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 12-month reporting period ended November 30,
1997. Your Fund produced a total return, including bond price changes and
interest income, of 9.65%.* During the reporting period the Fund produced
income dividends of approximately $0.823 per share. This is equivalent to a
distribution rate per share of 8.60%.**
The Economy
Almost everything went right for the U.S. economy over the reporting
period. At the same time, not everything went right for Europe (e.g. Germany
has the highest unemployment rate since post World War II). The U.S. economy,
in its seventh year of expansion, showed no sign of an upsurge in inflation
resulting from tightening labor markets. With the unemployment rate at a
quarter century low, investors had been concerned that wage gains might
result in higher levels of inflation and cause the Federal Reserve Board (the
"Fed") to again raise interest rates. Given the longevity of our economic
recovery, the Fed's monetary policymakers apparently were hoping that a
cyclical easing in the economic growth rate would help dampen any incipient
inflationary pressure. Recent turmoil in the financial markets of Asia and
Latin America has raised prospects for a slowdown in U.S. exports as those
nations shore up their financial systems. If this were to occur, the
diminished demand for U.S. goods overseas could be a drag on domestic
economic growth. What seems all but certain to us is that the Fed is
reluctant to further unsettle world financial markets by raising interest
rates over the near term.
Indicators of future economic conditions showed high levels of consumer
optimism and pointed toward continued growth. Consumers' spirits have been
lifted by a low unemployment rate (4.7% at the end of the reporting period),
and core inflation, which excludes food and energy price changes, at the 2%
level. The Conference Board, a business-sponsored research group, recently
reported that its Consumer Confidence Index hit a new high for this economic
expansion. Since consumers account for two thirds of all economic activity,
their confidence in the economy generally is considered an important
indicator of future conditions. Another important index of future economic
conditions, the Index of Leading Economic Indicators (also a Conference Board
index), implied continued growth. Government reports of personal income and
consumer spending showed healthy rates of increase as well.
The production side of the economy continued its robust advance.
Industrial output rose consistently, and while the factory utilization rate
(a potential harbinger of production bottlenecks and price pressures) also
increased, there was little evidence of producer-generated inflation.
Additional good news regarding inflation came from the report that the
productivity of U.S. workers rose at its fastest pace in five years during
the third quarter of 1997. This increase in worker efficiency helped push down
unit labor costs and eased concerns that labor costs, despite the tight
labor market, would lead to higher inflation.
The interplay between worker productivity and worker wage increases does
much in determining the future course of inflation. We continue to monitor
that closely, along with developments in the international financial arena.
The recent international turbulence underscored the close economic
relationships that exist among all countries.
Market Environment
The most underallocated sector in the fixed income market is the Treasury
market. Domestic bond participants have favored spread products over
Treasuries. Our belief is that spreads are going to widen and people will
shift their credit risk exposure back to Treasuries. We have mentioned other
positive technicals that continue to remain in place. These include a lower
budget deficit, reduced supply, a strong dollar, and higher yields than most
other developed countries. The following is an example of the 10-year global
yield levels present at the end of the reporting period: U.S. 5.88%; Italy
5.947%; Germany 5.454%; and Japan 2.03%. The Asian crisis should not be
underestimated, and in our opinion has not been fully priced into the bond
market. Asia represents approximately 30% of the world's Gross Domestic Product
("GDP"). Some Asian currencies have lost more than 50% of their pre-crisis value
versus the dollar, and their economies have been severely hampered. Since the
Asian countries will likely need to export their goods rapidly, this should mean
extreme price pressure. In turn these countries will not be able to import as
much, and asset prices will come under pressure. We believe the maximum price
pressure will be felt somewhere in the first quarter of 1998.
Given the above, we believe that the market will gradually realize that
the Fed will not want to tighten interest rates in a declining asset price
environment. We believe that the market will reverse its opinion and start to
price in an ease. We believe that whether the Fed acts or not, the market
will overreact and price it in.
We need to mention the impact on Europe here, too; the Fund maintains a
core exposure to non-dollar European countries. Europe, as we mentioned
earlier, is not in the same position as the U.S. The impact felt from Asia
will only be harder in countries that are already heavily dependent on export
growth to keep their own economies afloat. The European Monetary Union
("EMU"), while still moving along, may find itself in a precarious situation.
