DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
LETTER TO SHAREHOLDERS
Dear Shareholder:
The letter that follows is the first report to shareholders since Dreyfus
Strategic Governments Income, Inc. changed its primary portfolio manager. The
Fund is now managed by Gerald E. Thunelius, a portfolio manager of The
Dreyfus Corporation, which is a subsidiary of Mellon Bank, N.A.
Mr. Thunelius joined the company in 1989, and is the primary portfolio
manager for six Dreyfus mutual funds. In addition to acting as portfolio
manager, he also performs trading functions for these funds and does analysis
on U.S. Treasuries, agencies, mortgages and corporate products.
Mr. Thunelius received a B.B.A. in finance from Dowling College. We
welcome Jerry in bringing his considerable talents to the Fund.
Sincerely,
[Stephen E. Canter signature logo]
Stephen E. Canter
Chief Investment Officer
The Dreyfus Corporation
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on Dreyfus Strategic
Governments Income, Inc. For the six-month period ended May 31, 1996, your
Fund produced income dividends of $.375 per share which is equivalent to an
annualized distribution rate per share of 8.33%.* The Fund's total return for
the same time period was .57%;** the J.P. Morgan Global Government Bond
Index, the Fund's comparative benchmark, returned -0.8% for the same time
period.***
THE ECONOMY
Recent economic reports show that the economy continues to recover from
its year-end 1995 pause. Spurred by a surge in consumer and business
spending, the economy grew at a moderate 2.3% during the first quarter of
this year. Suggesting further strength, the index of leading economic
indicators extended its string of increases for the third consecutive month
in April, the first such three-month advance since late 1993. Despite a sharp
jump in energy prices, inflation remained in check. For the six months ended
in May, consumer prices rose 2.0%. Giving further evidence of moderating
prices, a survey released in May by the National Business Council revealed
greater difficulty for major industrial companies to raise prices now than
six months ago.
Despite the relatively benign level of inflation, the economy's expansion
has sparked concerns that the Federal Reserve could raise short-term interest
rates. So far, the Fed has refrained from tightening monetary policy,
apparently interpreting economic data to mean that the economy remains on a
path of moderate growth unaccompanied by a surge in inflation. In response to
the lack of Fed action and the stronger economic surge, long-term rates have
been rising steadily since the beginning of the year.
The strong employment data has some investors fearing that the Fed will
not continue to stand pat. There is now a greater consensus view that the Fed
will tighten soon, meaning that it will raise interest rates, in order to
prevent unacceptable levels of price inflation from accompanying the growth
in the economy.
Consumers, who account for over two thirds of our country's Gross
Domestic Product (GDP), are vital contributors to economic growth. So far,
they have continued to spend, despite their concerns about job security and
stagnating real wages. Retail sales in general are up 3.8% during the
reporting period. Additional encouragement to consumers occurred when the
Labor Department recently reported a continuation of the declining trend in
first-time jobless claims.
On the corporate side of the economy, capacity utilization inched higher
and is now at 83%. While still well below the peak level (85.1%) for this
economic expansion which was reached over a year ago, further growth in this
indicator may result in shortages that could produce higher prices. Following
the GM strike-induced slowdown in March, industrial production has risen 2%
during the reporting period.
We remain alert to early signs of growing inflationary pressures that
might cause the Federal Reserve to raise interest rates. To date, prices are
still being kept under control. However, we are especially watchful regarding
the potential buildup in wage pressures given the rising trend in both
corporate output and capacity utilization.
MARKET ENVIRONMENT
The market has currently priced in a 50 basis point interest rate hike by
the Fed in August. A tightening of that magnitude will likely cause prices
and yields on long-term bond maturities to stabilize. A lower increase may be
viewed by the market as insufficient, given the current economic environment.
We are not yet convinced that the Fed has to increase rates, but are aware
that the Fed might be inclined to accommodate what the market has priced in.
THE PORTFOLIO
The Fund has made several structural changes since the last writing.
