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 its annual reporting period ended November 30,
1996, your Fund produced a total return of 9.41% per share.* Income dividends
of $.750 per share were paid, which is equivalent to a distribution rate per
share of 8.00%.**
THE ECONOMY
For much of 1996, many investors were fearful that inflation would begin
to accelerate and that the rising commodity prices and tightening labor
markets would be the catalysts that could lead to increasing inflation. The
tightening labor market was of particular concern earlier in the year because
of the robust rate of new job growth at that time. More specifically, the
March non-farm payroll release showing an increase of 705,000 was the first
sign. In fact, that increase also began the bear market for bonds that lasted
until approximately mid July. However, during the summer, the pace of job
creation slowed, reducing the likelihood that the tightening employment
market would lead to inflation-inducing wage increases. About 150,000 jobs
per month over the past three months have been added to the employment rolls
compared to an average rate of over 250,000 during the spring and early
summer months. The unemployment rate has declined all year (the rate is now
at 5.2%, near a seven-year low), yet wages have only increased moderately.
The Employment Cost Index, a broad measure of wage and benefit growth, has
risen a modest 2.8% over the past year, about the same as the year before
when the Index increased 2.7%. During the summer the economy's growth rate
also slowed by more than half of its 4.7% growth rate in the second quarter.
Many investors believe that inflation will remain subdued for the
foreseeable future. Commodity prices have decreased significantly since July.
The Consumer Price Index continues to show an inflation level at an annual
rate of 3%, while the Producer Price Index shows scant evidence of price
pressures in the production pipeline. The Federal Reserve Board (the "Fed")
has held short-term interest rates steady since January, when it reduced its
Federal Funds target rate to 5.25% from 5.5%. (The Federal Funds rate is the
rate that banks charge each other for overnight loans.) However, the market,
specifically shorter maturities, continues to price with the anticipation of
tightening by the Fed. In fact, future rates across most of the developed
countries are anticipating the next interest rate move to be a tightening
one.
With both low unemployment and low inflation, measures of consumer
confidence remain high. The Index of Leading Economic Indicators, an index
compiled by the Conference Board (a private economic research group), has
reached record high levels. Retail sales are beginning to show signs of
moderate expansion after having slowed over the summer when consumers paid
off more credit card debt than they borrowed. On the production side of the
economy, output from the nation's factories has slowed somewhat from its pace
earlier in the year. With a capacity utilization rate of 83.3% as of November
30, 1996, there appears to be little indication of any production bottlenecks
that could lead to shortages and higher prices.
The probability of the European Monetary Union coming to fruition is
greater now than when we began 1996. Without going into the politics or
viability of such an agreement we are focusing on what impact this could have
on the Fund. As the countries move towards their 1999 goal of one currency,
we believe that investment opportunities should present themselves.
MARKET ENVIRONMENT
As we mentioned, the market continues to price with anticipation of
higher interest rates. This can be seen by the spread between two-year
Treasury notes and the Federal Funds rate. The two-year note retains a 50+
basis-point spread to Fed Funds. Mr. Greenspan recently spoke about what he
believed to be speculative bubbles, in an apparent attempt to have the market
address them. He has also been helped by foreign demand for Treasuries. As
foreigners continue to buy Treasuries in record amounts, the Fed could keep
policy tight. If the supply/demand ratio were to change, with foreigners buying
less, the Fed might move to counteract that, or at least consider that risk in
their policy decisions.
Generally, this type of uncertainty has caused the front end of the
Treasury curve (demand for shorter maturities) to perform better relative to
longer maturities. The biggest surprise to the market, global and domestic,
would be if world growth fails to pick up. Currently the Organization for
Economic Cooperation & Development is forecasting rate rises in a number of
countries. As we mentioned before, this outlook can be seen in the forward
rate markets. The Fed (as well as other central banks whose forward markets
are pricing with the prospect of higher interest rates) could surprise
everyone by doing nothing.
THE PORTFOLIO
The portfolio has been positioned with a more positive outlook for rates
at the beginning of 1997. The allocation to foreign government securities is
close to the portfolio maximum of 50%. We currently intend to hold these
foreign positions (a strategy that worked out well for us in 1996 when the
fund had an excess distribution due to our currency strategy) and hedge them
back to dollars as the opportunity arises.
