.375%, 2006 . . . . . . . . 10,000,000 (b) 10,000,000
Iridium Operating LLC/Capital,
Gtd. Sr. Notes, Ser. D, 10.875%, 2005 . . . . 7,000,000 5,600,000
Metrocall,
Sr. Sub. Notes, 10.375%, 2007 . . . . . . . . 10,000,000 (a) 9,350,000
Microcell Telecommunications,
Sr. Discount Notes, Zero Coupon, 2001 . . . . 7,500,000 (c) 5,362,500
DREYFUS HIGH YIELD STRATEGIES FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1998 (UNAUDITED)
Principal
Bonds and Notes (continued) Amount Value
- ---------------------------------------------------- _______________ _______________
Wireless
Communications (continued) Omnipoint:
Sr. Notes, 11.625%, 2006 . . . . . . . . . . . $ 1,250,000 $ 868,750
Sr. Notes, Ser. A, 11.625%, 2006 . . . . . . . 12,850,000 8,930,750
OrbCommunications Global, L.P./Capital,
Sr. Notes, 14%, 2004 . . . . . . . . . . . . . 13,000,000 (a) 11,505,000
SBA Communications,
Sr. Discount Notes, Zero Coupon, 2003 . . . . 15,000,000 (c) 7,875,000
Satelites Mexicanos SA,
Sr. Notes, 10.125%, 2004 . . . . . . . . . . . 10,000,000 (b) 7,025,000
Star Choice Communications,
Sr. Secured Notes, 13%, 2005 . . . . . . . . . 12,000,000 11,400,000
WinStar Communications,
Sr. Sub. Notes, 10%, 2008 . . . . . . . . . . 8,000,000 5,880,000
_______________
97,688,250
_______________
TOTAL BONDS AND NOTES
(cost $1,189,651,761) . . . . . . . . . . . . $1,040,825,250
_______________
Equity-Related Securites--3.1% Shares
- ------------------------------------------------------- _______________
Preferred Stocks--3.1%
Broadcasting--1.1% Paxson Communications,
Cum., $132.50 . . . . . . . . . . . . . . . . 9,000 (b) $ 8,550,000
_______________
Cable Television--.7% HMV Media Group, plc,
Sr. Cum., $12.875 (Units) . . . . . . . . . . 65,000 (b,e) 5,330,000
_______________
Wireless
Communications--1.3% WinStar Communications,
Cum., Ser. C, $142.50 . . . . . . . . . . . . 10,000 10,300,000
_______________
TOTAL PREFERRED STOCKS . . . . . . . . . . . . . . 24,180,000
_______________
Warrants--.0%
Transportation; HighwayMaster Communications . . . . . . . . . . . 8,660 1,645
_______________
TOTAL EQUITY-RELATED SECURITIES
(cost $27,521,600) . . . . . . . . . . . . . . $ 24,181,645
_______________
DREYFUS HIGH YIELD STRATEGIES FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) SEPTEMBER 30, 1998 (UNAUDITED)
Principal
Short-Term Investments--.4% Amount Value
- ---------------------------------------------------- _______________ _______________
U.S. Government Agencies; Federal Home Loan Banks,
5.40%, 10/1/98
(cost $2,817,000) . . . . . . . . . . . . . . $ 2,817,000 $ 2,817,000
_______________
TOTAL INVESTMENTS (cost $1,219,990,361) . . . . . . . . . . . . . . . . . . . . . . . 140.1% $1,067,823,895
_______ _______________
LIABILITIES, LESS CASH AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . (40.1%) $ (305,837,053)
_______ _______________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $ 761,986,842
_______ _______________
Notes to Statement of Investments:
- -----------------------------------------------------------------------------
(a) Securities held in whole or in part by Merrill Lynch in accordance with
reverse repurchase agreement currently in effect until December 15, 1998
(as described in Note 2 of the notes to financial statements).
(b) 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 September 30,
1998, these securities amounted to $248,641,100 or 32.2% of net assets.
(c) Zero coupon until year shown at which time a stated coupon rate becomes
effective.
(d) With warrants to purchase common stock.