First and foremost, the Fund shortened its duration to protect against higher
yields. The longer a fund's duration, the more volatile the fund will be as
interest rates move. In a rising interest rate environment, a shorter
duration generally is advantageous to a fund. The reverse is true in a
declining interest rate environment. That shorter duration helped the fund to
endure and perform well in the dramatic sell-off that began in February of
this year. The fund also moved out of most of its corporate debt holdings and
into mortgages. The yield spread between investment grade corporate bonds and
treasuries is currently very tight, which means that the yield on investment
grade corporate bonds is only marginally higher than treasuries. In our
opinion, this makes them unattractive because investors are not being
compensated enough for the risk associated with corporate debt. Mortgages, on
the other hand, have a very attractive yield spread compared to treasuries.
This change of allocation has worked well; while the yield spread between
mortgages and treasuries has tightened, it still remains more favorable than
the spread between corporate debt and treasuries, which continues to be very
narrow.
Going forward we anticipate adjusting the Fund's duration to match that
of the index. Interest rates have already increased substantially in
anticipation of a continued strong second half of the year. It is our opinion
that the rewards for maintaining a short portfolio maturity have dropped
considerably.
The Fund's investment objective - to maximize current income to the
extent consistent with preservation of capital - continues to govern our
portfolio management decisions.
Included in this report is a series of detailed statements about your
Fund's holdings and its financial condition. We hope they are informative.
Please know that we appreciate greatly your continued confidence in the Fund
and in The Dreyfus Corporation.
Sincerely,
[Gerald E. Thunelius signature logo]
Gerald E. Thunelius
Portfolio Manager
July 1, 1996
New York, N.Y.
* Annualized distribution rate per share is based upon dividends per share
paid from net investment income during the period divided by the market value
price at the end of the period.
**Total return is based on net asset value and includes the reinvestment of
any dividends and capital gains paid.
***Source: BLOOMBERG. Unlike the Fund, the J.P. Morgan Global Government Bond
index is an unmanaged index of bonds of intermediate maturity from Australia,
Belgium, Canada, Denmark, France, Germany, Great Britain, Italy, Japan, the
Netherlands, Spain and Sweden.
<TABLE>
<CAPTION>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
STATEMENT OF INVESTMENTS MAY 31, 1996 (UNAUDITED)
PRINCIPAL
BONDS AND NOTES-96.5% AMOUNT VALUE
_______ _______
<S> <C> <C>
BANKING AND FINANCE-4.1% American International Group,
Bonds, 11.70%, 2001.................. $ 1,943,383 (a) $ 2,162,013
Credit Local de France,
Bonds, 9 5/8%, 2000.................. 730,460 (b) 791,180
General Electric Capital,
Deb., 7%, 2000....................... 400,320 (c) 443,355
KfW International Finance,
Gtd. Bonds, 6%, 1999................. 1,387,219 (d) 1,574,494
RBSG Capital,
Notes (Gtd. by The Royal Bank of Scotland
Group PLC), 10 1/8%, 2004............ 1,000,000 1,153,064
_________
6,124,106
_________
CONSUMER-1.7% News America Holdings,
Gtd. Sr. Notes, 8 1/2%, 2004................ 2,500,000 2,613,200
_________
FOREIGN/
GOVERNMENTAL-36.2% Austrian Government Securities;
Republic of Austria, Deb.:
6 1/4%, 2003.......................... 3,884,213 (d) 4,719,319
7 1/4%, 2007.......................... 6,563,833 (e) 6,869,052
British Government Securities;
United Kingdom, Gilt Edged Securities:
9 1/2%, 2005..................... 1,550,500 (f) 1,684,231
9%, 2011......................... 775,250 (f) 818,616
Canadian Government Securities:
Canada Government Bonds,
8 3/4%, 2005......................... 730,460 (b) 783,455
Province of Newfoundland,
Sinking Fund Deb., 11 5/8%, 2007...... 2,000,000 2,595,980
Province of Quebec,
