Dreyfus
Core Bond Fund
SEMIANNUAL REPORT
April 30, 1999
<PAGE>
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.
<PAGE>
Contents
THE FUND
- --------------
2 Letter from the President
3 Discussion of Fund Performance
6 Statement of Investments
12 Statement of Financial Futures
13 Statement of Assets and Liabilities
14 Statement of Operations
15 Statement of Changes in Net Assets
16 Financial Highlights
17 Notes to Financial Statements
FOR MORE INFORMATION
- ----------------------
Back Cover
<PAGE>
Dreyfus The Fund
Core Bond Fund
LETTER FROM THE PRESIDENT
- -------------------------
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Core Bond Fund,
covering the six-month period from November 1, 1998 through April 30, 1999.
Inside, you'll find valuable information about how the Fund was managed during
the reporting period, including a discussion with the Fund's portfolio
manager, Michael Hoeh, a member of the Dreyfus Taxable Fixed Income Team.
The past six months have been rewarding for many fixed-income investors. Lower
short-term interest rates adopted by the Federal Reserve Board and other
central banks in the fall of 1998 appear to have helped many developed nations
withstand the effects of economic weakness in Japan, Asia and Latin America.
At the same time, the U.S. economy entered its eighth year of expansion in an
environment characterized by low inflation and high levels of consumer
spending.
Fixed-income securities provided mixed results in this economic climate. While
U.S. Treasury securities rallied strongly last summer when stocks and other
types of bonds fell, they subsequently gave back most of their gains. Other
types of bonds performed well, however, as investors shifted assets back into
bond market sectors they had previously avoided. Accordingly, many corporate
bonds, mortgage-backed securities, asset-backed securities and U.S. dollar-
denominated foreign bonds provided attractive returns over the reporting
period.
We appreciate your confidence over the past six months, and we look forward to
your continued participation in Dreyfus Core Bond Fund.
Sincerely,
/s/Stephen E. Canter
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
May 13, 1999
2
<PAGE>
DISCUSSION OF FUND PERFORMANCE
- ------------------------------
Michael Hoeh, Portfolio Manager
Dreyfus Taxable Fixed Income Team
How did Dreyfus Core Bond Fund perform
relative to its benchmark?
The Dreyfus Core Bond Fund (formerly Dreyfus Strategic Income Fund) produced a
total return, including share price changes and dividend income, of 4.01% for
the six-month period ended April 30, 1999.1 In comparison, the Fund's
benchmark, the Merrill Lynch Domestic Master Index,2 provided a 0.62% total
return.
The improved results were largely due to major changes in the Fund's strategy
over the past six months. The most important factor was its new emphasis on
higher credit-quality fixed-income securities.
What is the Fund's investment approach?
Dreyfus Core Bond Fund's objective is to maximize total return, consistent
with capital appreciation and current income. At least 65% of the Fund must be
invested in investment-grade fixed-income securities, including U.S.
governments, agencies, corporates and mortgage-backed securities. The
remaining 35% may be invested in below-investment grade or 'high-yield'
securities.
Consistent with the Fund's goal and current market conditions, we upgraded its
overall credit quality. First, we reduced our holdings in below investment-
grade bonds, such as emerging market debt. We also reduced preferred and
convertible stocks, and mortgage derivatives. We lightened these positions
gradually, selling securities as conditions turned more favorable.
We used the proceeds to purchase investment-grade securities. We had expected
that, as U.S. fixed income markets bounced back from last fall's liquidity
crisis, the highest-rated securities would recover first.
The Fund 3
<PAGE>
DISCUSSION OF FUND PERFORMANCE (continued)
Accordingly, we purchased AA- and AAA-rated debt. As we expected, these bonds
recovered, boosting the Funds overall performance.Our investment approach uses:
* Fundamental economic analysis. Our review of U.S. economic
conditions helps us choose between shorter- and longer-dated securities.
It is also useful in setting the Funds overall duration, or sensitivity
to interest rate changes. Dreyfus Core Bond Fund consists primarily of
intermediate-term securities (seven- to 15-year maturities), and as such,
its duration is also intermediate-term. As of the close of the reporting
period, it stood at 4.5 years, close to that of its benchmark. Because
economic conditions remained strong in the U.S. and weak overseas, we did
not expect interest rates to change significantly. As a result, we did
not make strategic adjustments to duration. Fundamental analysis also
helps us determine the Funds balance between domestic and international
securities. Looking ahead, we plan to include fewer emerging market
international bonds and instead focus on investment-grade domestic fixed-
income holdings.
* Sector allocation. We review all sectors of the fixed-income market to
evaluate their relative attractiveness. Over the past six months, as
we began shifting the Fund into core fixed-income holdings, we used
sector allocation to gauge the appeal of various investment-grade
sectors.
* Security selection. We rate securities on both their individual
merits and their relative value. In the period just ended, we
concentrated on seeking value within the investment-grade corporate
sector.
What other factors influenced the Funds performance?
In the last three months, we added several new holdings to the Fund, each of
which has contributed to its positive performance. Among the most noteworthy
4
<PAGE>
are Capital One Bank, a credit card company with excellent prospects. The
company has an arrangement with a major Internet search engine to become its
exclusive credit card provider. Also new to the Fund is Export-Import Bank of
Korea, a holding that had declined when credit agencies lowered their ratings
on Korean debt last summer. The bond was recently restored to investment-grade
status, and we purchased it early in its recovery. Countrywide Home Loan, Ser.
H, one of the countrys largest residential lenders, is another new holding.
The company is riding the wave of strong demand for residential housing and
mortgage refinancing. Finally, we purchased Reckson Operating Partnership, a
Real Estate Investment Trust (REIT) specializing in office space. Reckson,
along with other REITs, suffered in 1998, but is now recovering as commercial
construction activity slows and rents in office buildings increase.
What is the Funds current strategy?
We are keeping the Fund invested in sectors and securities with the potential
to benefit from domestic and global economic trends. If the U.S. economy
continues to expand at a moderate to rapid pace, the wealth effect of strong
growth would keep consumer demand high. This would serve as a boost for the
Funds investment-grade corporate bonds, particularly the debt of consumer-
related companies like Capital One and Countrywide. Furthermore, if global
economies continue to stabilize, the outlook for international investment-
grade securities, like Korean debt, would improve.
May 13, 1999
1 Total return includes reinvestment of dividends and any capital gains
paid.
2 SOURCE: MERRILL LYNCH, PIERCE, FENNER AND SMITH, INC. The Merrill
Lynch Domestic Master Index is an unmanaged performance benchmark composed
of U.S. Government, mortgage, and BBB- or higher rated corporate securities
with maturities greater than or equal to one year; Treasury securities in
the Index must have par amounts outstanding greater than or equal to $1
billion and corporate and generic mortgage-backed securities $100 million
per coupon.
The Fund 5
<PAGE>
STATEMENT OF INVESTMENTS
April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Principal
Bonds and Notes--102.1% Amount ($) Value ($)
- -------------------------------------------------------------------------------
<S> <C> <C>
Aircraft & Aerospace--2.5%
America West Airlines Pass-Through Trust,
Pass-Through Ctfs.,
Ser. 1997-1, Cl. C, 7.53%, 2004 6,674,410 6,767,084
Asset-Backed--4.8%
GE Capital Mortgage Services, Home Equity Loan,
Asset-Backed Ctfs.,
Ser. 1996-HE4, Cl. B3, 9.316%, 2026a,b 1,360,856 1,246,884
The Money Store Trust,
Asset-Backed Ctfs.,
Ser. 1998-B, Cl. AF7, 6.65%, 2039 12,000,000 11,963,700
13,210,584
Banking--5.7%
Capital One Bank:
Sr. Notes, 7.15%, 2006 8,000,000 8,381,944
Medium-Term Notes, 6.7%, 2008 7,250,000 7,236,442
15,618,386
Broadcasting--1.6%
Scandinavian Broadcasting System,
Conv. Deb., 7%, 2004a 3,650,000 4,466,688
Building Materials--1.2%
ICF Kaiser International,
Sr. Sub. Notes, 13%, 2003 4,750,000 3,342,813
Chemicals--1.1%
Union Carbide,
Notes, 6.7%, 2009 3,100,000 3,081,310
Commercial Mortgage
Pass-Through Ctfs.--15.2%
Asset Securitization,
Ser. 1997-D5, Cl. A2, 7.069%, 2041b 8,000,000 7,771,250
DLJ Mortgage Aceptance:
Ser. 1998-CF1, Cl. A1B, 6.41%, 2008 9,250,000 9,189,297
Ser. 1998-CF2, Cl. A3, 6.65%, 2031 7,423,000 7,358,049
Ser. 1999-CG1, Cl. B2, 7.487%, 2009b 6,000,000 5,521,875
GS Mortgage Securities II,
Ser. 1998-C1, Cl. D, 7.45%, 2030b 9,000,000 8,706,690
Structured Asset Securities,
REMIC, Ser. 1996-CFL, Cl. H, 7.75%, 2028a 4,750,000 3,420,784
41,967,945
Energy--2.6%
Conoco,
Sr. Notes, 6.95%, 2029 4,200,000 4,152,624
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Principal
Bonds and Notes (continued) Amount ($) Value ($)
- -------------------------------------------------------------------------------
<S> <C> <C>
Energy (continued)
Dual Drilling,
Sr. Sub. Notes, 9.875%, 2004 3,000,000 3,071,250
7,223,874
Financial--3.2%
Countrywide Home Loan, Ser. H,
Medium-Term Notes, 6.25%, 2009 9,200,000 8,950,450
Foreign/Governmental--7.6%
Corporacion Andina de Fomento,
Notes, 7.75%, 2004 2,000,000 2,003,630
Export-Import Bank of Korea,
Notes, 7.1%, 2007 10,000,000 9,874,750
Republic of Argentina,
Floating Rate Notes, (BOTE), Ser. 10, 5%, 2000b 801,600 771,872
Republic of Costa Rica,
Notes, 9.335%, 2009a 5,000,000 5,000,000
Republic of Kazakhstan,
Notes, 9.25%, 1999a 3,500,000 3,403,750
21,054,002
Industrial--2.1%
CMS Panhandle Holdings,
Sr. Notes, 7%, 2029a 3,000,000 2,931,330
International Paper,
Deb., 6.875%, 2029 3,000,000 2,905,608
5,836,938
Insurance--4.4%
American Financial Group,
Deb., 7.125%, 2009 2,500,000 2,442,435
Frank Russell,
Notes, 5.625%, 2009a 10,000,000 9,607,670
12,050,105
Manufacturing--1.2%
Tyco International Group,
Notes, 7%, 2028 3,400,000 3,379,155
Mining & Metals--1.0%
Inco,
Conv. Deb., 5.75%, 2004 3,000,000 2,730,000
Pharmaceutical--1.2%
CVS,
Notes, 5.5%, 2004 3,500,000 3,441,522
</TABLE>
The Fund 7
<PAGE>
STATEMENT OF INVESTMENTS (Unaudited)(continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Principal
Bonds and Notes (continued) Amount ($) Value ($)
- -------------------------------------------------------------------------------
<S> <C> <C>
Real Estate--6.3%
Crescent Real Estate Equities,
Notes, 7%, 2002 8,000,000 7,565,144
Reckson Operating Partnership,
Notes, 7.75%, 2009 10,000,000 9,876,040
17,441,184
Residential Mortgage
Pass-Through Ctfs. --7.3%
Bear Stearns Mortgage Securities, REMIC:
Ser. 1995-1, Cl. 1B4, 6.475%, 2010a,b 278,447 238,159
Ser. 1995-1, Cl. 2B4, 7.40%, 2010a 221,471 197,663
Chase Mortgage Finance,
REMIC, Ser. 1994-E, Cl. B5, 6.25%, 2010a 154,168 131,428
GE Capital Mortgage Services, REMIC:
Ser. 1993-11, Cl. B4, 6%, 2008a 136,496 123,017
Ser. 1993-15, Cl. B3, 6%, 2008a 396,589 354,451
Ser. 1994-21, Cl. B4, 6.50%, 2009a 257,124 221,448
Ser. 1994-22, Cl. B2, 6%, 2009 161,770 152,923
Ser. 1996-10, Cl. B3, 6.75%, 2011a 491,951 439,374
Ser. 1996-12, Cl. B2, 7.25%, 2011a 768,439 755,712
Ser. 1996-12, Cl. B3, 7.25%, 2011a 330,267 300,852
Ser. 1996-14, Cl. 2B3, 7.25%, 2011a 246,812 224,522
Ser. 1997-13, Cl. B2, 6.75%, 2012 948,951 825,388
Ser. 1998-1, Cl. B2, 6.75%, 2013 477,390 450,188
MORSERV:
Ser. 1996-1, Cl. B2, 7%, 2011 762,363 745,210
Ser. 1996-1, Cl. B3, 7%, 2011a 381,182 348,543
Norwest Asset Securities:
Ser. 1997-11, Cl. B3, 7%, 2027a 740,515 604,676
Ser. 1997-15, Cl. B3, 6.75%, 2012d 478,137 411,646
Ser. 1997-17, Cl. B3, 7.25%, 2027 1,035,931 838,780
Ser. 1998-2, Cl. B3, 6.50%, 2028 494,653 397,422
Ser. 1998-9, Cl. B4, 6.50%, 2028a 816,806 632,837
Ser. 1998-11. Cl. B3, 6.50%, 2013 721,031 669,189
Ser. 1998-11, Cl. B4, 6.50%, 2013a 865,045 756,845
Ser. 1998-13, Cl. B4, 6.25%, 2028a 743,773 560,154
Ser. 1998-18, Cl. B4, 6.25%, 2028a 869,144 657,834
PNC Mortgage Securities, REMIC:
Ser. 1998-2, Cl. III-B4, 6.75%, 2013a 463,976 400,469
Ser. 1998-2, Cl. III-B5, 6.75%, 2013a 371,181 302,876
Ser. 1998-2, Cl. IV-B4, 6.75%, 2027a 264,014 243,123
Ser. 1998-2, Cl. IV-B5, 6.75%, 2027a 264,014 190,320
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Principal
Bonds and Notes (continued) Amount ($) Value ($)
- -------------------------------------------------------------------------------
<S> <C> <C>
Residential Mortgage
Pass-Through Ctfs. (continued)
Prudential Home Mortgage Securities, REMIC:
Ser. 1996-7, Cl. B2, 6.75%, 2011 673,296 648,468
Ser. 1996-7, Cl. B3, 6.75%, 2011a 1,748,655 1,559,581
Ser. 1996-7, Cl. B4, 6.75%, 2011a 806,402 672,841
Residential Accredit Loans,
Ser. 1997-QS6, Cl. B1, 7.50%, 2012 346,719 310,313
Residential Funding Mortgage Securities I, REMIC:
Ser. 1997-S19, Cl. B1, 6.50%, 2012a 763,574 645,936
Ser. 1997-S19, Cl. B2, 6.50%, 2012a 327,219 236,825
Ser. 1997-S21, Cl. B1, 6.50%, 2012a 441,229 412,452
Ser. 1998-S14, Cl. B1, 6.50%, 2013a 663,297 525,767
Structured Asset Securities, REMIC,
Ser. Greenpoint 1996-A:
Cl. B1, 8.36%, 2027b 1,743,443 1,771,774
Cl. B2, 8.36%, 2027b 696,994 774,099
Cl. B4, 8.36%, 2027a,b 418,388 414,857
20,147,962
Retail--2.3%
Saks,
Notes, 7.25%, 2004 3,350,000 3,432,708
Tricon Global Restaurants,
Sr. Notes, 7.45%, 2005 2,800,000 2,863,252
6,295,960
Technology--1.2%
Quantum,
Conv. Notes, 7%, 2004 3,500,000 3,220,000
Utilities--5.0%
Niagara Mohawk Power:
Sr. Discount Notes, Ser. H, 8.5%, 2010c 11,000,000 8,514,132
Sr. Notes, Ser. E, 7.375%, 2003 5,000,000 5,102,635
13,616,767
U.S. Government Agencies/Mortgage Backed--24.6%
Federal National Mortgage Association, REMIC Trust,
Gtd. Pass-Through Ctfs. (Collateralized by
FNMA Pass-Through Ctfs.)
(Interest Only Obligation):
Ser. 1997-56, Cl. PM, 7%, 6/18/2026d 3,142,293 674,587
Ser. 1996-70, Cl. PL, 7%, 2/25/2026d 14,029,783 2,468,365
</TABLE>
The Fund 9
<PAGE>
STATEMENT OF INVESTMENTS (Unaudited)(continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Principal
Bonds and Notes (continued) Amount ($) Value ($)
- -------------------------------------------------------------------------------
<S> <C> <C>
Government National Mortgage Association I:
6.5%, 4/15/2029e 7,000,000 6,960,590
7.5%, 1/15/2002-7/15/2002 276,542 287,950
Construction Loan:
6.8%, 7/15/2001 8,885,214 9,148,927
6.8%, 7/15/2001e 3,797,886 3,766,487
Project Loan:
6.375%, 1/15/2034 9,743,732 9,410,326
6.495%, 7/15/2030 10,153,453 10,153,454
6.5%, 9/15/2033 9,694,754 9,577,706
6.54%, 7/15/2033 15,079,749 15,249,396
67,697,788
Total Bonds and Notes
(cost $281,387,659) 281,540,517
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Warrants--.5% Shares
- -------------------------------------------------------------------------------
<S> <C> <C>
Warrants--.5% Shares
Broadcasting--.4%
Spanish Broadcasting Systema,f 6,250 1,281,250
Transportation--.0%
Golden Ocean Groupf 5,270 5,929
Wireless Communications--.1%
Comunicacion Celulara,f 2,500 187,813
Total Warrants
(cost $862,013) 1,474,992
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Preferred Stocks--7.5%
- -------------------------------------------------------------------------------
<S> <C> <C>
Preferred Stocks--7.6%
Broadcasting--4.7%
Spanish Broadcasting System,
Cum., $142.50a 12,032 12,874,240
Entertainment--2.9%
Paxson Communications,
Cum., $132.50 9,520 7,949,200
Total Preferred Stocks
(cost $20,998,114) 20,823,440
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Short-Term Investments--.1% Shares Value ($)
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Bills:
4.2%, 6/10/1999g 225,000 223,912
4.43%, 6/17/1999g 125,000 124,290
(cost $348,227) 348,202
- -------------------------------------------------------------------------------
Total Investments (cost $303,596,013) 110.3% 304,187,151
Liabilities, Less Cash and Receivables (10.3%) (28,478,389)
Net Assets 100.0% 275,708,762
<FN>
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, 1999,
these securities amounted to $56,572,971 or 20.5% of net assets.
b Variable rate security-interest rate subject to periodic change.
c Zero coupon until a specified date at which time the stated coupon rate
becomes effective until maturity.
d Notional face amount shown.
e Purchased on a forward commitment basis.
f Non-income producing security.
g Held by the custodian in a segregated account as collateral for open
financial futures positions.
</FN>
</TABLE>
See notes to financial statements.
The Fund 11
<PAGE>
STATEMENT OF FINANCIAL FUTURES
April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Unrealized
Market Value Appreciation
Covered (Depreciation)
Contracts by Contracts Expiration at 4/30/99 ($)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial Futures Long
U.S. Treasury 30 year Bonds 125 15,023,438 June 99 (142,914)
Financial Futures Short
U.S. Treasury 10 year Notes 463 53,100,313 June 99 457,030
</TABLE>
See notes to financial statements.
12
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Cost Value
- ---------------------------------------------------------------------------------
<S> <C> <C>
Cost Value
Assets ($):
Investments in securities--See Statement of Investments 303,596,013 304,187,151
Receivable for investment securities sold 6,667,362
Dividends and interest receivable 3,010,356
Receivable for futures variation margin 238,453
Receivable for shares of Beneficial Interest subscribed 67,312
Prepaid expenses 42,659
314,213,293
- ---------------------------------------------------------------------------------
Liabilities ($):
Due to The Dreyfus Corporation and affiliates 183,144
Due to Distributor 56,962
Cash overdraft due to Custodian 3,210,731
Bank loan payable Note--2 18,650,000
Payable for investment securities purchased 15,874,842
Payable for shares of Beneficial Interest redeemed 406,579
Accrued expenses 122,273
38,504,531
- ---------------------------------------------------------------------------------
Net Assets ($) 275,708,762
- ---------------------------------------------------------------------------------
Composition of Net Assets ($):
Paid-in capital 279,324,393
Accumulated undistributed investment income--net 322,334
Accumulated net realized gain (loss) on investments
and forward currency exchange contracts (4,843,219)
Accumulated net unrealized appreciation (depreciation)
on investments (including $314,116 net unrealized
appreciation on financial futures)--Note 4(b) 905,254
- -------------------------------------------------------------------------------
Net Assets ($) 275,708,762
- -------------------------------------------------------------------------------
Shares Outstanding
(unlimited number of $.001 par value shares of
Beneficial Interest authorized) 19,025,605
Net Asset Value, offering and redemption price per share ($) 14.49
</TABLE>
See notes to financial statements.