Emerging market exposure is currently about 8% of total assets, and we
are anticipating keeping that allocation static at this time. Our belief is
that although a substantial spread tightening has occurred, there is still
room for further tightening.
At present, there are no plans to hold any U.S. dollar denominated
corporate issue debt. We believe that spreads between corporate debt and
government debt are too tight, and corporate securities do not appear
favorable in the risk/reward equation.
Very truly yours,
[Gerald E. Thunelius signature logo]
Gerald E. Thunelius
Portfolio Manager
December 20, 1996
New York, N.Y.
* Total return is based on net asset value and includes reinvestment of
dividends and any capital gains paid.
**Distribution rate per share is based upon dividends per share paid from net
investment income during the period, divided by the market price per share at
the end of the period.
<TABLE>
<CAPTION>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
SELECTED INFORMATION NOVEMBER 30, 1996 (UNAUDITED)
<S> <C>
Market Price per share November 30, 1996............................ $9 3\8
Shares Outstanding November 30, 1996................................ 14,640,617
New York Stock Exchange Ticker Symbol............................... DSI
</TABLE>
<TABLE>
<CAPTION>
MARKET PRICE (NEW YORK STOCK EXCHANGE)
Fiscal Year Ended
November 30, 1996
________________________________________________________________________________________________
Quarter Quarter Quarter Quarter
Ended Ended Ended Ended
February 29, 1996 May 31, 1996 August 31, 1996 November 30, 1996
____________________ ____________________ ____________________ ____________________
<S> <C> <C> <C> <C>
High $9 1\2 $9 1\2 $9 1\4 $9 3\8
Low 9 1\8 8 3\4 8 3\4 9
Close 9 3\8 9 9 1\4 9 3\8
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
PERCENTAGE GAIN based on change in Market Price*
June 24, 1988 (commencement of operations) through November 30, 1996.................. 69.37%
December 1, 1991 through November 30, 1996............................................ 27.04
December 1, 1995 through November 30, 1996............................................ 11.37
March 1, 1996 through November 30, 1996............................................... 6.28
June 1, 1996 through November 30, 1996................................................ 8.48
September 1, 1996 through November 30, 1996........................................... 3.43
NET ASSET VALUE PER SHARE
June 24, 1988 (commencement of operations).............. $ 11.11
November 30, 1995....................................... 10.66
February 29, 1996....................................... 10.49
May 31, 1996............................................ 10.30
August 31, 1996......................................... 10.32
November 30, 1996....................................... 10.76
PERCENTAGE GAIN based on change in Net Asset Value*
June 24, 1988 (commencement of operations) through November 30, 1996.................. 109.97%
December 1, 1991 through November 30, 1996............................................ 48.09
December 1, 1995 through November 30, 1996............................................ 9.41
March 1, 1996 through November 30, 1996............................................... 9.02
June 1, 1996 through November 30, 1996................................................ 8.79
September 1, 1996 through November 30, 1996........................................... 6.40
*With dividends reinvested.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
STATEMENT OF INVESTMENTS NOVEMBER 30, 1996
Principal
Bonds and Notes-93.8% Amount Value
_______ ______
<S> <C> <C>
Banking and Finance-5.4% American International Group,
Bonds, 11.70%, 2001.................. $ 1,980,198 (a) $ 2,363,861
Banco Nacional de Obras y Servicios Publicos,
S.N.C. (Banobras), Notes, 9 5/8%, 2003 1,000,000 1,006,250
Credit Local de France,
Bonds, 9 5/8%, 2000.................. 741,565 (b) 855,580
