Dreyfus
High Yield
Strategies Fund
SEMIANNUAL REPORT September 30, 1999
(reg.tm)
The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Year 2000 Issues (Unaudited)
The fund could be adversely affected if the computer systems used by The Dreyfus
Corporation and the fund's other service providers do not properly process and
calculate date-related information from and after January 1, 2000. The Dreyfus
Corporation is working to avoid Year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by Year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
Contents
THE FUND
- --------------------------------------------------
2 Letter from the President
3 Discussion of Fund Performance
6 Statement of Investments
15 Statement of Assets and Liabilities
16 Statement of Operations
17 Statement of Cash Flows
18 Statement of Changes in Net Assets
19 Financial Highlights
20 Notes to Financial Statements
25 Officers and Directors
FOR MORE INFORMATION
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Back Cover
The Fund
Dreyfus High Yield
Strategies Fund
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus High Yield
Strategies Fund, covering the six-month period from April 1, 1999 through
September 30, 1999. Inside, you'll find valuable information about how the fund
was managed during the reporting period, including a discussion with Roger King,
portfolio manager and a member of the Dreyfus Taxable Fixed Income Team that
manages the fund.
The past six months have been highly volatile for most bonds. When the reporting
period began, evidence had emerged that the U.S. economy was growing strongly in
an environment characterized by high levels of consumer spending and low levels
of unemployment. Concerns that inflationary pressures might re-emerge caused the
Federal Reserve Board to raise short-term interest rates twice during the summer
of 1999, effectively offsetting most of last fall' s interest-rate cuts
Higher interest rates led to some erosion of bond prices, especially among the
higher yielding market sectors. In this environment, however, the yields of many
higher yielding bonds -- including corporate bonds and U.S. government agency
securities -- have recently been quite attractive compared to the yields of U.S.
Treasury securities of comparable maturity.
We appreciate your confidence over the past six months, and we look forward to
your continued participation in Dreyfus High Yield Strategies Fund.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
October 15, 1999
DISCUSSION OF FUND PERFORMANCE
Roger King, Portfolio Manager Dreyfus Taxable Fixed Income Team
How did Dreyfus High Yield Strategies Fund perform relative to its benchmark?
Dreyfus High Yield Strategies Fund produced a -0.45% total return for the
six-month period ended September 30, 1999.(1) This compares to a -0.68% return
for the fund's benchmark, the Merrill Lynch High Yield Master II Index, for the
same period.(2)
We attribute both the market and the fund's lackluster performance to prevailing
investor sentiment. For what we believe to be largely technical factors,
individual and institutional investors have taken a cautious view, committing
little new money to high yield investments. In the absence of strong buying
interest, prices have drifted steadily downward.
What is the fund's investment approach?
The fund' s primary investment objective is high current income. We generally
invest most of the fund' s assets in fixed-income securities of
below-investment-grade credit quality. Issuers of below-investment-grade
securities may be in early stages of development or may have highly leveraged
balance sheets. To compensate the buyer for the greater risk, these companies
must offer higher yields than those offered by more highly rated firms.
Our approach to selecting individual issues is based on careful credit analysis
- -- our projection of each issuer' s ability to meet its obligations as they
become due. We buy debt from a wide range of issuers. For example, new companies
often must pay higher interest rates than more established firms. We also buy "
seasoned" bonds, which are issued by companies with an established track record,
have been outstanding for a number of years, and now have a shorter time
remaining until final maturity or projected retirement of the bond. We also seek
out bonds that are convertible into the issuer' s common stock.
The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
What other factors influenced the fund's performance?
At the beginning of the reporting period, fixed-income investors were concerned
that economic weakness in overseas markets might reduce earnings growth for many
U.S. companies, including issuers of high yield bonds. It quickly became
apparent, however, that these fears were largely unfounded. In fact, the
troubled economies of Japan and Southeast Asia appeared to strengthen, while
economic growth in the U.S. showed few signs of abating.
In this environment, the high yield market began to recover from the precipitous
drop it experienced in mid- to late 1998. However, the recovery was short lived.
By mid-year, investor sentiment shifted from concern that the economy might slow
to fear that the economy might grow too quickly, potentially awakening dormant
inflationary pressures. As a result of these inflation fears, the Federal
Reserve Board twice made a modest increase in short-term interest rates. Because
higher interest rates and economic uncertainty tend to put more financial
pressure on high yield bond issuers, investor interest in high yield bonds
waned.
