Dreyfus Short Term High Yield Fund
Letter to Shareholders
Dear Shareholder:
We are pleased to report the performance of the Dreyfus Short Term High
Yield Fund. For the six-month period ended April 30, 1998, your Fund produced
a total return, including share price changes and dividend income generated,
of 5.51%.* Income dividends paid from net investment income during the period
amounted to approximately $0.610 per share, representing an annualized
distribution rate per share of 9.41%.**
Economic Review
The United States is now in the eighth year of economic expansion.
Inflation continues to rise at the slowest pace since 1964 and the
unemployment rate has fallen to a level not seen in 25 years. Not
surprisingly, consumer confidence has soared. Along with continued evidence
of the robustness of the economy have come heightened expectations that the
Federal Reserve Board (the Fed) will raise interest rates in a preemptive
move to avoid a reignition of inflation. The last increase in short-term
rates came in March 1997 when the Federal Open Market Committee (the
policy-making arm of the Fed) hiked the target rates for Federal Funds by one
quarter of a percent to 5.5%. (The Federal Funds rate is the rate of interest
that banks charge one another for overnight loans.)
Inflation has remained benign on all fronts, even in the tight labor
market, an area closely watched by the Fed for signs of incipient inflation.
The Labor Department's Employment Cost Index, a measure of wage, salary and
benefit costs, suggests that wage inflation so far is not a problem. In fact,
the first quarter increase in the ECI (0.7%) was its smallest quarterly rise
in two years. Another inflation gauge, the broad-based Gross Domestic Product
Price Deflator, rose at an annual rate of only 0.9% in the first quarter, its
lowest rate since 1964. Inflation as measured by the Consumer Price Index has
been similarly tame. Prices at the consumer level have risen at an annual
rate of about 1.5% over the reporting period. The lack of inflation has been
even more dramatic at the production level of the economy where prices have
fallen: in the 12 months ended April 30, the Producer Price Index declined
1.8%. Such a generally tepid price environment has been partly fostered by
the economic problems in Asia which have suppressed worldwide demand for
commodities, particularly oil.
Reflecting a level of confidence not seen in three decades, consumers
increased their spending over the reporting period, the first-quarter rate
rising at the fastest pace in six years. Not surprisingly, the growth rate in
new-home construction over the reporting period was the strongest in four
years. Plentiful and well-paying jobs (total wage and salary income is 7%
higher than a year ago), low interest rates, the absence of inflation and
investment market gains have resulted in a financially healthy consumer with
a corresponding propensity to spend. Strong domestic demand for lower-priced
imports has contributed further to the quiescent inflation environment while
offsetting the drag on the economy resulting from the Asian financial crisis.
It is still widely expected that the Asian economic slowdown will have a
further dampening effect on the U.S. economy. Although the surge in domestic
spending has masked the full impact of the fall in Asian demand, our trade
deficit has reached a ten-year high, a dramatic sign of deterioration.
Expectation of an economic slowdown is another reason why the Fed has been
reluctant to raise short-term interest rates.
The production side of the economy has remained robust. Factory
utilization has been high, production rates strong, and while exports to Asia
have fallen sharply, they are growing in the rest of the world. Such
resilience has been characteristic of one of the longest, most healthy
economic advances in our history. Yet we remain mindful that the concept of
an economic cycle is not dead, nor is inflation, and we are alert for
indications of a resurgence in price pressures.
Market Environment
The current economic environment is optimal for the high-yield market:
steady, controlled growth, a confident consumer, and high industrial output.
These conditions helped the high-yield market continue its long run of strong
performance since 1991. The total return for the Merrill Lynch High Yield
Master II Index over the six-month period ended 4/30/98 was 5.39%***
Another factor positively influencing the high-yield market is a strong
demand in the fixed-income marketplace for yield. In a period of low interest
rates, high-yield bonds look attractive to a wide variety of investors: cash
inflows into high-yield mutual funds continue, investment-grade corporate
bond mutual funds, insurance portfolios, and pension funds are buying the
better quality high-yield issues; and the asset-backed market is creating
many investment pools with high-yield bonds as assets. Concurrent with this,
supply of new issues has increased. While this supply situation has alarmed
some observers, it has broadened the high-yield market and tends to lag
demand by only a few weeks. As stated here previously, the high-yield market
is more mature, and this trend continues.