The Fund 13
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Investment Income ($)
- ---------------------------------------------------------------------------------
<S> <C>
Income:
Interest 9,326,467
Cash dividends (net of $6,470 foreign taxes withheld at source) 1,462,309
Total Income 10,788,776
Expenses:
Management fee--Note 3(a) 833,840
Shareholder servicing costs--Note 3(b) 500,131
Interest expense--Note 2 90,180
Professional fees 51,917
Prospectus and shareholders' reports 20,411
Custodian fees--Note 3(b) 15,900
Registration fees 13,861
Trustees' fees and expenses--Note 3(c) 10,234
Miscellaneous 5,431
Total Expenses 1,541,905
- ---------------------------------------------------------------------------------
Investment Income--Net 9,246,871
Realized and Unrealized Gain (Loss) on Investments--Note 4:
Net realized gain (loss) on investments (2,256,171)
Net realized gain (loss) on forward currency exchange contracts
Short transactions 303,688
Net realized gain (loss) on financial futures (2,149,019)
Net Realized Gain (Loss) (4,101,502)
Net unrealized appreciation (depreciation) on investments and foreign
currency transactions (including $602,444 net unrealized appreciation
on financial futures) 6,026,020
Net Realized and Unrealized Gain (Loss) on Investments 1,924,518
Net Increase in Net Assets Resulting From Operations 11,171,389
</TABLE>
See notes to financial statements.
14
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Six Months Ended
April 30, 1999 Year Ended
(Unaudited) October 31, 1998
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Operations ($):
Investment income--net 9,246,871 19,457,627
Net realized gain (loss) on investments (4,101,502) 4,228,356
Net unrealized appreciation (depreciation) on investments 6,026,020 (13,705,034)
Net Increase (Decrease) in Net Assets
Resulting from Operations 11,171,389 9,980,949
- -----------------------------------------------------------------------------------------
Dividends to Shareholders From ($):
Investment income--net (9,306,318) (19,635,824)
- -----------------------------------------------------------------------------------------
Beneficial Interest Transactions ($):
Net proceeds from shares sold 26,748,513 69,009,151
Dividends reinvested 6,816,049 14,364,793
Cost of shares redeemed (43,056,996) (65,900,857)
Increase (Decrease) in Net Assets from Beneficial Interest
Transactions (9,492,434) 17,473,087
Total Increase (Decrease) in Net Assets (7,627,363) 7,818,212
- -----------------------------------------------------------------------------------------
Net Assets ($):
Beginning of Period 283,336,125 275,517,913
End of Period 275,708,762 283,336,125
Undistributed investment income--net 322,334 381,781
- -----------------------------------------------------------------------------------------
Capital Share Transactions (Shares):
Shares sold 1,840,598 4,585,726
Shares issued for dividends reinvested 468,750 958,864
Shares redeemed (2,959,994) (4,404,263)
Net Increase (Decrease) in Shares Outstanding (650,646) 1,140,327
</TABLE>
See notes to financial statements.
The Fund 15
<PAGE>
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the Fund would have increased
(or decreased) during each period, assuming you had reinvested all dividends
and distributions. These figures have been derived from the Fund's financial
statements
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Six Months Ended Year Ended October 31,
April 30, 1999 -------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Data ($):
Net asset value,
beginning of period 14.40 14.86 14.24 14.22 12.95 15.36
Investment Operations:
Investment income--net .48 1.01 1.05 .98 .93 .95
Net realized and unrealized
gain (loss) on investments .09 (.45) .59 .02 1.27 (2.04)
Total from Investment
Operations .57 .56 1.64 1.00 2.20 (1.09)
Distributions:
Dividends from investment
income--net (.48) (1.02) (1.02) (.98) (.93) (.95)
Dividends from net realized
gain on investments -- -- -- -- -- (.37)
Total Distributions (.48) (1.02) (1.02) (.98) (.93) (1.32)
Net asset value, end of period 14.49 14.40 14.86 14.24 14.22 12.95
- -------------------------------------------------------------------------------------------
Total Return (%) 8.09a 3.74 11.94 7.27 17.57b (7.44)b
- -------------------------------------------------------------------------------------------
Ratios/Supplemental Data (%):
Ratio of operating expenses to
average net assets 1.04a 1.02 1.03 1.04 1.04 .94
Ratio of interest expense to
average net assets .06 .03 .06 .02 -- --
Ratio of net investment income
to average net assets 6.65a 6.76 7.25 6.89 6.87 6.84
Decrease reflected in above
expense ratios due to
undertakings by the Manager -- -- -- -- -- .11
Portfolio Turnover Rate 122.90c 313.40 347.68 214.55 176.59 161.35
- -------------------------------------------------------------------------------------------
Net Assets, end of period
($ x 1,000) 275,709 283,336 275,518 294,911 320,345 322,487
<FN>
a Annualized.
b Exlusive of sales load.
c Not annualized.
</FN>
</TABLE>
See notes to financial statements.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1-Significant Accounting Policies:
Dreyfus Core Bond Fund (the Fund) is a separate diversified series of
Dreyfus Debt and Equity Funds (the Company) which is registered under the
Investment Company Act of 1940, as amended (the Act), as an open-end
management investment company and operates as a series company currently
offering six series, including the Fund. The Funds investment objective is to
maximize total return, consisting of capital appreciation and current income.
The Dreyfus Corporation (the Manager) serves as the Funds 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 Funds shares which are sold to the public without a sales load.
The Fund held a shareholder meeting on November 5, 1998, to vote on proposals
to (i) change the Funds investment objective, from maximizing current
income to maximizing total return (ii) eliminate a credit quality
restriction that provided that 95% of the Funds assets may be invested in
debt securities with a credit quality as low as CCC/Caa; and (iii) change
certain of the Funds investment restrictions, to update them to current
applicable law and to reclassify certain fundamental restrictiosns as non-
fundamental. At the meeting, shareholders approved each proposal.
The Companys Board of Trustees approved, effective November 15, 1998, a
change of the Funds name from Dreyfus Strategic Income Fund to Dreyfus
Core Bond Fund.
The Company accounts separately for the assets, liabilities and operations of
each fund. Expenses directly attributable to each fund are charged to that
funds operations; expenses which are applicable to all funds are allocated
among them on a pro rata basis.
The Funds 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.
The Fund 17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
(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 to U.S. dollars at the
prevailing rates of exchange.
(b) Foreign currency transactions: The Fund does not isolate that portion of
the results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in the market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales and maturities
of short-term securities, sales of foreign currencies, currency gains or
losses realized on securities transactions and the difference between the
amount of dividends, interest and foreign withholding taxes recorded on the
Funds books and the U.S. dollar equivalent of the amounts actually received
or paid. Net unrealized foreign exchange gains and losses arise from changes
18
<PAGE>
in the value of assets and liabilities other than investments in securities at
fiscal year end, resulting from changes in exchange rates. Such gains and
losses are included with net realized and unrealized gain or loss on
investments.
(c) Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income, including, where
applicable, amortization of discount on investments, is recognized on the
accrual basis. Under the terms of the custody agreement, the Fund receives net
earnings credits based on available cash balances left on deposit.
(d) 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 of
1986, as amended (the Code). To the extent that net realized capital gain
can be offset by capital loss carryovers, it is the policy of the Fund not to
distribute such gain.
(e) Federal income taxes: It is the policy of the Fund to continue to qualify
as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Code, and to make distributions of taxable income sufficient to relieve it
from substantially all Federal income and
excise taxes.
The Fund has an unused capital loss carryover of approximately $1,064,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to October 31, 1998. If not
applied, the carryover expires in fiscal 2003.
NOTE 2-Bank Lines of Credit:
The Fund may borrow up to $20 million for leveraging purposes under a short-
term unsecured line of credit and participates with other Dreyfus-managed
The Fund 19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
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, 1999 was approximately $3,484,000, with a
related weighted average annualized interest rate of 5.22%.
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 .60 of 1% of the value of the Funds 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 Funds 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, 1999, the Fund was charged $347,433 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, 1999, the Fund was charged $111,340 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 April 30, 1999, the Fund was
20
<PAGE>
charged $15,900 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:
(a) The aggregate amount of purchases and sales (including paydowns) of
investment securities, excluding short-term securities, financial futures and
forward currency exchange contracts, during the period ended April 30, 1999,
amounted to $383,447,102 and $348,821,388, respectively.
The Fund may enter into forward currency exchange contracts in order to hedge
its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings. When executing forward currency exchange contracts, the
Fund is obligated to buy or sell a foreign currency at a specified rate on a
certain date in the future. With respect to sales of forward currency exchange
contracts, the Fund would incur a loss if the value of the contract increases
between the date the forward contract is opened and the date the forward
contract is closed. The Fund realizes a gain if the value of the contract
decreases between those dates. With respect to purchases of forward currency
exchange contracts, the Fund would incur a loss if the value of the contract
decreases between the date the forward contract is opened and the date the
forward contract is closed. The Fund realizes a gain if the value of the
contract increases between those dates. The Fund is also exposed to credit
risk associated with counter party nonperformance on these forward currency
exchange contracts which is typically limited to the unrealized gain on each
open contract. At April 30, 1999, there were no open forward currency exchange
contracts.
The Fund may invest in financial futures contracts in order to gain exposure
to or protect against changes in the market. The Fund is exposed to market
The Fund 21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
risk as a result of changes in the value of the underlying financial
instruments. Investments in financial futures require the Fund to mark to
market on a daily basis, which reflects the change in market value of the
contracts at the close of each days trading. Accordingly, variation margin
payments are received or made to reflect daily unrealized gains or losses.
When the contracts are closed, the Fund recognizes a realized gain or loss.
These investments require initial margin deposits with a custodian, which
consist of cash or cash equivalents, up to approximately 10% of the contract
amount. The amount of these deposits is determined by the exchange or Board of
Trade on which the contract is traded and is subject to change. Contracts open
at April 30, 1999 are set forth in the Statement of Financial Futures.
(b) At April 30, 1999, accumulated net unrealized appreciation on investments
and financial futures was $905,254, consisting of $6,935,758 gross unrealized
appreciation and $6,030,504 gross unrealized depreciation.
At April 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).
22
<PAGE>
For More Information
Dreyfus
Core Bond 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
Distributor
Premier Mutual Fund Services, Inc.
60 State Street
Boston, MA 02109
To obtain information:
By telephone
Call 1-800-645-6561
By mail Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
By E-mail Send your request to [email protected]
On the Internet Information can be viewed online or downloaded from:
http://www.dreyfus.com
Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
(c) 1999, Dreyfus Service Corporation 031SA994
Dreyfus Equity
Income Fund
SEMIANNUAL REPORT
April 30, 1999
<PAGE>
Year 2000 Issues
(Unaudited)
The fund could be adversely affected if the computer systems used by The
Dreyfus Corporation and the funds 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 funds investments and its
share price.
<PAGE>
Contents
THE FUND
- --------------
2 Letter from the President
3 Discussion of Fund Performance
6 Statement of Investments
9 Statement of Assets and Liabilities
10 Statement of Operations
11 Statement of Changes in Net Assets
12 Financial Highlights
13 Notes to Financial Statements
FOR MORE INFORMATION
- ----------------------
Back Cover
<PAGE>
Dreyfus Equity Income Fund
The Fund
LETTER FROM THE PRESIDENT
- --------------------------
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Equity Income
Fund, covering the six-month period from November 1, 1998 through April 30,
1999. Inside, youll find valuable information about how the Fund was
managed during the reporting period, including a discussion with the Funds
portfolio manager, Timothy M. Ghriskey.
The past six months have been rewarding for many equity investors. Strong
economic growth, low inflation and high levels of consumer spending
supported continued strength in the stocks of many large companies. The
Federal Reserve Boards lowering of short-term interest rates in the fall of
1998 appears to have helped U.S. businesses withstand the effects of
economic weakness in Japan, Asia and Latin America. As a result, several
major market indices set new records, including the Dow Jones Industrial
Averages first-ever close above the 10,000 level. The broader S&P 500 Index
and the technology-laden NASDAQ Index also recorded new highs.
Yet, until near the end of the six-month period, the stock markets advance
remained relatively narrow, confined to a handful of highly valued growth
and technology stocks. In April, however, some previously out-of-favor
market sectors rallied strongly, including large-cap cyclical companies as
well as some small- and midcap stocks.
We appreciate your confidence over the past six months, and we look forward
to your continued participation in Dreyfus Equity Income Fund.
Sincerely,
/s/Stephen E. Canter
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
May 13, 1999
2
<PAGE>
DISCUSSION OF FUND PERFORMANCE
- -------------------------------
Timothy M. Ghriskey, Senior Portfolio Manager
How did Dreyfus Equity Income Fund perform
relative to its benchmark?
Dreyfus Equity Income Fund (formerly Dreyfus Equity Dividend Fund) produced
a total return during the six-month period of 13.71%,1 while the Funds
benchmark Index, the Wilshire Large Company Value Index (the Index)
achieved a total return of 15.04% for the same period.2 While the Index
provided a slightly higher return than the Fund, we are pleased with the
results in light of our distinctive strategy and objective, which is to
maximize current income and realize capital appreciation primarily through
carefully selected investments in dividend-paying, value-oriented stocks.
We attribute the Funds solid performance partly to a surprisingly rapid
recovery of global capital markets in the wake of last summers decline. The
recovery drove the overall market higher in the last few months of 1998, and
a shift in market sentiment favored value-oriented stocks toward the end of
the period.
What is the Funds investment approach?
Dreyfus Equity Income Fund invests primarily in carefully selected, value-
oriented companies that pay above-average dividends relative to the Standard
& Poors 500 Composite Stock Price Index. We believe that investing in
dividend-paying stocks offers a more conservative approach to equity
investing because the prices of dividend-paying stocks may decline less than
other stocks in falling markets. In effect, the stocks dividend yields may
provide a cushion against declines that other stocks do not enjoy.
The Funds conservative approach is also reflected in our buy-and-hold
strategy, which targets long-term growth rather than short-term profit.
Because we tend to buy and sell relatively few stocks over the course of a
single year, we may be able to minimize investors tax liabilities and
reduce the Funds trading costs.
The Fund 3
<PAGE>
DISCUSSION OF FUND PERFORMANCE (continued)
We select investments one stock and one company at a time. Our investment
process begins with a computerized, quantitative analysis to identify
dividend-paying stocks that meet our definition of value those that appear
underpriced in relation to the companys intrinsic value. Then, among the
stocks that have passed our value screens, we focus on companies that we
believe are best positioned to grow in the current market environment. Our
team of experienced analysts examines the fundamentals of each top-ranked
candidate to decide which to purchase and which, if any, to sell. The result
of our approach during the recent six-month period was a portfolio of
approximately 50 stocks representing a variety of industries.
What other factors influenced the Funds performance?
The financial services industry, which represented the Funds single largest
group of holdings, responded well to a strong U.S. economy and the apparent
stabilization of many global economies. Our investments in this area focused
on companies with far-flung global interests, such as Citigroup and Chase
Manhattan, as well as regional institutions, such as First Tennessee
National.
Strong consumer demand boosted shares of the Funds consumer durable stocks,
such as General Motors, and consumer nondurables, such as Anheuser-Busch
Cos. In the energy sector, holdings in companies such as Mobil and BP Amoco,
A.D.S. rose rapidly in response to industry mergers, growing global
industrial activity and production limits instituted by the Organization of
Petroleum Exporting Countries (OPEC).
Our disciplined strategy also positioned the Fund to potentially benefit
from the markets shift in favor of value-oriented stocks toward the end of
the period. For example, the Fund achieved substantial gains from basic
materials producers, such as duPont (E.I.) deNemours & Co.; capital goods
companies, such as Boeing; and value technology companies, such as Harris.
4
<PAGE>
In addition, our investment discipline enabled us to participate in strong-
performing stocks within relatively weak industries. For example, the market
generally did not reward telecommunications utilities to the same degree as
other value-oriented stocks in April. Nevertheless, holdings such as AT&T
and Ameritech were among the Funds best performers both for the month and
the semiannual reporting period.
What is the Funds current strategy?
As of April 30, we have been encouraged by the markets apparent shift
toward value. Valuations between growth-oriented and value-oriented stocks
had reached historically wide levels by the first quarter of 1999. Even
after Aprils shift in market sentiment from growth to value, that valuation
gap remained relatively wide.
Of course, we cannot be certain that investors interest in value will
continue, but we do not believe that current valuation disparities between
growth and value are likely to persist. In our view, the past six months
illustrate the importance of maintaining a disciplined investment style and
the Funds commitment to value oriented, high-dividend-yielding investments.
May 13, 1999
1 Total return includes reinvestment of dividends and any capital gains
paid.
2 SOURCE: WILSHIRE ASSOCIATES, INC. The Wilshire Large Company Value
Index is an unmanaged index reflecting the performance of the largest 750
stocks composing the Wilshire 5000 Index that meet statistical criteria
for being a value stock.
The Fund 5
<PAGE>
STATEMENT OF INVESTMENTS
April 30, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Common Stocks--97.7% Shares Value ($)
- -------------------------------------------------------------------------------
<S> <C> <C>
Banking--20.1%
Bank of New York 2,600 104,000
Bank One 1,900 112,100
BankAmerica 1,200 86,400
Chase Manhattan 1,600 132,400
First Tennessee National 3,000 129,375
First Union 1,400 77,525
Fleet Financial Group 2,200 94,737
KeyCorp 2,900 89,719
Wachovia 1,000 87,875
Wells Fargo 2,600 112,288
1,026,419
Consumer Durables--4.4%
General Motors 1,400 124,512
Newell 2,100 99,619
224,131
Consumer Non-Durables--5.7%
Anheuser-Busch Cos. 1,500 109,687
Dean Foods 2,500 89,219
PepsiCo 2,600 96,038
294,944
Electronic Technology--6.9%
Boeing 2,400 97,500
Harris 2,500 86,406
International Business Machines 800 167,350
351,256
Energy Minerals--10.0%
Atlantic Richfield 900 75,544
BP Amoco, A.D.S. 1,000 113,187
Mobil 1,300 136,175
Royal Dutch Petroleum (New York Shares) 1,900 111,506
Texaco 1,200 75,300
511,712
Finance--6.2%
Citigroup 1,400 105,350
Equity Office Properties Trust 4,000 110,250
Merrill Lynch 1,200 100,725
316,325
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Common Stocks (continued) Shares Value ($)
- -------------------------------------------------------------------------------
<S> <C> <C>
Health Technology--4.5%
American Home Products 1,700 103,700
Pharmacia & Upjohn 2,300 128,800
232,500
Insurance--3.6%
CIGNA 1,200 104,625
XL Capital, Cl. A 1,300 78,894
183,519
Process Industries--11.7%
Chesapeake 2,300 74,750
Crown Cork & Seal 2,700 87,750
Dow Chemical 900 118,069
duPont (E.I.) deNemours & Co. 1,600 113,000
Goodrich (B.F.) 2,800 111,300
International Paper 1,800 95,963
600,832
Producer Manufacturing--6.0%
General Electric 800 84,400
Honeywell 1,300 123,175
Minnesota Mining & Manufacturing 1,100 97,900
305,475
Technology Services--.2%
Computer Associates International 200 8,537
Transportation--2.1%
Union Pacific 1,800 108,000
Utilities--16.3%
AT&T 2,400 121,200
Ameritech 1,500 102,656
Bell Atlantic 1,700 97,963
CINergy 2,400 71,550
Central and South West 3,300 81,881
MCI WorldCom 1,100 a 90,406
Sprint (FON Group) 1,100 112,819
Texas Utilities 2,000 79,500
U S West 1,500 78,469
836,444
Total Common Stocks
(cost $4,295,836) 5,000,094
</TABLE>
The Fund 7
<PAGE>
STATEMENT OF INVESTMENTS (Unaudited)(continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Short-Term Investments--2.7% Shares Value ($)
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Bills;
4.27%, 7/22/1999
(cost $138,640) 140,000 138,593
- -------------------------------------------------------------------------------
Total Investments (cost $4,434,476) 100.4% 5,138,687
Liabilities, Less Cash and Receivables (.4%) (22,018)
Net Assets 100.0% 5,116,669
<FN>
a Non-income producing.
</FN>
</TABLE>
See notes to financial statements.
