Dreyfus
Strategic Governments
Income, Inc.
ANNUAL REPORT November 30, 1999
(reg.tm)
The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Year 2000 Issues (Unaudited)
The fund could be adversely affected if the computer systems used by Dreyfus and
the fund's other service providers do not properly process and calculate
date-related information from and after January 1, 2000. Dreyfus has taken steps
designed to avoid year 2000-related problems in its systems and to monitor the
readiness of other service providers. In addition, issuers of securities in
which the fund invests may be adversely affected by year 2000-related problems.
This could have an impact on the value of the fund's investments and its share
price.
Contents
THE FUND
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2 Letter from the President
3 Discussion of Fund Performance
6 Selected Information
7 Statement of Investments
11 Statement of Financial Futures
12 Statement of Options Written
13 Statement of Assets and Liabilities
14 Statement of Operations
15 Statement of Changes in Net Assets
16 Financial Highlights
17 Notes to Financial Statements
24 Report of Independent Auditors
25 Dividend Reinvestment and
Cash Purchase Plan
27 Proxy Results
29 Officers and Directors
FOR MORE INFORMATION
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Back Cover
The Fund
Dreyfus Strategic Governments Income, Inc.
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this annual report for Dreyfus Strategic Governments
Income, Inc., covering the 12-month period from December 1, 1998 through
November 30, 1999. Inside, you'll find valuable information about how the fund
was managed during the reporting period, including a discussion with the fund's
portfolio manager, Gerald Thunelius.
The past 12 months have been highly volatile for most bonds, including U.S.
government securities. When the reporting period began, U.S. Treasury securities
had already rallied strongly during a "flight to quality" caused by the global
financial crisis. However, other types of bonds -- including U.S. government
agency securities -- had declined sharply in the wake of massive selling by
troubled hedge funds. The Federal Reserve Board responded to these influences by
reducing short-term interest rates. Its strategy apparently was effective,
because the U.S. economy remained strong through the remainder of the reporting
period.
In fact, by the second quarter of 1999, stronger than expected economic growth
created concerns that inflationary pressures might re-emerge. To help forestall
a rise of inflation, the Federal Reserve Board increased short-term interest
rates three times during the summer and fall, leading to erosion of most bond
prices. In addition, supply-and-demand factors have recently pushed the yields
of U.S. government agency securities to levels that are quite attractive
compared to the yields of U.S. Treasury securities of comparable maturity.
We appreciate your confidence over the past year, and we look forward to your
continued participation in Dreyfus Strategic Governments Income, Inc.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
December 15, 1999
DISCUSSION OF FUND PERFORMANCE
Gerald Thunelius, Portfolio Manager
How did Dreyfus Strategic Governments Income, Inc. perform relative to its
benchmark?
For the 12-month period ended November 30, 1999, Dreyfus Strategic Governments
Income, Inc. produced a total return of 3.77%.(1) In contrast, the fund's
benchmark, the Salomon Smith Barney World Government Bond Index (currency
hedged) , produced a total return of 1.05% for the same period.(2)
We attribute our good relative performance primarily to our emphasis on
sovereign bonds, particularly those from issuers in emerging markets. In
addition, our allocation to U.S. government agency bonds boosted returns, while
our limited exposure to U.S. Treasury bonds helped us avoid the disappointing
returns those securities provided during much of the period.
What is the fund's investment approach?
The fund seeks to provide as high a level of current income as is consistent
with the preservation of capital. To pursue this goal, we invest primarily in
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities (" U.S. Government Securities" ), as well as in securities
issued by foreign governments and any of their political subdivisions, agencies
or instrumentalities (" Foreign Government Securities" ). Under normal
circumstances, the fund invests at least 65% of its total assets in the
securities of U.S. and foreign governments. The fund may also invest up to 35%
of its total assets in other debt securities, including those issued by
non-governmental issuers in the United States. The fund may invest up to 50% of
its total assets in Foreign Government Securities. The dollar-weighted average
maturity of the fund generally will not exceed 10 years.