The one caveat to this story at the present time is the potential
aftereffects of economic changes in Southeast Asia. Possibly, lower prices
for goods exported out of that region combined with less demand could
adversely affect the global economy and eventually our high-yield market.
Anticipation of this caused a drop in the equity and high-yield markets in
October and November of last year, but the lack of any cataclysmic event in
Southeast Asia has lessened investors' fears for now. The Asian crisis is not
over, and there is every chance it could get worse before it gets better.
Every prudent investor should keep a keen eye trained toward the East.
The Portfolio
The performance of the Fund over the last six months has benefitted
from a strong refinancing climate. Relatively low interest rates and high
equity valuations have allowed issues of better high-yield credits the
ability to refinance their high-coupon debt at high call prices. This has
improved the total return of your Fund. This scenario has a high potential
for continuing as long as the economy remains healthy and the bond and equity
markets broadly perform well. Of course, there can be no guarantees of how
the Fund's credits will actually perform.
Several examples of holdings in the Fund that were refinanced were
bonds of Nextel Communications, Duane Reade Holding, Coleman Holdings, Health
o meter, Interlake, and Finlay Jewelry. Most of the Fund's assets are issues
from companies that have performed very well since issuing their high-yield
debt and are strongly motivated to refinance it. Given the rapid increase in
high-yield issuance over the last few years combined with a continued steady
economy, the availability of suitable short-term high-yield assets for the
Fund should continue.
Emerging market exposure in the Fund is low due to the historically
volatile nature of the investment and a lesser ability by Dreyfus to perform
adequate credit research. Currency and sovereign risk, combined with less
clear accounting standards, make foreign analysis difficult. The Fund's
foreign exposure is usually limited to investment-grade-rated countries or
issuers affiliated with investment-grade multinational companies. No change
in this strategy is contemplated at this time.
Our primary task-to provide high current income with lower volatility
than the overall high-yield market-will guide our portfolio management
decisions. We will continue to use intensive fundamental research in seeking
to achieve high returns while reducing risk.
Very truly yours,
[Roger King signature logo]
Portfolio Manager
May 18, 1998
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains
paid.
** Distribution rate per share is based upon dividends per share paid from
net investment income during the period (annualized), divided by the net
asset value per share at the end of the period, adjusted for capital gain
distributions.
***SOURCE: MERRILL LYNCH, PIERCE, FENNER AND SMITH, INC.-The Merrill Lynch
High Yield Master II Index is a market capitalization weighted index
including all domestic and Yankee high-yield bonds with at least $100 million
par amount outstanding and greater than or equal to one year to maturity.
<TABLE>
<CAPTION>
DREYFUS SHORT TERM HIGH YIELD FUND
STATEMENT OF INVESTMENTS APRIL 30, 1998 (UNAUDITED)
Principal
Bonds and Notes-100.2% Amount Value
________________ _____________
<S> <C> <C> <C>
Aircraft & Aerospace-3.6% AM General,
Sr. Notes, Ser. B, 12.875%, 2002..... $ 2,000,000 $ 2,135,000
Aircraft Lease Portfolio Securitisation 96-1,
Pass Through Trust, Ctfs.,
Cl. D, 12.75%, 2006.................. 598,351 598,351
America West Airlines Pass Through Trust,
Pass Through Ctfs., Ser. 1996-1,
Cl. D, 8.16%, 2002................... 578,569 583,134
Burke Industries,
Sr. Notes, 9.6875%, 2007............. 2,000,000 (a,b) 2,000,000
Rocal, Ltd.,
Collateralized Global Medium Term Notes
(Gtd. by Embraer-Empresa Brasileira de Aeronautica,
S.A.), 10.25%, 1998.................. 1,590,000 (a) 1,593,975
Sequa,
Sr. Sub. Notes, 9.375%, 2003......... 1,000,000 1,045,000
_____________
Automotive-2.0% Collins & Aikman Products,
Gtd. Sr. Sub. Notes, 11.50%, 2006.... 2,500,000 2,812,500
Penda,
Sr. Notes, 10.75%, 2004.............. 1,500,000 1,537,500
_____________
4,350,000
_____________
Broadcasting-4.9% Azteca Holdings, S.A. de C.V.,
Sr. Secured Notes, 11%, 2002......... 4,500,000 4,680,000
Paxson Communications,
Sr. Sub. Notes, 11.625%, 2002........ 4,000,000 4,340,000
Univision Network Holding, L.P.,
Sub. Notes, 7%, 2002................. 2,550,575 1,732,500
_____________
10,752,500
_____________
Cable Television-10.4% Adelphia Communications,
Deb., 11.875%, 2004.................. 1,000,000 1,105,000
CCA Holdings,
Sr. Sub. Notes, Zero Coupon, 1999.... 3,731,362 3,000,000
Diamond Cable Communications, plc,
Sr. Discount Notes:.................