8
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Cost Value
- -------------------------------------------------------------------------------
<S> <C> <C>
Assets ($):
Investments in securities--See Statement of
Investments 4,434,476 5,138,687
Dividends receivable 6,552
Prepaid expenses 15,487
Due from The Dreyfus Corporation and affiliates 2,196
5,162,922
- -------------------------------------------------------------------------------
Liabilities ($):
Due to Distributor 1,030
Cash overdraft due to Custodian 20,546
Accrued expenses 24,677
46,253
- -------------------------------------------------------------------------------
Net Assets ($) 5,116,669
- -------------------------------------------------------------------------------
Composition of Net Assets ($):
Paid-in capital 4,003,048
Accumulated undistributed investment income--net 8,390
Accumulated net realized gain (loss) on investments 401,020
Accumulated net unrealized appreciation
(depreciation) on investments--Note 4 704,211
- -------------------------------------------------------------------------------
Net Assets ($) 5,116,669
- -------------------------------------------------------------------------------
Shares Outstanding
(unlimited number of $.001 par value shares of Beneficial
Interest authorized) 293,316
Net Asset Value, offering and redemption price per share ($) 17.44
</TABLE>
See notes to financial statements.
The Fund 9
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Investment Income ($)
- -------------------------------------------------------------------------------
<S> <C>
Income:
Cash dividends (net of $174 foreign taxes withheld at source) 60,318
Interest 2,279
Total Income 62,597
Expenses:
Management fee--Note 3(a) 17,761
Auditing fees 13,963
Registration fees 11,081
Shareholder servicing costs--Note--3(b) 6,480
Prospectus and shareholders reports 3,126
Custodian fees--Note 3(b) 1,112
Legal fees 299
Trustees fees and expenses--Note 3(c) 210
Loan commitment fees--Note 2 10
Miscellaneous 918
Total Expenses 54,960
Less--expense reimbursement from Manager due to
undertaking--Note 3(a) (25,349)
Net Expenses 29,611
Investment Income--Net 32,986
- -------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments--Note 4:
Net realized gain (loss) on investments 409,357
Net unrealized appreciation (depreciation) on investments 175,197
Net Realized and Unrealized Gain (Loss) on Investments 584,554
Net Increase in Net Assets Resulting From Operations 617,540
</TABLE>
See notes to financial statements.
10
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Six Months Ended
April 30, 1999 Year Ended
(Unaudited) October 31, 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Operations ($):
Investment income--net 32,986 86,382
Net realized gain (loss) on investments 409,357 400,656
Net unrealized appreciation (depreciation) on investments 175,197 (159,179)
Net Increase (Decrease) in Net Assets
Resulting from Operations 617,540 327,859
- --------------------------------------------------------------------------------------------
Dividends to Shareholders From ($):
Investment income--net (29,873) (84,192)
Net realized gain on investments (407,514) (329,506)
Total Dividends (437,387) (413,698)
- --------------------------------------------------------------------------------------------
Beneficial Interest Transactions ($):
Net proceeds from shares sold 291,111 657,588
Dividends reinvested 421,398 396,607
Cost of shares redeemed (241,991) (816,316)
Increase (Decrease) in Net Assets from Beneficial
Interest Transactions 470,518 237,879
Total Increase (Decrease) in Net Assets 650,671 152,040
- --------------------------------------------------------------------------------------------
Net Assets ($):
Beginning of Period 4,465,998 4,313,958
End of Period 5,116,669 4,465,998
Undistributed investment income--net 8,390 5,277
- --------------------------------------------------------------------------------------------
Capital Share Transactions (Shares):
Shares sold 17,031 37,863
Shares issued for dividends reinvested 25,972 23,937
Shares redeemed (14,364) (46,766)
Net Increase (Decrease) in Shares Outstanding 28,639 15,034
</TABLE>
See notes to financial statements.
The Fund 11
<PAGE>
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods
indicated. Total return shows how much your investment in the Fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These figures have been derived
from the Funds financial statements.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Six Months Ended
April 30, 1999 Year Ended October 31,
-----------------------------
(Unaudited) 1998 1997 1996a
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share Data ($):
Net asset value, beginning of period 16.87 17.28 13.89 12.50
Investment Operations:
Investment income--net .12 .32 .32 .23
Net realized and unrealized gain
(loss) on investments 2.07 .87 3.67 1.38
Total from Investment Operations 2.19 1.19 3.99 1.61
Distributions:
Dividends from investment income--net (.11) (.31) (.32) (.22)
Dividends from net realized gain on investments (1.51) (1.29) (.28) --
Total Distributions (1.62) (1.60) (.60) (.22)
Net asset value, end of period 17.44 16.87 17.28 13.89
- --------------------------------------------------------------------------------------------
Total Return (%) 13.71b 7.17 29.34 12.93b
- --------------------------------------------------------------------------------------------
Ratios/Supplemental Data (%):
Ratio of expenses to average net assets .62b 1.25 1.27 1.08b
Ratio of net investment income
to average net assets .69b 1.82 1.98 1.76b
Decrease reflected in above expense ratios
due to undertakings by the Manager .53b .84 1.36 1.05b
Portfolio Turnover Rate 63.33b 168.02 80.43 98.84b
Net Assets, end of period ($ x 1,000) 5,117 4,465 4,314 2,858
<FN>
a From December 29, 1995 (commencement of operations) to October 31, 1996.
b Not annualized.
</FN>
</TABLE>
See notes to financial statements.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Equity Income Fund (the Fund) is a separate diversified series of
Dreyfus Debt and Equity Funds (the Company) which is registered under the
Investment Company Act of 1940, as amended (the Act), as an open-end
management investment company and operates as a series company currently
offering six series, including the Fund. The Funds investment objective is
current income. Capital appreciation is a secondary objective. The Dreyfus
Corporation (the Manager) serves as the Funds investment adviser. The
Manager is a direct subsidiary of Mellon Bank, N.A., which is a wholly-owned
subsidiary of Mellon Bank Corporation. Premier Mutual Fund Services, Inc.
(the Distributor) is the distributor of the Funds shares, which are sold
to the public without a sales charge.
The Board of Trustees of the Company approved, effective March 1, 1999, a
change of the Funds name from Dreyfus Equity Dividend Fund to Dreyfus
Equity Income Fund.
The Company accounts separately for the assets, liabilities and operations
of each fund. Expenses directly attributable to each fund are charged to
that funds operations; expenses which are applicable to all funds are
allocated among them on a pro rata basis.
As of April 30, 1999, APT Holdings Corporation, an indirect subsidiary of
Mellon Bank Corporation, held 204,132 shares of the Fund.
The Funds financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management
estimates and assumptions. Actual results could differ from those estimates.
(a) Portfolio valuation: Investments in securities (including options and
financial futures) are valued at the last sales price on the securities
exchange on which such securities are primarily traded or at the last sales
price on the national securities market. Securities not listed on an
exchange or the national securities market, or securities for which there
were no transactions, are valued at the average of the most recent bid and
The Fund 13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
asked prices, except for open short positions, where the asked price is used
for valuation purposes. Bid price is used when no asked price is available.
Securities for which there are no such valuations are valued at fair value
as determined in good faith under the direction of the Board of Trustees.
Investments denominated in foreign currencies are translated to U.S. dollars
at the prevailing rates of exchange.
(b) Foreign currency transactions: The Fund does not isolate that portion of
the results of operations resulting from changes in foreign exchange rates
on investments from the fluctuations arising from changes in market prices
of securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency
gains or losses realized on securities transactions and the difference
between the amounts of dividends, interest and foreign withholding taxes
recorded on the Funds books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign exchange gains and losses
arise from changes in the value of assets and liabilities other than
investments in securities, resulting from changes in exchange rates. Such
gains and losses are included with net realized and unrealized gain or loss
on investments.
(c) Securities transactions and investment income: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income, including, where
applicable, amortization of discount on investments, is recognized on the
accrual basis. Under the terms of the custody agreement, the Fund received
net earnings credits of $202 during the period ended April 30, 1999 based on
available cash balances left on deposit. Income earned under this
arrangement is included in interest income.
14
<PAGE>
(d) Dividends to shareholders: Dividends are recorded on the ex-dividend
date. Dividends from investment income-net are declared and paid on a
quarterly basis. Dividends from net realized capital gain are normally
declared and paid annually, but the Fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code of 1986, as amended (the Code). To the extent that net
realized capital gain can be offset by capital loss carryovers, if any, it
is the policy of the Fund not to distribute such gain.
(e) Federal income taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Code, and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2--Bank Line of Credit:
The Fund participates with other Dreyfus-managed funds in a $600 million
redemption credit facility (Facility) to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the Fund has agreed to pay commitment fees on its pro rata
portion of the Facility. Interest is charged to the Fund at rates based on
prevailing market rates in effect at the time of borrowings. During the
period ended April 30, 1999, the Fund did not
borrow under the Facility.
NOTE 3--Management Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement with the Manager, the management fee
is computed at the annual rate of .75 of 1% of the value of the Funds
average daily net assets and is payable monthly. The Manager has undertaken
from November 1, 1998 through October 31, 1999, to reduce the management fee
paid by, or reimburse such excess expenses of the Fund, to the extent that
the Funds aggregate expenses exclusive of taxes, brokerage, interest on
The Fund 15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
borrowings, commitment fees, Shareholder Services Plan fees and
extraordinary expenses exceed an annual rate of 1% of the value of the
Funds average daily net assets. The expense reimbursement, pursuant to
the undertaking, amounted to $25,349 during the period ended
April 30, 1999.
(b) Under the Shareholder Services Plan, the Fund pays the Distributor at an
annual rate of .25 of 1% of the value of the Funds 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, 1999, the Fund was charged $5,920
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, 1999, the Fund was charged $526 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
April 30, 1999, the Fund was charged $1,112 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.
16
<PAGE>
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the period ended April 30, 1999,
amounted to $2,954,930 and $3,002,174, respectively.
At April 30, 1999, accumulated net unrealized appreciation on investments
was $704,211, consisting of $787,468 gross unrealized appreciation and
$83,257 gross unrealized depreciation.
At April 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).
The Fund 17
<PAGE>
For More Information
Dreyfus
Equity Income 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
Distributor
Premier Mutual Fund Services, Inc.
60 State Street
Boston, MA 02109
To obtain information:
By telephone
Call 1-800-645-6561
By mail Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
By E-mail Send your request to [email protected]
On the Internet Information can be viewed online or downloaded from:
http://www.dreyfus.com
Not FDIC-Insured Not Bank-Guaranteed May Lose Value
c 1999, Dreyfus Service Corporation 042SA994
Dreyfus
High Yield
Securities Fund
SEMIANNUAL REPORT
April 30, 1999
<PAGE>
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.
<PAGE>
Contents
THE FUND
- ------------------------------------------------------------------------------
2 Letter from the President
3 Discussion of Fund Performance
6 Statement of Investments
14 Statement of Assets and Liabilities
15 Statement of Operations
16 Statement of Changes in Net Assets
17 Financial Highlights
18 Notes to Financial Statements
FOR MORE INFORMATION
- ------------------------------------------------------------------------------
Back Cover
<PAGE>
The Fund
Dreyfus
High Yield Securities Fund
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus High Yield
Securities Fund, covering the six-month period from Novem ber 1, 1998 through
April 30, 1999. Inside, you'll find valuable information about how the Fund was
managed during the reporting period, including a discussion with the Fund's
portfolio manager, Roger E. King, a member of the Dreyfus Taxable Fixed Income
Team.
The past six months have been rewarding for many fixed-income investors. Lower
short-term interest rates adopted by the Federal Reserve Board and other central
banks in the fall of 1998 appear to have helped many developed nations withstand
the effects of economic weakness in Japan, Asia and Latin America. At the same
time, the U.S. economy entered its eighth year of expansion in an environment
characterized by low inflation and high levels of consumer spending.
Fixed-income securities provided mixed results in this economic climate. While
U.S. Treasury securities rallied strongly last summer when stocks and other
types of bonds fell, they subsequently gave back most of their gains. Other
types of bonds performed well, however, as investors shifted assets back into
bond market sectors they had previously avoided. Accordingly, many corporate
bonds, mortgage-backed securities, asset-backed securities and U.S.
dollar-denominated foreign bonds provided attractive returns over the reporting
period.
We appreciate your confidence over the past six months, and we look forward to
your continued participation in Dreyfus High Yield Securities Fund.
Sincerely,
/s/ Stephen E. Canter
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
May 13, 1999
2
<PAGE>
DISCUSSION OF FUND PERFORMANCE
Roger E. King, Portfolio Manager
Dreyfus Taxable Fixed Income Team
How did Dreyfus High Yield Securities Fund perform relative to its benchmark?
For the six-month period ended April 30, 1999, the Fund achieved a total return
of 19.14%.1 This compares to a 8.88% return for the Fund's benchmark, the
Merrill Lynch High Yield Master II Index.2
The Fund benefited from the general recovery of the high-yield market and from
the exceptional strength of several market segments in which we invested
heavily. Many of the market sectors we favored were hit hard by last summer's
flight to quality, when domestic and international investors sought safety in
the face of uncertainty in overseas markets. Many of the Fund's investments were
seen by investors to hold extra risk; accordingly, they declined more sharply
than broader market measures. But just as the flight to quality pushed certain
sectors down further than the high-yield market as a whole, the subsequent
recovery in such segments was stronger than the recovery of the overall market.
What is the Fund's investment approach?
The Fund attempts to maximize total return, including income and potential
capital gains, through investments in fixed-income securities of
below-investment-grade credit quality. Issuers of below-investment-grade bonds
may be in an early stage of development or may have a highly leveraged balance
sheet. To attract buyers and compensate them for assuming greater risks, these
issuers must offer higher yields than those offered by more established
companies.
To participate in potential capital gains, we base the selection of individual
issues on careful credit analysis -- our projection of each issuer's ability to
meet its obligations as they become due. Our emphasis is on special situations,
which are primarily out-of-favor companies that we
The Fund 3
<PAGE>
DISCUSSION OF FUND PERFORMANCE (continued)
believe may be undervalued. We search for trigger events that could lead the
market to discover the value we have seen, and create the potential for price
appreciation of the investment.
We add balance to our portfolio by purchasing securities of more established
companies, which tend to operate in more stable markets with relatively
predictable consumer demand. Our goal is to keep at least 25% of the Fund in
these kind of relatively more mainstream securities.
What other factors influenced the Fund's performance?
The high-yield market recovered in stages from last summer's precipitous drop.
As broader markets regained confidence, near-investment-grade securities
recovered first. Then, defensive issues -- bonds of companies in industries seen
considered recession-resistant, such as cable broadcasting and entertainment --
moved ahead. Off-the-run issues -- securities that are bought and sold
infrequently in even the best of markets -- rebounded next. Finally, a booming
equity market in sectors such as technology and telecommunications helped the
high-yield market advance for these industries as well. Because of our emphasis
on special situations, the bulk of our performance was achieved at the end of
the reporting period, when a number of our investments performed exceptionally
well.
For example, ICF Kaiser International has performed very well as its corporate
restructuring progresses toward a positive resolution. The Echostar
Communications position appreciated greatly as the business prospects of the
issuer proved stronger than the market anticipated. Several bond holdings, most
notably Rhythms NetConnections, had warrants attached to the bonds that greatly
increased in value when the issuers' public equity prices surged in March and
April.
4
<PAGE>
What is the Fund's current strategy?
The primary driver of the high-yield market has been the strong U.S. economy.
The stock market has performed well, and the high-yield market has followed. We
are focusing on special situations because we believe that this segment holds
the most potential for high total returns. However, we may reduce our exposure
to equity-related issues that have increased rapidly in price, taking some
profit and redeploying assets into more stable, higher rated bonds. Furthermore,
we continue to believe that the global economic situation may contain more risk
than is currently acknowledged, and that it may make sense to "take some risk
off the table" by positioning the portfolio more defensively.
May 13, 1999
1 Total return includes reinvestment of dividends and any capital gains paid.
2 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 $100 million par amount
and greater than or equal to one year to maturity.