When choosing securities, generally we first examine U.S. and global economic
conditions and other market factors to determine what we believe is the likely
direction of long- and short-term interest rates. The Fun
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
Using a research-driven investment process, we then attempt to identify
potentially profitable sectors before they are widely perceived by the market.
Finally, we look for what we believe are underpriced or mispriced securities
within those sectors that, in our opinion, potentially can perform well over
time.
What other factors influenced the fund's performance?
The global bond markets have been highly volatile over the past year. When 1999
began, many investors were concerned about the near collapse of a major U.S.
hedge fund, the rapid deterioration of Asian economies and markets, Russia's
debt default and low commodity prices. As a result of these negative economic
influences, investors seemed more comfortable holding U.S. Treasuries, which
many consider to be the most creditworthy investments in the world.
The environment that ultimately prevailed during most of 1999 presented quite a
different picture, however. As the year progressed, many global economies staged
impressive rebounds, and the U.S. economy continued to grow strongly. Commodity
prices also began to rise; this was especially true of oil prices, which more
than doubled over the course of the year.
As domestic and overseas economies continued to grow during the summer and fall,
the Federal Reserve Board raised short-term interest rates by a total of 75
basis points in an attempt to forestall an acceleration of inflation. At the
same time, strong economic growth reassured investors that recession was
unlikely, and they seemed to become more comfortable holding riskier assets such
as corporate and foreign government bonds.
As assets flowed into these higher yielding securities, they flowed out of U.S.
Treasury securities, putting downward pressure on prices. As a result, U.S.
Treasury securities underperformed most other sectors of the global bond market
in 1999. When prices of U.S. Treasury securities fell, the differences in yields
between U.S. Treasury securities and higher yielding bonds -- such as U.S.
government agency and corpo
rate bonds -- widened dramatically during the summer before moderating somewhat
toward the end of the reporting period. We took advantage of these market
conditions by locking in the higher yields available on U.S. corporate bonds and
Foreign Government Securities during the summer.
What is the fund's current strategy?
We have recently taken several steps to add liquidity to the portfolio while
simultaneously attempting to reduce potential Y2K-related risks. Toward the end
of the year, we began to take profits in many of our emerging market
investments, where we realized significant gains. We have redeployed those
assets primarily to U.S. Treasury securities, which provide greater liquidity
and have recently appeared more attractively valued. In addition, we reduced our
exposure to government agency bonds, where the yield differences relative to
Treasuries have narrowed recently, making government agency bonds less
attractive.
By increasing the fund's liquidity, we believe we have positioned the fund to
avoid any Y2K-related problems that may arise temporarily at the start of the
new year. We also believe we are well positioned to take advantage of any new
bond issuance in the early part of 2000. As global economies continue to grow,
we believe they will need to raise capital. Accordingly, our current strategy is
designed to keep assets readily available to selectively purchase new bonds as
they come to market.
December 15, 1999
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID,
BASED UPON THE NET ASSET VALUE PER SHARE. PAST PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS.
(2) SOURCE: LIPPER ANALYTICAL SERVICES, INC. -- THE SALOMON SMITH BARNEY WORLD
GOVERNMENT BOND INDEX (CURRENCY HEDGED) IS A MARKET CAPITALIZATION-WEIGHTED
BENCHMARK THAT TRACKS THE PERFORMANCE OF 18 GOVERNMENT BOND MARKETS.