The first tier EMU countries might feel the pinch from asset price declines
and greatly increased competitiveness. The second tier EMU countries might
find the consequences of entering the EMU on time too painful, given the
fiscal restraint needed to enter. All of this bodes well for the dollar, and
we continue to remain bullish on long-term dollar strength. Near term the
dollar might weaken as countries like Japan put forth a more credible fiscal
package.
Portfolio Overview
Currently the Fund's positioning reflects two of our major themes: the
dollar will get stronger versus most other major currencies, and interest
rates in the U.S. are poised to decline. We have positioned the Fund
accordingly, extending duration to the longer end of the Fund's maturity and
maintaining our currency hedges back to dollars. We have also, as in the
past, engaged in options that reflect our views on interest rates. Currently,
we have an options strategy in place consistent with our view that interest
rates are likely to move lower.
For most of the year our strategy assumed a flattening Treasury yield
curve. We have changed that bias in favor of overweighting the Treasury four-
to five-year maturity area, which we think should perform best when the
market begins to price in the full impact of Asia. We have achieved this
exposure by using five-year Treasury futures, which should also act as a
hedge against the Fund's mortgage exposure. It is our belief that mortgage
market participants have not fully protected themselves from refinancing in
response to lower rates. If rates do go lower, a larger percentage of the
overall mortgage market becomes prepayable. We believe that the five-year
sector should rally if refinancing fears heighten.
Our emerging-markets position and outlook have changed. We effectively
took advantage of the sell-off in countries like Brazil and Mexico (due to
fears that Asian economies needed to repatriate capital and would sell their
holdings) by increasing our exposure. This worked out well for the Fund, as
the emerging markets staged a dramatic comeback. However, the volatility in
this sector will remain high, and we will monitor it closely. Currently, we
anticipate that the Fund's exposure to emerging markets generally will not
exceed 15% of the Fund's total assets. Of course, market conditions could
warrant a change. The countries where we see value in Central and South
America are Mexico, Brazil, and to a lesser extent, Venezuela. Each has
particular events to watch: Venezuela could come under pressure from any
decline in oil prices while Brazil could benefit.
Other opportunities may be building in Asia itself. Countries like South
Korea, which have come under severe pressure, are trading at levels wider
than all of South America. We would argue that South Korea, after refinancing
its debt structure to longer maturities, should be a very attractive
investment. We continue to monitor this potential opportunity.
Our non-dollar position is approximately 35% at the end of the reporting
period, and should remain there for the foreseeable future. We believe that
the dollar should remain strong and that the opportunity for your Fund
continues to warrant this exposure. We have made no significant changes in
country exposure in non-dollar terms. Of course, we will continue to monitor
the situation and make adjustments to your Fund's portfolio as we deem
appropriate.
We appreciate your investment in Dreyfus Strategic Governments Income,
Inc. We want to assure you that we will continue to strive to provide you an
attractive investment vehicle.
Sincerely,
Gerald E. Thunelius (Signature Logo)
Gerald E. Thunelius
Portfolio Manager
December 5, 1997
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains
paid, based upon net asset value per share.
** 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>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
SELECTED INFORMATION NOVEMBER 30, 1997 (UNAUDITED)
Market Price per share November 30, 1997............................ $9 9\16
Shares Outstanding November 30, 1997................................ 14,640,617
New York Stock Exchange Ticker Symbol............................... DSI
MARKET PRICE (NEW YORK STOCK EXCHANGE)
Fiscal Year Ended November 30,1997
_______________________________________________________________________________________________
Quarter Quarter Quarter Quarter
Ended Ended Ended Ended
February 28, 1997 May 31, 1997 August 31, 1997 November 30, 1997
_________________ ____________________ __________________ ____________________
<S> <C> <C> <C> <C>
High $9 3\8 $9 1\4 $9 5\8 $9 9\16
Low 8 7\8 8 7\8 9 1\8 9 1\16
Close 9 3\8 9 1\8 9 7\16 9 9\16
PERCENTAGE GAIN based on change in Market Price*
June 24, 1988 (commencement of operations) through November 30, 1997........... 88.55%
December 1, 1992 through November 30, 1997..................................... 26.18
December 1, 1996 through November 30, 1997..................................... 11.32
March 1, 1997 through November 30, 1997........................................ 8.26
June 1, 1997 through November 30, 1997......................................... 8.99
September 1, 1997 through November 30, 1997.................................... 3.33
NET ASSET VALUE PER SHARE
June 24, 1988 (commencement of operations)........... $11.11
November 30, 1996.................................... 10.76
February 28, 1997.................................... 10.57
May 31, 1997......................................... 10.46
August 31, 1997...................................... 10.60
November 30, 1997.................................... 10.81
PERCENTAGE GAIN based on change in Net Asset Value*
June 24, 1988 (commencement of operations) through November 30, 1997........... 130.22%
December 1, 1992 through November 30, 1997..................................... 53.25
December 1, 1996 through November 30, 1997..................................... 9.65
March 1, 1997 through November 30, 1997........................................ 8.54
June 1, 1997 through November 30, 1997......................................... 7.48
September 1, 1997 through November 30, 1997.................................... 4.00
*With dividends reinvested.