The Fund 5
<PAGE>
STATEMENT OF INVESTMENTS
April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Principal
Bonds and Notes--64.0% Amount ($) Value ($)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Aircraft & Aerospace--.5%
Aircraft Lease Portfolio Securitisation 96-1,
Pass-Through Trust, Ctfs.,
Cl. D, 12.75%, 2006 897,967 888,987
Broadcasting--2.7%
Acme Intermediate Holdings/Finance, Ser. B,
Sr. Secured Discount Notes, 12%, 2005a 1,200,000 798,000
Acme Television/Finance, Ser. B,
Sr. Discount Notes, 10.875%, 2004a 1,100,000 957,000
Scandinavian Broadcasting System,
Conv. Notes, 7%, 2004b 2,500,000 3,059,375
4,814,375
Building Materials--5.1%
American Eco, Ser. B,
Sr. Notes, 9.625%, 2008 4,000,000 2,415,000
FWT,
Sr. Sub. Notes, 9.875%, 2007c 5,000,000 250,000
ICF Kaiser International,
Sr. Sub. Notes, 13%, 2003 9,023,000 6,349,936
9,014,936
Cable Television--3.7%
Star Choice Communications,
Sr. Notes, 13%, 2005 (Units)d 500,000 515,000
Supercanal Holdings,
Sr. Notes, 11.5%, 2005b 2,000,000 950,000
UIH Australia/Pacific:
Ser. B, Sr. Discount Notes, 14.75%, 2006 (Units)a,d 6,380,000 4,593,600
Ser. D, Sr. Discount Notes, 14.75%, 2006a 670,000 482,400
6,541,000
Chemicals--.6%
Trans-Resources,
Ser. B, Sr. Discount Notes, 12%, 2008a 2,000,000 1,040,000
Commercial Mortgage
Pass-Through Ctfs.--.9%
Structured Asset Securities, REMIC:
Ser. Greenpoint 1996-A, Cl. B5, 8.372%, 2027b,e 278,606 218,815
Ser. Greenpoint 1996-A, Cl. B6, 8.372%, 2027b,e 348,796 90,687
Ser. 1996-CFL, Cl. H, 7.75%, 2028b 1,750,000 1,260,289
1,569,791
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Principal
Bonds and Notes (continued) Amount ($) Value ($)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer--2.3%
Packaging Resources,
Sr. Notes, 13%, 2003 2,415,850 2,034,920
Syratech,
Sr. Notes, 11%, 2007 3,000,000 1,995,000
4,029,920
Energy--4.2%
Belden & Blake, Ser. B,
Sr. Sub. Notes, 9.875%, 2007 4,000,000 3,060,000
Kelly Oil & Gas,
Conv. Sub. Notes, 7.875%, 1999 1,600,000 952,000
Michael Petroleum, Ser. B,
Sr. Notes, 11.5%, 2005 2,000,000 1,170,000
Petsec Energy, Ser. B,
Sr. Sub. Notes, 9.5%, 2007 2,600,000 1,313,000
Sitel,
Sr. Sub. Notes, 9.25%, 2006 1,000,000 955,000
7,450,000
Entertainment--1.7%
Booth Creek Ski Holdings, Ser. B,
Sr. Notes, 12.5%, 2007 3,000,000 2,865,000
Discovery Zone,
Sr. Secured Notes, 13.5%, 2002c 500,000 100,000
2,965,000
Financial--1.0%
Amresco,
Sr. Sub. Notes, Ser. 98-A, 9.875%, 2005 2,000,000 1,680,000
Food & Beverages--1.1%
Cuddy International,
Sr. Notes, 10.75%, 2007 2,000,000 1,860,000
Gaming--1.2%
Hollywood Park,
Sr. Sub. Notes, 9.25%, 2007b 2,000,000 2,075,000
Metals--.3%
NSM Steel, Ser. B,
Sr. Sub. Mortgage Notes, 12.25%, 2008 (Units)b,d 1,750,000 96,250
</TABLE>
The Fund 7
<PAGE>
STATEMENT OF INVESTMENTS (Unaudited) (continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Principal
Bonds and Notes (continued) Amount ($) Value ($)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Metals (continued)
Northwestern Steel & Wire,
Sr. Notes, 9.5%, 2001 812,000 515,620
611,870
Office Services--.8%
U.S. Office Products,
Sr. Notes, 9.75%, 2008 2,000,000 1,390,000
Publishing--.6%
WAM ! NET,
Sr. Discount Notes, 13.25%, 2005 (Units)a,b,d 1,750,000 1,102,500
Residential Mortgage
Pass-Through Ctfs.--2.2%
Chase Mortgage Finance,
Ser. 1994-E, Cl. B6, 6.25%, 2010b 387,006 108,362
Citicorp Mortgage Services,
REMIC, Ser. 1994-9, Cl. B2, 5.75%, 2009b 450,108 126,030
GE Capital Mortgage Services:
Home Equity Loan, Ser. 1996-HE4,
Cl. B5, 9.316%, 2026b,e 1,289,575 296,602
REMIC:
Ser. 1993-13, Cl. B5, 6%, 2008b 426,140 119,319
Ser. 1994-15, Cl. B5, 6%, 2009b 686,938 192,343
Ser. 1994-21, Cl. B5, 6.5%, 2009b 903,756 253,052
Ser. 1996-10, Cl. B5, 6.75%, 2011b 328,481 91,975
Ser. 1996-12, Cl. B5, 7.25%, 2011b 384,990 107,797
Ser. 1996-14, Cl. 2B5, 7.25%, 2011b 231,569 64,839
Ser. 1997-11, Cl. B4, 7%, 2027b 742,606 501,491
MORSERV,
Ser. 1996-1, Cl. B5, 7%, 2011b 457,491 128,097
Norwest Asset Securities:
Ser. 1996-8, Cl. B4, 7.5%, 2026b 123,237 100,785
Ser. 1996-8, Cl. B5, 7.5%, 2026b 183,666 51,426
Ser. 1997-11. Cl. B4, 7%, 2027b 245,855 183,623
Ser. 1997-11, Cl. B5, 7%, 2027b 369,089 103,345
Ser. 1997-15, Cl. B4, 6.75%, 2012b 399,385 313,143
Ser. 1997-15, Cl. B5, 6.75%, 2012b 239,410 67,035
Ser. 1997-16, Cl. B5, 6.75%, 2027b 296,502 83,020
Prudential Home Mortgage Securites,
REMIC, Ser. 1996-7, Cl. B5, 6.75%, 2011b 807,864 226,202
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Principal
Bonds and Notes (continued) Amount ($) Value ($)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Residential Mortgage
Pass-Through Ctfs. (continued)
Residential Accredit Loans, REMIC:
Ser. 1997-QS6, Cl. B2, 7.5%, 2012b 148,634 121,508
Ser. 1997-QS6, Cl. B3, 7.5%, 2012b 351,484 98,415
Residential Funding Mortgage Securities I,
Ser. 1997-S15, Cl. B2, 7%, 2027 773,163 523,576
3,861,985
Technology--.8%
Entex Information Services,
Sr. Sub. Notes, 12.5%, 2006 1,850,000 1,325,063
Telecommunication/Carriers--16.0%
FirstWorld Communications,
Sr. Discount Notes, 13%, 2008a 5,500,000 3,052,500
Bell Technology Group,
Sr. Notes, 13%, 2005 (Units)d 3,000,000 3,461,250
Bestel,
Sr. Discount Notes, 12.75%, 2005 (Units)a,d 5,000,000 2,862,500
DTI Holdings:
Sr. Discount Notes, 12.5%, 2008 (Units)b,d 1,750,000 708,750
Sr. Discount Notes, Ser. B, 12.5%, 2008a 3,000,000 1,215,000
ESAT Telecom Group:
Notes, 11.875%, 2008 1,000,000 1,082,500
Sr. Discount Notes, 12.5%, 2007a 1,000,000 747,500
MGC Communications, Ser. B
Sr. Secured Notes, 13%, 2004 5,000,000 4,775,000
Poland Telecom Finance,
Sr. Notes, 14%, 2007 (Units)d 6,750,000 6,345,000
Rhythms NetConnections,
Sr. Discount Notes, 13.5%, 2008a 3,000,000 1,710,000
Versatel Telecom,
Sr. Notes, 13.25%, 2008 (Units)d 2,000,000 2,170,000
28,130,000
Transportation--8.9%
American President,
Sr. Notes, 7.125%, 2003 3,185,000 2,581,089
Canadian Airlines,
Sr. Notes, 12.25%, 2006 4,850,000 1,818,750
</TABLE>
The Fund 9
<PAGE>
STATEMENT OF INVESTMENTS (Unaudited) (continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Principal
Bonds and Notes (continued) Amount ($) Value ($)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Transportation (continued)
Fine Air Services,
Sr. Notes, 9.875%, 2008 5,000,000 4,525,000
Golden Ocean Group,
Sr. Notes, 10%, 2001 2,405,000 517,075
Holt Group,
Sr. Notes, 9.75%, 2006 1,500,000 995,625
Park N View,
Sr. Notes, 13%, 2008 (Units)d 1,000,000 490,000
Terminal R.R. Association,
First Mortgage Bonds, 4%, 2019 57,000 45,492
Union Pacific,
Sub. Deb, 5.5%, 2033 277,000 189,920
ValuJet,
Sr. Notes, 10.25%, 2001 5,050,000 4,387,188
15,550,139
Wireless Communications--9.4%
American Mobile Satellite/AMSC Acquisition:
Sr. Notes, 12.25%, 2008 500,000 372,500
Sr. Notes, 12.25%, 2008 (Units)d 500,000 348,125
Comunicacion Celular,
Sr. Discount Notes, 14.125%, 2005a,b 3,750,000 2,480,000
Conecel Holdings,
Sr. Notes, 16.5%, 2000 (Units)b,d 2,000,000 405,000
Consorcio Ecuatoriano,
Notes, 14%, 2002 1,000,000 302,500
E. Spire Communications,
Sr. Discount Notes, 12.75%, 2006a 3,550,000 2,396,250
Ionica,
Sr. Discount Notes, 15%, 2007a,c 2,000,000 40,000
Northeast Optic Network,
Sr. Notes, 12.75%, 2008 3,000,000 3,195,000
Occidente y Caribe Celular, Ser. B,
Sr. Discount Notes, 14%, 2004a 2,910,000 2,146,125
OnePoint Communications,
Sr. Notes, 14.5%, 2008 (Units)d 3,000,000 1,545,000
OrbCommunications Global/Capital,
Sr. Notes, 14%, 2004 1,000,000 1,045,000
Telesystem International Wireless:
Ser. B, Sr. Discount Notes, 13.25%, 2007a 1,400,000 875,000
Ser. C, Sr. Discount Notes, 10.5%, 2007a 2,500,000 1,262,500
16,413,000
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Principal
Bonds and Notes (continued) Amount ($) Value ($)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Total Bonds and Notes
(cost $134,647,465) 112,313,566
- -------------------------------------------------------------------------------------------
Common Stocks--4.2% Shares Value ($)
- -------------------------------------------------------------------------------------------
Automotive--.0%
Glasstech warrantsf 2,000 1,000
Broadcasting--.5%
Pegasus Media & Communications warrantsf 5,000 300,000
Spanish Broadcasting System warrantsb,f 3,000 615,000
915,000
Consumer--.0%
Discovery Zone warrantsf 4,500 5
Paper & Packaging--.0%
SF Holdings Group, Cl. Cb,f 3,700 7,400
Supermarkets-.0%
Electronic Retailing Systems International warrantsf 1,250 6,250
Telecommunication/Carriers--3.2%
FirstWorld Communications warrantsf 5,500 275,000
Hyperion Telecommunications warrantsf 1,000 70,000
MGC Communications warrantsb,f 3,000 456,000
Rhythms NetConnections warrantsf 20,000 4,683,840
RSL Communications warrantsf 880 96,910
5,581,750
Transportation--.0%
Golden Ocean Group warrantsf 3,000 3,375
HighwayMaster Communications warrantsf 4,000 400
Teletrac Holdings warrantsf 750 8
3,783
Wireless Communications--.5%
Advanced Radio Telecom warrantsf 30,000 397,500
American Mobile Satellite warrantsf 1,500 45,187
Comunicacion Celular warrantsb,f 1,000 75,125
Iridium warrantsf 1,000 20,125
Microcell Telecommunications warrantf 16,000 274,640
Occidente y Caribe Celular warrantsf 7,640 123,193
935,770
Total Common Stocks
(cost $1,114,734) 7,450,958
</TABLE>
The Fund 11
<PAGE>
STATEMENT OF INVESTMENTS (Unaudited) (continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Preferred Stocks--24.7% Amount ($) Value ($)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Broadcasting--6.5%
Granite Broadcasting,
Cum., $127.50 2,000 2,095,000
Pegasus Media & Communications,
Ser. A, Cum., $127.50 5,081 5,652,613
Spanish Broadcasting System,
Ser. A, Cum., $142.50 3,428 3,667,960
11,415,573
Cable Television--.6%
Echostar Communications,
Ser. C, Cum. Conv., $3.375 5,000 1,025,000
Energy--1.1%
Clark USA,
Sr. Cum., $115.00 2,794 1,885,950
Entertainment--4.4%
Paxson Communications:
Cum., $125.00 705 645,075
Cum., $132.50 6,080 5,076,800
Cum. Conv., $975.00b 216 2,073,600
7,795,475
Paper & Packaging--.2%
SF Holdings Group,
Cum., $137.50 1,120 406,000
Publishing--1.8%
Day International Group,
Cum., $122.50 3,515 3,088,982
Supermarkets--2.0%
Supermarkets General,
Cum., $3.52f 96,000 3,492,000
Telecommunication/Carriers--4.5%
Concentric Network,
Cum. Conv., $135.00 6,157 6,680,345
Hyperion Telecommunications,
Ser. B, Cum., $128.75 1,209 1,142,505
7,822,850
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Preferred Stocks--(continued) Amount ($) Value ($)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Wireless Communications--3.6%
Crown Castle International,
Cum., $127.50b 2,063 2,289,930
WinStar Communications,
Ser. C, Cum., $142.50 5,000 4,000,000
6,289,930
Total Preferred Stocks
(cost $44,541,620) 43,221,760
- -------------------------------------------------------------------------------------------
Principal
Short-Term Investments--5.7% Amount ($) Value ($)
- -------------------------------------------------------------------------------------------
U.S. Government Agencies;
Federal Home Loan Banks,
4.8%, 5/3/1999
(cost $9,970,341) 9,973,000 9,970,341
- -------------------------------------------------------------------------------------------
Total Investments (cost $190,274,160) 98.6% 172,956,625
Cash and Receivables (net) 1.4% 2,439,971
Net Assets 100.0% 175,396,596
<FN>
a Zero coupon until a specified date at which time the stated coupon rate
becomes effective until maturity.
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 April 30, 1999, these securities amounted to
$21,302,130 or 12.1% of net assets.
c Non-income producing--security in default.
d With warrants to purchase common stock.
e Variable rate security-interest rate subject to periodic change.
f Non-income producing.
See notes to financial statements.
</FN>
</TABLE>
The Fund 13
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Cost Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets ($):
Investments in securities--See Statement of Investments 190,274,160 172,956,625
Cash 233,767
Dividends and interest receivable 4,118,156
Receivable for investment securities sold 1,438,030
Receivable for shares of Beneficial Interest subscribed 172,683
Prepaid expenses 32,530
178,951,791
- ------------------------------------------------------------------------------------------------
Liabilities ($):
Due to The Dreyfus Corporation and affiliates 104,974
Due to Distributor 34,798
Payable for investment securities purchased 2,797,995
Payable for shares of Beneficial Interest redeemed 527,353
Accrued expenses 90,075
3,555,195
- ------------------------------------------------------------------------------------------------
Net Assets ($) 175,396,596
- ------------------------------------------------------------------------------------------------
Composition of Net Assets ($):
Paid-in capital 207,206,352
Accumulated undistributed investment income--net 1,580,792
Accumulated net realized gain (loss) on investments (16,073,013)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 (17,317,535)
- ------------------------------------------------------------------------------------------------
Net Assets ($) 175,396,596
- ------------------------------------------------------------------------------------------------
Shares Outstanding
(unlimited number of $.001 par value shares of Beneficial Interest authorized) 14,440,334
Net Asset Value, offering and redemption price per share--Note 3(d) ($) 12.15
</TABLE>
See notes to financial statements.
14
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended April 30, 1999 (Unaudited)
<TABLE>
- ------------------------------------------------------------------------------------------------
Investment Income ($)
- ------------------------------------------------------------------------------------------------
<S> <C>
Income:
Interest 9,606,566
Cash dividends 2,144,360
Total Income 11,750,926
Expenses:
Management fee--Note 3(a) 479,928
Shareholder servicing costs--Note 3(b) 240,443
Interest expense--Note 2 70,557
Professional fees 30,389
Registration fees 27,629
Prospectus and shareholders' reports 13,950
Custodian fees--Note 3(b) 8,686
Trustees' fees and expenses--Note 3(c) 6,076
Miscellaneous 5,149
Total Expenses 882,807
Investment Income--Net 10,868,119
- -----------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments--Note 4:
Net realized gain (loss) on investments (8,772,383)
Net unrealized appreciation (depreciation) on investments 24,848,303
Net Realized and Unrealized Gain (Loss) on Investments 16,075,920
Net Increase in Net Assets Resulting From Operations 26,944,039
</TABLE>
See notes to financial statements.
The Fund 15
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Six Months Ended
April 30, 1999 Year Ended
(Unaudited) October 31, 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations ($):
Investment income--net 10,868,119 19,868,237
Net realized gain (loss) on investments (8,772,383) (7,282,385)
Net unrealized appreciation (depreciation) on investments 24,848,303 (46,390,352)
Net Increase (Decrease) in Net Assets
Resulting from Operations 26,944,039 (33,804,500)
- ------------------------------------------------------------------------------------------------
Dividends to Shareholders From ($):
Investment income--net (11,949,769) (19,328,799)
Net realized gain on investments -- (141,121)
Total Dividends (11,949,769) (19,469,920)
- ------------------------------------------------------------------------------------------------
Beneficial Interest Transactions ($):
Net proceeds from shares sold 68,331,968 190,636,895
Dividends reinvested 8,225,325 13,452,641
Cost of shares redeemed (46,451,058) (141,818,296)
Redemption fee 72,034 409,632
Increase (Decrease) in Net Assets from Beneficial Interest
Transactions 30,178,269 62,680,872
Total Increase (Decrease) in Net Assets 45,172,539 9, 406,452
- ------------------------------------------------------------------------------------------------
Net Assets ($):
Beginning of Period 130,224,057 120,817,605
End of Period 175,396,596 130,224,057
- ------------------------------------------------------------------------------------------------
Undistributed investment income--net 1,580,792 2,662,442
- ------------------------------------------------------------------------------------------------
Capital Share Transactions (Shares):
Shares sold 6,079,617 12,746,280
Shares issued for dividends reinvested 751,902 957,437
Shares redeemed (4,160,359) (10,120,402)
Net Increase (Decrease) in Shares Outstanding 2,671,160 3,583,315
</TABLE>
See notes to financial statements.
16
<PAGE>
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the Fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the Fund's financial
statements.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Six Months Ended
April 30, 1999 Year Ended October 31,
-------------------------------
(Unaudited) 1998 1997 a 1996 b
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share Data ($):
Net asset value, beginning of period 11.06 14.76 13.83 12.50
Investment Operations:
Investment income--net .80 1.55 1.58 .69
Net realized and unrealized gain (loss)
on investments 1.20 (3.69) 1.05 1.19
Total from Investment Operations 2.00 (2.14) 2.63 1.88
Distributions:
Dividends from investment income--net (.92) (1.57) (1.56) (.55)
Dividends from net realized gain on investments -- (.02) (.23) --
Total Distributions (.92) (1.59) (1.79) (.55)
Redemption fees added to paid-in capital .01 c .03 c .09 c --
Net asset value, end of period 12.15 11.06 14.76 13.83
- -------------------------------------------------------------------------------------
Total Return (%) 38.60 d (16.28) 21.13 25.14 d
- -------------------------------------------------------------------------------------
Ratios/Supplemental Data (%):
Ratio of operating expenses to
average net assets 1.10 d 1.06 .71 .02 d
Ratio of interest expense to
average net assets .10 d .15 .34 .27 d
Ratio of net investment income
to average net assets 14.72 d 10.87 11.72 11.33 d
Decrease reflected in above expense ratios
due to undertakings by the Manager -- -- .43 1.55 d
Portfolio Turnover Rate 29.22 e 117.34 252.50 233.62 e
- --------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 175,397 130,224 120,818 24,857
<FN>
a Restated to conform to current year presentation.
b From March 25, 1996 (commencement of operations) to October 31, 1996.
c Based on average shares outstanding at each month end.
d Annualized.
e Not annualized.
See notes to financial statements.
</FN>
</TABLE>
The Fund 17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus High Yield Securities Fund (the "Fund") is a separate diversified series
of Dreyfus Debt and Equity Funds (the "Company") which is registered under the
Investment Company Act of 1940, as amended (the "Act"), as an open-end
management investment company and operates as a series company currently
offering six series, including the Fund. The Fund's investment objective is to
maximize total return, consisting of capital appreciation and current income.
The Dreyfus Corporation (the "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) 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,
18
<PAGE>
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.
(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 $2,786 during the period ended April 30, 1999 based on
available cash balances left on deposit. Income earned under this arrangement is
included in interest income.
(c) Dividends to shareholders: It is the policy of the Fund to declare and pay
dividends quarterly from investment income-net. Dividends from net realized
capital gain, if any, 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 of 1986, as amended (the "Code"). To
the extent that net realized capital gain can be offset by capital loss
carryovers it is the policy of the Fund not to distribute such gain.
(d) Federal income taxes: It is the policy of the Fund to continue to qualify as
a regulated investment company, if such qualification is in the best interests
of its shareholders, by complying with the applicable provisions of the Code,
and to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes.
The Fund 19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The Fund has an unused capital loss carryover of approximately $7,297,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to October 31, 1998. If not
applied, the carryover expires in fiscal 2006.
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, 1999 was approximately $2,776,000, with a
related weighted average annualized interest rate of 5.12%.
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.
20
<PAGE>
During the period ended April 30, 1999, the Fund was charged $184,588 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, 1999, the Fund was charged $26,030 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 April 30, 1999, the Fund was
charged $8,686 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.
(d) A 1% redemption fee is charged and retained by the Fund on shares redeemed
within six months following the date of issuance, including redemptions through
the use of the Fund Exchange privilege.
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,
1999, amounted to $53,056,060 and $42,954,557, respectively.
At April 30, 1999, accumulated net unrealized depreciation on investments was
$17,317,535, consisting of $15,439,334 gross unrealized appreciation and
$32,756,869 gross unrealized depreciation.
At April 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).
The Fund 21
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
For More Information
Dreyfus
High Yield Securities 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
Distributor
Premier Mutual Fund Services, Inc.
60 State Street
Boston, MA 02109
To obtain information:
By telephone
Call 1-800-645-6561
By mail Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
By E-mail Send your request to [email protected]
On the Internet Information can be viewed online or downloaded from:
http://www.dreyfus.com
Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
(c) 1999, Dreyfus Service Corporation 043SA994
Dreyfus
Short Term
High Yield Fund
SEMIANNUAL REPORT
April 30, 1999
<PAGE>
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.
<PAGE>
Contents
The Fund
- --------------------------------------------------------------------------------
2 Letter from the President
3 Discussion of Fund Performance
6 Statement of Investments
12 Statement of Assets and Liabilities
13 Statement of Operations
14 Statement of Changes in Net Assets
15 Financial Highlights
16 Notes to Financial Statements
For More Information
- --------------------------------------------------------------------------------
Back Cover
<PAGE>
The Fund
Dreyfus Short Term
High Yield Fund
Letter From The President
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Short Term High
Yield Fund, covering the six-month period from November 1, 1998 through April
30, 1999. Inside, you'll find valuable information about how the Fund was
managed during the reporting period, including a discussion with the Fund's
portfolio manager, Roger King, a member of the Dreyfus Taxable Fixed Income
Team.
The past six months have been rewarding for many fixed-income investors. Lower
short-term interest rates adopted by the Federal Reserve Board and other central
banks in the fall of 1998 appear to have helped many developed nations withstand
the effects of economic weakness in Japan, Asia and Latin America. At the same
time, the U.S. economy entered its eighth year of expansion in an environment
characterized by low inflation and high levels of consumer spending.
Fixed-income securities provided mixed results in this economic climate. While
U.S. Treasury securities rallied strongly last summer when stocks and other
types of bonds fell, they subsequently gave back most of their gains. Other
types of bonds performed well, however, as investors shifted assets back into
bond market sectors they had previously avoided. Accordingly, many corporate
bonds, mortgage-backed securities, asset-backed securities and U.S.
dollar-denominated foreign bonds provided attractive returns over the reporting
period.
We appreciate your confidence over the past six months, and we look forward to
your continued participation in Dreyfus Short Term High Yield Fund.
Sincerely,
/s/ Stephen E. Canter
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
May 13, 1999
2
<PAGE>
DISCUSSION OF FUND PERFORMANCE
Roger King, Portfolio Manager
Dreyfus Taxable Fixed Income Team
How did Dreyfus Short Term High Yield Fund perform relative to its benchmark?