Zero Coupon, 1999 4,500,000 (c) 4,207,500
Zero Coupon, 2000 2,000,000 (c) 1,600,000
Digital Television Service/Capital,
Secured Sr. Sub. Notes, 12.50%, 2007. 2,000,000 2,300,000
Echostar Satellite Broadcast:
Gtd. Notes, 12.50%, 2002............. 1,500,000 1,687,500
Gtd. Sr. Discount Notes, Zero Coupon, 2000 2,000,000 (c) 1,720,000
Galaxy Telecom, L.P.,
Sr. Sub. Notes, 12.375%, 2005........ 1,000,000 1,120,000
Helicon Group,
Sr. Secured Notes, Ser. B, 11%, 2003. 1,000,000 1,067,500
Kabelmedia Holdings GMBH,
Sr. Discount Notes, Zero Coupon, 2001 2,000,000 (c) 1,555,000
Dreyfus Short Term High Yield Fund
Statement of Investments (continued) April 30, 1998 (Unaudited)
Principal
Bonds and Notes (continued) Amount Value
_____________ _____________
Cable Television (continued) Net Sat Servicos, Ltda.,
Sr. Secured Notes, 12.75%, 2001 $ 500,000 (d) $ 515,000
Pegasus Media & Communications,
Sr. Sub. Notes, Ser. B, 12.50%, 2005. 2,775,000 3,177,375
_____________
23,054,875
_____________
Casinos/Gaming-4.9% Casino Magic Finance,
First Mortgage, 11.50%, 2001 3,650,000 3,869,000
Hollywood Casino,
Sr. Notes, 12.75%, 2003 3,235,000 3,582,763
Majestic Star Casino, LLC,
Sr. Exchange Secured Notes, 12.75%, 2003 1,625,000 1,779,375
Waterford Gaming, L.L.C./Finance,
Sr. Notes, 12.75%, 2003.............. 1,419,000 1,567,995
_____________
10,799,133
_____________
Commercial Mortgages-9% Nomura Depositor Trust ST IA,
Mortgage Pass-Through Ctfs.,
Ser. 1998 ST I, Cl. B-2, 9.875%, 2003 2,000,000 (a,b) 1,986,875
_____________
Consumer-3.5% BPC Holding,
Sr. Secured Notes, 12.50%, 2006...... 350,000 385,000
Health o meter,
Sr. Sub. Notes, 13%, 2002 (Units).... 750,000 (e) 855,000
Hosiery Corp. of America,
Sr. Sub. Exchange Notes, 13.75%, 2002 1,000,000 1,107,500
Revlon Worldwide,
Sr. Secured Discount Notes,
Zero Coupon, 2001.................... 5,000,000 3,862,500
Sweetheart Cup,
Gtd. Sr. Notes, 9.625%, 2000......... 1,500,000 1,500,000
_____________
7,710,000
_____________
Energy-7.1% Clark USA,
Sr. Secured Notes, Ser. B, 10.875%, 2005 2,000,000 2,200,000
DeepTech International,
Sr. Secured Notes:
11%, 2000 4,500,000 (a) 4,702,500
12%, 2000 2,800,000 2,975,000
Gerrity Oil & Gas,
Sr. Sub. Notes, 11.75%, 2004......... 544,000 591,600
Kelly Oil & Gas:
Conv. Deb., 8.50%, 2000.............. 2,370,000 2,358,150
Conv. Sub. Notes, 7.875%, 1999....... 1,699,000 1,656,525
Reading & Bates,
Conv. Deb., 4.878%, 1998............. 98,400 97,200
Rutherford-Moran Oil,
Sr. Sub. Notes, 10.75%, 2004......... 1,000,000 1,075,000
_____________
15,655,975
_____________
Dreyfus Short Term High Yield Fund
Statement of Investments (continued) April 30, 1998 (Unaudited)
Principal
Bonds and Notes (continued) Amount Value
_____________ _____________
Entertainment-5.4% American Skiing,