General Electric Capital,
Deb., 7%, 2000....................... 383,730 (c) 428,626
KfW International Finance,
Gtd. Bonds, 6%, 1999................. 1,316,945 (d) 1,507,902
Societe Nationale des Chemins de fer Francais,
Sr. Bonds, 5 1/4%, 2005.............. 2,302,379 (c) 2,460,093
_______
8,622,312
_______
Collateralized Mortgage
Obligation-.7% GMAC Commercial Mortgage Securities,
Mortgage Pass-Through Ctfs.,
Ser. 1996-C1, Cl.D, 7.73%, 2006...... 1,000,000 1,034,375
_______
Foreign/
Governmental-42.0% Argentinian Government Securities;
Republic of Argentina, Global Bonds,
11%, 2006............................. 2,000,000 2,086,250
Austrian Government Securities;
Republic of Austria, Deb.:
6 1/4%, 2003.......................... 3,687,445 (d) 4,646,181
7 1/4%, 2007.......................... 6,501,951 (e) 7,168,401
Belgian Government Securities;
Belgium Kingdom Bonds,
9%, 2003.............................. 1,892,744 (f) 2,273,943
British Government Securities;
United Kingdom Gilt Edged Securities:
10 1/2%, 1999......................... 841,000 (g) 909,331
9 1/2%, 2005.......................... 1,177,400 (g) 1,335,245
9%, 2011.............................. 1,345,600 (g) 1,516,323
Canadian Government Securities;
Canada Government Bonds:
9 3/4%, 2000.......................... 1,483,129 (b) 1,753,059
8 3/4%, 2005.......................... 1,483,129 (b) 1,776,211
Colombian Government Securities;
Republic of Colombia,
Notes, 7 1/4%, 2004....................... 5,000,000 4,938,645
Ecuadorian Government Securities;
Republic of Ecuador, Discount Bonds,
6 1/2%, 2025.......................... 500,000 (h) 349,375
French Government Securities;
France O.A.T., Deb.:
10%, 2000.......................... 1,435,681 (i) 1,698,411
8 1/2%, 2003.......................... 2,488,515 (i) 2,953,618
8 1/2%, 2023.......................... 1,818,530 (i) 2,274,253
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
STATEMENT OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1996
Principal
Bonds and Notes (continued) Amount Value
_______ ______
Foreign/
Governmental (continued) German Government Securities:
Bundesrepublik Deutschland,
Bonds, 9%, 2000........................... $ 3,901,170 (e) $4,531,209
German Unity Bonds,
8 3/4%, 2001.......................... 4,551,365 (e) 5,318,270
Irish Government Securities;
Republic of Ireland, Deb.,
7 3/8%, 2002...................... 1,534,919 (c) 1,816,577
Mexican Government Securities;
United Mexican States, Global Bonds:
9 3/4%, 2001.......................... 1,000,000 1,037,500
11 3/8%, 2016.......................... 2,000,000 2,070,000
11 1/2%, 2026.......................... 1,500,000 1,573,500
Spanish Government Securities;
Spain Government, Deb.:
12 1/4%, 2000.......................... 3,087,611 (j) 3,647,086
10.30%, 2002........................... 3,087,611 (j) 3,641,886
10%, 2005.............................. 3,087,611 (j) 3,696,661
Swedish Government Securities;
Sweden Government, Deb.,
6%, 2005.............................. 3,273,810 (k) 3,100,920
_______
66,112,855
_______
Foreign/
Supranational-5.1% European Investment Bank, Notes:
12 3/4%, 2000........................ 2,640,264 (a) 3,102,310
12.20%, 2003......................... 3,960,396 (a) 4,930,693
_______
8,033,003
_______
U.S. Government
Agencies-12.9% Federal Home Loan Mortgage Corp.,
REMIC Trust, Pass-Through Ctfs.
(Collateralized by FHLMC Pass-Through Ctfs.),
Ser. 1611, Cl. L, 7%, 2023
(Interest Only Obligation)........... (l) 2,192,500
Federal National Mortgage Association:
7.13%, 1/1/2012...................... 2,000,000 (m) 2,025,000
8%, 12/1/2025........................ 1,938,844 1,995,187
Gtd. REMIC Pass-Through Ctfs.,
Ser. 1988-16, Cl. B.,
9 1/2%, 6/25/2018..................... 5,273,526 5,639,298
Government National Mortgage Association I:
7 1/2%, 10/15/2023................... 3,384,197 3,455,028
10%, 5/15/1998....................... 34,894 37,065
U.S. Government Gtd. Development, Participation Ctfs.