The general decline continued through the third quarter and has now returned the
high yield market to the high yield levels seen at the depth of the financial
crisis of October 1998. The major force driving the price decline has been
concern over calendar year-end liquidity. In anticipation of problems which we
believe will likely prove unfounded, investors have stepped up redemptions of
high yield mutual funds and fund managers have raised cash ahead of anticipated
redemptions, while at the same time institutional investors have largely stayed
on the sidelines. This has created a market in which a large supply of high
yield issues has been met by a weak demand; in such a market, prices decline.
In our view, high yield bonds currently represent an attractive buying
opportunity. Because year-end concerns are, by definition, temporary, we believe
that the current differences between yields of high yield corporate bonds and
U.S. Treasury securities should moderate to more normal levels. If yields
moderate, current investors may be able to lock in today's high yields and
participate in potential capital appreciation.
What is the fund's current strategy?
We are adjusting the portfolio to reflect the opportunities currently available
in the high yield market. The fund currently is looking to increase the
percentage of BB-rated credits to raise overall credit quality, and to a lesser
extent, the percentage of discounted bonds for capital appreciation potential.
The fund reduced its leverage by 16.9% from the beginning to the end of the
reporting period, decreasing the amount that it borrows to make investments. The
fund also increased the amount of its dividend to $0.1275 cents per share for
each of the dividends declared in July, August and September. We continue to
place industry focus on more defensive sectors -- sectors that we believe can do
well in various economic environments.
October 12, 1999
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID,
BASED UPON NET ASSET VALUE PER SHARE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS.
(2) SOURCE: MERRILL LYNCH, PIERCE, FENNER AND SMITH, INC. -- THE MERRILL LYNCH
HIGHYIELD MASTER II INDEX IS AN UNMANAGED PERFORMANCE BENCHMARK COMPOSED OF U.S.
DOMESTIC AND YANKEE BONDS RATED BELOW INVESTMENT GRADE WITH AT LEAST $100
MILLION PAR AMOUNTS OUTSTANDING AND GREATER THAN OR EQUAL TO ONE YEAR TO
MATURITY.
The Fund
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF INVESTMENTS
September 30, 1999 (Unaudited)
Principal
BONDS AND NOTES--123.4% Amount ($) Value ($)
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AIRCRAFT & AEROSPACE--6.0%
Aircraft Finance Trust,
Asset-Backed Notes,
Ser. 1999-1A, Cl. D, 11%, 2024 10,000,000 (a) 10,000,000
American Pacific,
Sr. Notes, 9.25%, 2005 13,825,000 13,963,250
Burke Industries,
Sr. Sub. Notes, 10%, 2007 12,895,000 9,348,875
Stellex Industries, Ser. B,
Sr. Sub. Notes, 9.5%, 2007 13,000,000 9,425,000
42,737,125
AUTOMOTIVE--11.4%
Advanced Accessory Systems/Capital, Ser. B,
Sr. Sub. Notes, 9.75%, 2007 7,000,000 6,352,500
Aetna Industries,
Sr. Notes, 11.875%, 2006 14,195,000 16,022,606
Anchor Lamina,
Sr. Sub. Notes, 9.875%, 2008 11,025,000 9,536,625
HCC Industries,
Sr. Sub. Notes, 10.75%, 2007 11,750,000 8,871,250
J.H. Heafner,
Sr. Notes, 10%, 2008 9,000,000 8,505,000
Lear,
Sr. Notes, 7.96%, 2005 20,000,000 (a) 19,635,800
United Auto Group:
Ser. A, Sr. Sub. Notes, 11%, 2007 12,000,000 10,920,000
Ser. B, Sr. Sub. Notes, 11%, 2007 1,000,000 910,000
80,753,781
BROADCASTING--4.5%
Acme Intermediate Holdings/Finance, Ser. B,
Sr. Secured Discount Notes, 0/12%, 2005 4,800,000 (b) 3,384,000
Acme Television/Finance, Ser. B,