(e) With common stock attached.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS HIGH YIELD STRATEGIES FUND
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 1998 (UNAUDITED)
Cost Value
_______________ _______________
<S> <C> <C>
ASSETS: Investments in securities--See Statement of Investments . . $1,219,990,361 $1,067,823,895
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 2,308,228
Interest receivable . . . . . . . . . . . . . . . . . . . 34,158,049
Prepaid expenses and other assets . . . . . . . . . . . . 569,742
_______________
1,104,859,914
_______________
LIABILITIES: Due to The Dreyfus Corporation and affiliates . . . . . . 857,814
Due to Shareholder Servicing Agent . . . . . . . . . . . 91,345
Proceeds from Reverse Repurchase Agreement--Note 2 . . . 325,000,000
Unrealized depreciation on interest rate swaps--Note 1(a) . . 11,054,562
Accrued expenses and other liabilities . . . . . . . . . 5,869,351
_______________
342,873,072
_______________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 761,986,842
_______________
REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . $ 924,962,724
Accumulated undistributed investment income--net . . . . 8,253,123
Accumulated net realized gain (loss) on investments . . . (8,007,977)
Accumulated net unrealized appreciation (depreciation)
on investments and interest rate swaps--Note 4(b) . . . (163,221,028)
_______________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 761,986,842
_______________
SHARES OUTSTANDING
(unlimited number of $.001 par value shares of Beneficial Interest authorized) . . . . . . 61,768,573
NET ASSET VALUE per share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12.34
_______
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS HIGH YIELD STRATEGIES FUND
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FROM APRIL 29, 1998 (COMMENCEMENT OF OPERATIONS) TO SEPTEMBER 30, 1998
(UNAUDITED)
INVESTMENT INCOME
<S> <C> <C>
INCOME Interest Income . . . . . . . . . . . . . . . . . . . . . $ 50,578,466
EXPENSES: Management fee--Note 3(a) . . . . . . . . . . . . . . . . $ 4,469,944
Interest expense--Note 2 . . . . . . . . . . . . . . . . 7,481,590
Shareholder servicing costs--Note 3(b) . . . . . . . . . 507,182
Loan commitment fees--Note 2 . . . . . . . . . . . . . . 96,598
Professional fees . . . . . . . . . . . . . . . . . . . . 66,799
Trustees' fees and expenses--Note 3(c) . . . . . . . . . 58,129
Custodian fees--Note 3(a) . . . . . . . . . . . . . . . . 33,557
Shareholders' reports . . . . . . . . . . . . . . . . . . 14,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 70,021
_____________
Total Expenses . . . . . . . . . . . . . . . . . . . . 12,797,820
_____________
INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,780,646
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments . . . . . . . . . $ (8,007,977)
Net unrealized appreciation (depreciation)
on investments and interest rate swaps . . . . . . . . (163,221,028)
_____________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . . . . (171,229,005)
_____________
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . $(133,448,359)
_____________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS HIGH YIELD STRATEGIES FUND
- -----------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
FROM APRIL 29, 1998 (COMMENCEMENT OF OPERATIONS) TO SEPTEMBER 30, 1998
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Interest received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,649,007
Interest and loan commitment fees paid . . . . . . . . . . . . . . . . . . . . . . . . (6,667,465)
Operating expenses paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (629,873)
Paid to The Dreyfus Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,612,130) $ 5,739,539
______________
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of portfolio securities . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,674,705,076)
Proceeds from sales of portfolio securities . . . . . . . . . . . . . . . . . . . . . . 450,838,564 (1,223,866,512)
______________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 919,248,500
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,913,304)
Proceeds from Reverse Repurchase Agreement . . . . . . . . . . . . . . . . . . . . . . 325,000,000 1,220,335,196
______________ ______________
Increase in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,208,223
Cash at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,005
______________
Cash at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,308,228
______________
RECONCILIATION OF NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH USED BY OPERATING ACTIVITIES:
Net (Decrease) in Net Assets Resulting From Operations . . . . . . . . . . . . . . . . (133,448,359)
______________
Adjustments to reconcile net decrease in net assets resulting from operations
to net cash used by operating activities:
Increase in interest receivable . . . . . . . . . . . . . . . . . . . . . . . . (29,797,633)
Increase in interest and loan commitment fees . . . . . . . . . . . . . . . . . 910,723
Increase in accrued operating expenses . . . . . . . . . . . . . . . . . . . . . 628,557
Increase in prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . (508,742)
Increase in due to The Dreyfus Corporation . . . . . . . . . . . . . . . . . . . 857,814
Net realized loss on investments . . . . . . . . . . . . . . . . . . . . . . . . 8,007,977
Net unrealized depreciation on investments . . . . . . . . . . . . . . . . . . . 163,221,028
Net amortization of discount on investments . . . . . . . . . . . . . . . . . . (4,131,826)
______________
Net Cash Used by Operating Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,739,539