(Gtd. by U.S. Small Business Administration),
Ser. 1996-20K, 6.95%, 11/1/2016...... 5,000,000 5,052,750
_______
20,396,828
_______
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
STATEMENT OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1996
Principal
Bonds and Notes (continued) Amount Value
_______ ______
U.S. Government-27.7% U.S. Treasury Bonds:
11 5/8%, 11/15/2004.................. $ 7,000,000 (n) $ 9,446,453
6 1/2%, 10/15/2006................... 30,650,000 31,639,443
U.S. Treasury Notes,
6 1/4%, 10/31/2001................... 2,450,000 2,494,344
_______
43,580,240
_______
TOTAL BONDS AND NOTES
(cost $144,117,645).................. $147,779,613
=======
Short-Term Investments-.7%
Foreign Treasury Bills; Republic of Mexico (Cetes),
32%, 2/13/1997
(cost $1,090,221).................... $ 1,101,173 (o) $ 1,019,686
=======
TOTAL INVESTMENTS (cost $145,207,866)....................................... 94.5% $148,799,299
==== =======
CASH AND RECEIVABLES (NET).................................................. 5.5% $ 8,727,947
==== =======
NET ASSETS.................................................................. 100.0% $157,527,246
==== =======
</TABLE>
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 Belgian Francs.
(g) Denominated in British Pounds.
(h) Variable rate security-interest rate subject to periodic change.
(i) Denominated in French Francs.
(j) Denominated in Spanish Pesetas.
(k) Denominated in Swedish Krona.
(l) Notional face $5,000,000.
(m) Purchased on a foward commitment basis.
(n) Partially held by the custodian in a segregated account as
collateral for open Financial Futures positions.
(o) Denominated in Mexican Pesos.
<TABLE>
<CAPTION>
STATEMENT OF FINANCIAL FUTURES NOVEMBER 30, 1996
Market Value Unrealized
Number of Covered Appreciation
Financial Futures Purchased Contracts by Contracts Expiration at 11/30/96
__________________________ ____________ _____________ _____________ _____________
<S> <C> <C> <C> <C>
Italian Government 10yr bond................. 17 $2,896,576 December `96 $312,316
United Kingdom 15yr Gilt..................... 7 652,632 March `97 5,703
Swiss Government 10yr bond................... 3 282,320 December `96 7,276
_____
$325,295
=====
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
STATEMENT OF ASSETS AND LIABILITIES NOVEMBER 30, 1996
Cost Value
______________ ______________
<S> <C> <C>
ASSETS: Investments in securities-See Statement of Investments $145,207,866 $148,799,299
Receivable for investment securities sold.. 23,419,864
Interest receivable........................ 3,656,656
Net unrealized appreciation on
forward currency exchange contracts-Note 3(a) 944,414
Receivable for futures variation margin-Note 3(a) 325,295
Prepaid expenses........................... 22,938
_______
177,168,466
_______
LIABILITIES: Due to The Dreyfus Corporation and affiliates 89,426
Payable for investment securities purchased 19,283,010
Accrued expenses........................... 268,784
_______
19,641,220
_______
NET ASSETS.................................................................. $157,527,246
=======
REPRESENTED BY: Paid-in capital-Note 4..................... $161,164,920
Accumulated distributions in excess of
....................... investment income-net (140,794)
Accumulated net realized gain (loss) on investments and
............... foreign currency transactions (8,358,022)
Accumulated net unrealized appreciation (depreciation)
on investments and foreign currency transactions
(including $325,295 net unrealized appreciation
............. on financial futures)-Note 3(b) 4,861,142
_______
NET ASSETS.................................................................. $157,527,246
=======
SHARES OUTSTANDING
(100 million shares of $.001 par value Common Stock authorized)............. 14,640,617
NET ASSET VALUE per share................................................... $10.76
=======
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
STATEMENT OF OPERATIONS YEAR ENDED NOVEMBER 30, 1996
INVESTMENT INCOME
INCOME Interest Income............................ $11,965,161
EXPENSES: Management fee-Note 2(a)................... $ 1,072,096
Shareholders' reports...................... 70,705
Directors' fees and expenses-Note 2(b)..... 55,734
Professional fees.......................... 53,883
Shareholder servicing costs................ 47,165
Custodian fees............................. 42,151
Registration fees.......................... 24,108
Miscellaneous.............................. 15,486
_______
Total Expenses....................... 1,381,328
_______
INVESTMENT INCOME-NET....................................................... 10,583,833
_______
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-Note 3:
Net realized gain (loss) on investments and foreign currency