</TABLE>
<TABLE>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
STATEMENT OF INVESTMENTS NOVEMBER 30, 1997
Principal
Bonds and Notes-95.7% Amount Value
_______________________________________________________________________________ ____________ ____________
<S> <C> <C>
Banking and Finance-4.1% American International Group,
Bonds, 11.70%, 2001.................. $ 1,734,004(a) $ 2,111,149
Credit Local de France,
Bonds, 9 5\8%, 2000................... 702,198(b) 773,735
KfW International Finance,
Gtd. Bonds, 6%, 1999................. 1,175,272(c) 1,303,084
Societe Nationale des Chemins de fer
Francais, Sr. Bonds, 5 1\4%, 2005........ 2,102,165(d) 2,299,769
____________
6,487,737
____________
Foreign-.6% Power Finance, Ltd.
Notes, 7 1\2%, 2009................... 1,000,000(e) 862,500
____________
Foreign/
Governmental-32.5% Belgium Kingdom Bonds:
7 3\4%, 2000.......................... 2,195,450(f) 2,378,331
9%, 2003............................. 1,646,587(f) 1,934,411
Canada Government Bonds:
9 3\4%, 2000.......................... 1,404,396(b) 1,584,636
8 3\4%, 2005.......................... 1,404,396(b) 1,695,401
Federative Republic of Brazil,
Bonds, 10 1\8%, 2027.................. 3,000,000 2,677,501
France O.A.T., Deb.:
8 1\2%, 2003.......................... 2,199,476(g) 2,553,592
8 1\2%, 2023.......................... 1,607,309(g) 2,136,436
German Unity Bonds,
8 3\4%, 2001.......................... 2,830,456(h) 3,202,661
Kingdom of Denmark Bonds,
7%, 2007............................. 1,487,232(i) 1,605,615
Republic of Austria, Deb.:
6 1\4%, 2003.......................... 3,290,762(c) 4,166,927
7 1\4%, 2007.......................... 5,660,911(h) 6,309,085
Republic of Colombia, Notes,
8 3\8%, 2027.......................... 3,000,000 2,755,386
Spain Government, Deb.:
12 1\4%, 2000......................... 2,678,811(j) 3,101,660
10.30%, 2002......................... 2,678,811(j) 3,211,224
10%, 2005............................ 2,678,811(j) 3,373,292
Sweden Government, Deb.,
6%, 2005............................. 2,845,318(k) 2,813,934
United Kingdom Gilt Edged Securities:
10 1\2%, 1999......................... 843,900(l) 881,348
9 1\2%, 2005.......................... 1,181,460(l) 1,369,755
9%, 2011............................. 1,350,240(l) 1,650,246
United Mexican States, Global Bonds,
11 1\2%, 2026......................... 1,000,000 1,160,000
Venezuela Global Bonds,
9 1\4%, 2027.......................... 1,000,000 881,500
____________
51,442,941
____________
</TABLE>
<TABLE>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
STATEMENT OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1997
Principal
Bonds and Notes (continued) Amount Value
_______________________________________________________________________________ ____________ ____________
<S> <C> <C>
Foreign/
Supranational-4.5% European Investment Bank, Notes:
12 3\4%, 2000......................... $ 2,312,005(a) $ 2,664,585
12.20%, 2003......................... 3,468,007(a) 4,473,729
____________
7,138,314
____________
Publishing/
Newspapers-.6% A.H. Belo,
Sr. Notes, 6 7\8%, 2002............... 1,000,000 1,011,315
____________
U.S. Government
Agencies-31.3% Federal Farm Credit, Real Yield Securities,
3%, 2/14/2002........................ 1,000,000(m) 978,560
Federal Home Loan Banks,
Bonds, 5.975%, 11/6/2002............. 12,500,000 12,423,911
Federal Home Loan Mortgage Corp.:
Gtd. REMIC Pass-Through Ctfs.,
Ser. 51, Cl. E, 10%, 7/15/2020 8,431,942 9,219,802
REMIC Trust, Pass-Through Ctfs.