Sr. Sub. Notes, 12%, 2006............ $ 6,000,000 $ 6,720,000
Premier Parks,
Gtd. Sr. Notes, Ser. A, 12%, 2003.... 1,160,000 1,291,950
United Artists Theatres,
Floating Rate Sr. Sub. Notes, 10.0625%, 2007 4,000,000 (a,b) 4,000,000
_____________
12,011,950
_____________
Financial/Asset-Backed-1.5% Commercial Loan Funding Trust I,
Floating Rate Sub. Notes, Cl. D1, 18%, 2005
(Interest Only Obligation)........... 1,500,000 (b,f) 1,308,750
Imperial Credit Capital Trust I,
Remarketed Par Securities, Ser. A, 10.25%, 2002 2,000,000 (a) 1,978,992
_____________
3,287,742
_____________
Foods and Beverages-4.1% American Rice,
First Mortgage, 13%, 2002............ 2,000,000 1,600,000
Envirodyne Industries:
Sr. Notes, 10.25%, 2001.............. 2,000,000 2,025,000
First Priority Sr. Secured Notes, Ser. B, 12%, 2000 2,500,000 2,662,500
RC/Arbys,
Gtd. Sr. Notes, 9.75%, 2000.......... 2,686,000 2,739,720
_____________
9,027,220
_____________
Foreign/Governmental-.4% Republic of Argentina,
Floating Rate Notes, 9.50%, 2002..... 1,000,000 (b) 988,750
_____________
Forest Products-4.2% Maxxam Group Holdings,
Sr. Secured Notes:
12%, 2003 5,860,000 6,402,050
11.25%, 2003 225,000 237,938
Pacific Lumber,
Sr. Notes, 10.50%, 2003.............. 2,500,000 2,575,000
_____________
9,214,988
_____________
Healthcare-.7% Eye Care Centers of America,
Floating Interest Rate Sub. Term Securities,
9.223%, 2008......................... 1,500,000 (a,b) 1,507,500
_____________
Homebuilding-.4%. KHE Finance,
Sub. Notes (Gtd. by Hovnanian Enterprises),
11.25%, 2002......................... 1,000,000 1,041,250
_____________
Industrial-3.5% Applied Extrusion Technology,
Sr. Notes, Ser. B, 11.50%, 2002...... 3,500,000 3,745,000
HCC Industries,
Sr. Sub. Notes, 10.75%, 2007......... 1,250,000 1,309,375
Interlake,
Sr. Notes, 12%, 2001................. 1,000,000 1,115,000
Vicap, S.A. de C.V.,
Gtd. Sr. Notes, 10.25%, 2002......... 1,500,000 (a) 1,563,750
_____________
7,733,125
_____________
Dreyfus Short Term High Yield Fund
Statement of Investments (continued) April 30, 1998 (Unaudited)
Principal
Bonds and Notes (continued) Amount Value
_____________ _____________
Metals-3.6% Kaiser Aluminum & Chemical,
Gtd. Sr. Notes, 9.875%, 2002......... $ 3,000,000 $ 3,108,750
Renco Metals:
Sr. Notes, 12%, 2000................. 1,500,000 1,582,500
Sr. Notes, 11.50%, 2003.............. 3,000,000 3,187,500
_____________
7,878,750
_____________
Paper and Paper Related- .2% Stone Container,
Sr. Sub. Notes, 11%, 1999............ 350,000 359,188
_____________
Publishing-1.0% American Media Operations,
Sr. Sub. Notes, 11.625%, 2004........ 2,000,000 2,170,000
_____________
Real Estate-1.3% Rockefeller Center Properties,
Conv. Deb., Zero Coupon, 2000........ 4,000,000 2,980,000
_____________
Retail-3.5% Cafeteria Operators, L.P.