The Fund
Selected Information
November 30, 1999 (Unaudited)
Market Price per share November 30, 1999 $ 8 1_4
Shares Outstanding November 30, 1999 14,640,617
New York Stock Exchange Ticker Symbol DSI
Market Price (New York Stock Exchange) FISCAL YEAR ENDED NOVEMBER 30, 1999 ($)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Quarter Ended
February 28, 1999 May 31, 1999 August 31, 1999 November 30, 1999
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High 9(1)_4 9(1)_16 8(13)_16 8(7)_8
Low 8(7)_8 8(3)_4 8(1)_4 8(1)_16
Close 9(5)_8 8(7)_8 8(7)_16 8(1)_4
</TABLE>
Percentage Gain (Loss) BASED ON CHANGE IN MARKET PRICE(%)((+))
June 24, 1988 (commencement of operations) through November 30, 1999 100.50
December 1, 1989 through November 30, 1999 99.39
December 1, 1994 through November 30, 1999 43.42
December 1, 1998 through November 30, 1999 (2.21)
March 1, 1999 through November 30, 1999 (2.20)
June 1, 1999 through November 30, 1999 (2.86)
September 1, 1999 through November 30, 1999 (0.00)
Net Asset Value Per Share ($)
June 24, 1988 (commencement of operations) 11.11
November 30, 1998 10.20
February 28, 1999 10.02
May 31, 1999 9.97
August 31, 1999 9.74
November 30, 1999 9.73
Percentage Gain BASED ON CHANGE IN NET ASSET VALUE(%)((+))
June 24, 1988 (commencement of operations) through November 30, 1999 155.12
December 1, 1989 through November 30, 1999 122.82
December 1, 1994 through November 30, 1999 56.52
December 1, 1998 through November 30, 1999 3.77
March 1, 1999 through November 30, 1999 3.49
June 1, 1999 through November 30, 1999 1.87
September 1, 1999 through November 30, 1999 2.05
((+)) WITH DIVIDENDS REINVESTED.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
STATEMENT OF INVESTMENTS
November 30, 1999
Principal
BONDS AND NOTES--94.4% Amount (a) Value ($)
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BANKING AND FINANCE--4.7%
Bangko Sentral Philipinas,
Bonds, 8.6%, 2027 2,500,000 2,109,258
Credit Local de France,
Bonds, 9.625%, 2000 CAD 1,000,000 696,960
DLJ,
Medium-Term Notes, .4%, 2000 2,500,000 (b) 2,519,850
Mannesmann Finance,
Bonds, 4.75%, 2009 EUR 1,500,000 1,353,522
6,679,590
FOREIGN/GOVERNMENTAL--37.2%
Belgium Kingdom Bonds,
9%, 2003 EUR 2,478,935 2,836,500
Canada Government Bonds:
9.75%, 2000 CAD 2,000,000 1,416,057
8.75%, 2005 CAD 2,000,000 1,533,899
Federative Republic of Brazil:
Bonds, 14.5%, 2009 1,000,000 1,042,500
Floating Rate Notes, 7%, 2009 1,000,000 (c) 757,500
France O.A.T., Deb.:
8.5%, 2003 EUR 781,837 882,733
8.5%, 2008 EUR 1,800,000 2,260,914
8.5%, 2023 EUR 1,143,367 1,549,772
Hellenic Republic of Greece:
Bonds, 8.6%, 2008 GRD 400,000,000 1,377,398
Bonds, 6.3%, 2009 GRD 310,000,000 938,271
Ivory Coast,
Floating Rate Notes, 2%, 2018 2,000,000 (c) 440,000
Kingdom of Denmark Bonds,
7%, 2007 DKK 9,000,000 1,344,165
Poland, Ser. PDI,
Floating Rate Bonds, 6%, 2014 2,500,000 (c) 2,209,375
Republic of Argentina:
Bonds, 11.75%, 2009 1,000,000 967,500
Ser. B, Discount Notes, 0%, 2001 3,000,000 2,658,900
Republic of Austria,
Deb., 6.25%, 2003 JPY 720,000,000 8,530,676
Republic of Italy Bonds,
5.125%, 2003 JPY 270,000,000 3,068,254
Republic of Turkey,
Notes, 11.875%, 2004 3,000,000 3,026,250
Republica Oriental del Uruguay,
Sr. Notes, 7.875%, 2027 2,645,000 2,453,238