Sr. Discount Notes, 0/10.875%, 2004 6,400,000 (b) 5,536,000
Telemundo Holdings,
Sr. Discount Notes, 0/11.5%, 2008 22,050,000 (b) 12,871,687
Tri-State Outdoor Media Group,
Sr. Notes, 11%, 2008 10,400,000 10,270,000
32,061,687
BUILDING MATERIALS--5.3%
American Builders & Contractors, Ser. B,
Sr. Sub. Notes, 10.625%, 2007 10,000,000 9,062,500
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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BUILDING MATERIALS (CONTINUED)
American Eco, Ser. B,
Sr. Notes, 9.625%, 2008 20,645,000 12,490,225
ICF Kaiser International,
Sr. Sub. Notes, 13%, 2003 12,324,000 (c) 6,223,620
United Rentals,
Sr. Sub. Notes, 9.5%, 2008 10,000,000 9,850,000
37,626,345
CABLE TELEVISION--6.8%
Classic Communications,
Sr. Discount Notes, 0/13.25%, 2009 (Units) 4,000,000 (a,b,d) 2,760,000
Coaxial Communications/Phoenix,
Sr. Notes, 10%, 2006 5,650,000 5,424,000
Coaxial/Finance,
Sr. Discount Notes, 0/12.875%, 2008 11,000,000 (b) 7,095,000
OpTel, Ser. B,
Sr. Notes, 13%, 2005 11,722,000 8,264,010
Star Choice Communications,
Sr. Secured Notes, 13%, 2005 12,000,000 11,940,000
UIH Australia/Pacific:
Ser. B, Sr. Discount Notes, 0/14.75%, 2006 13,745,000 (b) 10,652,375
Ser. D, Sr. Discount Notes, 0/14.75%, 2006 2,655,000 (b) 2,057,625
48,193,010
CHEMICALS--4.2%
GNI Group,
Sr. Notes, 10.875%, 2005 9,000,000 3,825,000
Lyondell Chemical, Ser. A,
Notes, 9.625%, 2007 9,500,000 9,476,250
Sterling Chemicals:
Ser. A, Sr. Sub. Notes, 11.25%, 2007 8,450,000 4,858,750
Sr. Sub. Notes, 11.75%, 2006 2,000,000 1,250,000
Secured Notes, 12.375%, 2006 1,500,000 (a) 1,410,000
Trans-Resources:
Ser. B, Sr. Discount Notes, 0/12%, 2008 12,000,000 (b) 6,060,000
Ser. B, Sr. Notes, 10.75%, 2008 3,500,000 3,167,500
30,047,500
CONSTRUCTION--.2%
FWT,
Sr. Sub. Notes, 9.875%, 2007 12,300,000 (c) 1,107,000
CONSUMER--9.8%
Amazon.com,
Sr. Discount Notes, 0/10%, 2008 9,500,000 (b) 6,222,500
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
- ----------------------------------------------------------------------------------------------------------------------------------
CONSUMER (CONTINUED)
BPC Holding, Ser. B,
Sr. Secured Notes, 12.5%, 2006 5,432,000 5,106,080
Carson, Ser. B,
Sr. Sub. Notes, 10.375%, 2007 10,000,000 7,850,000
Concord Camera, Ser. B,
Sr. Notes, 11%, 2005 15,000,000 14,775,000
Corning Consumer Products,
Sr. Sub. Notes, 9.625%, 2008 9,000,000 7,166,250
Decora Industries,
Sr. Secured Notes, 11%, 2005 12,000,000 10,920,000
E & S Holdings, Ser. B,
Sr. Sub. Notes, 10.375%, 2006 4,500,000 1,912,500
Revlon Consumer Products,
Sr. Sub. Notes, 8.625%, 2008 6,500,000 5,346,250
Sparkling Spring Water,
Sr. Sub. Notes, 11.5%, 2007 13,000,000 10,400,000
69,698,580
ENERGY--5.9%
Anker Coal Group, Ser. B,
Sr. Notes, 9.75%, 2007 8,350,000 3,715,750
Belden & Blake, Ser. B,
Sr. Sub. Notes, 9.875%, 2007 12,000,000 7,650,000
Michael Petroleum, Ser. B,
Sr. Notes, 11.5%, 2005 11,410,000 5,362,700
Northern Offshore ASA,
Sr. Notes, 10%, 2005 5,000,000 3,075,000
Ocean Rig Norway,
Notes, 10.25%, 2008 10,000,000 7,850,000
P & L Coal Holdings,
Sr. Sub. Notes, 9.625%, 2008 7,000,000 6,772,500
Petsec Energy, Ser. B,
Sr. Sub. Notes, 9.5%, 2007 15,250,000 7,548,750
41,974,700
ENTERTAINMENT--4.6%
American Skiing, Ser. B,
Sr. Sub. Notes, 12%, 2006 11,400,000 10,545,000
Booth Creek Ski Holdings, Ser. B,
Sr. Notes, 12.5%, 2007 11,500,000 8,452,500
Livent,
Sr. Notes, 9.375%, 2004 4,950,000 (c) 1,509,750
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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ENTERTAINMENT (CONTINUED)
Production Resource Group,
Sr. Sub. Notes, 11.5%, 2008 13,000,000 12,155,000
32,662,250
FINANCIAL--3.9%