For the six-month period ended April 30, 1999, the Fund achieved a total return
of 4.32%.1 This compares to a 8.88% return for the Fund's benchmark, the Merrill
Lynch High Yield Master II Index.2 Despite the Fund's restricted maturity and
duration, structure and composition, major reporting agencies report the Fund in
a "high-yield bond" category with other longer term funds, because there are no
existing categories for "short-term" high-yield funds. For this reason, we also
gauge performance against a shorter term measure: the Dreyfus Customized Limited
Term High Yield Index. This is a blended index, composed of four shorter-term
subindices of the Merrill Lynch High Yield Master II. The Dreyfus Customized
Index produced a 6.23% return for the period.3
We attribute the Fund's relative performance to our somewhat aggressive stance
during the period. We were most heavily invested in securities with lower credit
ratings at a time when the market sought and rewarded relatively higher credit
quality in the junk bond universe.
What is the Fund's investment approach?
The Fund seeks to create high levels of current income, while managing
interest-rate and credit risk by limiting the average effective maturity and
duration of its holdings to three years or less. Shorter term securities are
seen, in most cases, as having been useful tools in reducing interest rate and
credit risk.
When seeking high-current income, we typically invest most of the Fund's total
assets in fixed-income securities that are of below-investment-grade credit
quality. Issuers of below-investment-grade securities may be in an early stage
of development or may have a highly lever
The Fund 3
<PAGE>
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
aged balance sheet. To attract buyers, these issuers must offer higher yields
than those offered by more established companies, to compensate the buyer for
the greater risks.
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 range of different types of issuers. For example,
new companies often must pay higher interest rates than more established firms.
We carefully research these new issuers to find the most creditworthy, best
income-producing bonds. We also buy "seasoned" bonds: bonds issued by companies
with an established track record that 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, while they are convertible
into the issuer's common stock, will probably not be converted because the
target stock price is not likely to be reached. Many times overlooked, these
bonds often offer an attractive risk-adjusted return.
What other factors influenced the Fund's performance?
A variety of factors had an impact on the Fund's performance. The average credit
rating in our portfolio over the period was single B. Lower rated issues such as
these fell much faster and farther in price than did higher rated securities
during the high-yield market upheaval of last summer and fall. This price
downturn was maintained during the early part of this reporting period,
contributing to underperformance. Lower rated issues also snapped back more
slowly than better credits as the market recovered into 1999. We also held about
half the portfolio in "yield-to-call" bonds: bonds that we anticipated would not
remain outstanding until maturity, but would be refinanced long before they came
due. During periods of market turmoil, yield-to-call bonds followed the same
pattern as lower rated bonds: down more sharply than the market as a whole, and
slower in recovery. Finally, sev-
4
<PAGE>
eral of the issuers whose bonds we held -- including companies such as
Discovery Zone, Texfi Industries and Loewen Group -- did not perform as we had
expected, creating a drag on return.
What is the Fund's current strategy?
We are working to better position the Fund to take advantage of recent market
strengths and to better protect the Fund from potential recurrence of market
instability. To that end, we are increasing the fund's overall credit quality,
reducing our dependence on the yield-to-call strategy and reducing the fund's
average maturity. We believe that in light of current and anticipated market
conditions, these steps will help us achieve the goal of providing high-current
income, while limiting exposure to broader market risks.
May 13, 1999
1 Total return includes reinvestment of dividends and any capital gains paid.
2 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 $100 million par amount
outstanding and greater than or equal to one year to maturity.
3 SOURCE: MERRILL
LYNCH, PIERCE, FENNER AND SMITH, INC.--The Dreyfus Customized Limited Term High
Yield Index is composed of four subindices of the Merrill Lynch High Yield
Master II Index. These subindices, blended and market weighted, are (i)
BB-rated, 1-3 years, (ii) B-rated 1-3 years, (iii) BB-rated, 3-5 years and (iv)
B-rated, 3-5 years. Unlike the Dreyfus Customized Limited Term High Yield Index,
which is composed of bonds rated no lower than "B" the Fund can invest in bonds
with lower credit ratings than "B" and as low as "D".
The Fund 5
<PAGE>
STATEMENT OF INVESTMENTS (Unaudited)
<TABLE>
<CAPTION>
Principal
Bonds and Notes--101.9% Amount ($) Value ($)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Aircraft & Aerospace--2.0%
AM General, Ser. B,
Sr. Notes, 12.875%, 2002 1,000,000 705,000
Aircraft Lease Portfolio Securitisation 96-1,
Pass-Through Trust, Ctfs.,
Cl. D, 12.75%, 2006 538,780 533,391
America West Airlines Pass-Through Trust,
Pass-Through Ctfs.,
Ser. 1996-1, Cl. D, 8.16%, 2002 287,447 289,254
Burke Industries,
Sr. Notes, 9.034%, 2007a 2,000,000 1,872,500
3,400,145
Automotive--2.5%
Aetna Industries,
Sr. Notes, 11.875%, 2006 3,000,000 3,232,500
Penda, Ser. B,
Sr. Notes, 10.75%, 2004 1,000,000 1,025,000
4,257,500
Broadcasting--3.9%
Azteca Holdings, S.A. de C.V.,
Sr. Secured Notes, 11%, 2002 500,000 457,500
Paxson Communications,
Sr. Sub. Notes, 11.625%, 2002 4,000,000 4,190,000
Univision Network Holding,
Sub. Notes, 7%, 2002 2,550,575 1,822,500
6,470,000
Building Materials--1.3%
ICF Kaiser International,
Sr. Sub. Notes, 13%, 2003 3,000,000 2,111,250
Cable Television--7.7%
Adelphia Communications, Ser. B,
Sr. Notes, 10.25%, 2000 600,000 621,750
Diamond Cable Communications:
Sr. Discount Notes, 13.25%, 2004b 4,500,000 4,691,250
Sr. Discount Notes, 11.75%, 2005b 2,000,000 1,810,000
Digital Television Service/Capital, Ser. B
Sr. Sub. Notes, 12.5%, 2007 2,000,000 2,252,500
Net Sat Servicos,
Sr. Secured Notes, 12.75%, 2001c 500,000 396,250
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Principal
Bonds and Notes (continued) Amount ($) Value ($)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Pegasus Media & Communications, Ser. B,
Sr. Sub. Notes, 12.5%, 2005 2,775,000 3,101,063
12,872,813
Commercial Mortgage
Pass-Through Ctfs.--2.1%
GS Mortgage Securities II,
Ser. 1999-FL2A, Cl. G, 7.048%, 2013a,d 2,000,000 1,841,640
Nomura Depositor Trust ST1A,
Ser. 1998-ST1, Cl. B2, 9.176%, 2003a 2,000,000 1,751,563
3,593,203
Consumer--4.4%
BPC Holding, Ser. B,
Sr. Secured Notes, 12.5%, 2006 350,000 372,750
Hosiery Corp. of America,
Sr. Sub. Notes, 13.75%, 2002 2,500,000 2,696,875
Loewen Group,
Putable Asset Trust Securities, 6.7%, 1999d 1,000,000 560,000
Sharp Do Brazil,
Medium-Term Notes, 9.625%, 2000e 1,000,000 452,500
Signature Brands USA,
Sr. Notes, 13%, 2002 (Units)f 750,000 832,500
Sweetheart Cup,
Sr. Sub. Notes, 9.625%, 2000 2,500,000 2,400,000
7,314,625
Energy--2.8%
Clark USA, Ser. B,
Sr. Notes, 10.875%, 2005 2,000,000 1,715,000
Gerrity Oil & Gas,
Sr. Sub. Notes, 11.75%, 2004 544,000 569,160
Kelly Oil & Gas:
Conv. Sub. Deb., 8.5%, 2000 2,370,000 1,398,300
Conv. Sub. Notes, 7.875%, 1999 1,699,000 1,010,905
4,693,365
Entertainment--5.0%
American Skiing, Ser. B,
Sr. Sub. Notes, 12%, 2006 4,000,000 3,740,000
Premier Parks, Ser. A,
Sr. Notes, 12%, 2003 1,160,000 1,249,900
United Artists Theatres, Ser. B,
Floating Rate Notes, 9.375%, 2007a 4,000,000 3,300,000
8,289,900
Financial--.9%
Imperial Credit Capital Trust I, Ser. A,
Remarketed Par Securities, 10.25%, 2002 2,000,000 1,455,250
</TABLE>
The Fund 7
<PAGE>
STATEMENT OF INVESTMENTS (Unaudited) (continued)
<TABLE>
<CAPTION>
Principal
Bonds and Notes (continued) Amount ($) Value ($)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Food & Beverages--2.2%
Envirodyne Industries:
Ser. B, First Priority Sr. Secured Notes, 12%, 2000 2,045,000 2,057,781
Sr. Notes, 10.25%, 2001 2,000,000 1,550,000
3,607,781
Forest Products--3.8%
Maxxam Group Holdings,
Sr. Secured Notes, 12%, 2003 6,110,000 6,384,950
Gaming--1.4%
Argosy Gaming,
First Mortgage Bonds, 13.25%, 2004 2,000,000 2,277,500
HealthCare--.7%
EyeCare Centers of America,
Floating Interest Rate Sub. Term Securities, 8.952%, 2008a 1,500,000 1,220,625
Homebuilding--.6%
KHE Finance (Gtd. by Hovnanian Enterprises),
Sub. Notes, 11.25%, 2002 1,000,000 1,013,750
Industrial--.6%
Interlake,
Sr. Notes, 12%, 2001 1,000,000 1,073,750
Metals--13.0%
Kaiser Aluminum & Chemical,
Sr. Notes, 9.875%, 2002 3,000,000 3,075,000
Northwestern Steel & Wire,
Sr. Notes, 9.5%, 2001 2,000,000 1,270,000
Renco Metals,
Sr. Notes, 11.5%, 2003 4,500,000 4,747,500
Republic Engineered Steels,
First Mortgage Bonds, 9.875%, 2001 8,175,000 8,542,875
Weirton Steel,
Sr. Notes, 10.875%, 1999 4,150,000 4,191,500
21,826,875
Office Services--6.6%
Corporate Express,
Conv. Sub. Notes, 4.5%, 2000 10,988,000 9,861,730
Pierce Leahy,
Sr. Sub. Notes, 11.125%, 2006 1,130,000 1,265,600
11,127,330
Packaging--1.1%
Stone Container,
Sr. Sub. Notes, 12%, 1999a 350,000 351,750
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Principal
Bonds and Notes (continued) Amount ($) Value ($)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Packaging (continued)
Vicap, S.A. de C.V.,
Gtd. Sr. Notes, 10.25%, 2002 1,500,000 1,492,500
1,844,250
Real Estate--2.7%
Associated Estates Realty,
Sr. Notes, 8.375%, 2000 1,500,000 1,496,649
Rockefeller Center Properties,
Conv. Deb., 0%, 2000 4,000,000 3,020,000
4,516,649
Retail--.6%
Cafeteria Operators
(Gtd. by Furrs/Bishops Specialty Group),
Sr. Secured Notes, 12%, 2001 1,000,000 997,500
Supermarkets--.6%
Pathmark Stores,
Discount Notes, 10.75%, 2003b 1,000,000 1,000,000
Technology--2.1%
Baan,
Conv. Sub. Notes, 4.5%, 2001 3,000,000 2,206,860
Lam Research,
Conv. Notes, 5%, 2002 1,500,000 1,291,875
3,498,735
Telecommunication/Carriers--4.1%
Call-Net Enterprises,
Sr. Discount Notes, 13.25%, 2004b 6,000,000 6,172,500
GST USA,
Sr. Discount Notes, 13.875%, 2005b 1,000,000 763,750
6,936,250
Textiles--2.0%
Sassco Fashions,
Sr. Notes, 12.75%, 2004 3,317,519 3,101,880
Texfi Industries,
Sr. Sub. Deb., 8.75%, 1999g 2,500,000 287,500
3,389,380
Transportation--9.4%
Eletson Holdings,
First Pfd. Ship Mortgage Notes, 9.25%, 2003 850,000 823,438
MTL, Ser. B,
Floating Interest Rate Sub. Term Securities, 10.5%, 2006a 3,000,000 2,820,000
</TABLE>
The Fund 9
<PAGE>
STATEMENT OF INVESTMENTS (Unaudited) (continued)
<TABLE>
<CAPTION>
Principal
Bonds and Notes (continued) Amount ($) Value ($)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Transportation (continued)
Moran Transportation, Ser. B,
First Pfd. Ship Mortgage Notes, 11.75%, 2004 3,350,000 3,659,875
OMI,
Sr. Notes, 10.25%, 2003 2,000,000 2,025,000
Petro Stopping Centers/Financial,
Sr. Notes, 10.5%, 2007 2,000,000 2,155,000
Union Pacific,
Sub. Deb, 5.5%, 2033 3,068,000 2,103,513
ValuJet,
Sr. Notes, 10.25%, 2001 2,450,000 2,128,438
15,715,264
Utilities--.1%
Hidroelectric Piedra Aguila,
Medium-Term Notes, 10.625%, 2001g 500,000 201,250
Wireless Communications--17.7%
Clearnet Communications,
Sr. Discount Notes, 14.75%, 2005b 4,000,000 3,740,000
Comunicacion Celular,
Sr. Discount Notes, 14.125%, 2005b,d 2,500,000 1,657,500
Dial Call Communications,
Sr. Notes, 10.25%, 2005 4,791,000 4,994,618
Microcell Telecommunications, Ser. B,
Sr. Discount Notes, 14%, 2006b 5,000,000 4,225,000
Mobile Telecommunications,
Sr. Notes, 13.5%, 2002 1,200,000 1,368,000
NEXTEL Communications,
Sr. Discount Notes, 9.75%, 2004 2,000,000 2,085,000
Occidente y Caribe Celular, Ser. B,
Sr. Discount Notes, 14%, 2004b 5,000,000 3,687,500
Orion Network Systems,
Sr. Discount Notes, 12.5%, 2007b 7,000,000 4,305,000
Pagemart Nationwide,
Sr. Discount Notes, 15%, 2005b 2,495,000 2,133,225
WinStar Communications,
Sr. Discount Notes, 14%, 2005b 1,600,000 1,384,000
29,579,843
Total Bonds and Notes
(cost $187,047,233) 170,669,733
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Common Stocks--.1% Shares Value ($)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer--.0%
Discovery Zone warrantsd.h 1,000 1
Gaming--.0%
Sun International Hotelsh 198 8,378
Wireless Communications--.1%
Comunicacion Celular warrantsd,h 1,500 112,687
Total Common Stocks
(cost $151,136) 121,066
Preferred Stocks--1.0%
Broadcasting--.9%
Spanish Broadcasting System:
Ser. A, Cum., $142.50 214 228,980
Ser. A, Cum., $142.50d 1,228 1,313,960
1,542,940
Energy--.1%
Kelly Oil & Gas,
Conv. Cum., $2.625 34,70 175,669
Total Preferred Stocks
(cost $2,433,995) 1,718,609
- -------------------------------------------------------------------------------------------
Total Investments (cost $189,632,364) 103.0% 172,509,408
Liabilities, Less Cash and Receivables (3.0%) (5,004,596)
Net Assets 100.0% 167,504,812
</TABLE>
a Variable rate security-interest rate subject to periodic change.
b Zero coupon until a specified date at which time the stated coupon rate
becomes effective until maturity.
c Reflects date security can be redeemed at holder's option; the stated maturity
is 8/5/2004.
d 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, 1999, these
securities amounted to $5,485,788 or 3.3% of net assets.
e Reflects date security can be redeemed at holder's option; the stated maturity
is 10/30/2005.
f With warrants to purchase common stock.
g Non-income producing--security in default.
h Non-income producing.
See notes to financial statements.
</FN>
The Fund 11
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Cost Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Assets ($):
Investments in securities--See Statement of Investments 189,632,364 172,509,408
Interest and dividends receivable 3,931,320
Receivable for shares of Beneficial Interest subscribed 24,253
Prepaid expenses and other assets 23,753
176,488,734
- --------------------------------------------------------------------------------------------
Liabilities ($):
Due to The Dreyfus Corporation and affiliates 107,543
Due to Distributor 34,363
Cash overdraft due to Custodian 135,284
Bank loan payable--Note 2 7,887,000
Payable for shares of Beneficial Interest redeemed 739,015
Interest payable--Note 2 48,591
Accrued expenses 32,126
8,983,922
- -------------------------------------------------------------------------------------------
Net Assets ($) 167,504,812
- -------------------------------------------------------------------------------------------
Composition of Net Assets ($):
Paid-in capital 194,081,610
Accumulated undistributed investment income--net 87,315
Accumulated net realized gain (loss) on investments (9,541,157)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 (17,122,956)
- -------------------------------------------------------------------------------------------
Net Assets ($) 167,504,812
- -------------------------------------------------------------------------------------------
Shares Outstanding
(unlimited number of $.001 par value shares of Beneficial Interest authorized) 14,827,731
Net Asset Value, offering and redemption price per share ($) 11.30
See notes to financial statements.
</TABLE>
12
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Investment Income ($)
- --------------------------------------------------------------------------------------------
<S> <C>
Income:
Interest 10,849,497
Cash dividends 89,048
Total Income 10,938,545
Expenses:
Management fee--Note 3(a) 594,425
Shareholder servicing costs--Note 3(b) 317,207
Interest expense--Note 2 117,319
Professional fees 27,268
Registration fees 16,679
Prospectus and shareholders' reports 11,072
Custodian fees--Note 3(b) 8,159
Trustees' fees and expenses--Note 3(c) 6,288
Miscellaneous 6,345
Total Expenses 1,104,762
Investment Income--Net 9,833,783
- --------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments--Note 4:
Net realized gain (loss) on investments (7,575,195)
Net unrealized appreciation (depreciation) on investments 5,453,902
Net Realized and Unrealized Gain (Loss) on Investments (2,121,293)
Net Increase in Net Assets Resulting from Operations 7,712,490
See notes to financial statements.
</TABLE>
The Fund 13
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Six Months Ended
April 30, 1999 Year Ended
(Unaudited) October 31, 1998
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Operations ($):
Investment income--net 9,833,783 19,007,204
Net realized gain (loss) on investments (7,575,195) (1,959,796)
Net unrealized appreciation (depreciation)
on investments 5,453,902 (22,833,877)
Net Increase (Decrease) in Net Assets 7,712,490 (5,786,469)
Resulting from Operatons
- --------------------------------------------------------------------------------------------
Dividends to Shareholders From ($):
Investment income--net (9,912,285) (18,947,207)
Net realized gain on investments -- (1,405,597)
Total Dividends (9,912,285) (20,352,804)
- ---------------------------------------------------------------------------------------------
Beneficial Interest Transactions ($):
Net proceeds from shares sold 95,937,027 248,552,018
Dividends reinvested 6,254,536 14,395,569
Cost of shares redeemed (108,964,851) (207,057,502)
Increase (Decrease) in Net Assets from
Beneficial Interest Transactions (6,773,288) 55,890,085
Total Increase (Decrease) in Net Assets (8,973,083) 29,750,812
- -------------------------------------------------------------------------------------------
Net Assets ($):
Beginning of Period 176,477,895 146,727,083
End of Period 167,504,812 176,477,895
Undistributed investment income--net 87,315 165,817
- --------------------------------------------------------------------------------------------
Capital Share Transactions (Shares):
Shares sold 8,363,150 19,465,771
Shares issued for dividends reinvested 547,535 1,140,837
Shares redeemed (9,523,694) (16,472,534)
Net Increase (Decrease) in Shares Outstanding (613,009) 4,134,074
See notes to financial statements.
</TABLE>
14
<PAGE>
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the Fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the Fund's financial
statements.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Six Months Ended
April 30, 1999 Year Ended October 31,
(Unaudited) 1998 1997 1996a
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share Data ($):
Net asset value, beginning of period 11.43 12.98 12.69 12.50
Investment Operations:
Investment income--net .61 1.22 1.29 .26
Net realized and unrealized
gain (loss) on investments (.12) (1.44) .34 .19
Total from Investment Operations .49 (.22) 1.63 .45
Distributions:
Dividends from investment income--net (.62) (1.21) (1.29) (.26)
Dividends from net realized gain
on investments -- (.12) (.05) --
Total Distributions (.62) (1.33) (1.34) (.26)
Net asset value, end of period 11.30 11.43 12.98 12.69
- -------------------------------------------------------------------------------------------
Total Return (%) 8.71b (2.18) 13.38 17.02b
- -------------------------------------------------------------------------------------------
Ratios/Supplemental Data (%):
Ratio of operating expenses to average
net assets 1.08b 1.06 1.09 .92b
Ratio of interest expense to average
net assets .13b .12 .22 --
Ratio of net investment income
to average net assets 10.75b 9.58 10.02 9.76b
Decrease reflected in above expense ratios
due to undertakings by the Manager -- -- .02 1.62b
Portfolio Turnover Rate 35.83c 71.00 102.59 77.79c
Net Assets, end of period ($ x 1,000) 167,505 176,478 146,727 18,779
<FN>
a From August 16, 1996 (commencement of operations) to October 31, 1996.
b Annualized.
c Not annualized.