transactions (including options transactions) $ (47,913)
Net realized gain (loss) on financial futures (666,100)
Net realized gain (loss) on forward
currency exchange contracts............ 2,025,355
_______
Net Realized Gain (Loss)............. 1,311,342
Net unrealized appreciation (depreciation) on investments
and foreign currency transactions (including $325,295
net unrealized appreciation on financial futures) 529,921
_______
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...................... 1,841,263
_______
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $12,425,096
=======
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
November 30, 1996 November 30, 1995
____________________ ____________________
OPERATIONS:
Investment income-net.............................................. $ 10,583,833 $ 11,337,503
Net realized gain (loss) on investments............................ 1,311,342 (1,479,776)
Net unrealized appreciation (depreciation) on investments.......... 529,921 13,433,969
_______ _______
Net Increase (Decrease) in Net Assets Resulting from Operations.. 12,425,096 23,291,696
_______ _______
DISTRIBUTIONS TO SHAREHOLDERS:
From investment income-net......................................... (10,839,669) (11,313,830)
In excess of investment income-net................................. (140,794) (183,158)
_______ _______
Total Distributions.............................................. (10,980,463) (11,496,988)
_______ _______
CAPITAL STOCK TRANSACTIONS:
Cost of Treasury Stock acquired-Note 4............................. - (875,728)
_______ _______
Total Increase (Decrease) in Net Assets...................... 1,444,633 10,918,980
NET ASSETS:
Beginning of Period................................................ 156,082,613 145,163,633
_______ _______
End of Period...................................................... $157,527,246 $156,082,613
======= =======
Distributions in excess of investment income-net....................... $ (140,794) $ (183,158)
_______ _______
Shares Shares
_______ _______
CAPITAL SHARE TRANSACTIONS:
Shares of Treasury Stock acquired.................................. - (97,300)
======= =======
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
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.
Six Months Ended
Year Ended November 30, November 30, Year Ended May 31,
__________________________ ______________________ ______________________________
PER SHARE DATA: 1996 1995 1994(1) 1994 1993 1992
___ ___ ___ ___ ___ ___
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.66 $ 9.85 $10.30 $11.03 $11.06 $10.92
___ ___ ___ ___ ___ ___
Investment Operations:
Investment income-net............ .72(2) .71 .42 .89 .95 1.01
Net realized and unrealized gain (loss)
on investments................. .13(2) .82 (.44) (.70) .02 .19
___ ___ ___ ___ ___ ___
Total from Investment Operations. .85(2) 1.53 (.02) .19 .97 1.20
___ ___ ___ ___ ___ ___
Distributions:
Dividends from investment income-net (.74) (.71) (.28) (.92) (.91) (1.03)
Dividends in excess of
investment income-net.......... (.01) (.01) - - - -
Dividends from net realized gain
on investments................. - - - - (.09) (.03)
Dividends from paid-in capital... - - (.15) - - -
___ ___ ___ ___ ___ ___
Total Distributions.............. (.75) (.72) (.43) (.92) (1.00) (1.06)
___ ___ ___ ___ ___ ___
Net asset value, end of period... $10.76 $10.66 $ 9.85 $10.30 $11.03 $11.06
=== === === === === ===
Market Value, end of period...... $ 9 3\8 $ 9 1\8 $ 9 1\8 $10.00 $11 1\2 $11 1\2
=== === === === === ===
TOTAL INVESTMENT RETURN(3)........... 11.37% 8.80% (8.98%)(4) (5.23%) 9.36% 13.83%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .90% .94% .92%(4) .89% .88% .88%
Ratio of net investment income
to average net assets.......... 6.91% 7.56% 8.28%(4) 8.18% 8.57% 9.18%
Portfolio Turnover Rate.......... 328.37% 91.27% 65.21%(5) 22.76% 43.00% 56.29%
Net Assets, end of period (000's Omitted) $157,527 $156,083 $145,164 $154,140 $164,174 $163,197
(1) The Fund changed its fiscal year end from May 31 to November 30.
(2) Based on average shares outstanding.
(3) Calculated based on Market Value.
(4) Annualized.
(5) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
NOTES TO FINANCIAL STATEMENTS
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. ("Mellon").
S.A.M. Finance, S.A. serves as the Fund's sub-investment adviser.
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 (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 the 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, 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.
(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
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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) as defined in the dividend reinvestment and cash
purchase plan.