(Collateralized by FHLMC Pass-Through
Ctfs.):
Ser. 1611, Cl. L, 7%, 11/15/2023
(Interest Only Obligation) 5,000,000(n) 2,081,250
Ser. 1978, Cl. PJ, 7%, 3/15/2026
(Interest Only Obligation) 5,130,500(n) 2,198,099
Federal National Mortgage Association :
8%, 12/1/2025........................ 1,723,036 1,785,496
Gtd. REMIC Pass-Through Ctfs.,
Ser. 1988-16, Cl. B., 9 1\2%, 6/25/2018. 4,270,476 4,570,477
Government National Mortgage Association I,
10%, 5/15/1998....................... 4,922 5,033
U.S. Government Gtd. Development,
Participation Ctfs.
(Gtd. by U.S. Small Business Administra-
tion):
Ser 1994-20K,Cl. 1, 8.65%, 11/1/2014... 5,226,750 5,726,794
Ser 1994-20L,Cl. 1, 8.40%, 12/1/2014... 8,139,789 8,906,396
Ser 1997-20J,Cl. 1, 6.55%, 10/1/2017... 1,711,000 1,720,821
____________
49,616,639
____________
U.S. Government-22.1% U.S. Treasury Bonds:
6 1\8%, 11/15/2027.................... 6,500,000(o) 6,574,141
10 5\8%, 8/15/2015.................... 5,000,000 7,432,032
10 3\4%, 8/15/2005.................... 2,150,000 2,783,578
U.S. Treasury Notes,
6 1\8%, 8/15/2007..................... 17,800,000 18,150,438
____________
34,940,189
____________
TOTAL BONDS AND NOTES
(cost $155,489,670).................. $151,499,635
============
</TABLE>
<TABLE>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
STATEMENT OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1997
Options-.4% Contracts Value
_______________________________________________________________________________ ____________ ____________
<S> <C> <C>
Call Options; U.S. Treasury Bonds, 6 3\8%, 8/15/2027,
October '98 @$102.9375............... 50 $ 234,050
U.S. Treasury Notes, 6 1\8%, 8/15/2007,
October '98 @$101.25................. 200 459,400
_____________
TOTAL OPTIONS
(cost $600,000)...................... $ 693,450
============
Principal
Short-Term Investments-3.7% Amount
_______________________________________________________________________________ ____________
U.S. Government
Agencies-.8% Federal Home Loan Mortgage,
5.63%, 12/1/1997..................... $ 1,254,000 $ 1,254,000
____________
U.S. Treasury Bills-2.9% 4.94%, 12/11/1997....................... 1,413,000 1,410,626
4.93%, 12/18/1997...................... 1,112,000(p) 1,109,820
4.92%, 1/8/1998........................ 216,000 214,782
5.13%, 2/19/1998....................... 1,845,000(p) 1,823,672
____________
4,558,900
____________
TOTAL SHORT-TERM INVESTMENTS
(cost $5,813,311).................... $ 5,812,900
============
TOTAL INVESTMENTS (cost $161,902,981)....................................... 99.8% $158,005,985
===== ============
CASH AND RECEIVABLES (NET).................................................. .2% $ 321,882
===== ============
NET ASSETS.................................................................. 100.0% $158,327,867
===== ============
Notes to Statement of Investments:
______________________________________________________________________________
(a) Converted to U.S. Dollars from Italian Lire.
(b) Converted to U.S. Dollars from Canadian Dollars.
(c) Converted to U.S. Dollars from Japanese Yen.