See notes to financial statements.
</FN>
</TABLE>
The Fund 15
<PAGE>
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 Debt and Equity Funds (the "Company") which is registered under the
Investment Company Act of 1940, as amended (the "Act"), as an open-end
management investment company and operates as a series company currently
offering six series, including the Fund. The Fund's investment objective is to
provide high current income. The Dreyfus Corporation (the "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) 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
16
<PAGE>
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.
(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 $7,269 during the period ended April 30, 1999 based on
available cash balances left on deposit. Income earned under this arrangement is
included in interest income.
(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, if any, 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 of 1986, as amended (the
"Code"). To the extent that net realized capital gain can be offset by capital
loss carryovers, it is the policy of the Fund not to distribute such gain.
(d) Federal income taxes: It is the policy of the Fund to continue to qualify as
a regulated investment company, if such qualification is in the best interests
of its shareholders, by complying with the applicable provisions of the Code,
and to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes.
The Fund has an unused capital loss carryover of approximately $1,960,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to October 31, 1998. If not
applied, the carryover expires in fiscal 2006.
The Fund 17
<PAGE>
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, 1999 was approximately $4,578,700, with a
related weighted average annualized interest rate of 5.17%.
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, 1999, the Fund was charged $228,625 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 provid-
18
<PAGE>
ing personnel and facilities to perform transfer agency services for the Fund.
During the period ended April 30, 1999, the Fund was charged $52,496 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 April 30, 1999, the Fund was
charged $8,159 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,
1999, amounted to $63,033,491 and $73,753,175, respectively.
At April 30, 1999, accumulated net unrealized depreciation on investments was
$17,122,956, consisting of $1,092,296 gross unrealized appreciation and
$18,215,252 gross unrealized depreciation.
At April 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).
The Fund 19
<PAGE>
For More Information
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
Distributor
Premier Mutual Fund Services, Inc.
60 State Street
Boston, MA 02109
To obtain information:
By telephone
Call 1-800-645-6561
By mail Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
By E-mail Send your request
to [email protected]
On the Internet Information
can be viewed online or
downloaded from:
http://www.dreyfus.com
Not FDIC-Insured o Not Bank-Guaranteed o May Lose Value
(C) 1999 Dreyfus Service Corporation
044SA994
Dreyfus Premier
Real Estate
Mortgage Fund
SEMIANNUAL REPORT
April 30, 1999
<PAGE>
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.
<PAGE>
Contents
THE FUND
- --------------
2 Letter from the President
3 Discussion of Fund Performance
6 Statement of Investments
9 Statement of Assets and Liabilities
10 Statement of Operations
11 Statement of Cash Flows
12 Statement of Changes in Net Assets
14 Financial Highlights
19 Notes to Financial Statements
FOR MORE INFORMATION
- -----------------------
Back Cover
<PAGE>
Dreyfus Premier The Fund
Real Estate Mortgage Fund
LETTER FROM THE PRESIDENT
- -------------------------
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Premier Real Estate
Mortgage Fund, covering the six-month period from November 1, 1998 through April
30, 1999. Inside, you'll find valuable information about how the Fund was
managed during the reporting period, including a discussion with the Fund's
portfolio manager, Michael Hoeh, a member of the Dreyfus Taxable Fixed Income
Team.
The past six months have been rewarding for many fixed-income investors. Lower
short-term interest rates adopted by the Federal Reserve Board and other central
banks in the fall of 1998 appear to have helped many developed nations withstand
the effects of economic weakness in Japan, Asia and Latin America. At the same
time, the U.S. economy entered its eighth year of expansion in an environment
characterized by low inflation and high levels of consumer spending.
Fixed-income securities provided mixed results in this economic climate. While
U.S. Treasury securities rallied strongly last summer when stocks and other
types of bonds fell, they subsequently gave back most of their gains. Other
types of bonds performed well, however, as investors shifted assets back into
bond market sectors they had previously avoided. Accordingly, many corporate
bonds, mortgage-backed securities, asset-backed securities and U.S.
dollar-denominated foreign bonds provided attractive returns over the reporting
period.
We appreciate your confidence over the past six months, and we look forward to
your continued participation in Dreyfus Premier Real Estate Mortgage Fund.
Sincerely,
/s/Stephen E. Canter
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
May 13, 1999
2
<PAGE>
DISCUSSION OF FUND PERFORMANCE
- ------------------------------
Michael Hoeh, Portfolio Manager
Dreyfus Taxable Fixed Income Team
How did Dreyfus Premier Real Estate Mortgage Fund
perform relative to its benchmark?
The Dreyfus Premier Real Estate Mortgage Fund (formerly Dreyfus Real Estate
Mortgage Fund) produced a total return of 7.59% for Class A shares for the
six-month period ending April 30, 1999.1 In comparison, the Fund's benchmarks,
the Standard & Poor's Real Estate Investment Trust Composite Index2 and the
Lehman Brothers Aggregate Bond Index3, returned 3.97% and 0.69%, respectively.
The public offering of the Fund's Class B, C, R, and T shares commenced on
December 24, 1998. From December 24, 1998 through April 30, 1999, the Fund
produced a total return of 7.64% for Class B shares, 7.76% for Class C shares,
8.07% for Class R shares, and 7.95% for Class T shares.
The Fund's strong performance was largely attributable to its diverse portfolio.
Many of its real estate oriented peers were invested strictly in the common
stock of real estate investment trusts (REITs), which have typically moved in
line with small company stocks. By contrast, we combined REIT debt and equity
securities with less price volatile real estate investments such as commercial
mortgage-backed securities and residential mortgage-backed securities, a move
that offset REIT volatility and served to boost the Fund's overall performance.
What is the Fund's investment approach?
Dreyfus Premier Real Estate Mortgage Fund's objective is to maximize total
return, consisting of capital appreciation and current income. To reach that
goal, the Fund invests primarily in mortgage-related securities, including
below-investment grade issues. The portfolio maintains an average credit quality
of BBB or higher, and balances volatile REITs with vehicles that can provide
more predictable returns. The Fund generally can be characterized as a real
estate "hybrid," investing in both real estate debt and equity.
The Fund 3
<PAGE>
DISCUSSION OF FUND PERFORMANCE (continued)
We use a three-step investment approach:
* Asset allocation. We allocate the Fund's assets among commercial
and residential mortgage-backed securities, U.S. government agency
mortgages, commercial mortgage obligations, asset-backed securities, REIT
debt, and REIT common and preferred stocks. The Fund is not subject to
maintaining any express asset allocation percentages.
We make decisions based on our analysis of the real estate market and
risk-adjusted return projections for these investments.
* Quantitative analysis. Certain tools help us select among the various
mortgage-related investments. We stay within a target duration, or
interest-rate sensitivity, on the Fund's fixed-income securities ranging
from 20% below to 20% above that of the Lehman Brothers Aggregate Index.
* Real estate fundamental analysis. We purchase REIT debt and equity
investments with positive real estate fundamentals such as improving
rental rates and low levels of new construction. To limit risk, we
diversify the Fund's REIT holdings geographically and across real estate
sectors.
What other factors influenced the Fund's performance?
Early in the period, we had a small percentage of the Fund's assets invested in
REIT common stocks and a larger percentage in commercial mortgage-backed
securities. Like other mortgage-related debt, commercial mortgage-backed bonds
suffered in September and October of 1998 when a large hedge fund, Long Term
Capital Management, was forced to liquidate nearly $10 billion of these types of
securities. Nonetheless, due to their high yield, mortgage bonds performed much
better than the REIT universe. As a result, our fundamental strategy --
emphasizing commercial mortgage-backed securities and de-emphasizing REITs --
contributed positively to performance.
As REITs began to recover, we increased their allocation in the portfolio. Among
our new, higher-grade REIT holdings was Host Marriott, a hotel REIT specializing
in high-end resort hotels. Host Marriott has few competitors in its market and
we believe they should benefit from the strong economy. We also added Meditrust
(Unit), a nationwide provider of nursing homes and health care facilities that
is benefiting from restructuring. Simon Property Group, another new holding, is
the largest owner of retail malls in the U.S. Their new mall marketing strategy,
"Simon Brand Ventures," offers major corporations the opportunity to become an
exclusive provider of a product or service at Simon's locations. Finally, we
added one commercial mortgage-backed security issued by Salomon Brothers and
secured by a loan on New York's W.R. Grace building. Each of these additions
enhanced the Fund's return.
4
<PAGE>
Hurting performance were a few existing REIT holdings that declined during the
REIT downturn. Also on the negative side were residential mortgage-backed
securities, including those issued by Norwest Asset Securities, Chase Mortgage
Finance, and GE Capital Mortgage Services. This sector has yet to fully recover
from the September-October 1998 liquidity crisis. Other strategies that hurt
return were liquidating our U.S. Treasury and Government National Mortgage
Association (GNMA) positions. Overall, though, the Fund handily outperformed its
benchmark indices over the period.
What is the Fund's current strategy?
We plan to maintain our increased position in the REIT sector, which is still
recovering from its setback. New supply of both residential and commercial real
estate is already low. If the U.S. economy continues to grow at a swift pace, we
believe demand for both types of properties would increase. This combination of
low supply and high demand would benefit REITs, as well as other sectors of the
real estate market. We also plan to maintain our allocation to commercial
mortgage-backed securities, which we believe still have room to rebound further.
May 13, 1999
1 Total return includes reinvestment of dividends and any capital gains
paid, and does not take into consideration the maximum initial sales
charge in the case of Class A and Class T shares, or the applicable
contingent deferred sales charge imposed on redemptions in the case of
Class B and Class C shares. The Dreyfus Corporation has agreed, until
October 31, 1999, to waive receipt of its fees and/or assume the expenses
of the Fund so that Fund expenses (excluding taxes, brokerage
commissions, extraordinary expenses, interest expenses, commitment fees
on offerings, shareholder services fees and Rule12b-1 fees) do not exceed
.65%.
2 The Standard & Poor's Real Estate Investment Trust (REIT) Composite
Index is a capitalization-weighted index of 100 stocks designed to
measure the performance of real estate investment trusts, commonly known
as REITs, with a base value of 100 as of December 31, 1996. The Index
includes reinvested dividends.
3 The Lehman Brothers Aggregate Bond Index is a widely accepted
unmanaged index of corporate, government and government-agency debt
instruments, mortgage-backed securities and asset-backed securities. The
Index includes reinvested dividends.
The Fund 5
<PAGE>
STATEMENT OF INVESTMENTS
April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Principal
Bonds and Notes--94.7% Amount ($) Value ($)
- ------------------------------------------------------------------------------
<S> <C> <C>
Asset-Backed Securities--3.1%
Nomura Depositor Trust,
Ser. 1998-STI, Cl. B-2, 9.188%, 2003 500,000 a,b 437,891
Commercial Mortgage Pass-Through Ctfs.--34.2%
Asset Securitization,
Ser. 1997-D5, Cl. A1-D, 6.85%, 2041 750,000 756,914
DLJ Commercial Mortgage
Ser. 1999-CG1, Cl. B-2, 7.486%, 2009 1,000,000 b 920,312
DLJ Mortgage Acceptance,
Ser. 1997-CF2, Cl. B-3TB, 6.99%, 2009 1,000,000 a 907,500
GS Mortgage Securities II,
Ser. 1998-GS1, Cl. D, 5.735%, 2000 250,000 b 248,438
Library Tower Trust I,
Ser. 1998-1, Cl. B, 6.66%, 2029 500,000 a 492,185
Merrill Lynch Mortgage Investors,
Ser. 1997-SD1, Cl. E, 6.280%, 2010 775,000 a,b 726,805
Salomon Brothers Mortgage,
Ser. 1997-TZH, Cl. D, 7.902%, 2022 750,000 a 736,388
4,788,542
Real Estate Investment Trusts--3.1%
Crescent Real Estate Equities,
Notes, 7.5%, 2007 500,000 a 442,542
Residential Mortgage Pass-Through Ctfs.--36.7%
Chase Mortgage Finance:
Ser. 1998-S3, Cl. B-4, 6.5%, 2013 326,217 a 245,274
Ser. 1998-S3, Cl. B-5, 6.5%, 2013 435,141 a 108,785
Ser. 1998-S5, Cl. B-5, 6.5%, 2013 306,667 a 76,667
GE Capital Mortgage Services:
Ser. 1996-1, Cl. B-4, 6.75%, 2011 321,872 a 274,918
Ser. 1998-16, Cl. B-4, 6.5%, 2013 365,498 a 273,210
Ser. 1998-16, Cl. B-5, 6.5%, 2013 365,501 a 91,375
Norwest Asset Securities:
Ser. 1997-17, Cl. B-5, 7.25%, 2027 1,036,505 a 309,656
Ser. 1997-20, Cl. B-4, 6.75%, 2012 240,711 a 188,659
Ser. 1998-2, Cl. B-4, 6.50%, 2028 371,236 284,460
Ser. 1998-2, Cl. B-5, 6.50%, 2028 371,776 95,500
Ser. 1998-9, Cl. B-5, 6.50%, 2028 271,939 a 181,209
Ser. 1998-9, Cl. B-6, 6.50%, 2028 408,951 a 104,346
Ser. 1998-18, Cl. B-5, 6.25%, 2028 347,658 a 217,286
Ser. 1998-18, Cl. B-6, 6.25%, 2028 521,508 a 135,592
Ser. 1998-19, Cl. B-6, 6.5%, 2028 328,912 109,003
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Principal
Bonds and Notes (continued) Amount ($) Value ($)
- ------------------------------------------------------------------------------
<S> <C> <C>
Residential Mortgage Pass-Through Ctfs. (continued)
PNC Mortgage Securities:
Ser. 1997-8, Cl. 3B-4, 6.75%, 2012 246,284 a 214,190
Ser. 1997-8, Cl. 3B-5, 6.75%, 2012 197,027 a 153,804
Ser. 1997-8, Cl. 3B-6, 6.75%, 2012 197,024 a 51,226
Ser. 1998-2, Cl. 3B-6, 6.75%, 2013 371,184 a 96,508
Ser. 1998-2, Cl. 4B-6, 6.75%, 2027 264,018 a 68,645
Prudential Home Mortgage,
Ser., 1996-3, Cl. B-4, 6.75%, 2011 268,353 215,788
Residential Funding Mortgage Securities I,
Ser. 1997-S18, Cl. B-2, 6.75%, 2012 219,516 a 152,563
Ser. 1997-S18, Cl. B-3, 6.75%, 2012 292,804 a 94,268
Ser. 1998-S22, Cl. B-2, 6.5%, 2013 375,704 281,308
Ser. 1997-S21, Cl. B-2, 6.5%, 2012 189,085 a 155,102
Ser. 1997-S21, Cl. B-3, 6.5%, 2012 252,210 a 63,289
Ser. 1998-NS1, Cl. B-2, 6.375%, 2009 74,711 a 54,702
Ser. 1998-NS1, Cl. B-3, 6.375%, 2009 224,066 a 80,664
Ser. 1998-S14, Cl. B-2, 6.5%, 2013 497,545 a 373,936
Ser. 1998-S14, Cl. B-3, 6.5%, 2013 497,483 a 165,025
Ser. 1998-S16, Cl. B-2, 6.5%, 2013 223,641 a 153,963
Ser. 1998-S16, Cl. B-3, 6.5%, 2013 223,645 a 72,615
5,143,536
U.S. Government Agencies--17.6%
Federal Home Loan Mortgage,
REMIC, Multiclass Mortgage Participation Ctfs.
(Interest Only Obligation):
Ser. 1499, Cl. E, 7%, 2023 864,285 c,d 342,084
Ser. 1995, Cl. PY, 7%, 2027 875,000 c,d 355,469
Federal National Mortgage Association:
(Interest Only Obligation):
Ser. 1542, Cl. QC, 7%, 2020 750,000 c,d 77,925
REMIC, Mutliclass Mortgage Participation Ctfs.,
(Interest Only Obligation):
Ser. 1993-119, Cl. JA, 7%, 2019 986,771 d 34,695
Ser. 1998-17, Cl. PL, 7%, 2019 1,250,000 c,d 154,188
Government National Mortgage Association I,
6%, 500,000 e 484,530
Project Notes:
6.45%, 11/15/2033 498,493 504,101
6.625%, 8/15/2028 497,833 509,498
2,462,490
Total Bonds and Notes
(cost $14,146,606) 13,275,001
</TABLE>
The Fund 7
<PAGE>
STATEMENT OF INVESTMENTS (Unaudited) (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Equity-Related Securities--46.9% Shares Value ($)
- ------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks
Real Estate Investment Trusts:
Alexandria Real Estate 15,000 422,813
AvalonBay Communities 10,304 360,640
Cabot Industrial Trust 38,100 776,286
Camden Property Trust 10,000 270,000
Crescent Real Estate Equities 12,000 268,500
Duke Realty Investments 15,000 352,500
Host Marriott 45,000 599,063
LNR Property 10,000 196,250
Meditrust 70,000 870,625
PS Business Parks 27,400 640,475
Public Storage 10,000 278,750
Reckson Associates Realty Corp 14,000 315,000
SL Green Realty 17,000 337,875
Simon Property Group 20,000 573,750
Tower Realty Trust 15,000 307,500
Total-Equity Related Securities
(cost $6,530,705) 6,570,027
- -------------------------------------------------------------------------------
Total Investments (cost $20,677,311) 141.6% 19,845,028
Liabilities, Less Cash and Receivables (41.6%) (5,830,379)
Net Assets 100.0% 14,014,649
<FN>
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,
1999, these securities amounted to $8,149,226 or 58.1% of net assets.
b Variable interest rate--interest rate subject to change periodically.
c Securities held in whole or in part by the custodian in a segregated
account as collateral for securities purchased on a forward commitment
basis.
d Reflects notional face.
e Purchased on a forward commitment basis.
</FN>
</TABLE>
See notes to financial statements.
8
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Cost Value
- --------------------------------------------------------------------------------------
<S> <C> <C>
Assets ($):
Investments in securities--See Statement of Investments 20,677,311 19,845,028
Cash 71,507
Dividends and interest receivable 182,875
Paydowns receivable 3,016
Prepaid expenses 81,854
Due from The Dreyfus Corporation and affiliates 1,953
20,186,233
- --------------------------------------------------------------------------------------
Liabilities ($):
Due to Distributor 2,763
Bank loan payable--Note 2 4,647,000
Payable for investment securities purchased 1,461,709
Interest payable--Note 2 46,609
Accrued expenses 13,503
6,171,584
- --------------------------------------------------------------------------------------
Net Assets ($) 14,014,649
- --------------------------------------------------------------------------------------
Composition of Net Assets ($):
Paid-in capital 14,589,374
Accumulated undistributed investment income--net 129,378
Accumulated net realized gain (loss) on investments 128,180
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 (832,283)
- --------------------------------------------------------------------------------------
Net Assets ($) 14,014,649
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------------
Net Asset Value Per Share
Class A Class B Class C Class R Class T
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Assets ($) 13,685,526 25,069 1,078 301,897 1,079.33
Shares Outstanding 1,133,486 2,086 89,354 25,027 89,439
- --------------------------------------------------------------------------------------
Net Asset Value
Per Share ($) 12.07 12.02 12.06 12.06 12.07
</TABLE>
See notes to financial statements.
The Fund 9
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Investment Income ($)
- --------------------------------------------------------------------------------------
<S> <C>
Income:
Interest 687,484
Cash dividends 176,970
Total Income 864,454
Expenses:
Management fee--Note 3(a) 42,078
Interest expense--Note 2 120,660
Registration fees 32,009
Shareholder servicing costs--Note 3(c) 17,586
Professional fees 9,708
Prospectus and shareholders' reports 4,232
Custodian fees--Note 3(c) 2,709
Trustees' fees and expenses--Note 3(e) 550
Distribution fees--Note 3(b) 30
Miscellaneous 11,100
Total Expenses 240,662
Less--expense reimbursement from the Manager due to
undertaking--Note 3(a) (61,731)
Net Expenses 178,931
Investment Income--Net 685,523
- --------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments--Note 4:
Net realized gain (loss) on investments 204,488
Net unrealized appreciation (depreciation) on investments 114,909
Net Realized and Unrealized Gain (Loss) on Investments 319,397
Net Increase in Net Assets Resulting From Operations 1,004,920
</TABLE>
See notes to financial statements.