Deb., 13 1/4%, 2014................... 3,200,000 3,892,512
Colombian Government Securities;
Republic of Colombia, Notes:
8 3/4%, 1999....................... 1,000,000 1,030,790
7 1/4%, 2003....................... 1,000,000 941,352
French Government Securities;
France O.A.T., Deb.:
10%, 2000........................... 1,454,475 (g) 1,693,300
8 1/2%, 2023........................ 1,842,335 (g) 2,113,158
German Government Securities:
Bundesrepublik Deutschland,
Bonds, 9%, 2000....................... 5,251,067 (e) 6,017,197
German Unity Bonds,
8 3/4%, 2001........................ 4,594,683 (e) 5,291,697
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
STATEMENT OF INVESTMENTS (CONTINUED) MAY 31, 1996 (UNAUDITED)
PRINCIPAL
BONDS AND NOTES (CONTINUED) AMOUNT VALUE
_______ _______
FOREIGN/
GOVERNMENTAL (CONTINUED) Ireland Government Securities;
Republic of Ireland, Deb.,
7 3/8%, 2002....................... $ 1,601,281 (c) $ 1,841,473
Mexican Government Securities;
United Mexican States,
Floating Rate Notes, 10 13/16%, 1997.. 2,500,000 (h) 2,603,125
New Zealand Government Securities;
Government of New Zealand,
Bonds, 10 5/8%, 2005.................. 3,000,000 3,730,290
South African Government Securities;
Republic of South Africa,
Notes, 9 5/8%, 1999................... 1,000,000 1,047,500
Spanish Government Securities;
Spain Government, Deb.:
12 1/4%, 2000..................... 3,117,450 (i) 3,515,548
10.30%, 2002...................... 3,117,450 (i) 3,343,496
___________
54,532,091
___________
FOREIGN/SUPRANATIONAL-1.9% European Investment Bank,
Notes, 12 3/4%, 2000................. 2,591,177 (a) 2,908,596
___________
OTHER-2.1% City of New York,
General Obligation Taxable Bonds,
Ser. D, 9.85%, 2008.................. 3,000,000 3,217,500
___________
U.S. GOVERNMENT
AND AGENCIES-50.5% Federal Farm Credit Bank, Deb.,
11.90%, 1997......................... 12,450,000 13,370,877
Federal Home Loan Mortgage Corp.:
Notes, 8.20%, 1998................... 5,000,000 5,064,345
Real Estate Mortgage Investment
Conduit Trust, Pass-Through Ctfs.
(Collateralized by FHLMC Pass-Through Ctfs):
Ser. 1611, Cl. L, 7%, 2023
(Interest Only Obligation) (j) 2,228,688
Ser. 10, Cl. O, 7 3/4%, 2023
(Interest Only Obligation) (j) 2,521,875
Federal National Mortgage Association:
7%, 8/1/2025 - 5/1/2026.............. 5,049,997 4,825,044
8%, 3/1/23 - 12/1/2025............... 8,342,494 8,386,801
9 1/2%, 2018......................... 5,942,358 6,280,241
Government National Mortgage Association I:
10%, 1998............................ 71,153 75,200
7 1/2%, 2023......................... 3,594,075 3,530,029
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
STATEMENT OF INVESTMENTS (CONTINUED) MAY 31, 1996 (UNAUDITED)
PRINCIPAL
BONDS AND NOTES (CONTINUED) AMOUNT VALUE
_______ _______
U.S. GOVERNMENT
AND AGENCIES (CONTINUED) U.S. Treasury Bonds:
13 1/8%, 5/15/2001................... $ 3,400,000 $ 4,323,312
12%, 8/15/2013....................... 10,000,000 13,954,688
U.S. Treasury Notes:
9 1/8%, 5/15/1999.................... 3,500,000 (k) 3,747,735
6 1/4%, 4/30/2001.................... 8,000,000 7,866,250
___________
76,175,085
___________
TOTAL BONDS AND NOTES
(cost $148,404,003).................. $145,570,578
============
SHORT-TERM INVESTMENTS-1.4%
AGENCY DISCOUNT NOTE-.3% Federal Home Loan Mortgage Corp.,
5.30%, 6/3/1996...................... $ 470,000 $ 469,862
___________
U.S. TREASURY BILLS-1.1%....5%, 6/20/1996 955,000 952,441
4.96%, 8/1/1996........................ 486,000 481,898
5.03%, 8/22/1996....................... 203,000 200,663
___________
1,635,002
___________
TOTAL SHORT-TERM INVESTMENTS
(cost $2,104,931).................... $ 2,104,864
============
TOTAL INVESTMENTS (cost $150,508,934)....................................... 97.9% $147,675,442
========= ============
CASH AND RECEIVABLES (NET).................................................. 2.1% $ 3,123,570
========= ============
NET ASSETS.................................................................. 100.0% $150,799,012
========= ============
NOTES TO STATEMENT OF INVESTMENTS:
(a) Denominated in Italian Lire.