(d) Converted to U.S. Dollars from Swiss Francs.
(e) Security exempt from registration under Rule 144A of the
Securities Act of 1933. This security may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At November
30, 1997 this security amounted to $862,500 or .5% of net assets.
(f) Converted to U.S. Dollars from Belgian Francs.
(g) Converted to U.S. Dollars from French Francs.
(h) Converted to U.S. Dollars from German Deutsche Marks.
(i) Converted to U.S. Dollars from Danish Krone.
(j) Converted to U.S. Dollars from Spanish Pesetas.
(k) Converted to U.S. Dollars from Swedish Krona.
(l) Converted to U.S. Dollars from British Pounds.
(m) Variable rate security-base interest rate shown-adjustment to
interest rate linked to the Consumer Price Index.
(n) Notional face amount shown.
(o) Purchased on a forward commitment basis.
(p) Partially held by the custodian in a segregated account as
collateral for open Financial Futures positions.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
STATEMENT OF OPTIONS WRITTEN NOVEMBER 30, 1997
Call Options
____________
Issuer: Contracts Value
_______ ____________ ____________
<S> <C> <C>
U.S. Treasury Bonds, 6 3\8%, 8/15/2027, October '98 @$108.4375............ 50 $134,350
U.S. Treasury Notes, 6 1\8%, 8/15/2007, October '98 @$104.375............. 200 233,200
____________
(Premiums received $300,000)......................................... $367,550
============
Put Options
___________
Issuer Contracts
______ ____________
U.S. Treasury Bonds, 6 3\8%, 8/15/2027, October '98 @$95.25............... 50 $ 82,700
U.S. Treasury Notes, 6 1\8%, 8/15/2007, October '98 @$96.15625............ 200 143,200
____________
(Premiums received $300,000)......................................... $225,900
============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
STATEMENT OF FINANCIAL FUTURES NOVEMBER 30, 1997
Unrealized
Market Value Appreciation
Covered (Depreciation)
Financial Futures Long Contracts by Contracts Expiration at 11/30/97
___________________ _____________ _____________ _____________ _____________
<S> <C> <C> <C> <C>
Australian 10yr Bonds........................ 43 $4,284,344 December '97 $(59,041)
Municipal 30yr Bonds......................... 21 2,556,750 March '98 9,625
Swiss Government 10yr Bonds.................. 3 243,358 December '97 2,922
United Kingdom 15yr Gilt..................... 7 704,717 March '98 2,320
U.S. Treasury 30yr Bonds..................... 25 2,979,688 December '97 781
________
$(43,393)
========
Market Value Unrealized
Covered (Depreciation)
Financial Futures Short Contracts by Contracts Expiration at 11/30/97
___________________ _____________ _____________ _____________ ___________
U.S. Treasury 30yr Bonds..................... 21 $2,499,656 March '98 $(3,718)
=======
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
STATEMENT OF ASSETS AND LIABILITIES NOVEMBER 30, 1997
Cost Value
____________ ____________
<S> <C> <C>
ASSETS: Investments in securities-See Statement of Investments.. $161,902,981 $158,005,985
Receivable for investment securities sold.. 16,380,758
Interest receivable........................ 4,024,364
Receivable for futures variation margin-Note 3(a)...... 23,482
Prepaid expenses and other assets.......... 10,771
____________
178,445,360
____________
LIABILITIES: Due to The Dreyfus Corporation............. 95,358
Cash overdraft due to Custodian............ 3,675,155
Payable for investment securities purchased........ 15,521,487
Net unrealized (depreciation) on forward
currency exchange contracts-Note 3(a)....... 105,262
Outstanding options written, at value
(premiums received $600,000)
-see Statement of Options Written.......... 593,450
Accrued expenses........................... 126,781
____________
20,117,493
____________
NET ASSETS.................................................................. $158,327,867
============
REPRESENTED BY: Paid-in capital............................ $161,164,920
Accumulated undistributed investment income-net $ 6,480,990
Accumulated net realized gain (loss) on investments,
foreign currency transactions and forward currency
exchange contracts (5,275,223)
Accumulated net unrealized appreciation (depreciation) on
investments, options written and foreign currency
transactions [including ($47,111) net unrealized
(depreciation) on financial futures)-Note 3(b)......... (4,042,820)
____________
NET ASSETS.................................................................. $158,327,867
============
SHARES OUTSTANDING
(100 million shares of $.001 par value Common Stock authorized)............. 14,640,617
NET ASSET VALUE per share................................................... $10.81
======
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
STATEMENT OF OPERATIONS YEAR ENDED NOVEMBER 30, 1997
INVESTMENT INCOME
<S> <C> <C>
INCOME Interest Income............................ $11,460,731
EXPENSES: Management fee-Note 2(a)................... $ 1,084,015
Shareholder servicing costs................ 71,104
Shareholders' reports...................... 65,351