AmeriCredit,
Sr. Notes, 9.875%, 2006 10,000,000 9,900,000
Amresco:
Ser. 97-A, Sr. Sub. Notes, 10%, 2004 6,000,000 3,690,000
Ser. 98-A, Sr. Sub. Notes, 9.875%, 2005 6,000,000 3,690,000
Imperial Credit Industries, Ser. B,
Sr. Notes, 9.875%, 2007 4,750,000 3,633,750
Superior National Capital Trust I,
Gtd. Trust Preferred Securities, 10.75%, 2017 6,965,000 6,425,213
27,338,963
FOOD, BEVERAGES AND TOBACCO--5.6%
Cuddy International,
Sr. Notes, 10.75%, 2007 11,100,000 9,282,375
Envirodyne Industries,
Sr. Notes, 10.25%, 2001 4,019,000 2,833,395
FRD Acquisition, Ser. B,
Sr. Notes, 12.5%, 2004 7,500,000 5,775,000
North Atlantic Trading, Ser. B,
Sr. Notes, 11%, 2004 16,000,000 15,200,000
SFC,
Sr. Sub. Discount Deb., 0/11%, 2009 329,987 (a,b,e) 0
SFC New Holdings,
Sr. Notes, 11.25%, 2001 6,890,000 (a) 6,683,300
39,774,070
FOREST PRODUCTS--1.3%
U.S. Timberlands Klamath Falls/Finance,
Sr. Notes, 9.625%, 2007 9,750,000 8,921,250
GAMING--1.9%
Ameristar Casinos, Ser. B,
Sr. Sub. Notes, 10.5%, 2004 11,000,000 10,945,000
Circus Circus,
Sr. Notes, 6.45%, 2006 2,500,000 2,229,413
13,174,413
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
- ----------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL--8.8%
Alliance Laundry Systems,
Sr. Sub. Notes, 9.625%, 2008 13,000,000 11,375,000
Elgin National Industries, Ser. B,
Sr. Notes, 11%, 2007 12,250,000 11,208,750
International Knife & Saw,
Sr. Sub. Notes, 11.375%, 2006 4,500,000 3,498,750
Key Components/Finance,
Sr. Notes, 10.5%, 2008 14,000,000 13,230,000
Numatics, Ser. B,
Sr. Sub. Notes, 9.625%, 2008 12,375,000 10,518,750
Precise Technology, Ser. B,
Sr. Sub. Notes, 11.125%, 2007 12,650,000 12,270,500
62,101,750
METALS--2.6%
ISG Resources,
Sr. Sub. Notes, 10%, 2008 10,050,000 9,698,250
Recycling Industries,
Sr. Sub. Notes, 13%, 2005 10,000,000 (c) 250,000
Renco Steel Holdings,
Sr. Notes, 11.5%, 2003 9,400,000 8,601,000
18,549,250
OIL--.1%
EOTT Energy Partners/Finance,
Sr. Notes, 11%, 2009 1,000,000 1,018,750
PAPER & PACKAGING--2.9%
Fonda Group, Ser. B,
Sr. Sub. Notes, 9.5%, 2007 3,000,000 2,625,000
Indesco International,
Sr. Sub. Notes, 9.75%, 2008 10,000,000 5,750,000
SF Holdings Group, Ser. B,
Sr. Secured Discount Notes, 0/12.75%, 2008 26,550,000 (b) 11,947,500
20,322,500
PERSONNEL SERVICES--.8%
Employee Solutions, Ser. B,
Sr. Notes, 10%, 2004 10,000,000 6,050,000
PUBLISHING--1.2%
Day International Group,
Sr. Sub. Notes, 9.5%, 2008 10,000,000 8,150,000
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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REAL ESTATE--1.3%
LNR Property, Ser. B,
Sr. Sub. Notes, 9.375%, 2008 10,000,000 9,250,000
RETAIL--1.2%
J Crew Operating,
Sr. Sub. Notes, 10.375%, 2007 2,000,000 1,870,000
US Office Products,
Sr. Notes, 9.75%, 2008 12,250,000 6,768,125
8,638,125
SHIPPING--2.6%
Cenargo International,
First Pfd. Ship Mortgage, 9.75%, 2008 10,000,000 9,025,000
Holt Group,
Sr. Notes, 9.75%, 2006 13,500,000 9,399,375
18,424,375
TECHNOLOGY--7.1%
Axiohm Transactions Solutions,
Sr. Sub. Notes, 9.75%, 2007 10,000,000 2,950,000
Details, Ser. B,
Sr. Sub. Notes, 10%, 2005 9,000,000 8,370,000
Entex Information Services,
Sr. Sub. Notes, 12.5%, 2006 10,000,000 6,050,000
Hadco,
Sr. Sub. Notes, 9.5%, 2008 7,500,000 7,143,750
Orbital Imaging, Ser. B,
Sr. Notes, 11.625%, 2005 8,950,000 6,041,250
Packard Bioscience, Ser. B,
Sr. Sub. Notes, 9.375%, 2007 10,895,000 9,914,450
Viasystems:
Ser. B, Sr. Sub. Notes, 9.75%, 2007 2,000,000 1,730,000
Sr. Sub. Notes, 9.75%, 2007 8,960,000 7,750,400
49,949,850
TELECOMMUNICATION/CARRIERS--5.6%
FirstWorld Communications,
Sr. Discount Notes, 0/13%, 2008 18,660,000 (b) 9,609,900
GST Equipment,