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount (a) Value ($)
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FOREIGN/GOVERNMENTAL (CONTINUED)
Spain Government,
Deb., 10%, 2005 EUR 3,504,554 4,344,418
Sweden Government,
Deb., 6%, 2005 SEK 13,000,000 1,572,137
United Kingdom Gilt Edged Securities:
9.5%, 2005 GBP 600,000 1,110,846
9%, 2011 GBP 250,000 529,641
United Mexican States:
Bonds, 11.375%, 2016 2,000,000 2,210,000
Ser. B, Secured Bonds, 6.25%, 2019 3,000,000 2,328,900
Ser. C, Collateralized Floating Rate Bonds,
6.836%, 2019 1,000,000 (c,d) 908,800
Ser. WA, Secured Bonds, 6.25%, 2019 1,000,000 (d) 776,300
53,074,944
FOREIGN/SUPRANATIONAL--4.9%
European Investment Bank,
Notes, 12.2%, 2003 ITL 7,000,000,000 4,440,959
International Bank for Reconstruction and Development,
Notes, 5.25%, 2002 JPY 230,000,000 (g) 2,513,960
6,954,919
U.S. GOVERNMENT AGENCY--16.5%
Federal Farm Credit, Real Yield Securities,
2.858%, 2/14/2002 1,000,000 (d) 972,520
Federal National Mortgage Association:
Medium-Term Notes, 5.75%, 2/15/2008 5,000,000 4,686,365
Medium-Term Notes, 5.25%, 1/15/2009 20,000,000 17,916,400
23,575,285
U.S. GOVERNMENT AGENCY/MORTGAGE-BACKED--14.7%
Federal Home Loan Mortgage Corp.:
Gtd. REMIC Pass-Through Ctfs.,
Ser. 51, Cl. E, 10%, 7/15/2020 4,005,010 4,279,554
REMIC Trust, Pass-Through Ctfs.
(Collateralized by FHLMC Pass-Through Ctfs.),
Ser. 2153, Cl. PI, 6.5%, 3/15/2016
(Interest Only Obligation) 7,000,000 (e) 1,585,938
Federal National Mortgage Association:
8%, 12/1/2025 726,456 739,845
Gtd. REMIC Pass-Through Ctfs.,
Ser. 1988-16, Cl. B, 9.5%, 6/25/2018 1,980,460 2,068,828
Principal
BONDS AND NOTES (CONTINUED) Amount (a) Value ($)
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U.S. GOVERNMENT AGENCY/MORTGAGE-BACKED (CONTINUED)
U.S. Government Gtd. Development,
Participation Ctfs.
(Gtd. By U.S. Small Business Administration):
Ser. 1994-20K, 8.65%, 11/1/2014 3,816,889 3,995,199
Ser. 1994-20L, 8.4%, 12/1/2014 6,451,007 6,696,388
Ser. 1997-20J, 6.55%, 10/1/2017 1,576,901 1,519,471
20,885,223
U.S. GOVERNMENT--15.8%
U.S. Treasury Notes:
5.875%, 10/31/2001 20,000,000 19,957,600
6%, 8/15/2009 2,600,000 2,567,786
22,525,386
UTILITIES--.6%
Korea Electric Power,
Discount Notes, 0/7.95%, 2096 5,256,000 (f) 789,094
TOTAL BONDS AND NOTES
(cost $138,895,710) 134,484,441
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OPTIONS--.0% Contracts Value ($)
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Call Options;
U.S. Treasury Notes, 4.75%, 11/15/2008,
December '99 @$100.375
(cost $207,187) 85 1
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Principal
SHORT-TERM INVESTMENTS--5.7% Amount ($) Value ($)
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U.S. GOVERNMENT AGENCIES--5.2%
Federal Home Loan Banks,
Discount Notes, 5.57%, 12/1/1999 7,355,000 7,355,000
U.S. TREASURY BILLS--.5%
4.5%, 12/9/1999 550,000 (g) 549,461
4.7%, 12/23/1999 150,000 (g) 149,625
699,086
TOTAL SHORT-TERM INVESTMENTS
(cost $8,054,019) 8,054,086
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TOTAL INVESTMENTS (cost $147,156,916) 100.1% 142,538,528
LIABILITIES, LESS CASH AND RECEIVABLES (.1%) (55,424)
NET ASSETS 100.0% 142,483,104
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
A PRINCIPAL AMOUNT WILL BE IN U.S. DOLLARS UNLESS OTHERWISE NOTED.