(Gtd. by Furrs / Bishops Specialty Group),
Sr. Secured Notes, 12%, 2001......... 1,000,000 1,005,000
Corporate Express,
Conv. Notes, 4.50%, 2000............. 3,500,000 3,180,625
Discovery Zone,
Sr. Secured Notes, 13.50%, 2002...... 1,000,000 970,000
Finlay Jewelry,
Sr. Notes, 10.625%, 2003............. 2,400,000 2,514,000
_____________
7,669,625
_____________
Shipping-2.1% Eletson Holdings,
First Preferred Ship Mortgage Notes,
9.25%, 2003.......................... 850,000 877,625
Moran Transportation,
First Preferred Ship Mortgage Notes,
11.75%, 2004......................... 3,350,000 3,752,000
_____________
4,629,625
_____________
Steel-5.9% Republic Engineered Steels,
First Mortgage Notes, 9.875%, 2001... 3,675,000 3,656,625
Russel Metals,
Sr. Notes, 10.25%, 2000.............. 9,000,000 9,315,000
_____________
12,971,625
_____________
Technology-1.9% The Learning Company,
Conv. Sr. Notes, 5.50%, 2000......... 3,000,000 (a) 2,876,250
Unisys, Sr. Notes,
12%, 2003............................ 1,150,000 1,305,250
_____________
4,181,500
_____________
Telecommunications-14.2% Call-Net Enterprises,
Sr. Discount Notes, Zero Coupon, 1999 3,000,000 (c) 2,835,000
Clearnet Communications,
Sr. Discount Notes, Zero Coupon, 2000 2,000,000 (c) 1,680,000
Comunicacion Celular SA,
Bonds, Zero Coupon, 2000............. 1,500,000 (c) 1,181,250
Dreyfus Short Term High Yield Fund
Statement of Investments (continued) April 30, 1998 (Unaudited)
Principal
Bonds and Notes (continued) Amount Value
_____________ _____________
Telecommunications (continued) Dial Call Communications,
Sr. Discount Notes, Zero Coupon, 1998 $ 2,000,000 (c) $ 1,972,500
GST USA,
Sr. Discount Notes, Zero Coupon, 2000 1,000,000 (c) 808,750
Intermedia Communications,
Sr. Discount Notes, Zero Coupon, 2001 1,500,000 (c) 1,222,500
Microcell Telecommunications,
Sr. Discount Notes, Zero Coupon, 2001 5,000,000 (c) 3,737,500
Occidente y Caribe Celular SA,
Sr. Discount Notes, Zero Coupon, 2001 5,000,000 (c) 3,862,500
Orion Network Systems,
Sr. Discount Notes, Zero Coupon, 2002 2,000,000 (c) 1,550,000
Pagemart Nationwide,
Sr. Discount Notes, Zero Coupon, 2000 2,495,000 (c) 2,220,550
Sprint Spectrum L.P. / Finance,
Sr. Discount Notes, Zero Coupon, 2001 1,000,000 (c) 832,500
WinStar Communications,
Sr. Discount Notes, Zero Coupon, 2000 11,600,000 (c) 9,396,000
_____________
31,299,050
_____________
Textiles-2.7% Sassco Fashions,
Notes, 12.75%, 2004.................. 3,317,519 3,574,627
Texfi Industries,
Sr. Sub. Deb., 8.75%, 1999........... 2,500,000 2,437,500
_____________
6,012,127
_____________
Transportation-6.1% Aerovias de Mexico S.A.:
Deb., 9.75%, 2000.................... 2,725,000 2,728,406
Deb., 9.75%, 2000.................... 1,000,000 (a) 1,001,250
CHC Helicopter,
Sr. Sub. Notes, 11.50%, 2002 (Units). 1,000,000 (e) 1,062,500
OMI,
Sr. Notes, 10.25%, 2003.............. 2,000,000 2,090,000
Union Pacific,
Sub. Deb., 5.50%, 2033............... 3,068,000 2,763,133
ValuJet,
Sr. Notes, 10.25%, 2001.............. 3,950,000 3,890,750
_____________
13,536,039
_____________
Utilities-.2% Hidroelectric Piedra Aguila,
Medium-Term Notes, 10.625%, 2001..... 500,000 527,500
_____________
TOTAL BONDS AND NOTES
(cost $220,691,301) $221,292,372
_____________
_____________
Dreyfus Short Term High Yield Fund
Statement of Investments (continued) April 30, 1998 (Unaudited)
Equity-Related Securities-2.7% Shares Value
_____________ ____________
Common Stocks-0.0%
Consumer; Sun International Hotels 198 $ 9,095
_____________
Preferred Stocks-2.6%
Broadcasting-.5% Spanish Broadcasting System,
Cum., $142.50........................ 1,071 (a) 1,124,550
_____________
Cable Television-.1% Time Warner,
Cum., Ser. K, $102.50................ 156 175,793
_____________
Consumer-.5% La Petite Holdings,
Cum., $3.03.......................... 25,000 1,175,000
_____________
Energy-.9% ELF Overseas, Ltd.,
Ser. A, Gtd. Cum., $2.125............ 40,700 1,063,287
Kelly Oil & Gas,
Conv. Cum., $2.625................... 34,700 893,525
_____________
1,956,812
_____________
Publishing-.6% Newscorp Overseas, Ltd.,
Ser. A, Cum., $2.15625............... 55,772 1,380,357
_____________
TOTAL PREFERRED STOCK................ 5,812,512
_____________
Warrants-.1%
Retail-.0% Discovery Zone 1,000 60,000
_____________
Telecommunications-.1% Comunicacion Celular SA 1,500 105,000