Sr. Secured Notes, 13.25%, 2007 7,000,000 7,350,000
MGC Communications, Ser. B,
Sr. Secured Notes, 13%, 2004 11,000,000 9,735,000
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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TELECOMMUNICATION/CARRIERS (CONTINUED)
RSL Communications,
Sr. Notes, 9.125%, 2008 15,000,000 12,900,000
39,594,900
TEXTILES--1.2%
Sassco Fashions,
Sr. Notes, 12.75%, 2004 8,500,000 8,287,500
TRANSPORTATION--4.6%
Canadian Airlines,
Sr. Notes, 12.25%, 2006 14,600,000 8,687,000
Fine Air Services,
Sr. Notes, 9.875%, 2008 10,000,000 8,762,500
TFM, S.A. de C.V.,
Sr. Notes, 10.25%, 2007 8,000,000 6,980,000
ValuJet,
Sr. Notes, 10.25%, 2001 9,000,000 7,965,000
32,394,500
WIRELESS COMMUNICATIONS--12.0%
Dolphin Telecom,
Sr. Discount Notes, 0/11.5%, 2008 15,250,000 (b) 6,862,500
Filtronic,
Sr. Notes, 10%, 2005 10,000,000 (a) 9,775,000
Globalstar/Capital,
Sr. Notes, 11.375%, 2004 10,000,000 6,450,000
Metrocall,
Sr. Sub. Notes, 10.375%, 2007 10,000,000 6,550,000
Microcell Telecommunications, Ser. B,
Sr. Discount Notes, 0/14%, 2006 7,500,000 (b) 6,300,000
Omnipoint, Ser. A,
Sr. Notes, 11.625%, 2006 9,100,000 9,418,500
OrbCommunications Global/Capital,
Sr. Notes, 14%, 2004 13,000,000 11,505,000
SBA Communications,
Sr. Discount Notes, 0/12%, 2008 15,000,000 (b) 8,100,000
Satelites Mexicanos, Ser. B,
Sr. Notes, 10.125%, 2004 10,000,000 7,825,000
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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Telesystem International Wireless:
Ser. B, Sr. Discount Notes, 0/13.25%, 2007 6,000,000 (b) 3,090,000
Ser. C, Sr. Discount Notes, 0/10.5%, 2007 6,500,000 (b) 2,697,500
WinStar Communications,
Sr. Sub. Notes, 10%, 2008 8,000,000 6,680,000
85,253,500
TOTAL BONDS AND NOTES
(cost $1,067,143,553) 874,055,674
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PREFERRED STOCKS--6.4% Shares Value($)
- ----------------------------------------------------------------------------------------------------------------------------------
BROADCASTING--4.4%
Cumulus Media, Ser. A,
Cum., $137.50 7,907 8,579,095
Paxson Communications:
Cum., $1,325 1,015 10,962,000
Cum., Conv., $975 1,024 (a) 11,468,800
31,009,895
RETAIL--.9%
HMV Media Group,
Sr. Cum., $12.875 (Units) 6,500 (a,d) 6,727,500
WIRELESS COMMUNICATIONS--1.1%
Winstar Communications, Ser. C, 10,000 8,000,000
Cum., $142.50
TOTAL PREFERRED STOCKS
(cost $49,703,909) 45,737,395
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COMMON STOCKS--.2% Shares Value ($)
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PAPER & PACKAGING--.0%
SF Holdings, Cl. C 49,100 (a,e) 491
TECHNOLOGY--.0%
Orbital Imaging (Warrants) 3,950 (a,e) 79,494
TELECOMMUNICATION/CARRIERS--.2%
FirstWorld Communications (Warrants) 18,660 (a,e) 1,306,200
TRANSPORTATION--.0%
Highwaymaster Communications (Warrants) 8,660 (a,e) 2,165
TOTAL COMMON STOCKS
(cost $204,295) 1,388,350
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
SHORT-TERM INVESTMENTS--.5% Amount ($) Value ($)
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TIME DEPOSITS
Republic National Bank of New York,
5.5%, 10/1/1999
(cost $3,445,000) 3,445,000 3,445,000
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TOTAL INVESTMENTS (cost $1,120,496,757) 130.5% 924,626,419
LIABILITIES, LESS CASH AND RECEIVABLES (30.5%) (216,169,488)
NET ASSETS 100.0% 708,456,931
(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 BUYERS. AT SEPTEMBER 30, 1999, THESE SECURITIES AMOUNTED
TO $69,848,750 OR 9.9% OF NET ASSETS.
(B) ZERO COUPON UNTIL A SPECIFIED DATE AT WHICH TIME THE STATED COUPON RATE
BECOMES EFFECTIVE UNTIL MATURITY.
(C) NON-INCOME PRODUCING--SECURITY IN DEFAULT.