______________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS HIGH YIELD STRATEGIES FUND
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
FROM APRIL 29, 1998 (COMMENCEMENT OF OPERATIONS) TO SEPTEMBER 30, 1998
OPERATIONS:
<S> <C> <C>
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37,780,646
Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . (8,007,977)
Net unrealized appreciation (depreciation) on investments . . . . . . . . . . . . . . . . (163,221,028)
_____________
Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . . . . . . . (133,448,359)
_____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (29,527,523)
_____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 919,248,500
Dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,614,219
_____________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions . . . . . . . 924,862,719
_____________
Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . . . . . . 761,886,837
NET ASSETS:
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,005
_____________
End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $761,986,842
_____________
Undistributed investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,253,123
_____________
Shares
_____________
CAPITAL SHARE TRANSACTIONS:
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,352,500
Shares issued for dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . 409,406
_____________
Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . . . . . . . 61,761,906
_____________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS HIGH YIELD STRATEGIES FUND
- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (UNAUDITED)
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average net
assets and other supplemental data for the period from April 29, 1998
(commencement of operations) to September 30, 1998. This information has been
derived from the financial statements and market price data for the Fund's
shares.
PER SHARE DATA:
<S> <C> <C>
Net asset value, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15.00
_______
Investment Operations:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2.79)
_______
Total from Investment Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2.18)
_______
Distributions:
Dividends from investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.48)
_______
Net asset value, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12.34
_______
Market value, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12 15_16
_______
TOTAL INVESTMENT RETURN(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (25.27%)(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.47%(2)
Ratio of interest expense to average net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03%(2)
Ratio of net investment income
to average net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.23%(2)
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51.37%(3)
Net Assets, end of period (000's Omitted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $773,041
- -----------------------------
(1) Calculated based on market value.
(2) Annualized.
(3) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS HIGH YIELD STRATEGIES FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus High Yield Strategies Fund (the "Fund" ) is registered under the
Investment Company Act of 1940, as amended (the "Act") as a non-diversified
closed-end management investment company. The Fund' s primary investment
objective is to seek high current income by investing at least 65% of its total
assets in income securities rated below investment grade. The Dreyfus
Corporation (the "Manager" ) serves as the Fund' s investment manager and
administrator. The Manager is a direct subsidiary of Mellon Bank, N.A.
("Mellon").
The Fund sold 53,350,000 shares at $15.00 per share through an initial
offering which settled on April 29, 1998. Subsequently, an additional 8,002,500
shares at $15.00 per share were also issued to cover over-allotments to the
Underwriters on May 19, 1998. Costs associated with initial underwriting of
$1,039,000 were charged against the proceeds of the offering.
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 (excluding short-term
investments, other than U.S. Treasury Bills) 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.
Short-term investments, excluding U.S. Treasury Bills, are carried at amortized
cost, which approximates value. Interest rate swap transactions are valued based
on the net present value of all future cash settlement amounts based on implied
forward interest rates.
(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. The Fund includes in interest income amounts paid and received
under its interest rate swap agreements.
(C) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net are declared and paid monthly. Dividends
from net realized capital gain, if any, are declared and paid at least annually.
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 HIGH YIELD STRATEGIES FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
For shareholders who elect to receive their distributions in additional shares
of the Fund, in lieu of cash, such distributions will be reinvested either (i)
through receipt of additional unissued but authorized shares from the Fund
(" newly issued shares") or (ii) by purchase of outstanding Shares on the open
market on the New York Stock exchange or elsewhere as defined in the dividend
reinvestment plan.
On September 30, 1998, the Board of Trustees declared a cash dividend of $.12
per share from investment income-net, payable on October 28, 1998 to
shareholders of record as of the close of business on October 14, 1998.