(b) Denominated in Canadian Dollars.
(c) Denominated in Swiss Francs.
(d) Denominated in Japanese Yen.
(e) Denominated in German Deutsche Marks.
(f) Denominated in British Pounds.
(g) Denominated in French Francs.
(h) Variable rate security-interest rate subject to periodic change.
(i) Denominated in Spanish Pesetas.
(j) Notional face $5,000,000.
(k) Partially held by the custodian in a segregated account as
collateral for open Financial Futures positions.
</TABLE>
See independent accountants' review report and notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
STATEMENT OF FINANCIAL FUTURES MAY 31, 1996 (UNAUDITED)
MARKET VALUE UNREALIZED
NUMBER OF COVERED APPRECIATION
FINANCIAL FUTURES PURCHASED; CONTRACTS BY CONTRACTS EXPIRATION AT 5/31/96
- - ---------------------- ------ ------------- ---------- -------------
<S> <C> <C> <C> <C>
German Government 10yr bond.................. 3 $ 482,685 June `96 $ 98
--------
FINANCIAL FUTURES SOLD SHORT;
- - ----------------------
U.S. Treasury 5yr bond....................... 100 10,476,562 September `96 33,594
--------
$33,692
============
</TABLE>
See independent accountants' review report and notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
STATEMENT OF ASSETS AND LIABILITIES MAY 31, 1996 (UNAUDITED)
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $150,508,934)-see statement..................................... $147,675,442
Cash.................................................................... 164,744
Interest receivable..................................................... 3,162,226
Net unrealized appreciation on forward currency exchange contracts-Note 3(a) 5,978
Receivable for futures variation margin-Note 3(a)....................... 98
___________
151,008,488
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 89,511
Accrued expenses........................................................ 119,965 209,476
___________ ___________
NET ASSETS.................................................................. $150,799,012
=============
REPRESENTED BY:
Paid-in capital-Note 4.................................................. $161,189,503
Accumulated distributions in excess of investment income-net............ (425,239)
Accumulated net realized (loss) on investments and
foreign currency transactions......................................... (7,171,430)
Accumulated net unrealized (depreciation) on investments and
foreign currency transactions (including $33,692 net unrealized
appreciation on financial futures)-Note 3(b).......................... (2,793,822)
___________
NET ASSETS at value applicable to 14,640,617 outstanding shares
(100 million shares of $.001 par value Common Stock authorized)......... $150,799,012
=============
NET ASSET VALUE per share
($150,799,012 / 14,640,617 shares)...................................... $10.30
========
See independent accountants' review report and notes to financial statements.
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
STATEMENT OF OPERATIONS SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
INVESTMENT INCOME:
INTEREST INCOME......................................................... $ 5,948,724
EXPENSES:
Management fee-Note 2(a).............................................. $ 538,944
Shareholders' reports................................................. 38,662
Directors' fees and expenses-Note 2(b)................................ 28,763
Shareholder servicing costs........................................... 28,605
Professional fees..................................................... 27,831
Custodian fees........................................................ 18,484
Registration fees..................................................... 11,978
Miscellaneous......................................................... 7,306
___________
TOTAL EXPENSES.................................................. 700,573
___________
INVESTMENT INCOME-NET........................................... 5,248,151
___________
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized (loss) on investments and foreign currency transactions
(including options transactions)-Note 3(a)............................ $ (244,257)
Net realized gain on financial futures-Note 3(a)........................ 235,141
Net realized gain on forward currency exchange contracts-Note 3(a)...... 2,092,639
___________
NET REALIZED GAIN..................................................... 2,083,523
Net unrealized (depreciation) on investments and foreign currency
transactions (including $33,692 net unrealized appreciation on
financial futures).................................................... (7,125,043)
___________
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS............... (5,041,520)
___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 206,631
============
See independent accountants' review report and notes to financial statements.