10
<PAGE>
STATEMENT OF CASH FLOWS
Six Months Ended April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities ($):
Dividends and interest received 856,667
Interest and loan commitment fees paid (97,541)
Operating expenses paid (91,532) 667,594
Cash Flows From Investing Activities ($):
Purchases of portfolio securities (32,368,928)
Proceeds from sales of portfolio securities 30,727,663 (1,641,265)
Cash Flows From Financing Activities ($):
Proceeds from Fund shares sold 883,285
Payments for Fund shares redeemed (751,769)
Cash dividends paid (28,943)
Net proceeds from bank loans 1,165,000 1,267,573
Increase in cash 293,902
Cash overdraft at beginning of period (222,395)
Cash at end of period 71,507
- --------------------------------------------------------------------------------------
Reconciliation of Net Increase in Net Assets
Resulting From Operations to Net Cash
Provided by Operating Activities ($):
Net Increase in Net Assets Resulting From Operations 1,004,920
Adjustments to reconcile net increase in net assets
resulting from operations to net cash provided by
operating activities:
Increase in dividends and interest receivable (5,263)
Increase in interest payable 23,119
Decrease in accrued expenses (8,427)
Increase in prepaid expenses (27,717)
Increase due from The Dreyfus Corporation
and affiliates 2,696
Net interest sold on investments (2,327)
Net realized gain on investments (204,498)
Net unrealized appreciation on investments (114,909)
Net Cash Provided by Operating Activities 667,594
</TABLE>
See notes to financial statements
The Fund 11
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Six Months Ended
April 30, 1999 Year Ended
(Unaudited)* October 31, 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
Operations ($):
Investment income--net 685,523 1,035,615
Net realized gain (loss) on investments 204,488 205,391
Net unrealized appreciation (depreciation) on investments 114,909 (928,840)
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,004,920 312,166
- --------------------------------------------------------------------------------------
Dividends to Shareholders From ($):
Investment income--net:
Class A shares (700,132) (938,975)
Class B shares (577) --
Class C shares (22) --
Class R shares (25) --
Class T shares (23) --
Net realized gain on investments:
Class A shares (282,340) (123,741)
Total Dividends (983,119) (1,062,716)
- --------------------------------------------------------------------------------------
Beneficial Interest Transactions ($):
Net proceeds from shares sold:
Class A shares 556,285 3,543,424
Class B shares 24,000 --
Class C shares 1,000 --
Class R shares 301,000 --
Class T shares 1,000 --
Dividends reinvested:
Class A shares 954,082 1,039,144
Class B shares 24 --
Class C shares 22 --
Class R shares 25 --
Class T shares 23 --
Cost of shares redeemed:
Class A shares (751,769) (1,320,983)
Increase (Decrease) in Net Assets from
Beneficial Interest Transactions 1,085,692 3,261,585
Total Increase (Decrease) in Net Assets 1,107,493 2,511,035
- --------------------------------------------------------------------------------------
Net Assets ($):
Beginning of Period 12,907,156 10,396,121
End of Period 14,014,649 12,907,156
Undistributed investment income--net 129,378 144,634
<FN>
* From December 24, 1998 (commencement of initial offering) to April 30,
1999, for Class B, Class C, Class R and Class T shares.
</FN>
</TABLE>
See notes to financial statements.
12
<PAGE>
STATEMENT OF CHANGES IN NET ASSESTS (continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Six Months Ended
April 30, 1999 Year Ended
(Unaudited)* October 31, 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
Capital Share Transactions:
Class A
Shares sold 47,096 271,699
Shares issued for dividends reinvested 83,028 79,840
Shares redeemed (64,538) (103,016)
Net Increase (Decrease) in Shares Outstanding 65,586 248,523
- --------------------------------------------------------------------------------------
Class B*
Shares sold 2,084 --
Shares issued for dividends reinvested 2 --
Net Increase (Decrease) in Shares Outstanding 2,086 --
- --------------------------------------------------------------------------------------
Class C*
Shares sold 87 --
Shares issued for dividends reinvested 2 --
Net Increase (Decrease) in Shares Outstanding 89 --
- --------------------------------------------------------------------------------------
Class R*
Shares sold 25,025 --
Shares issued for dividends reinvested 2 --
Net Increase (Decrease) in Shares Outstanding 25,027 --
- --------------------------------------------------------------------------------------
Class T*
Shares sold 87 --
Shares issued for dividends reinvested 2 --
Net Increase (Decrease) in Shares Outstanding 89 --
<FN>
* From December 24, 1998 (commencement of initial offering) to April 30, 1999.
</FN>
</TABLE>
See notes to financial statements.
The Fund 13
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for
the fiscal periods indicated. Certain information reflects financial results
for a single Fund share. "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. These figures have been derived
from the Fund's financial statements.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Six Months Ended
April 30, 1999 Year Ended October 31,
------------------------
Class A Shares (Unaudited) 1998 1997a
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share Data ($):
Net asset value, beginning of period 12.09 12.69 12.50
Investment Operations:
Investment income--net .62 1.03 .06
Net realized and unrealized gain (loss)
on investments .26 (.52) .13
Total from Investment Operations .88 .51 .19
Distributions:
Dividends from investment income--net (.64) (.96) --
Dividends from net realized gain on investments (.26) (.15) --
Total Distributions (.90) (1.11) --
Net asset value, end of period 12.07 12.09 12.69
- --------------------------------------------------------------------------------------
Total Return (%) 15.31c 3.82 17.34b,c
- --------------------------------------------------------------------------------------
Ratios/Supplemental Data (%):
Ratio of operating expenses to average net assets 2.76c .90 .90c
Ratio of interest expense to average net assets 1.86c 1.66 --
Ratio of net investment income to average net assets 10.58c 8.13 5.39c
Decrease reflected in above expense ratios due to
undertakings by the Manager .95c .71 2.77c
Portfolio Turnover Rate 164.73d 752.42 244.61d
- --------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 13,686 12,907 10,396
<FN>
a From September 30, 1997 (commencement of operations) to October 31, 1997.
b Exclusive of redemption fee.
c Annualized.
d Not annualized.
</FN>
</TABLE>
See notes to financial statements.
14
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Six Months Ended
April 30, 1999
Class B Shares (Unaudited)a
- -------------------------------------------------------------------------------
<S> <C>
Per Share Data ($):
Net asset value, beginning of period 11.47
Investment Operations:
Investment income--net .27
Net realized and unrealized gain (loss)
on investments .56
Total from Investment Operations .83
Distributions:
Dividends from investment income--net (.28)
Net asset value, end of period 12.02
- -------------------------------------------------------------------------------
Total Return (%) 21.79b
- -------------------------------------------------------------------------------
Ratios/Supplemental Data (%):
Ratio of operating expenses to average net assets 3.51b
Ratio of interest expense to average net assets 1.86b
Ratio of net investment income to average net assets 9.84b
Decrease reflected in above expense ratios due to
undertakings by the Manager .95b
Portfolio Turnover Rate 164.73c
- -------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 25
<FN>
a From December 24, 1998 (commencement of initial offering) to April 30, 1999.
b Annualized.
c Not annualized.
</FN>
</TABLE>
See notes to financial statements.
The Fund 15
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Six Months Ended
April 30, 1999
Class C Shares (Unaudited)a
- -------------------------------------------------------------------------------
<S> <C>
Per Share Data ($):
Net asset value, beginning of period 11.47
Investment Operations:
Investment income--net .24
Net realized and unrealized gain (loss)
on investments .60
Total from Investment Operations .84
Distributions:
Dividends from investment income--net (.25)
Net asset value, end of period 12.06
- -------------------------------------------------------------------------------
Total Return (%) 22.13b
- -------------------------------------------------------------------------------
Ratios/Supplemental Data (%):
Ratio of operating expenses to average net assets 3.51b
Ratio of interest expense to average net assets 1.86b
Ratio of net investment income to average net assets 9.84b
Decrease reflected in above expense ratios due to
undertakings by the Manager .95b
Portfolio Turnover Rate 164.73c
- -------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 1
<FN>
a From December 24, 1998 (commencement of initial offering) to April 30, 1999.
b Annualized.
c Not annualized.
</FN>
</TABLE>
See notes to financial statements.
16
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Six Months Ended
April 30, 1999
Class R Shares (Unaudited)a
- -------------------------------------------------------------------------------
<S> <C>
Per Share Data ($):
Net asset value, beginning of period 11.47
Investment Operations:
Investment income--net .28
Net realized and unrealized gain (loss)
on investments .60
Total from Investment Operations .88
Distributions:
Dividends from investment income--net (.29)
Net asset value, end of period 12.06
- -------------------------------------------------------------------------------
Total Return (%) 23.01b
- -------------------------------------------------------------------------------
Ratios/Supplemental Data (%):
Ratio of operating expenses to average net assets 2.51b
Ratio of interest expense to average net assets 1.86b
Ratio of net investment income to average net assets 10.84b
Decrease reflected in above expense ratios due to
undertakings by the Manager .95b
Portfolio Turnover Rate 164.73c
- -------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 302
<FN>
a From December 24, 1998 (commencement of initial offering) to April 30, 1999.
b Annualized.
c Not annualized.
</FN>
</TABLE>
See notes to financial statements.
The Fund 17
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Six Months Ended
April 30, 1999
Class T Shares (Unaudited)a
- -------------------------------------------------------------------------------
<S> <C>
Per Share Data ($):
Net asset value, beginning of period 11.47
Investment Operations:
Investment income--net .25
Net realized and unrealized gain (loss)
on investments .61
Total from Investment Operations .86
Distributions:
Dividends from investment income--net (.26)
Net asset value, end of period 12.07
- -------------------------------------------------------------------------------
Total Return (%) 22.67b
- -------------------------------------------------------------------------------
Ratios/Supplemental Data (%):
Ratio of operating expenses to average net assets 3.01b
Ratio of interest expense to average net assets 1.86b
Ratio of net investment income to average net assets 10.34b
Decrease reflected in above expense ratios due to
undertakings by the Manager .95b
Portfolio Turnover Rate 164.73c
- -------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 1
<FN>
a From December 24, 1998 (commencement of initial offering) to April 30, 1999.
b Annualized.
c Not annualized.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Premier Real Estate Mortgage Fund (the "Fund") is a separate non-
diversified series of Dreyfus Debt and Equity Funds (the "Company") which is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company and operates as a series company
currently offering six series, including the Fund. The Fund's investment
objective is to maximize total return, consisting of capital appreciation and
current income. The Dreyfus Corporation (the "Manager") serves as the Fund's
investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A.
("Mellon") which is a wholly-owned subsidiary of Mellon Bank Corporation.
The Company's Board of Trustees approved, effective December 24, 1998, a change
of the Fund's name from "Dreyfus Real Estate Mortgage Fund" to "Dreyfus Premier
Real Estate Mortgage Fund" and the Fund became a five class fund.
Premier Mutual Fund Services, Inc. (the "Distributor") is the distributor of the
Fund's shares. The Fund is authorized to issue an unlimited number of $.001 par
value shares in the following classes of shares: Class A, Class B, Class C,
Class R and Class T shares. Class A and Class T shares are subject to a sales
charge imposed at the time of purchase, Class B shares are subject to a
contingent deferred sales charge ("CDSC") imposed on Class B share redemptions
made within six years of purchase, Class C shares are subject to a CDSC imposed
on Class C shares redeemed within one year of purchase and Class R shares are
sold at net asset value per share only to institutional investors. Other
differences between the classes include the services offered to and the expenses
borne by each class and certain voting rights.
As of April 30, 1999, MBC Investment Corp., an indirect subsidiary of Mellon
Bank Corporation, held 939,481 Class A shares.
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 19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
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.
(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 $43 during the period ended April 30, 1999 based on
available cash balances left on deposit. Income earned under this arrangement is
included in interest income.
20
<PAGE>
(c) Dividends to shareholders: It is the policy of the Fund to declare and pay
dividends from investment income-net quarterly. 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 of 1986, as amended (the "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 Code,
and to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes.
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, 1999 was approximately $4,690,000 with a
related weighted average annualized interest rate of 5.19%.
The Fund 21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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. The Manager has undertaken from
December 24, 1998 through October 31, 1999 to reduce the management fee paid by,
or reimburse such excess expenses of the Fund, to the extent that the Fund's
aggregate annual expenses (exclusive of taxes, brokerage, interest on
borrowings, commitment fees, Rule 12b-1 distribution fees, shareholder servicing
fees and expenses and extraordinary expenses) exceed an annual rate of .65 of 1%
of the value of the Fund's average daily net assets. The expense reimbursement
pursuant to the undertaking, amounted to $61,731 during the period ended April
30, 1999.
Dreyfus Service Corporation, a wholly owned subsidiary of the Manager, retained
$1,484 during the period ended April 30, 1999, from commissions earned on sales
of the Fund's shares.
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act,
Class B, Class C and Class T shares pay the Distributor for distributing their
shares at an annual rate of .75 of 1% of the value of the average daily net
assets of Class B and Class C shares and .25 of 1% of the value of the average
daily net assets of Class T shares. During the period ended April 30, 1999,
Class B, Class C and Class T shares were charged $27, $2 and $1, respectively,
pursuant to the Distribution Plan.
(c) Under the Shareholder Services Plan, Class A, Class B, Class C and Class T
shares pay the Distributor at an annual rate of .25 of 1% of the value of their
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, 1999, Class A, Class B, Class C and
Class T shares were charged $16,152, $9, $1 and $1, respectively, pursuant to
the Shareholder Services Plan.
22
<PAGE>
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, 1999, the Fund was charged $381 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 April 30, 1999, the Fund was
charged $2,709 pursuant to the custody agreement.
(d) A 1% redemption fee is charged and retained by the Fund on shares redeemed
within six months following the date of issuance, including redemptions made
through the use of the Fund Exchange privilege.
(e) 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,
1999, amounted to $31,852,790 and $30,366,360, respectively.
At April 30, 1999, accumulated net unrealized depreciation on investments was
$832,283, consisting of $268,742 gross unrealized appreciation and $1,101,025
gross unrealized depreciation.
At April 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).
The Fund 23
<PAGE>
NOTES
<PAGE>
For More Information
Dreyfus Premier
Real Estate Mortgage 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
Distributor
Premier Mutual Fund Services, Inc.
60 State Street
Boston, MA 02109
To obtain information:
By telephone
Call your financial representative or
1-800-554-4611
By mail Write to:
The Dreyfus Premier
Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
(c) 1999 Dreyfus Service Corporation 045/245SA994
Dreyfus Premier
High Yield Debt
Plus Equity Fund
SEMIANNUAL REPORT
April 30, 1999
<PAGE>
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.
<PAGE>
CONTENTS
The Fund
---------
2 Letter from the President
3 Discussion of Fund Performance
6 Statement of Investments
10 Statement of Assets and Liabilities
11 Statement of Operations
12 Statement of Changes in Net Assets
14 Financial Highlights
18 Notes to Financial Statements
For More Information
--------------------
Back Cover
<PAGE>
THE FUND
Dreyfus Premier
High Yield Debt Plus Equity Fund
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Premier High Yield
Debt Plus Equity Fund, covering the six-month period from November 1, 1998
through April 30, 1999. Inside, you'll find valuable information about how the
Fund was managed during the reporting period, including a discussion with the
Fund's portfolio managers, Roger King and John V. Koerber, members of the
Dreyfus Taxable Fixed Income Team.
The past six months have been rewarding for many fixed-income investors. Lower
short-term interest rates adopted by the Federal Reserve Board and other central
banks in the fall of 1998 appear to have helped many developed nations withstand
the effects of economic weakness in Japan, Asia and Latin America. At the same
time, the U.S. economy entered its eighth year of expansion in an environment
characterized by low inflation and high levels of consumer spending.
Fixed-income securities provided mixed results in this economic climate. While
U.S. Treasury securities rallied strongly last summer when stocks and other
types of bonds fell, they subsequently gave back most of their gains. Other
types of bonds performed well, however, as investors shifted assets back into
bond market sectors they had previously avoided. Accordingly, many corporate
bonds, mortgage-backed securities, asset-backed securities and U.S.
dollar-denominated foreign bonds provided attractive returns over the reporting
period.
We appreciate your confidence over the past six months, and we look forward to
your continued participation in Dreyfus Premier High Yield Debt Plus Equity
Fund.
Sincerely,
/S/ Stephen E. Canter
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
May 13, 1999
2
<PAGE>
DISCUSSION OF FUND PERFORMANCE
John V. Koerber, Portfolio Manager
Roger E. King, Portfolio Manager
Dreyfus Taxable Fixed Income Team
How did Dreyfus Premier High Yield Debt Plus Equity Fund perform relative to its
benchmark?
For the six-month period ended April 30, 1999, the Fund achieved a total return
of 42.92% for Class A shares, 42.42% for Class B shares, 42.39% for Class C
shares and 42.65% for Class T shares.1 This compares to a 8.88% return for the
Fund's benchmark, the Merrill Lynch High Yield Master II index. 2
The Fund benefited from the recovery of the high yield market, and from the
exceptional strength of several market segments in which we invested heavily.
Many of the market sectors we favored were hit hard by last summer's flight to
quality, when domestic and international investors sought safety in the face of
uncertainty in overseas markets. Many of the Fund's investments at that time,
including both high yield bonds and stocks, were seen by the investors to hold
extra risk: they declined more sharply than did broader market measures. But
just as the flight to quality pushed certain sectors down further than the
high-yield market as a whole, the subsequent recovery in such segments was
stronger than the recovery of the overall market.
What is the Fund's investment approach?
The Fund attempts to maximize total return in two ways. First, we invest in
fixed-income securities issued by companies with credit ratings
below-investment-grade. Second, we purchase common stocks of companies that
issue below-investment-grade debt. Issuers of below-investment-grade bonds may
be at an early stage of development or have highly leveraged balance sheets. To
attract buyers and compensate them for higher credit risk, these issuers must
offer higher yields than those offered by more established companies.
The Fund 3
<PAGE>
DISCUSSION OF FUND PERFORMANCE (continued)
Our approach to the selection of individual bonds is based on careful credit
analysis -- our projection of an issuer's ability to meet its obligations. Our
emphasis is on special situations, which are out-of-favor companies that we
believe are undervalued. We believe that a trigger event will lead the market to
discover the value we see, and the price of our investment will rise.
Of the approximately 2,000 companies issuing high-yield bonds, about one-third
also issue common stock. We review these companies to find about one dozen
stocks that we believe have the greatest potential for growth. When evaluating
stocks, we look at factors that are similar to those we consider when purchasing
high-yield bonds. Because stock prices tend to advance more rapidly on positive
news than bond prices, we look to the stock portion of our portfolio to enhance
overall performance in rising markets. We balance the proportions of stocks and
bonds according to economic and financial events. Presently, we strive to invest
about 25% of the portfolio in stocks.
What other factors influenced the Fund's performance?
The high-yield market recovered in stages from last summer's precipitous drop.
As broader markets regained confidence, near-investment-grade securities
recovered first. Then, defensive issues -- bonds of companies in industries
considered recession-resistant, such as cable broadcasting and
entertainment--moved ahead. Finally, a booming equity market in sectors such as
technology and telecommunications carried the high-yield market in these
industries as well. Because of our emphasis on special situations, our growth
was concentrated at the end of the period when a number of our investments
performed exceptionally well.
Several holdings performed very well. They include MGC Communications, a
corporate telecommunications provider, ICF Kaiser International, an engineering
management and facilities provider that is undergoing a corporate restructuring
and EchoStar Communications, a consumer direct-satellite broadcast company.
4
<PAGE>
What is the Fund's current strategy?
While we are very pleased with the Fund's performance over the semiannual
period, we also acknowledge that portion of the gain was recovery from serious
underperformance in the preceding period.
We currently intend to maintain our weightings of debt and equity, as we believe
the high-yield debt markets offer better relative value (and hence, downside
protection) than the equity offerings of this market at this time. 3
May 13, 1999
1 Total return included reinvestment of dividends and any capital gains paid,
and does not reflect the maximum initial sales charge in the case of Class A
and Class T shares, or the applicable contingent deferred sales charge imposed
on redemptions in the case of Class B and Class C shares.
2 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 $100 million par amount
outstanding and greater than or equal to one year to maturity.
3 Portfolio composition is subject to change at any time, as market conditions
warrant or other factors deem advisable.