On November 27, 1996, the Board of Directors declared a cash dividend of
$.135 per share from investment income-net, payable on December 27, 1996 to
shareholders of record as of the close of business on December 12, 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 $8,313,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to November 30, 1996. If not
applied, $768,000 of the carryover expires in fiscal 2001, $6,651,000 expires
in fiscal 2002, $18,000 expires in fiscal 2003 and $876,000 expires in fiscal
2004.
As of November 30, 1996, the Fund reclassified certain components of net
assets. The reclassifications resulted in a net decrease to accumulated
distributions in excess of investment income-net and an increase in
accumulated net realized losses on investments and foreign currency
transactions of $414,411. This reclassification was the result of permanent
book to tax differences, primarily from foreign currency transactions. In
addition, the Fund reclassified $24,583 from paid-in capital to undistributed
investment income-net. Net assets were not affected by the
reclassifications.
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.
The Fund compensates Mellon, 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 $27,137
for the period ended November 30, 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 period ended November 30, 1996, amounted to
$478,698,348 and $481,959,907, respectively.
<TABLE>
<CAPTION>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
In addition, the following summarizes open forward currency exchange contracts at November 30, 1996:
Foreign Unrealized
Currency Appreciation
Forward Currency Sales Contracts Amount Proceeds Value (Depreciation)
________________________________ ________________ _______________ _______________ _______________
<S> <C> <C> <C> <C>
Belgian Francs, expiring 12/13/96........ 72,000,000 $ 2,329,343 $ 2,272,727 $ 56,616
British Pounds, expiring 12/13/96........ 2,000,000 3,106,400 3,363,600 (257,200)
Canadian Dollars, expiring 12/13/96...... 2,200,000 1,608,540 1,632,653 (24,113)
French Francs, expiring 12/13/96......... 37,000,000 7,208,260 7,086,765 121,495
German Deutsche Marks, expiring 12/13/96. 26,500,000 17,672,557 17,240,258 432,299
Italian Lire, expiring 12/13/96.......... 16,000,000,000 10,430,928 10,554,438 (123,510)
Japanese Yen, expiring 12/13/96.......... 715,000,000 6,565,657 6,286,267 279,390
Spanish Pesetas, expiring 12/13/96....... 1,400,000,000 10,926,403 10,800,802 125,601
Swedish Krona, expiring 12/13/96......... 20,000,000 3,012,956 2,977,342 35,614
Swiss Francs, expiring 12/13/96.......... 6,200,000 5,061,224 4,763,002 298,222
_____
$ 944,414
=====
</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.
In addition, the following table summarizes the Fund's call/put options
written for the period ended November 30, 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........................... 950 700,781
__ _____
950 700,781
__ _____
Contracts terminated:
Closed.................................... 750 547,656 $216,406 $331,250
Expired................................... 200 153,125 - 153,125
__ _____ _____ _____
Total contracts terminated............ 950 700,781 $216,406 $484,375
__ _____ ===== =====
Contracts outstanding November 30, 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
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 November 30,
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
November 30, 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 November 30, 1996, and their
related unrealized appreciation are set forth in the Statement of Financial
Futures.
(b) At November 30, 1996, accumulated net unrealized appreciation on
investments, financial futures and forward currency exchange contracts was
$4,861,142, consisting of $6,600,949 gross unrealized appreciation and
$1,739,807 gross unrealized depreciation.
At November 30, 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 31, 1996. 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.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Directors
Dreyfus Strategic Governments Income, Inc.
We have audited the accompanying statement of assets and liabilities of
Dreyfus Strategic Governments Income, Inc., including the statements of
investments and financial futures, as of November 30, 1996, and the related
statement of operations for the year then ended, and the statement of changes
in net assets for each of the two years in the period then ended, and
financial highlights for the years indicated therein. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of November 30, 1996 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Dreyfus Strategic Governments Income, Inc., at November 30, 1996,
the results of its operations for the year then ended, and the changes in its
net assets and financial highlights for the periods indicated therein, in
conformity with generally accepted accounting principles.
[ERNST & YOUNG LLP signature logo]
New York, New York
January 8, 1997
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
The Fund generally distributes net investment income and any net realized
short-term capital gains monthly, and net realized long-term capital gains at
least annually.