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SIX MONTHS ENDED
NOVEMBER 30, MAY 31, 1996
1995 (UNAUDITED)
_______ _________
OPERATIONS:
Investment income-net.................................................. $ 11,337,503 $ 5,248,151
Net realized gain (loss) on investments................................ (1,479,776) 2,083,523
Net unrealized appreciation (depreciation) on investments for the period 13,433,969 (7,125,043)
_____________ _____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................. 23,291,696 206,631
_____________ _____________
DISTRIBUTIONS TO SHAREHOLDERS:
From investment income-net............................................. (11,313,830) (5,490,232)
In excess of investment income-net..................................... (183,158) --
_____________ _____________
TOTAL DISTRIBUTIONS.................................................. (11,496,988) (5,490,232)
_____________ _____________
CAPITAL STOCK TRANSACTIONS;
Cost of Treasury Stock acquired-Note 4................................. (875,728) --
_____________ _____________
TOTAL INCREASE (DECREASE) IN NET ASSETS.............................. 10,918,980 (5,283,601)
NET ASSETS:
Beginning of period.................................................... 145,163,633 156,082,613
_____________ _____________
End of period [including distributions in excess of investment
income-net: ($183,158) in 1995 and ($425,239) in 1996]............... $156,082,613 $150,799,012
============== =============
SHARES SHARES
______ ______
CAPITAL SHARE TRANSACTIONS;
Shares of Treasury Stock acquired...................................... (97,300) --
============== =============
</TABLE>
See independent accountants' review report and notes to financial statements.
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Common Stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each period indicated. This
information has been derived from the financial statements and market price
data for the Fund's shares.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
YEAR ENDED MAY 31, NOVEMBER 30, NOVEMBER 30, MAY 31, 1996
--------------------------------------------
PER SHARE DATA: 1991 1992 1993 1994 1994(1) 1995 (UNAUDITED)
------ ------ ------ ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.70 $10.92 $11.06 $11.03 $10.30 $ 9.85 $10.66
------ ------ ------ ------ ------ ------ -----------
INVESTMENT OPERATIONS:
Investment income-net 1.06 1.01 .95 .89 .42 .71 .36
Net realized and
unrealized gain (loss)
on investments.... .24 .19 .02 (.70) (.44) .82 (.34)
------ ------ ------ ------ ------ ------ -----------
TOTAL FROM INVESTMENT
OPERATIONS.... 1.30 1.20 .97 .19 (.02) 1.53 .02
------ ------ ------ ------ ------ ------ -----------
DISTRIBUTIONS:
Dividends from investment
income-net........ (1.08) (1.03) (.91) (.92) (.28) (.71) (.38)
Dividends in excess
of investment
income-net........ -- -- -- -- -- (.01) .-
Dividends from net realized
gain on investments -- (.03) (.09) -- -- -- .-
Dividends from
paid-in-capital... -- -- -- -- (.15) -- .-
------ ------ ------ ------ ------ ------ -----------
TOTAL DISTRIBUTIONS (1.08) (1.06) (1.00) (.92) (.43) (.72) (.38)
------ ------ ------ ------ ------ ------ -----------
Net asset value,
end of period..... $10.92 $11.06 $11.03 $10.30 $ 9.85 $10.66 $10.30
======= ======= ====== ====== ======= ======= ========
Market Value,
end of period..... $ 11 1/8 $ 11 1/2 $ 11 1/2 $10.00 $ 9 1/8 $ 9 1/8 $ 9.00
======= ======= ====== ====== ======= ======= ========
TOTAL INVESTMENT
RETURN(2)........... 24.63% 13.83% 9.36% (5.23%) (8.98%)(3) 8.80% 5.31%(3)
RATIOS/
SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets .87% .88% .88% .89% .92%(3) .94% .91%(3)
Ratio of net investment
income to average
net assets........ 9.67% 9.18% 8.57% 8.18% 8.28%(3) 7.56% 6.80%(3)
Portfolio Turnover Rate 26.38% 56.29% 43.00% 22.76% 65.21%(4) 91.27% 82.13%(4)
Net Assets, end of
period
(000's Omitted)... $159,751 $163,197 $164,174 $154,140 $145,164 $156,083 $150,799
(1) The Fund changed its fiscal year end from May 31 to November 30.