Professional fees.......................... 58,592
Directors' fees and expenses-Note 2(b)..... 57,980
Custodian fees............................. 56,857
Registration fees.......................... 20,217
Miscellaneous.............................. 14,450
____________
Total Expenses......................... 1,428,566
____________
INVESTMENT INCOME-NET....................................................... 10,032,165
____________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-Note 3:
Net realized gain (loss) on investments and foreign
currency transactions (including options transactions). $ 1,280,371
Net realized gain (loss) on financial futures 488,187
Net realized gain (loss) on forward currency
exchange contracts..................... 9,945,770
____________
Net Realized Gain (Loss)............. 11,714,328
Net unrealized appreciation (depreciation) on
investments, options written and foreign currency
transactions [including ($99,465) net unrealized
(depreciation) on financial futures].............. (8,903,962)
____________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...................... 2,810,366
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $12,842,531
============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
November 30, 1997 November 30, 1996
__________________ __________________
<S> <C> <C>
OPERATIONS:
Investment income-net............................................... $ 10,032,165 $ 10,583,833
Net realized gain (loss) on investments............................. 11,714,328 1,311,342
Net unrealized appreciation (depreciation) on investments........... (8,903,962) 529,921
_____________ _____________
Net Increase (Decrease) in Net Assets Resulting from Operations... 12,842,531 12,425,096
_____________ _____________
DISTRIBUTIONS TO SHAREHOLDERS:
From investment income-net.......................................... (9,891,371) (10,839,669)
In excess of investment income-net.................................. (2,150,539) (140,794)
_____________ _____________
Total Distributions............................................... (12,041,910) (10,980,463)
_____________ _____________
Total Increase (Decrease) in Net Assets......................... 800,621 1,444,633
NET ASSETS:
Beginning of Period................................................. 157,527,246 156,082,613
_____________ _____________
End of Period....................................................... $158,327,867 $157,527,246
============= =============
Undistributed investment income (Distributions in excess of investment income)
- net.............................................................. $ 6,480,990 $ (140,794)
_____________ _____________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
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 Fund's financial statements.
Six Months Ended
Year Ended November 30, November 30, Year Ended May 31,
__________________________ ___________________
PER SHARE DATA: 1997 1996 1995 1994(1) 1994 1993
______ ______ _______ _______ ______ ______
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $10.76 $10.66 $ 9.85 $10.30 $11.03 $11.06
______ ______ _______ _______ ______ ______
Investment Operations:
Investment income-net.................. .69(2) .72(2) .71 .42 .89 .95
Net realized and unrealized gain (loss)
on investments....................... .18(2) .13(2) .82 (.44) (.70) .02
______ ______ _______ _______ ______ ______
Total from Investment Operations....... .87(2) .85(2) 1.53 (.02) .19 .97
______ ______ _______ _______ ______ ______
Distributions:
Dividends from investment income-net... (.67) (.74) (.71) (.28) (.92) (.91)
Dividends in excess of investment income-net... (.15) (.01) (.01) - - -
Dividends from net realized gain on investments - - - - - (.09)
Dividends from paid-in-capital......... - - - (.15) - -
______ ______ _______ _______ ______ ______
Total Distributions.................... (.82) (.75) (.72) (.43) (.92) (1.00)
______ ______ _______ _______ ______ ______
Net asset value, end of period......... $10.81 $10.76 $10.66 $ 9.85 $10.30 $11.03
====== ====== ====== ====== ====== ======
Market value, end of period............ $ 9 9\16 $ 9 3\8 $ 9 1\8 $ 9 1\8 $ 10 $11 1\2
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN (3)................ 11.32% 11.37% 8.80% (8.98%)(4) (5.23%) 9.36%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets...... .92% .90% .94% .92%(4) .89% .88%
Ratio of net investment income
to average net assets................ 6.48% 6.91% 7.56% 8.28%(4) 8.18% 8.57%
Portfolio Turnover Rate................ 337.41% 328.37% 91.27% 65.21%(5) 22.76% 43.00%
Net Assets, end of period (000's Omitted)...... 158,328 $157,527 $156,083 $145,164 $154,140 $164,174
_________________________________
(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 ("Investment Adviser") serves as the Fund's
investment adviser. The Investment Adviser is a direct subsidiary of Mellon
Bank, N.A. ("Mellon"). Sinopia Asset Management 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 and U.S.