Under the Fund's Dividend Reinvestment and Cash Purchase Plan (the
"Plan"), a shareholder who has Fund shares registered in his own name will
have all distributions reinvested automatically by Mellon, as Plan agent (the
"Agent"), in additional shares of the Fund's Common Stock at the lower of
prevailing market price or net asset value (but not less than 95% of market
value at the time of valuation) unless such shareholder elects to receive
cash as provided below. If market price is equal to or exceeds net asset
value, shares will be issued at net asset value. If net asset value exceeds
market price or if a dividend or other distribution payable only in cash is
declared, the Agent, as agent for the Plan participants, will buy shares of
the Fund's Common Stock in the open market. A Plan participant is not
relieved of any income tax that may be payable on such dividends or
distributions.
A shareholder who owns Fund shares registered in the name of his
broker/dealer or other nominee (i.e., in "street name") may not participate
in the Plan, but may elect to have cash dividend distributions reinvested by
his broker/dealer or other nominee in additional shares of the Fund if such
service is provided by the broker/dealer or other nominee; otherwise such
distributions will be treated like any other cash dividend.
A shareholder who has Fund shares registered in his name may elect to
withdraw from the Plan at any time for a $5.00 fee and thereby elect to
receive cash in lieu of shares of the Fund. Changes in elections must be in
writing, sent to Mellon Bank, N.A., P.O. Box 750, Pittsburgh, Pennsylvania
15230, Attention: Dividend Reinvestment, should include the shareholder's
name and address as they appear on the Agent's records and will be effective
only if received more than fifteen days prior to the record date for any
distribution.
A Plan participant who has Fund shares registered in his name has the
option of making additional cash payments to the Agent, semi-annually, in any
amount from $100 to $500, for investment in the Fund's shares in the open
market on or about January 15 and July 15. Any voluntary cash payments
received more than 30 days prior to these dates will be returned by the
Agent, and interest will not be paid on any uninvested cash payments. A
participant may withdraw a voluntary cash payment by written notice, if the
notice is received by the Agent not less than 48 hours before the payment is
to be invested. A shareholder who owns Fund shares registered in street name
should consult his broker/dealer to determine whether an additional cash
purchase option is available through his broker/dealer.
The Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in the account. Shares in the
account of each Plan participant will be held by the Agent in
non-certificated form in the name of the participant, and each such
participant's proxy will include those shares purchased pursuant to the Plan.
Plan participants pay an Agent's fee of $.50 per reinvestment of
dividends and distributions, a pro rata share of brokerage commissions
incurred with respect to the Agent's open market purchases and purchases from
voluntary cash payments, and a $3.00 fee for each purchase made from a
voluntary cash payment.
The Fund reserves the right to amend or terminate the Plan as applied to
any voluntary cash payments made and any dividend or distribution paid
subsequent to written notice of the change sent to Plan participants at least
90 days before the record date for such dividend or distribution. The Plan
also may be amended or terminated by the Agent on at least 90 days' written
notice to Plan participants.
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
PROXY RESULTS (UNAUDITED)
During the fiscal year ended November 30, 1996, stockholders voted on the
following proposals presented at the annual stockholders' meeting held on
August 8, 1996. The description of each proposal and the number of shares
voted are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For Against Abstained
___________ _________ __________
1.To consider a proposal to convert the Fund
from a closed-end investment company
to an open-end investment company.................. 2,802,425 2,894,716 338,905
2.To ratify the selection of Ernst & Young LLP
as independent auditors of the Fund................ 7,529,295 322,465 0
For Authority Withheld
____________ __________________
3.To elect three Class I Directors:
Joseph S. DiMartino............................ 12,101,283 292,203
Sander Vanocur................................. 12,111,629 281,857
Warren B. Rudman............................... 12,115,948 277,538
</TABLE>
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
Richard W. Ingram
Vice President and Assistant Treasurer
Mary A. Nelson
Vice President and Assistant Secretary
Elizabeth Keeley
Vice President and Assistant Secretary
Douglas C. Conroy
Vice President and Assistant Secretary
Mark A. Karpe
Assistant Treasurer
Joseph F. Tower, III
Portfolio Managers
Kevin McClintock
Gerald Thunelius
Jean Charles Bertrand
Michel-Andre Levy
Benedict 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. 429AR9611
[Dreyfus logo]
Strategic
Governments
Income, Inc.
Annual Report
November 30, 1996