(2) Calculated based on Market Value.
(3) Annualized.
(4) Not annualized.
See independent accountants' review report and notes to financial statements.
</TABLE>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Strategic Governments Income, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 ("Act") as a
non-diversified closed-end management investment company. The Fund's
investment objective is to maximize current income to the extent consistent
with the preservation of capital. The Dreyfus Corporation ("Manager") serves
as the Fund's investment adviser. The Manager is a direct subsidiary of
Mellon Bank, N.A. S.A.M. Finance, S.A. serves as the Fund's sub-investment
adviser.
(A) PORTFOLIO VALUATION: Investments in securities (including options and
financial futures, but excluding domestic-debt securities) 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 the last business day of each week and month. Securities not listed on an
exchange or the national securities market, or securities for which there
were no transactions, are valued at the average of the most recent bid and
asked prices. Bid price is used when no asked price is available. Investments
denominated in foreign currencies are translated to U.S. dollars at the
prevailing rates of exchange. Forward currency exchange contracts are valued
at the forward rate.
Most domestic-debt securities (excluding short-term investments) are
valued on the last business day of each week and month by an independent
pricing service ("Service") approved by the Board of Directors. Domestic-debt
securities 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 domestic-debt 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. Short-term investments
are carried at amortized cost, which approximates value.
(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 of foreign
currencies, currency gains or losses realized on securities transactions, the
difference between the amount of interest and foreign withholding taxes
recorded on the Fund's books, and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign exchange gains and losses
arise from changes in the value of assets and liabilities other than
investments in securities 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. Interest
income, including, where applicable, amortization of discount on investments,
is recognized on the accrual basis.
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(D) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend
date. Dividends from investment income-net and net
short-term realized capital gain are normally declared and paid monthly.
Dividends from net long-term realized capital gain are normally declared and
paid annually, but the Fund may make distributions on a more frequent basis
to comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the Fund not to distribute such gain.
For shareholders who elect to receive their distributions in additional
shares of the Fund, in lieu of cash, such distributions will be reinvested at
the lower of the market price or net asset value per share (but not less than
95% of the market price) based on the record date's respective prices. If the
net asset value per share on the record date is lower than the market price
per share, shares will be issued by the Fund at the record date's net asset
value on the payable date of distribution. If the net asset value per share
is less than 95% of market value, shares will be issued by the Fund at 95% of
market value. If the market price is lower than the net asset value per share
on the record date, Mellon Bank, N.A. will purchase Fund shares in the open
market commencing on the payable date and reinvest those shares accordingly.
As a result of purchasing Fund shares in the open market, Fund shares
outstanding will not be affected by this form of reinvestment.
On May 31, 1996, the Board of Directors declared a cash dividend of
$.0625 per share from investment income-net, payable on June 28, 1996 to
shareholders of record as of the close of business on June 14, 1996.
(E) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue 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 $7,437,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to November 30, 1995. The
carryover does not include net realized securities losses from November 1,
1995 through November 30, 1995 which are treated, for Federal income tax
purposes, as arising in fiscal 1996. If not applied, $768,000 of the
carryover expires in fiscal 2001, $6,651,000 expires in fiscal 2002 and
$18,000 expires in fiscal 2003.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .70 of 1% of the value
of the Fund's average weekly net assets and is payable monthly.