CAD--CANADIAN DOLLARS DKK--DANISH KRONE EUR--EUROS GBP--BRITISH POUNDS
GRD--GREEK DRACHMAS ITL--ITALIAN LIRE JPY--JAPANESE YEN SEK--SWEDISH KRONA
B SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF
1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION,
NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT NOVEMBER 30, 1999, THESE
SECURITIES AMOUNTED TO $2,519,850 OR 1.8% OF NET ASSETS.
C VARIABLE RATE SECURITY--INTEREST RATE SUBJECT TO PERIODIC CHANGE.
D WITH VALUE RECOVERY RIGHTS ATTACHED.
E NOTIONAL FACE AMOUNT SHOWN.
F ZERO COUPON UNTIL A SPECIFIED DATE AT WHICH TIME THE STATED COUPON RATE
BECOMES EFFECTIVE UNTIL MATURITY.
G HELD BY THE CUSTODIAN IN A SEGREGATED ACCOUNT AS COLLATERAL FOR OPEN FINANCIAL
FUTURES POSITIONS.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
STATEMENT OF FINANCIAL FUTURES
November 30, 1999
Unrealized
Market Value Appreciation
Covered by (Depreciation)
Contracts Contracts ($) Expiration at 11/30/99 ($)
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL FUTURES LONG
U.S. Treasury 5 year Notes 68 7,300,437 December '99 (15,938)
U.S. Treasury 5 year Notes 43 4,256,328 March '00 (13,773)
U.S. Treasury 10 year Notes 26 2,534,594 March '00 (6,906)
U.S. Treasury 30 year Bonds 69 6,421,313 March '00 (129,859)
Australian Dollar 25 1,592,000 December '99 (53,000)
Euro Bond 15 1,892,813 December '99 (138,375)
Euro Bond 51 5,441,150 March '00 41,499
United Kingdom 15 year Gilt 15 2,730,318 March '00 (25,683)
FINANCIAL FUTURES SHORT
U.S. Treasury 20 year Bonds 90 10,071,563 December '99 177,063
(164,972)
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Fund
STATEMENT OF OPTIONS WRITTEN
November 30, 1999
Call Options
ISSUER Contracts Value ($)
- --------------------------------------------------------------------------------
U.S. Treasury Notes, 4.75%, 11/15/2008, 85 1
December '99 @$104.78125
Put Options
ISSUER
- --------------------------------------------------------------------------------
U.S. Treasury Notes, 4.75%, 11/15/2008,
December '99 @ $95.125 85 443,955
(Premiums received $207,187) 443,956
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1999
Cost Value
- --------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 147,156,916 142,538,528
Cash 4,000,189
Interest receivable 2,936,182
Receivable for investment securities sold 2,598,255
Net unrealized appreciation on forward
currency exchange contracts--Note 3(a) 61,012
Receivable for futures variation margin--Note 3(a) 19,178
Prepaid expenses and other assets 10,821
152,164,165
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LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 92,286
Payable for investment securities purchased 7,970,780
Dividend payable 915,039
Outstanding options written, at value
(premiums received $207,187)--see Statement of Options Written 443,956
Accrued expenses and other liabilities 259,000
9,681,061
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NET ASSETS ($) 142,483,104
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COMPOSITION OF NET ASSETS ($):
Paid-in capital 160,194,917
Accumulated distributions in excess of investment income-net (2,183,543)
Accumulated net realized gain (loss) on investments, options
and foreign currency transactions (10,520,422)
Accumulated net unrealized appreciation (depreciation) on
investments, options written and foreign currency transactions
[including ($164,972) net unrealized depreciation on
financial futures] (5,007,848)
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NET ASSETS ($) 142,483,104
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SHARES OUTSTANDING
(100 million shares of $.001 par value Common Stock authorized) 14,640,617
NET ASSET VALUE, per share ($) 9.73
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF OPERATIONS
Year Ended November 30, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INTEREST INCOME 11,575,270
EXPENSES:
Management fee--Note 2(a) 1,022,275
Shareholder servicing costs 71,413
Custodian fees 67,993
Professional fees 62,600
Directors' fees and expenses--Note 2(b) 58,455
Shareholders' reports 54,576
Registration fees 24,260