The Fund 5
<PAGE>
STATEMENT OF INVESTMENTS
April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Principal
Bonds and Notes--66.7% Amount($) Value ($)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Airlines--2.4%
Canadian Airlines,
Sr. Notes, 12.25%, 2006 800,000 300,000
Alternative Video Providers--2.8%
UIH Australia/Pacific, Ser.B,
Sr. Discount Notes, 14.75%, 2006 (Units)a,b 500,000 360,000
Broadcasting/Television--3.9%
Scandinavian Broadcasting System,
Conv. Deb., 7%, 2004 400,000 489,500
Business Services--13.7%
American Eco, Ser. B,
Sr. Notes, 9.625%, 2008 750,000 452,813
Employee Solutions, Ser. B,
Sr. Notes, 10%, 2004 500,000 253,125
Entex Information Services,
Sr. Notes, 12.5%, 2006 150,000 107,438
ICF Kaiser International,
Sr. Sub. Notes, 13%, 2003 825,000 580,594
U.S. Office Products,
Sr. Notes, 9.75%, 2008 500,000 347,500
1,741,470
Chemicals--2.0%
Trans-Resources,
Ser. B, Sr. Discount Notes, 12%, 2008a 500,000 260,000
Competitive Local Exchange Carrier--8.9%
FirstWorld Communications,
Sr. Discount Notes, 13%, 2008a 600,000 330,000
Phonetel Technologies,
Sr. Notes, 12%, 2006c 1,500,000 442,500
Poland Telecom Finance,
Sr. Notes, 14%, 2007 (Units)b 250,000 235,000
USN Communications, Ser. B,
Sr. Discount Notes, 14.625%, 2004a,c 1,247,000 118,464
1,125,964
Consumer--2.6%
Samsonite,
Sr. Sub. Notes, 10.75%, 2008 300,000 225,000
Syratech,
Sr. Notes, 11%, 2007 150,000 99,750
324,750
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Principal
Bonds and Notes (continued) Amount($) Value ($)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Energy--2.7%
Kelly Oil & Gas,
Conv. Sub. Notes, 7.875%, 1999 400,000 238,000
Petsec Energy, Ser B,
Sr. Sub. Notes, 9.5%, 2007 200,000 101,000
339,000
Entertainment and Recreation--2.5%
Discovery Zone,
Sr. Secured Notes, 13.5%, 2002b,c 125,000 25,000
E&S Holdings, Ser. B,
Sr. Sub Notes, 10.375%, 2006 239,000 111,135
Livent,
Sr. Notes, 9.375%, 2004c 400,000 182,000
318,135
Forest Products--7.5%
Four M, Ser. B,
Sr. Notes, 12%, 2006c 400,000 302,000
Maxxam Group Holdings,
Sr. Secured Notes, 12%, 2003 250,000 261,250
SF Holdings, Ser. B,
Sr. Secured Discount Notes, 12.75%, 2008a 1,250,000 393,750
957,000
Industrial--.1%
FWT,
Sr. Sub. Notes, 9.875%, 2007c 300,000 15,000
Insurance--2.9%
Penncorp Financial,
Sr. Sub. Notes, 9.25%, 2003 500,000 362,500
Metals--7.0%
Metal Management,
Sr. Notes, 10%, 2008 600,000 483,000
Northwestern Steel & Wire,
Sr. Notes, 9.5%, 2001 600,000 381,000
Recycling Industries,
Sr. Sub. Notes, 13%, 2005c 200,000 25,000
889,000
Retail--1.5%
J. Crew Group, Ser. B,
Sr. Discount Notes, 13.125%, 2008a 350,000 197,750
</TABLE>
The Fund 7
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Principal
Bonds and Notes (continued) Amount($) Value ($)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Satellite--2.4%
American Mobile Satellite/AMSC Acquistion, Ser. B,
Sr. Notes, 12.25%, 2008 (Units)b 400,000 298,000
Technology--2.5%
Therma-Wave, Ser. B,
Sr. Notes, 10.625%, 2004 400,000 322,000
Wireless Communication--1.3%
Comunicacion Celular,
Sr. Discount Notes, 14.125%, 2005a,d 250,000 165,000
Total Bonds and Notes
(cost $8,934,131) 8,465,069
- --------------------------------------------------------------------------------------------
Common Stocks--18.0% Shares Value ($)
- --------------------------------------------------------------------------------------------
Aerospace--1.3%
American Pacifice 20,000 165,000
Airlines--1.5%
America West Airlines warrantse 20,000 185,000
Alternative Video Providers--1.3%
Pegasus Communicationse 4,000 164,000
Broadcasting/Television--.9%
Granite Broadcastinge 15,000 113,437
Building Materials--1.5%
Associated Materials 15,000 193,125
Competitive Local Exchange Carrier--2.9%
FirstWorld Communications warrants d,e 600 30,000
MGC Communicationse 10,000 340,000
370,000
Consumer--3.7%
Coinmach Laundrye 38,000 465,500
Entertainment and Recreation--2.6%
American Skiinge 65,000 333,125
Forest Products--.0%
SF Holdings, Cl. Cd, e 2,500 5,000
PCS/EMSR--2.3%
Clearnet Communicationse 24,500 286,344
Total Common Stocks
(cost $2,255,607) 2,280,531
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Preferred Stocks--11.2% Shares Value ($)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Alternative Video Providers--1.6%
Echostar Communications,
Ser. C, Cum. Conv., $3.375 1,000 205,000
Broadcasting/Television--3.6%
Paxson Communications,
Cum. Conv., $975d 48 460,800
Competitive Local Exchange Carrier--3.8%
Winstar Communications,
Ser. C, Cum., $142.50 600 480,000
Supermarkets--2.2%
Supermarkets General,
Cum., $3.52e 7,500 272,813
Total Preferred Stocks
(cost $1,313,100) 1,418,613
- --------------------------------------------------------------------------------------------
Principal
Short-Term Investments--1.6% Amount ($) Value ($)
- --------------------------------------------------------------------------------------------
U. S. Government Agencies;
Federal Home Loan Banks,
Discount Notes, 4.8%, 5/3/1999
(cost $198,947) 199,000 198,947
- --------------------------------------------------------------------------------------------
Total Investments (cost $12,701,785) 97.5% 12,363,160
Cash and Receivables (net) 2.5% 315,037
Net Assets 100.0% 12,678,197
a Zero coupon until a specified date at which time
the stated coupon rate becomes effective until maturity.
b With warrants to purchase common stock.
c Non-income producing--security in default.
d 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, 1999, these
securities amounted to $660,800 or 5.2% of net assets.
e Non-income producing.
See notes to financial statements.
</TABLE>
The Fund 9
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Cost Value
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Assets ($):
Investments in securities--
See Statement of Investments 12,701,785 12,363,160
Interest and dividends receivable 15,000 333,733
Receivable for shares of Beneficial
Interest subscribed
Prepaid expenses and other assets 41,726
Due from The Dreyfus Corporation 10,498
12,764,117
- --------------------------------------------------------------------------------------------
Liabilities ($):
Due to Distributor 6,681
Cash overdraft due to Custodian 7,117
Accrued expenses 72,122
85,920
- --------------------------------------------------------------------------------------------
Net Assets ($) 12,678,197
- --------------------------------------------------------------------------------------------
Composition of Net Assets ($):
Paid-in capital 11,286,336
Accumulated undistributed investment 201,334
income--net
Accumulated net realized gain (loss) 1,529,152
on investments
Accumulated net unrealized appreciation (depreciation)
on investments--Note 3 (338,625)
- --------------------------------------------------------------------------------------------
Net Assets ($) 12,678,197
- --------------------------------------------------------------------------------------------
Net Asset Value Per Share
Class A Class B Class C Class T
- --------------------------------------------------------------------------------------------
Net Assets ($) 4,877,419 5,392,061 1,216,540 1,192,177
Shares Outstanding 351,525 388,192 87,640 85,884
- --------------------------------------------------------------------------------------------
Net Asset Value Per Share ($) 13.88 13.89 13.88 13.88
See notes to financial statements.
</TABLE>
10
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Investment Income ($)
- --------------------------------------------------------------------------------------------
<S> <C>
Income:
Interest 673,368
Cash dividends 68,283
Total Income 741,651
Expenses:
Management fee--Note 2(a) 37,963
Registration fees 43,638
Legal fees 30,000
Distribution fees--Note 2(b) 20,897
Auditing fees 15,000
Shareholder servicing costs--Note 2(c) 12,956
Prospectus and shareholders' reports 5,947
Custodian fees--Note 2(c) 4,200
Trustees' fees and expenses--Note 2(d) 384
Miscellaneous 6,097
Total Expenses 177,082
Less--expense reimbursement from the Manager
due to undertaking--Note 2(a) (105,568)
Net Expenses 71,514
Investment Income--Net 670,137
- --------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments--Note 3:
Net realized gain (loss) on investments 1,582,572
Net unrealized appreciation (depreciation) on investments 1,498,064
Net Realized and Unrealized Gain (Loss) on Investments 3,080,636
Net Increase in Net Assets Resulting from Operations 3,750,773
See notes to financial statements.
</TABLE>
The Fund 11
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Six Months Ended
April 30, 1999 Year Ended
(Unaudited) October 31, 1998*
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations ($):
Investment income--net 670,137 207,990
Net realized gain (loss) on investments 1,582,572 (53,420)
Net unrealized appreciation (depreciation)
on investments 1,498,064 (1,836,689)
Net Increase (Decrease) in Net Assets
Resulting from Operations 3,750,773 (1,682,119)
- ---------------------------------------------------------------------------------------------------
Dividends to Shareholders From ($):
Investment income--net:
Class A shares (216,238) (59,567)
Class B shares (219,273) (52,961)
Class C shares (48,708) (14,021)
Class T shares (51,785) (14,240)
Total Dividends (536,004) (140,789)
- ---------------------------------------------------------------------------------------------------
Beneficial Interest Transactions:
Net proceeds from shares sold:
Class A shares 59,015 4,024,588
Class B shares 521,640 4,180,616
Class C shares 15,000 1,088,000
Class T shares -- 1,000,000
Dividends reinvested:
Class A shares 215,684 59,567
Class B shares 209,772 52,961
Class C shares 48,100 13,840
Class T shares 51,786 14,240
Cost of shares redeemed:
Class B shares (203,973) --
Class C shares -- (64,500)
Increase (Decrease) in Net Assets
from Beneficial Interest Transactions 917,024 10,369,312
Total Increase (Decrease) in Net Assets 4,131,793 8,546,404
- ---------------------------------------------------------------------------------------------------
Net Assets ($)
Beginning of Period 8,546,404 --
End of Period 12,678,197 8,546,404
Undistributed investment income--net 201,334 67,201
* From June 29, 1998 (commencement of operations) to October 31, 1998. See notes
to financial statements.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Six Months Ended
April 30, 1999 Year Ended
(Unaudited) October 31, 1998*
- ------------------------------------------------------------------------------------
<S> <C> <C>
Capital Share Transactions:
Class A
Shares sold 4,985 321,985
Shares issued for dividends reinvested 18,833 5,722
Net Increase (Decrease) in Shares Outstanding 23,818 327,707
- ------------------------------------------------------------------------------------
Class B
Shares sold 46,031 336,268
Shares issued for dividends reinvested 18,270 5,088
Shares redeemed (17,465) --
Net Increase (Decrease) in Shares Outstanding 46,836 341,356
- ------------------------------------------------------------------------------------
Class C
Shares sold 1,079 87,040
Shares issued for dividends reinvested 4,190 1,331
Shares redeemed -- (6,000)
Net Increase (Decrease) in Shares Outstanding 5,269 82,371
- ------------------------------------------------------------------------------------
Class T
Shares sold -- 80,000
Shares issued for dividends reinvested 4,516 1,368
Net Increase (Decrease) in Shares Outstanding 4,516 81,368
* From June 29, 1998 (commencement of operations) to October 31, 1998.
See notes to financial statements.
</TABLE>
The Fund 13
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the
fiscal periods indicated. Certain information reflects financial results for a
single Fund share. 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. These figures have been derived from the Fund's
financial statements.
- --------------------------------------------------------------------------------
Six Months Ended
April 30, 1999 Year Ended
Class A Shares (Unaudited) October 31, 1998 a
- --------------------------------------------------------------------------------
Per Share Data ($):
Net asset value, beginning of period 10.27 12.50
Investment Operations:
Investment income--net .79 .27
Net realized and unrealized gain (loss)
on investments 3.47 (2.31)
Total from Investment Operations 4.26 (2.04)
Distributions:
Dividends from investment income--net (.65) (.19)
Net asset value, end of period 13.88 10.27
- --------------------------------------------------------------------------------
Total Return (%) b 86.55 c (16.38) d
Ratios/Supplemental Data (%):
Ratio of expenses to average net assets 1.00 c 1.00 c
Ratio of net investment income (loss)
to average net assets 13.65 c 7.07 c
Decrease reflected in above expense ratios
due to undertaking by the Manager 2.07 c 2.26 C
Portfolio Turnover Rate 80.74 d 42.54 d
- --------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 4,877 3,364
a From June 29, 1998 (commencement of operations) to October 31, 1998.
b Exclusive of sales load.
c Annualized.
d Not annualized. See notes to financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
Six Months Ended
April 30, 1999 Year Ended
Class B Shares (Unaudited) October 31, 1998 a
- --------------------------------------------------------------------------------
Per Share Data ($):
Net asset value, beginning of period 10.26 12.50
Investment Operations:
Investment income--net .73 .24
Net realized and unrealized gain (loss)
on investments 3.49 (2.32)
Total from Investment Operations 4.22 (2.08)
Distributions:
Dividends from investment income--net (.59) (.16)
Net asset value, end of period 13.89 10.26
- --------------------------------------------------------------------------------
Total Return (%) b 85.54 c (16.64) d
Ratios/Supplemental Data (%):
Ratio of expenses to average net assets 1.75 c 1.75 c
Ratio of net investment income (loss)
to average net assets 12.92 c 6.32 c
Decrease reflected in above expense ratios
due to undertaking by the Manager 2.11 c 2.26 c
Portfolio Turnover Rate 80.74 d 42.54 d
- --------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 5,392 3,503
a From June 29, 1998 (commencement of operations) to October 31, 1998.
b Exclusive of sales load.
c Annualized.
d Not annualized.
The Fund 15
<PAGE>
FINANCIAL HIGHLIGHTS (Unaudited) (continued)
- --------------------------------------------------------------------------------
Six Months Ended
April 30, 1999 Year Ended
Class C Shares (Unaudited) October 31, 1998 a
- --------------------------------------------------------------------------------
Per Share Data ($):
Net asset value, beginning of period 10.25 12.50
Investment Operations:
Investment income--net .74 .25
Net realized and unrealized gain (loss)
on investments 3.47 (2.33)
Total from Investment Operations 4.21 (2.08)
Distributions:
Dividends from investment income--net (.58) (.17)
Net asset value, end of period 13.88 10.25
- --------------------------------------------------------------------------------
Total Return (%) b 85.48 c (16.64) d
- --------------------------------------------------------------------------------
Ratios/Supplemental Data (%):
Ratio of expenses to average net assets 1.75 c 1.75 c
Ratio of net investment income (loss)
to average net assets 12.89 c 6.29 c
Decrease reflected in above expense ratios
due to undertaking by the Manager 2.03 c 2.26 c
Portfolio Turnover Rate 80.74 d 42.54 d
- --------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 1,217 844
a From June 29, 1998 (commencement of operations) to October 31, 1998.
b Exclusive of sales load.
c Annualized.
d Not annualized. See notes to financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
Six Months Ended
April 30, 1999 Year Ended
Class T Shares (Unaudited) October 31, 1998 a
- --------------------------------------------------------------------------------
Per Share Data ($):
Net asset value, beginning of period 10.26 12.50
Investment Operations:
Investment income--net .77 .26
Net realized and unrealized gain (loss)
on investments 3.48 (2.32)
Total from Investment Operations 4.25 (2.06)
Distributions:
Dividends from investment income--net (.63) (.18)
Net asset value, end of period 13.88 10.26
- --------------------------------------------------------------------------------
Total Return (%) b 86.01 c (16.64) d
- --------------------------------------------------------------------------------
Ratios/Supplemental Data (%):
Ratio of expenses to average net assets 1.25 c 1.25 c
Ratio of net investment income (loss)
to average net assets 13.39 c 6.82 c
Decrease reflected in above expense ratios
due to undertaking by the Manager 2.07 c 2.26 c
Portfolio Turnover Rate 80.74 d 42.54 d
- --------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 1,192 835
a From June 29, 1998 (commencement of operations) to October 31, 1998.
b Exclusive of sales load.
c Annualized.
d Not annualized. See notes to financial statements.
The Fund 17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Premier High Yield Debt Plus Equity Fund (the "Fund") is a separate
non-diversified series of Dreyfus Debt and Equity Funds (the "Company") which is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company and operates as a series company
currently offering six series, including the Fund. The Fund's investment
objective is to maximize total return, consisting of capital appreciation and
current income. The Dreyfus Corporation (the "Manager") serves as the Fund's
investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A.
("Mellon") which is a wholly-owned subsidiary of Mellon Bank Corporation.
Premier Mutual Fund Services, Inc. (the "Distributor") is the distributor of the
Fund's shares. The Fund is authorized to issue an unlimited number of $.001 par
value shares in the following classes of shares: Class A, Class B, Class C and
Class T shares. Class A and Class T shares are subject to a sales charge imposed
at the time of purchase, Class B shares are subject to a contingent deferred
sales charge ("CDSC") imposed on Class B share redemptions made within six years
of purchase and Class C shares are subject to a CDSC imposed on Class C shares
redeemed within one year of purchase. Other differences between the classes
include the services offered to and the expenses borne by each class and certain
voting rights.
As of April 30, 1999, MBC Investments Corp., an indirect subsidiary of Mellon
Bank Corporation, held the following shares of the Fund:
Class A ..................344,404 Class C ..................85,521
Class B ..................341,879 Class T ..................85,884
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.
18
<PAGE>
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.
(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 $1,875 during the period ended April 30, 1999 based on
available cash balances left on deposit. Income earned under this arrangement is
included in interest income.
The Fund 19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(c) Dividends to shareholders: It is the policy of the Fund to declare and pay
dividends from investment income-net quarterly. 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 of 1986, as amended (the "Code"). To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the Fund not to distribute such gain.
(d) Federal income taxes: It is the policy of the Fund to continue to qualify as
a regulated investment company, if such qualification is in the best interests
of its shareholders, by complying with the applicable provisions of the Code,
and to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes.
The Fund has unused capital loss carryover of approximately $53,000 available
for Federal income tax purposes to be applied against future net securities
profits, if any, realized subsequent to October 31, 1998. If not applied, the
carryover expires in fiscal 2006.
NOTE 2--Management Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement with the Manager, the management fee is
computed at the annual rate of .75 of 1% of the value of the Fund's average
daily net assets and is payable monthly. The Manager had undertaken from June
29, 1998 through April 30, 1999 to reduce the management fee paid by, or
reimburse such excess expenses of the Fund, to the extent that the Fund's
aggregate annual expenses, exclusive of taxes, brokerage, interest on
borrowings, commitment fees, Rule 12b-1 distribution fees and expenses and
extraordinary expenses exceed an annual rate of 1.00% of the value of the Fund's
average daily net assets. The expense reimbursement, pursuant to the
undertaking, amounted to $105,568 during the period ended April 30, 1999.
20
<PAGE>
Dreyfus Service Corporation, a wholly owned subsidiary of the Manager, retained
$5,238 during the period ended April 30, 1999, from commissions earned on sales
of the Fund's shares.
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act,
Class B and Class C shares pay the Distributor for distributing their shares at
an annual rate of .75 of 1% of the value of their average daily net assets, and
Class T shares pay the Distributor at the annual rate of .25 of 1% of the value
of the average daily net assets of Class T shares. During the period ended April
30, 1999, Class B, Class C and Class T shares were charged $16,037, $3,654 and
$1,206, respectively, pursuant to the Distribution Plan.
(c) Under the Shareholder Services Plan, Class A, Class B, Class C and Class T
shares pay the Distributor at an annual rate of .25 of 1% of the value of their
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, 1999, Class A, Class B, Class C and
Class T shares were charged $4,885, $5,345, $1,218 and $1,206, respectively,
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, 1999, the Fund was charged $143 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 April 30, 1999, the Fund was
charged $4,200 pursuant to the custody agreement.
The Fund 21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(d) 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 3--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities, during the period ended April 30, 1999, amounted to
$9,399,958 and $7,676,274, respectively.
At April 30, 1999, accumulated net unrealized depreciation on investments was
$338,625, consisting of $1,137,670 gross unrealized appreciation and $1,476,295
gross unrealized depreciation.
At April 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).
22
<PAGE>
For More Information
Dreyfus Premier
High Yield Debt Plus Equity 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
Distributor
Premier Mutual Fund Services, Inc.
60 State Street
Boston, MA 02109
To obtain information:
By telephone
Call your financial representative or
1-800-554-4611
By mail Write to:
The Dreyfus Premier
Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
(C) 1999 Dreyfus Service Corporation 046/246SA994