_____________
TOTAL WARRANTS......................... 165,000
_____________
TOTAL EQUITY-RELATED SECURITIES
(cost $5,964,640).................... $ 5,986,607
_____________
_____________
TOTAL INVESTMENTS (cost $226,655,941)....................................... 102.9% $ 227,278,979
_____ _____________
_____ _____________
LIABILITIES, LESS CASH AND RECEIVABLES...................................... (2.9%)$ (6,433,478)
_____ _____________
_____ _____________
NET ASSETS.................................................................. 100.0% $ 220,845,501
_____ _____________
_____ _____________
Notes to Statement of Investments:
(a) Securities exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
April 30, 1998 these securities amounted to $24,335,642 or 11% of net
assets.
(b) Variable rate security-interest rate subject to periodic change.
(c) Zero coupon until year shown at which time a stated coupon rate
becomes effective.
(d) Reflects date security can be redeemed at holders' option; the
stated maturity is 8/5/2004.
(e) With warrants to purchase common stock.
(f) Reflects notional face.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS SHORT TERM HIGH YIELD FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (UNAUDITED)
Cost Value
_____________ _____________
<S> <C> <C> <C>
ASSETS: Investments in securities-See Statement of Investments $ 226,655,941 $ 227,278,979
Cash....................................... 333,876
Dividends and interest receivable.......... 4,821,942
Receivable for shares of Beneficial Interest subscribed 108,565
Prepaid expenses and other assets.......... 62,029
_____________
232,605,391
_____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates 124,433
Due to Distributor......................... 44,166
Bank loan payable-Note 2................... 7,014,000
Payable for investment securities purchased 3,635,557
Payable for shares of Beneficial Interest redeemed 893,836
Interest payable-Note 2.................... 8,206
Accrued expenses........................... 39,692
_____________
11,759,890
_____________
NET ASSETS.................................................................. $220,845,501
_____________
_____________
REPRESENTED BY: Paid-in capital............................ $219,402,988
Accumulated undistributed investment income-net77,507
Accumulated net realized gain (loss) on investments 741,968
Accumulated net unrealized appreciation
........ (depreciation) on investments-Note 4 623,038
_____________
NET ASSETS.................................................................. $220,845,501
_____________
_____________
SHARES OUTSTANDING
(unlimited number of $.001 par value shares of Beneficial Interest
authorized) ........................................... 17,058,433
NET ASSET VALUE, offering and redemption price per share.................... $12.95
_______
_______
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS SHORT TERM HIGH YIELD FUND
STATEMENT OF OPERATIONS SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED)
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME: Interest................................... $9,416,247
Cash dividends............................. 165,316
___________
Total Income........................... $9,581,563
EXPENSES: Management fee-Note 3(a)................... 585,155
Shareholder servicing costs-Note 3(b)...... 279,763
Interest expense-Note 2.................... 114,204
Registration fees.......................... 44,407
Professional fees.......................... 23,199
Prospectus and shareholders' reports....... 13,475
Custodian fees-Note 3(b)................... 9,673
Trustees' fees and expenses-Note 3(c)...... 6,264
Miscellaneous.............................. 8,461
___________
Total Expenses......................... 1,084,601
___________
INVESTMENT INCOME-NET....................................................... 8,496,962
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-Note 4:
Net realized gain (loss) on investments.... $ 748,133
Net unrealized appreciation (depreciation) on investments 366,019
___________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...................... 1,114,152
___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $9,611,114
___________
___________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS SHORT TERM HIGH YIELD FUND
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