Miscellaneous 32,639
TOTAL EXPENSES 1,394,211
INVESTMENT INCOME-NET 10,181,059
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 3 ($):
Net realized gain (loss) on investments and
foreign currency transactions (including options written) (3,366,332)
Net realized gain (loss) on financial futures (712,103)
Net realized gain (loss) on forward currency exchange contracts 1,642,855
NET REALIZED GAIN (LOSS) (2,435,580)
Net unrealized appreciation (depreciation) on investments, options
written and foreign currency transactions [including ($251,514)
net unrealized (depreciation) on financial futures] (3,685,483)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (6,121,063)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 4,059,996
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF CHANGES IN NET ASSETS
Year Ended November 30,
-----------------------------------
1999 1998
- --------------------------------------------------------------------------------
OPERATIONS ($):
Investment income-net 10,181,059 10,142,388
Net realized gain (loss) on investments (2,435,580) (4,401,402)
Net unrealized appreciation (depreciation)
on investments (3,685,483) 2,720,455
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 4,059,996 8,461,441
- --------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income-net (10,010,460) (16,664,869)
In excess of investment income-net -- (720,868)
Tax return of capital (970,003) --
TOTAL DIVIDENDS (10,980,463) (17,385,737)
TOTAL INCREASE (DECREASE) IN NET ASSETS (6,920,467) (8,924,296)
- --------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 149,403,571 158,327,867
END OF PERIOD 142,483,104 149,403,571
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
FINANCIAL HIGHLIGHTS
The following tables describe the performance for the fiscal period indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements and market price data for the fund's shares.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Year Ended November 30,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
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PER SHARE DATA ($):
Net asset value, beginning of period 10.20 10.81 10.76 10.66 9.85
Investment Operations:
Investment income--net .70(a) .70(a) .69(a) .72(a) .71
Net realized and unrealized gain (loss)
on investments (.42) (.12) .18 .13 .82
Total from Investment Operations .28 .58 .87 .85 1.53
Distributions:
Dividends from investment income-net (.69) (1.14) (.67) (.74) (.71)
Dividends in excess of investment
income--net -- (.05) (.15) (.01) (.01)
Tax return of capital (.06) -- -- -- --
Total Distributions (.75) (1.19) (.82) (.75) (.72)
Net asset value, end of period 9.73 10.20 10.81 10.76 10.66
Market Value, end of period 8 1_4 9 3_16 9 9_16 9 3_8 9 1_8
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TOTAL RETURN (%) (B) (2.21) 8.75 11.32 11.37 8.80
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RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets .95 .90 .92 .90 .94
Ratio of net investment income to
average net assets 6.97 6.65 6.48 6.91 7.56
Portfolio Turnover Rate 480.07 559.75 337.41 328.37 91.27
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ X 1,000) 142,483 149,404 158,328 157,527 156,083
A BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
B CALCULATED BASED ON MARKET VALUE.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
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, as amended (the "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"), which is a wholly-owned subsidiary of Mellon Financial
Corporation. 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 (excluding short-term
investments, other than U.S.Treasury Bills, options and financial futures) are
valued each business day by an independent pricing service ("Service") approved
by the Board of Directors. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the judgement
of the Service are valued at the mean between the quoted bid prices (as obtained
by the Service from dealers in such securities) and asked prices (as calculated
by the Service based upon its evaluation of the market for such securities).