Pursuant to a Sub-Investment advisory Agreement between the Manager and
S.A.M. Finance, S.A., the sub-advisory fee is computed at the annual rate of
.20 of 1% of the value of the Fund's average weekly net assets and is payable
monthly by the Manager.
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
The Fund compensates Mellon Bank, N.A., an affiliate of the Manager,
under a transfer agency agreement for providing
personnel and facilities to perform transfer agency services for the Fund.
Such compensation amounted to $13,473 for the six months ended May 31, 1996.
(B) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $4,500 and an attendance fee of $500
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
(A) The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, forward currency exchange contracts and
options transactions, during the six months ended May 31, 1996, amounted to
$119,857,084 and $118,886,100, respectively.
In addition, the following summarizes open forward currency exchange
contracts at May 31, 1996:
<TABLE>
<CAPTION>
FOREIGN UNREALIZED
CURRENCY APPRECIATION
FORWARD CURRENCY SALE CONTRACTS AMOUNT PROCEEDS VALUE (DEPRECIATION)
- - ---------------------------- --------- ---------- ------- --------------
<S> <C> <C> <C> <C>
British Pounds, expiring 9/13/96...... 1,700,000 $ 2,570,910 $ 2,632,280 $ (61,370)
Canadian Dollars, expiring 9/13/96.... 2,240,000 1,638,505 1,639,464 (959)
French Francs, expiring 9/13/96....... 20,000,000 3,877,472 3,895,522 (18,050)
German Deutsche Marks, expiring 9/13/96 31,000,000 20,354,563 20,470,153 (115,590)
Italian Lire, expiring 9/13/96........ 8,000,000,000 5,088,087 5,135,777 (47,690)
Japanese Yen, expiring 9/13/96........ 710,000,000 6,862,556 6,661,663 200,893
Spanish Pesetas, expiring 9/13/96..... 900,000,000 7,014,809 6,974,041 40,768
Swiss Francs, expiring 9/13/96........ 3,050,000 2,470,036 2,462,060 7,976
__________
$ 5,978
===========
</TABLE>
The Fund enters 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 gains on such contracts that are recognized in the Statement of
Assets and Liabilities.
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
In addition, the following table summarizes the Fund's call/put options
written for the six months ended May 31, 1996:
<TABLE>
<CAPTION>
OPTIONS TERMINATED
__________________________
NET
NUMBER OF PREMIUMS REALIZED
CONTRACTS RECEIVED COST GAIN
____________ __________ _____ ____________
<S> <C> <C> <C> <C>
OPTIONS WRITTEN:
Contracts outstanding November 30, 1995..... - $ -
Contracts written........................... 400 292,969
______ _________
Contracts terminated........................ 400 292,969 $ 86,719 $206,250
______ _________ ======== =========
Contracts outstanding May 31, 1996.......... - $ -
======== ===========
</TABLE>
The Fund may purchase and write (sell) put and call options in order to
gain exposure to or protect against changes in the market.
As a writer of call options, the Fund receives a premium at the outset
and then bears the market risk of unfavorable changes in the price of the
financial instrument underlying the option. Generally, the Fund would incur a
gain, to the extent of the premium, if the price of the underlying financial
instrument decreases between the date the option is written and the date on
which the option is terminated. Generally, the Fund would realize a loss, if
the price of the financial instrument increases between those dates. At May
31, 1996, there were no call options written outstanding.
As a writer of put options, the Fund receives a premium at the outset and
then bears the market risk of unfavorable changes in the price of the
financial instrument underlying the option. Generally, the Fund would incur a
gain, to the extent of the premium, if the price of the underlying financial
instrument increases between the date the option is written and the date on
which the option is terminated. Generally, the Fund would realize a loss, if
the price of the financial instrument decreases between those dates. At May
31, 1996, there were no put options written outstanding.
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 risk as a result of changes in the value of the underlying financial
instruments (see Statement of Financial Futures). Investments in financial
futures require the Fund to "mark to market" on a daily basis, which reflects
the change in the market value of the contracts at the close of each day's
trading. Typically, 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 May 31, 1996, and their related
unrealized appreciation are set forth in the Statement of Financial Futures.