(D) WITH COMMON STOCK ATTACHED.
(E) NON-INCOME PRODUCING SECURITY.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1999 (Unaudited)
Cost Value
- ------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 1,120,496,757 924,626,419
Interest receivable 28,089,056
Receivable for investment securities sold 3,472,788
Unrealized appreciation on interest rate swaps--Note 4(a) 2,461,706
Dividends receivable 655,397
Prepaid expenses and other assets 277,517
959,582,883
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LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 751,313
Due to Shareholders Servicing Agent 81,868
Bank loan payable--Note 2 245,000,000
Cash overdraft due to Custodian 326,238
Payable for investment securities purchased 1,550,450
Interest payable--Note 2 681,701
Swap expense payable 2,632,392
Accrued expenses and other liabilities 101,990
251,125,952
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NET ASSETS ($) 708,456,931
- ------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 951,740,682
Accumulated undistributed investment income--net 11,808,871
Accumulated net realized gain (loss) on investments (61,683,990)
Accumulated net unrealized appreciation (depreciation)
on investments and interest rate swaps--Note 4(b) (193,408,632)
- ------------------------------------------------------------------------------
NET ASSETS ($) 708,456,931
- ------------------------------------------------------------------------------
SHARES OUTSTANDING
(unlimited number of $.001 par value shares of Beneficial Interest authorized)
64,037,671
NET ASSET VALUE, per share ($) 11.06
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF OPERATIONS
Six Months Ended September 30, 1999 (Unaudited)
- ------------------------------------------------------------------------------
INVESTMENT INCOME ($):
Interest 58,342,675
Cash dividends 2,419,776
TOTAL INCOME 60,762,451
EXPENSES:
Management fee--Note 3(a) 4,657,285
Interest expense--Note 2 8,145,788
Shareholder servicing costs--Note 3(b) 556,128
Prospectus and shareholders' reports 150,938
Professional fees 87,515
Trustees' fees and expenses--Note 3(c) 77,761
Custodian fees--Note 3(a) 45,326
Registration fees 36,307
Loan commitment fees--Note 2 16,583
Miscellaneous 56,325
TOTAL EXPENSES 13,829,956
INVESTMENT INCOME--NET 46,932,495
- ------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (13,531,506)
Net unrealized appreciation (depreciation)
on investments and interest rate swaps (35,484,316)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (49,015,822)
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (2,083,327)
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF CASH FLOWS
September 30, 1999 (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES ($):
Interest received 47,817,727
Dividends received 2,153,684
Interest and loan commitment fees paid (7,534,072)
Operating expenses paid (861,318)
Paid to The Dreyfus Corporation (4,705,041) 36,870,980
- ------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES ($):
Purchases of portfolio securities (174,564,267)
Net purchases of short-term portfolio securities 1,475,234
Proceeds from sales of portfolio securities 208,690,474 35,601,441
- ------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES ($):
Dividends paid (32,293,189)
Proceeds from Bank loan payable (50,000,000) (82,293,189)
- ------------------------------------------------------------------------------
Increase in cash (9,820,768)
Cash at beginning of period 9,494,529
- ------------------------------------------------------------------------------
CASH AT END OF PERIOD (326,239)