(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 of 1986, as amended, and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and excise taxes
(E) OTHER: Organization expenses paid by the Fund in the amount of $69,880 are
capitalized. However, on April 3, 1998, Statement of Position 98-5 was issued by
the Board of Certified Public Accountants. This Statement of Position requires
that unamortized organization costs on the Fund' s statement of assets and
liabilities be written off. This Statement of Position is effective for fiscal
years beginning after December 15, 1998, therefore, the Fund is required to
write off the deferred organization expenses on April 1, 1999.
NOTE 2--BORROWINGS:
The Fund may borrow money from banks or enter into reverse repurchase
agreements for leveraging purposes.
The Fund has entered into a $325,000,000 line of credit facility ("Facility")
which expires on June 15, 2001. Under the terms of the Facility the Fund may
borrow under either a Eurodollar Loan, a Federal Funds Rate Loan or a
combination of the two. Interest is charged to the Fund at rates in effect at
time of borrowing for the loan type chosen by the Fund. For the period ended
September 30, 1998 the Fund did not borrow under the Facility. In addition, the
fund pays a commitment fee of .10 of 1% on the unused portion of the Facility.
The Fund has entered into a reverse repurchase agreement with Merrill Lynch,
under which the Fund sold securities and agreed to repurchase them on December
15, 1998 at an agreed upon price. However, the Fund at its option chose to
repurchase a portion of the securities held from Merrill Lynch on October 15,
1998. At September 30, 1998, the interest rate in effect for the reverse
repurchase agreement was 5.73%.
DREYFUS HIGH YIELD STRATEGIES FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
The average daily amount of borrowings outstanding under the reverse
repurchase agreement during the period ended September 30, 1998 was
approximately $299,850,000, with a related weighted average annualized interest
rate of 5.80%.
NOTE 3--MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management and administration agreement with Dreyfus, the
management and administration fee is computed at the annual rate of .90 of 1% of
the value of the Fund's average weekly total assets minus the sum of accrued
liabilities (other than the aggregate indebtedness constituting financial
leverage) (the "Managed Assets") and is payable monthly.
The Fund compensates Mellon under a custody agreement for providing custodial
services for the Fund. During the period ended September 30, 1998, the Fund was
charged $33,557 pursuant to the custody agreement.
The Fund compensates Mellon, an affiliate of the Investment Adviser, under a
transfer agency agreement for providing personnel and facilities to perform
transfer agency services for the Fund. During the period ended September 30,
1998, the Fund was charged $10,522 pursuant to the transfer agency ageement.
(B) In accordance with the Shareholder Servicing Agreement, Paine Webber Inc.
provides certain shareholder services for which the Fund pays a fee computed at
the annual rate of .10 of 1% of the value of the Fund's average weekly Managed
Assets. During the period ended September 30, 1998 the fund was charged $496,660
pursuant to the Shareholder Servicing Agreement.
(C) Effective July 1, 1998 each Trustee who is not an "interested person " of
the Fund as defined in the Act receives $5,000 per year plus $1,000 for each
Board meeting attended and, $2,000 for separate committee meetings attended
which are not held in conjunction with a regularly scheduled Board meeting. In
the event that there is a joint committee meeting of the Dreyfus/Laurel Funds,
Inc., The Dreyfus/Laurel Tax-Free Municipal Funds, The Dreyfus/Laurel Funds
Trust, collectively, (the "Dreyfus/Laurel Funds") and the Fund, the $2,000 fee
will be allocated between the Dreyfus/Laurel Funds and the Fund. Each Trustee
who is not an interested person also receives $500 for Board meetings and
separate committee meetings attended that are conducted by telephone. The Fund
also reimburses each Trustee who is not an "interested person " of the Fund for
travel and out-of-pocket expenses. The Chairman of the Board receives an
additional 25% of such compensation (with the exception of reimbursable amounts)
. Prior to July 1, 1998, each Trustee received $1,500 per year, $250 for each
Board meeting attended and was reimbursed for travel and out-of-pocket expenses
DREYFUS HIGH YIELD STRATEGIES FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 September 30, 1998, amounted to $1,673,337,008 and
$450,838,564, respectively.