Other investments (which constitute a majority of the portfolio securities) are
carried at fair value as determined by the Service, based on methods which
include consideration of: yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to values from dealers; and general
market conditions. Securities for which there are no such valuations are valued
at fair value as determined in good faith under the direction of the Board of
Directors. Short-term investments, excluding U.S. Treasury Bills, are carried at
amortized cost, which approximates value. Financial futures and options are
valued at the last The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
sales price on the securities exchange on which such securities are primarily
traded or at the last sales price on the national securities market on each
business day. Investments denominated in foreign currencies are translated to
U.S. dollars at the prevailing rates of exchange.
(b) Foreign currency transactions: The fund does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in the market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss 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. Under the terms of the custody agreement, the
fund received net earnings credits of $35,762 during the period ended November
30, 1999 based on available cash balances left on deposit. Income earned under
this arrangement is included in interest income.
(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net are normally declared and paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the fund may make distributions on a more frequent basis to comply
with the distribution requirements of the Internal Revenue Code of 1986, as
amended (the
" Code" ). This may result in distributions that are 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.
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 12, 1999, the Board of Directors declared a cash dividend of $.0625
per share from investment income-net, payable on December 1, 1999 to
shareholders of record as of the close of business on November 16, 1999.
(e) Federal income taxes: It is the policy of the fund to continue to qualify as
a regulated investment company, if such qualification is in the best interests
of its shareholders, by complying with the applicable provisions of the Code,
and to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes.
The fund has an unused capital loss carryover of approximately $10,333,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to November 30, 1999. This
amount is calculated based on Federal income tax regulations which may differ
from financial reporting in accordance with generally accepted accounting
principles. If not applied, $4,384,000 of the carryover expires in fiscal 2002,
$18,000 expires in fiscal 2003, $831,000 expires in fiscal 2004, $811,000
expires in fiscal 2006 and $4,289,000 expires in fiscal 2007.
During the period ended November 30, 1999, the fund increased accumulated
undistributed investment income-net by $1,090,005 and decreased accumulated net
realized gain (loss) on iinvestments by $120,002 and paid-in capital by
$970,003. Net assets were not effected by this reclassification.
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--Management Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement with the Investment Adviser, 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 Adviser
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 and is
payable monthly by the Investment Adviser.
The fund compensates Mellon, an affiliate of the Investment Adviser, under a
transfer agency agreement for providing personnel and facilities to perform
transfer agency services for the fund. During the period ended November 30,
1999, the fund was charged $19,482 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.
(c) At November 30,1999, the fund held 320,000 shares of Common Stock in
Treasury, with a cost basis of $2,850,038.
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 transactions, during the period
ended November 30, 1999, amounted to $669,683,639 and $675,607,994,
respectively.
The following summarizes open forward currency exchange contracts at November
30, 1999:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOREIGN UNREALIZED
FORWARD CURRENCY CURRENCY APPRECIATION
EXCHANGE CONTRACTS AMOUNTS PROCEEDS ($) VALUE($) (DEPRECIATION)($)
- ------------------------------------------------------------------------------------------------------------------------------------
SALES:
British Pounds,
expiring 2/24/2000 1,075,000 1,741,640 1,719,211 22,429
Canadian Dollars,
expiring 2/24/2000 5,700,000 3,896,903 3,877,805 19,098
Danish Krone,
expiring 2/24/2000 10,237,000 1,430,768 1,394,759 36,009
Euro,
expiring 2/24/2000 17,525,000 18,195,331 17,784,289 411,042
Greek Drachmas,
expiring 1/20/2000 806,000,000 2,508,325 2,462,116 46,209
Japanese Yen,
expiring 2/24/2000 1,443,000,000 13,851,027 14,360,800 (509,773)
Swedish Krona,
expiring 2/24/2000 14,312,000 1,728,649 1,692,651 35,998
TOTAL 61,012
</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
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
The following summarizes the fund' s call/put options written for the period
ended November 30, 1999:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
OPTIONS TERMINATED
___________________
NET
NUMBER OF PREMIUMS REALIZED
CONTRACTS RECEIVED ($) COST ($) GAIN ($)
__________ ____________ _____________________
OPTIONS WRITTEN:
Contracts outstanding
November 30, 1998 -- --
Contracts written 1,157 1,267,658
Contracts terminated:
Closed 837 884,283 743,114 141,169
Exercised 150 176,187 176,187 --
Contracts outstanding
November 30, 1999 170 207,188
</TABLE>
The fund may purchase and write (sell) put and call options in order to gain
exposure to or to protect against changes in the market.