- ------------------------------------------------------------------------------
RECONCILIATION OF NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH USED BY OPERATING ACTIVITIES ($):
Net (Decrease) in Net Assets Resulting From Operations (2,083,327)
- ------------------------------------------------------------------------------
ADJUSTMENTS TO RECONCILE NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS TO NET CASH USED BY OPERATING ACTIVITIES ($):
Increase in interest receivable (1,010,907)
Decrease in dividends receivable (266,092)
Increase in interest and loan commitment fees (32,323)
Increase in accrued operating expenses 2,638,496
Increase in prepaid expenses 142,878
Increase in due to The Dreyfus Corporation (47,756)
Net interest sold on investments (2,931,779)
Net realized loss on investments 13,531,506
Net unrealized depreciation on investments 35,484,316
Net amortization of discount on investments (8,554,032)
- ------------------------------------------------------------------------------
NET CASH USED BY OPERATING ACTIVITIES 36,870,980
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
September 30, 1999 Year Ended
(Unaudited) March 31, 1999(a)
- ------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 46,932,495 85,720,719
Net realized gain (loss) on investments (13,531,506) (48,152,484)
Net unrealized appreciation (depreciation)
on investments (35,484,316) (157,924,316)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (2,083,327) (120,356,081)
- ------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
INVESTMENT INCOME--NET (46,543,316) (74,301,027)
- ------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS ($):
Net proceeds from shares sold -- 919,248,500
Dividends reinvested--Note 1(c) 14,250,127 18,142,050
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS 14,250,127 937,390,550
TOTAL INCREASE (DECREASE) IN NET ASSETS (34,376,516) 742,733,442
- ------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 742,833,447 100,005
END OF PERIOD 708,456,931 742,833,447
Undistributed investment income--net 11,808,871 11,419,692
- ------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold -- 61,352,500
Shares issued for dividends reinvested 1,222,674 1,455,830
INCREASE IN SHARES OUTSTANDING AS A
RESULT OF DIVIDENDS REINVESTED 1,222,674 62,808,330
(A) FROM APRIL 29, 1998 (COMMENCEMENT OF OPERATIONS) TO MARCH 31, 1999.
SEE NOTES TO FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
<S> <C> <C>
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. This information has been derived from the financial statements
and market price data for the fund's shares.
Six Months Ended
September 30, 1999 Year Ended
(Unaudited) March 31, 1999(a)
- -----------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value, beginning of period 11.83 15.00
Investment Operations:
Investment income--net .74 1.38
Net realized and unrealized gain (loss) on investments (.77) (3.35)
Total from Investment Operations (.03) (1.97)
Distributions:
Dividends from investment income--net (.74) (1.20)
Net asset value, end of period 11.06 11.83
Market value, end of period 11.38 11 7/8
- -----------------------------------------------------------------------------------------
TOTAL RETURN (%) (B,C) 2.00 (14.12)
- -----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses to average net assets (c) 1.09 1.46
Ratio of interest expense to average net assets (c) 1.57 2.17
Ratio of net investment income to average net assets (c) 9.02 11.64
Portfolio Turnover Rate (d) 15.38 59.40
- -----------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 708,457 742,833
(A) FROM APRIL 29, 1998 (COMMENCEMENT OF OPERATIONS) TO MARCH 31, 1999.