Government obligations) 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.
Investments in U.S. Government obligations, including U.S. Treasury Bills,
are valued at the mean between quoted bid and asked prices. Short-term
investments (excluding U.S. Treasury Bills) 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 and 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 basis to comply with the
distribution requirements of the Internal Revenue Code. This may result in
distributions that are
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
in excess of investment income-net and net realized gain on a fiscal year
basis. 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.
As of November 30, 1997, the Fund reclassified certain components of net
assets. The reclassifications resulted in a net increase to accumulated
undistributed investment income-net and an increase in accumulated net
realized losses on investments and foreign currency transactions of
$8,631,529. This reclassification was the result of permanent book to tax
differences, primarily from foreign currency transactions. Net assets were
not affected by these reclassifications.
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 the distribution. If 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 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 November 26, 1997, the Board of Directors declared a cash dividend of
$0.50 per share from investment income-net, payable on December 26, 1997 to
shareholders of record as of the close of business on December 11, 1997. The
dividend declared in November 1997 reflected an increase from the dividend of
$0.0625 per share of common stock declared in October 1997. This increase was
primarily due to income from realized gains on currency hedge positions.
(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 $5,233,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to November 30, 1997. If not
applied, $4,384,000 of the carryover expires in fiscal 2002, $18,000 expires
in fiscal 2003 and $831,000 expires in fiscal 2004.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(a) Pursuant to a management agreement with the Investment Advisor, 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 Investment
Advisor and Sinopia Asset Management, 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
sub-advised by Sinopia Asset Management and is payable monthly by the
Manager.
The Fund compensates Mellon, an affiliate of the Investment Advisor,
under a transfer agency agreement for providing personnel and facilities to
perform transfer agency services for the Fund. During the period ended
November 30, 1997, the Fund was charged $43,704 pursuant to the transfer
agency agreement.
(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
(including paydowns), excluding short-term securities, financial futures,
forward currency exchange contracts and options written transactions, during
the period ended November 30, 1997, amounted to $523,032,875 and
$512,459,370, respectively.
<TABLE>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
In addition, the following summarizes open forward currency exchange contracts at November 30, 1997:
Unrealized
Foreign Currency Appreciation
Forward Currency Exchange Contracts Amount Proceeds Value (Depreciation)
___________________________________ ________________ ___________ ___________ _____________
Sales:
_____
<S> <C> <C> <C> <C>
Belgian Francs, expiring 12/18/97........ 170,000,000 $ 4,629,631 $ 4,670,458 $ (40,827)
British Pounds, expiring 12/18/97........ 2,350,000 3,730,625 3,963,275 (232,650)
Canadian Dollars, expiring 12/18/97...... 6,000,000 4,330,254 4,217,037 113,217
Danish Krone, expiring 12/18/97.......... 11,350,000 1,677,505 1,689,717 (12,212)
French Francs, expiring 12/18/97......... 29,000,000 4,859,249 4,911,425 (52,176)
German Deutsche Marks, expiring 12/18/97. 17,500,000 9,856,378 9,916,700 (60,322)
Italian Lire, expiring 12/18/97.......... 17,000,000,000 9,710,402 9,824,829 (114,427)
Japanese Yen, expiring 12/18/97........... 730,000,000 6,182,249 5,733,585 448,664
Spanish Pesetas, expiring 12/18/97....... 1,520,000,000 10,093,632 10,183,572 ( 89,940)
Swedish Krona, expiring 12/18/97......... 22,500,000 2,900,942 2,911,980 (11,038)
Swiss Francs, expiring 12/18/97.......... 3,450,000 2,368,692 2,422,243 (53,551)
___________
Total.................................... $(105,262)
===========
</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 gain on each
open contract.