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(B) At May 31, 1996, accumulated net unrealized depreciation on
investments, financial futures and forward currency exchange
contracts was $2,793,822, consisting of $1,411,134 gross unrealized
appreciation and $4,204,956 gross unrealized depreciation.
At May 31, 1996, 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).
NOTE 4-OTHER MATTERS:
Fund shares traded at an average discount of more than 10% from their net
asset value for the 12-week period ended December 29, 1995. In accordance
with the Fund's Prospectus for its initial public offering, under such
circumstances the Fund will submit a proposal to shareholders to convert the
Fund from a closed-end to an open-end fund at its next annual shareholder
meeting.
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
REVIEW REPORT OF ERNST & YOUNG LLP, INDEPENDENT ACCOUNTANTS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
We have reviewed the accompanying statement of assets and liabilities of
Dreyfus Strategic Governments Income, Inc., including the statements of
investments and financial futures, as of May 31, 1996, and the related
statements of operations and changes in net assets and financial highlights
for the six month period ended May 31, 1996. These financial statements and
financial highlights are the responsibility of the Fund's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which
will be performed for the full year with the objective of expressing an
opinion regarding the financial statements and financial highlights taken as
a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the interim financial statements and financial highlights
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the statement of changes in net assets for the year ended
November 30, 1995 and financial highlights for each of the five years in the
period ended November 30, 1995 and in our report dated January 10, 1996, we
expressed an unqualified opinion on such statement of changes in net assets
and financial highlights.
[Ernst & Young LLP signature logo]
New York, New York
July 1, 1996
OFFICERS AND DIRECTORS
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
200 Park Avenue
New York, NY 10166
DIRECTORS
Joseph S. DiMartino, Chairman
David W. Burke
Diane Dunst
Rosalind Gersten Jacobs
Jay I. Meltzer
Daniel Rose
Warren B. Rudman
Sander Vanocur
OFFICERS
President and Treasurer
Marie E. Connolly
Vice President and Secretary
John E. Pelletier
Vice President and Assistant Treasurer
Frederick C. Dey
Vice President and Assistant Secretary
Eric B. Fischman
Vice President and Assistant Secretary
Elizabeth Bachman
Assistant Treasurer
John J. Pyburn
Assistant Treasurer
Joseph F. Tower, III
Assistant Secretary
Margaret M. Pardo
PORTFOLIO MANAGERS
Kevin M. McClintock
Gerald Thunelius
Jean Charles Bertrand
Michel-Andre Levy
Benedicte Maillant
Thierry Mirabe
Pierre Sequier
Jacques Sikarov
INVESTMENT ADVISER
The Dreyfus Corporation
SUB-INVESTMENT ADVISER
S.A.M. Finance, S.A.
CUSTODIAN
The Bank of New York
COUNSEL
Stroock & Stroock & Lavan
TRANSFER AGENT,
DIVIDEND DISTRIBUTION AGENT
AND REGISTRAR
Mellon Bank, N.A.
STOCK EXCHANGE LISTING
NYSE Symbol: DSI
INITIAL SEC EFFECTIVE DATE
June 23, 1988
The Net Asset Value appears in the
following publications: Barron's, Closed-End Funds section under
the heading "World Income Funds"
every Monday; Wall Street Journal, Mutual Funds section under the
heading "Closed-End Funds World Income Funds" every Monday;
New York Times, Business Section under the heading "Closed-End
Funds-World Income Funds"
every Sunday.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the Fund may purchase shares of its
common stock in the open market when it can do so at prices below the then
current net asset value per share.
[Dreyfus lion "d" logo]
DREYFUS STRATEGIC GOVERNMENTS
INCOME, INC.
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT,
DIVIDEND DISBURSING AGENT
AND REGISTRAR
Mellon Bank, N.A.
85 Challenger Road
Ridgefield Park, NJ 07660
Printed in U.S.A. 429SA965
[Dreyfus logo]
Strategic
Governments
Income, Inc.
Semi-Annual
Report
May 31, 1996