(B) CALCULATED BASED ON MARKET VALUE.
(C) ANNUALIZED.
(D) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Fund
NOTES TO FINANCIAL STATEMENTS
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' 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. Under the terms of the custody agreement, the fund received net
earnings credits of $34,369 during the period ended September 30, 1999 based on
available cash balances left on deposit. Income earned under this arrangement is
included in interest income. 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, it is the policy of the fund not to distribute such gain.
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, 1999, the Board of Trustees declared a cash dividend of $.1275
per share from investment income-net, payable on October 28, 1999 to
shareholders of record as of the close of business on October 14, 1999.
(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 of 1986, as amended, and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and
excise taxes.
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The fund has an unused capital loss carryover of approximately $32,078,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to September 30, 1999. This
amount is calculated based on Federal income tax regulations which may differ
from financial reporting in accordance with generally accepted accounting
principles. If not applied, the carryover expires in fiscal 2007.
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 (the "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. In
addition, the fund pays a commitment fee of .10 of 1% on the unused portion of
the Facility.
The average daily amount of borrowings outstanding during the period ended
September 30, 1999 was approximately $292,541,000, with a related weighted
average annualized interest rate of 4.57%.
NOTE 3--Management Fee and Other Transactions With Affiliates:
(a) Pursuant to a management and administration agreement with the Manager, 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 ChaseMellon Shareholder Services, L.L.C., an affiliate 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 September 30, 1999, the fund was charged $7,000 pursuant to the transfer
agency agreement.
The fund compensates Mellon, under a custody agreement for providing custodial
services for the fund. During the period ended September 30, 1999, the fund was
charged $45,326 pursuant to the custody agreement.
(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, 1999, the fund was charged
$556,128 pursuant to the Shareholder Servicing Agreement.
(c) Each Trustee who is not an "interested person" of the fund as defined in the
Act received, prior to August 1, 1999, $5,000 and as of August 1, 1999, receives
$17,000 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).
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, 1999, amounted to $153,042,601 and $187,675,841, respectively.
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
The following summarizes open interest rate swap agreements at September 30,
1999:
NOTIONAL RATE PAID RATE RECEIVED NET
SWAP PRINCIPAL BY THE FUND BY THE FUND FLOATING TERMINATION UNREALIZED
COUNTER PARTY AMOUNT ($) AT 9/30/99 AT 9/30/99 RATE INDEX DATE GAIN ($)
- -----------------------------------------------------------------------------------------------------------------------------------
Chase 150,000,000 6.0875% 5.51% 3-month LIBOR 6/15/2003 2,080,588
J.P. Morgan 150,000,000 6.0205% 5.51% 3-month LIBOR 6/15/2001 381,118
2,461,706
- ----------------------------------------------------------------------------------------------------------------------------------
</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 forecasts 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, 1999, accumulated net unrealized depreciation on
investments was $193,408,632, consisting of $13,279,874 gross unrealized
appreciation and $206,688,506 gross unrealized depreciation.
At September 30, 1999, 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
DIRECTORS
Joseph S DiMartino, Chairman
James M. Fitzgibbons
J. Tomlinson Fort
Arthur L. Goeschel
Kenneth A. Himmel
Stephen J. Lockwood
John J. Sciullo
Roslyn M. Watson
Benaree Pratt 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, Assistant Treasurer and Assistant Secretary
Frederick C. Dey
Vice President and Assistant Secretary
Karen Jacoppo-Wood
Vice President and Assistant Treasurer
John P. Covino
Vice President and Assistant Treasurer
Joseph F. Tower, III
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 ADVISER
The Dreyfus Corporation
CUSTODIAN
Mellon Bank, N.A.
COUNSEL
Kirkpatrick & Lockhart LLP
TRANSFER AGENT, 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, BUSINESS SECTION UNDER THE HEADING "CLOSED-END
BOND FUNDS--SINGLE STATE MUNICIPAL BOND FUNDS" EVERY SUNDAY.
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.
For More Information
Dreyfus
High Yield Strategies 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
Chase Mellon Shareholder Services, LLC
450 West 33rd Street
New York, NY 10001
(c) 1999 Dreyfus Service Corporation 430SA999