April 30, 1998 Year Ended
(Unaudited) October 31, 1997
________________ ________________
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 8,496,962 $ 8,137,508
Net realized gain (loss) on investments................................. 748,133 1,397,716
Net unrealized appreciation (depreciation) on investments............... 366,019 133,680
________________ ________________
Net Increase (Decrease) in Net Assets Resulting from Operations... 9,611,114 9,668,904
________________ ________________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net................................................... (8,525,275) (8,031,688)
Net realized gain on investments........................................ (1,405,596) (105,272)
________________ ________________
Total Dividends................................................... (9,930,871) (8,136,960)
________________ ________________
BENEFICIAL INTEREST TRANSACTIONS :
Net proceeds from shares sold........................................... 137,313,795 297,929,536
Dividends reinvested.................................................... 7,222,304 5,823,917
Cost of shares redeemed................................................. (70,097,924) (177,337,269)
________________ ________________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions 74,438,175 126,416,184
________________ ________________
Total Increase (Decrease) in Net Assets....................... 74,118,418 127,948,128
NET ASSETS:
Beginning of Period..................................................... 146,727,083 18,778,955
________________ ________________
End of Period........................................................... $220,845,501 $146,727,083
________________ ________________
________________ ________________
Undistributed investment income -net...................................... $ 77,507 $ 105,820
________________ ________________
Shares Shares
________________ ________________
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 10,608,275 23,168,626
Shares issued for dividends reinvested.................................. 558,854 450,821
Shares redeemed......................................................... (5,415,361) (13,792,318)
________________ ________________
Net Increase (Decrease) in Shares Outstanding..................... 5,751,768 9,827,129
________________ ________________
________________ ________________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS SHORT TERM HIGH YIELD FUND
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated.This
information has been derived from the Fund's financial statements.
Six Months Ended
April 30, 1998 Year Ended October 31,
_____________________
PER SHARE DATA: (Unaudited) 1997 1996(1)
__________ ______ ______
<S> <C> <C> <C>
Net asset value, beginning of period....................... $12.98 $12.69 $12.50
______ ______ ______
Investment Operations:
Investment income-net...................................... .60 1.29 .26
Net realized and unrealized gain (loss)
on investments........................................... .10 .34 .19
______ ______ ______
Total from Investment Operations........................... .70 1.63 .45
______ ______ ______
Distributions:
Dividends from investment income-net....................... (.61) (1.29) (.26)
Dividends from net realized gain on investments............ (.12) (.05) -
______ ______ ______
Total Distributions........................................ (.73) (1.34) (.26)
______ ______ ______
Net asset value, end of period............................. $12.95 $12.98 $12.69
______ ______ ______
______ ______ ______
TOTAL INVESTMENT RETURN........................................ 11.11%(2) 13.38% 17.02%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses to average net assets.......... 1.07%(2) 1.09% .92%(2)
Ratio of interest expense to average net assets............ .13%(2) .22% -
Ratio of net investment income to average net assets....... 9.44%(2) 10.02% 9.76%(2)
Decrease reflected in above expense ratios
due to undertaking by the Manager........................ - .02% 1.62%(2)
Portfolio Turnover Rate.................................... 36.93%(3) 102.59% 77.79%(3)
Net Assets, end of period (000's Omitted).................. $220,846 $146,727 $18,779
(1) From August 16, 1996 (commencement of operations) to October 31, 1996.