In addition, the following table summarizes the Fund's call/put options
written for the period ended November 30, 1997:
<TABLE>
Options Terminated
__________________________
Net
Number of Premiums Realized
Contracts Received Cost Gain
___________ ___________ ___________ _________
<S> <C> <C> <C> <C>
OPTIONS WRITTEN:
Contracts outstanding November 30, 1996..... - $ -
Contracts written........................... 1,425 1,430,847
_____ __________
Contracts terminated:
Closed ................................... 650 640,097 $370,841 $269,256
Expired................................... 275 190,750 - 190,750
_____ __________ __________ ________
Total contracts terminated............ 925 830,847 $370,841 $460,006
======== ========
Contracts outstanding November 30, 1997..... 500 $ 600,000
===== ==========
</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. Contracts open at
November 30, 1997 are set forth in the Statement of Options Written.
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.
Contracts open at November 30, 1997 are set forth in the Statement of Options
Written.
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, 1997, and their
related unrealized appreciation (depreciation) are set forth in the Statement
of Financial Futures.
(b) At November 30, 1997, accumulated net unrealized depreciation on
investments, financial futures, options written and forward currency exchange
contracts was $4,042,820, consisting of $364,569 gross unrealized
appreciation and $4,407,389 gross unrealized depreciation.
At November 30, 1997, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
DREYFUS 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, options written and financial futures, as of November 30, 1997,
and the related statement of operations for the year then ended, the
statement of changes in net assets for each of two years in the period then
ended, and financial highlights for each of 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 and financial highlights. 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, 1997,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated years, in conformity with generally
accepted accounting principles.
(Ernst & Young LLP SIGNATURE LOGO)
New York, New York
January 16, 1998
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., c/o ChaseMellon Shareholder Services,
P.O. Box 3338, South Hackensack, NJ 07606-1938, 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.
<TABLE>
DREYFUS STRATEGIC GOVERNMENTS INCOME, INC.
PROXY RESULTS (UNAUDITED)
During the fiscal year ended November 30, 1997, stockholders voted on the
following proposals presented at the annual stockholders' meeting held on
August 8, 1997. The description of each proposal and the number of shares
voted are as follows:
Shares
------------------------------------------------
For Against Abstained
---------- --------- -----------
<S> <C> <C> <C>
1.To consider a proposal to convert the Fund
from a closed-end investment company
to an open-end investment company.................. 3,241,719 4,116,033 502,057
2.To ratify the selection of Ernst & Young LLP
as independent auditors of the Fund................ 11,991,997 130,067 257,209
For Authority Withheld
---------- -------------------
3.To elect three Class I Directors:
David W. Burke................................. 11,577,183 802,090
Jay I. Meltzer................................. 11,568,933 810,340
Daniel Rose.................................... 11,573,401 805,872
</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 Treasurer
Michael S. Petrucelli
Vice President and Assistant Treasurer
Richard W. Ingram
Vice President and Assistant Treasurer
Mary A. Nelson
Vice President and Assistant Secretary
Douglas C. Conroy
Vice President and Assistant Treasurer
Joseph F. Tower, III
Portfolio Managers
Kevin McClintock
Gerald Thunelius
Jean Charles Bertrand
Michel-Andre Levy
Thierry Mirabe
Jacques Sikarov
Investment Adviser
The Dreyfus Corporation
Sub-Investment Adviser
Sinopia Asset Management
Custodian
The Bank of New York
Counsel
Stroock & Stroock & Lavan LLP
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.
Registration Mark
[Dreyfus lion "d" logo]
DREYFUS STRATEGIC GOVERNMENTS
INCOME, INC.
200 Park Avenue
New York, NY 10166
INVESTMENT ADVISER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
SUB-INVESTMENT ADVISOR
Sinopia Asset Management
66 Rue de la Chaussee d'Antin
Paris, France 75009
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
& REGISTRAR
Mellon Bank, N.A.
85 Challenger Road
Ridgefield Park, NJ 07660
Printed in U.S.A. 854AR9711
Strategic
Governments
Income, Inc.
Annual Report
November 30, 1997
Registration Mark
[Dreyfus logo]