As a writer of call options, the fund receives a premium at the outset and then
bears the market risk of unfavorable changes in the price of the financial
instrument underlying the option. Generally, the fund would incur a gain, to the
extent of the premium, if the price of the underlying financial instrument
decreases between the date the option is written and the date on which the
option is terminated. Generally, the fund would realize a loss, if the price of
the financial instrument increases between those dates.
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.
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.
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, 1999 are set
forth in the Statement of Financial Futures.
(b) At November 30, 1999, accumulated net unrealized depreciation on
investments, financial futures, options and forward currency exchange contracts
was $4,959,117, consisting of $2,410,584 gross unrealized appreciation and
$7,369,701 gross unrealized depreciation.
At November 30, 1999, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
The Fund
REPORT OF 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, 1999, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the 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. Our procedures included confirmation of
securities owned as of November 30, 1999 by correspondence with the custodian.
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, 1999, 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.
New York, New York
January 12, 2000
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (Unaudited)
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 name will have all
distributions reinvested automatically by The 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 fund 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 The Fun
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (CONTINUED) (Unaudited)
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
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.
PROXY RESULTS (Unaudited)
Stockholders voted on the following proposals presented at the annual
stockholders' meeting held on June 11, 1999. The description of each proposal
and the number of shares voted are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Shares
----------------------------------------------------------------------------
For Against Abstained
----------------------------------------------------------------------------
1. To consider a proposal
to convert the fund
to an open-end
investment company 2,192,140 4,849,434 475,596
2. To ratify the selection
of Ernst & Young LLP
as independent auditors
of the fund 12,211,849 168,458 153,684
3. To consider a stockholder
proposal recommending that the
fund's board commit to a program
to repurchase fund shares. 2,035,814 4,910,267 583,388
Authority
For Withheld
-------------------------------------------------------
4. To elect three Class I Directors:((+))
Joseph S. DiMartino 11,954,162 579,829
Warren B. Rudman 11,951,448 582,543
Sander Vanocur 11,944,836 589,155
((+)) THE TERMS OF THESE CLASS I DIRECTORS EXPIRE IN 2002.
</TABLE>
The Fund
NOTES
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
Margaret W. Chambers
Vice President and Assistant Treasurer
John P. Covino
Vice President and Assistant Treasurer
Mary A. Nelson
Vice President and Assistant Treasurer
George A. Rio
Vice President and Assistant Treasurer
Joseph F. Tower, III
Vice President, Assistant Treasurer and
Assistant Secretary
Frederick C. Dey
Vice President, Assistant Treasurer and
Assistant Secretary
Stephanie Pierce
Vice President and Assistant Secretary
Douglas C. Conroy
Vice President and Assistant Secretary
Karen Jacoppo-Wood
Vice President and Assistant Secretary
Christopher J. Kelley
OFFICERS (CONTINUED)
Vice President and Assistant Secretary
Kathleen K. Morrisey
Vice President and Assistant Secretary
Elba Vasquez
PORTFOLIO MANAGERS
Gerald Thunelius
Jean Charles Bertrand
Michel-Andre Levy
Benedicte Maillant
Thierry Mirabe
Pierre Sequier
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 DISBURSING 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
BOND 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.
The Fund
For More Information
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 Adviser
Sinopia Asset Management
66 Rue de la Chaussee d'Antin
Paris, France 75009
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agent,
Dividend Disbursing Agent
& Registrar
Mellon Bank, N.A.
85 Challenger Road
Ridgefield Park, NJ 07660
(c) 2000 Dreyfus Service Corporation 429AR9911