(2) Annualized.
(3) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS SHORT TERM HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1-Significant Accounting Policies:
Dreyfus Short Term High Yield Fund (the "Fund") is a separate diversified
series of Dreyfus Income Funds
(the "Company") which is registered under the Investment Company Act of 1940
("Act") as an open-end management investment company and operates as a series
company currently offering five series, including the Fund. The Fund's
investment objective is to provide high current income. The Dreyfus
Corporation ("Manager") serves as the Fund's investment adviser. The Manager
is a direct subsidiary of Mellon Bank, N.A. ("Mellon"). Premier Mutual Fund
Services, Inc. (the "Distributor") is the distributor of the Fund's shares,
which are sold to the public without a sales charge.
The Company accounts separately for the assets, liabilities and
operations of each fund. Expenses directly attributable to each fund are
charged to that fund's operations; expenses which are applicable to all funds
are allocated among them on a pro rata basis.
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, and financial futures) 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. Financial futures are valued at the last sales price on
the securities exchange on which such securities are primarily traded or at
the last sales price on the national securities market on each business day.
Investments denominated in foreign currencies are translated into U.S.
dollars at the prevailing rates of exchange.
(b) Securities transactions and investment income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis.
(c) Dividends to shareholders: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Fund not to distribute such gain.
(d) Federal income taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
Dreyfus Short Term High Yield Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
NOTE 2-Bank Lines of Credit:
The Fund may borrow up to $10 million for leveraging purposes under a
short-term unsecured line of credit and participates with other
Dreyfus-managed funds in a $100 million unsecured line of credit primarily to
be utilized for temporary or emergency purposes, including the financing of
redemptions. Interest is charged to the Fund at rates which are related to
the Federal Funds rate in effect at the time of borrowings.
The average daily amount of borrowings outstanding under both
arrangements during the period ended April 30, 1998 was approximately
$3,847,000, with a related weighted average annualized interest rate of
5.99%.
NOTE 3-Management Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement with the Manager, the management
fee is computed at the annual rate of
.65 of 1% of the value of the Fund's average daily net assets and is payable
monthly.
(b) Under the Shareholder Services Plan, the Fund pays the Distributor at
an annual rate of .25 of 1% of the value of the Fund's average daily net
assets for the provision of certain services. The services provided may
include personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding the Fund and providing reports and other
information, and services related to the maintenance of shareholder accounts.
The Distributor may make payments to Service Agents (a securities dealer,
financial institution or other industry professional) in respect of these
services. The Distributor determines the amounts to be paid to Service
Agents. During the period ended April 30, 1998, the Fund was charged $225,060
pursuant to the Shareholder Services Plan.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. During the
period ended April 30, 1998, the Fund was charged $40,213 pursuant to the
transfer agency agreement.
The Fund compensates Mellon under custody agreement to provide custodial
services for the Fund. During the period ended April 30, 1998, the Fund was
charged $9,673 pursuant to the custody agreement.
(c) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Company an annual fee of $2,500 and an attendance fee of
$500 per meeting. The Chairman of the Board receives an additional 25% of
such compensation.
NOTE 4-Securities Transactions:
The aggregate amount of purchases and sales (including paydowns) of
investment securities, excluding short-term securities, during the period
ended April 30, 1998 amounted to $140,931,734 and $67,904,155, respectively.
At April 30, 1998, accumulated net unrealized appreciation on investments
was $623,038, consisting of $2,359,148 gross unrealized appreciation and
$1,736,110 gross unrealized depreciation.
At April 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).
Dreyfus Short Term High Yield Fund
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
MELLON BANK, N.A.
ONE MELLON BANK CENTER
PITTSBURGH, PA 15258
Transfer Agent &
Dividend Disbursing Agent
DREYFUS TRANSFER, INC.
P.O. BOX 9671
PROVIDENCE, RI 02940
PRINTED IN U.S.A. 044SA984
Short Term
High Yield Fund
Semi-Annual
Report
April 30, 1998
[Registration mark]
[Dreyfus lion/2hres logo]