In addition, the following summarizes open interest rate swap agreements at
September 30, 1998:
<TABLE>
Rate Paid Rate Received Net
Swap Notional by the Fund by the Fund Floating Termination Unrealized
Counter-Party Principal at 9/30/98 at 9/30/98 Rate Index Date (Loss)
_____________ ______________ ___________ _____________ _____________________ __________ _____________
<S> <C> <C> <C> <C> <C> <C>
Chase $150,000,000 6.0875% 5.50% Three-month LIBOR 6/15/03 $(6,742,418)
J.P. Morgan 150,000,000 6.0205% 5.50% Three-month LIBOR 6/15/01 (4,312,144)
</TABLE>
The Fund enters into interest rate swaps to hedge its exposure to floating
rate financing currently utilized to leverage its portfolio. Interest rate swaps
involve the exchange of commitments to pay or receive interest, e.g., an
exchange of floating-rate payments for fixed rate payments. If forcasts of
interest rates and other factors are incorrect, investment performance will
diminish compared to what performance would have been if these investment
techniques were not used. Even if the forecasts are correct, there is the risk
that the positions may correlate imperfectly with the assets or liability being
hedged. The Fund is also exposed to credit risk associated with counter party
nonperformance on these transactions as well as the fact that a liquid secondary
market for these transactions may not always exist.
(B) At September 30, 1998, accumulated net unrealized depreciation on
investments was $152,166,466, consisting of $156,419 gross unrealized
appreciation and $152,322,885 gross unrealized depreciation.
At September 30, 1998, 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).
OFFICERS AND DIRECTORS
DREYFUS HIGH YIELD STRATEGIES FUND
200 Park Avenue
New York, NY 10166
Trustees
Francis P. Brennan, Chairman
Ruth Marie Adams
Joseph S. DiMartino
James M. Fitzgibbons
J. Tomlinson Fort
Arthur L. Goeschel
Kenneth A. Himmel
Arch S. Jeffery
Stephen J. Lockwood
John J. Sciullo
Roslyn M. Watxon
Benaree Pratl Wiley
Officers
President and Treasurer
Marie E. Connolly
Vice President and Secretary
Margaret W. Chambers
Vice President and Assistant Treasurer
George A. Rio
Vice President and Assistant Treasurer
Mary A. Nelson
Vice President and Assistant Treasurer
Joseph F. Tower, III
Vice President, Assistant Treasurer and Assistant Secretary
Michael S. Petrucelli
Vice President, Assistant Treasurer and Assistant Secretary
Stephanie Pierce
Vice President and Assistant Secretary
Douglas C. Conroy
Vice President and Assistant Secretary
Christopher J. Kelley
Vice President and Assistant Secretary
Kathleen K. Morrisey
Vice President and Assistant Secretary
Elba Vasquez
Portfolio Managers
Michael Hoeh
Roger E. King
Kevin M. McClintock
Gerald E. Thunelius
Investment Manager and Administrator
The Dreyfus Corporation
Custodian
Mellon Bank, N.A.
Counsel
Kirkpatrick & Lockhart LLP
Transfer Agent and Dividend Distribution Agent Chase Mellon Shareholder
Services, L.L.C.
Stock Exchange Listing
NYSE Symbol: DHF
Initial SEC Effective Date
4/23/98
The Net Asset Value appears in the following publications: Barron's, Closed-End
Bond Funds section under the heading "Municipal Bond Funds" every Monday; Wall
Street Journal, Mutual Funds section under the heading "Closed-End Bond Funds"
every Monday; New York Times, Money and Business Section under the heading
"Closed-End Bond Funds--Single State Municipal Bond Funds" every Sunday.
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Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the Fund may purchase shares of its common
stock in the open market when it can do so at prices below the then current net
asset value per share.
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[Lion "d" logo] (reg.tm)
[Lion "d" logo] (reg.tm)
DREYFUS HIGH YIELD STRATEGIES FUND
200 Park Avenue
New York, NY 10166
INVESTMENT MANAGER AND ADMINISTRATOR
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
Chase Mellon Shareholder Services, LLC
450 West 33rd Street
New York, NY 10001
Printed in U.S.A. 430SA989
High Yield
Strategies Fund
Semi-Annual
Report
September 30, 1998
