YEAR 2000 ISSUES (UNAUDITED)
The fund could be adversely affected if the computer systems used by The
Dreyfus Corporation and the fund' s other service providers do not properly
process and calculate date-related information from and after January 1, 2000.
The Dreyfus Corporation is working to avoid Year 2000-related problems in its
systems and to obtain assurances from other service providers that they are
taking similar steps. In addition, issuers of securities in which the fund
invests may be adversely affected by Year 2000-related problems. This could have
an impact on the value of the fund's investments and its share price.
DREYFUS INTERMEDIATE TERM INCOME FUND
- -----------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to report the performance for Dreyfus Intermediate Term Income
Fund for the six-month period ended January 31, 1999. Your fund produced a
total return, including share price changes and dividend income generated, of
3.27% .* This compares with a total return of 5.17% for the Merrill Lynch
Domestic Master Index during the same period.** Income dividends paid from net
investment income during the period amounted to approximately $0.465 per share,
representing an annualized distribution rate per share of 6.93%.***
The Economy
The U.S. economy remained strong in 1998 in spite of economic turmoil in Asia
and Russia. There were two main reasons: First, consumer spending was strong,
backed by healthy real wage and salary income and the wealth effect from high
asset prices. Second, technology spending was quite strong even as capital
spending in the older industries showed signs of cooling late in the year.
The Fed stood pat with an unchanged Federal Funds rate for the first nine
months of 1998, but began to ease rates on September 30. The trigger for its
doing so was a financial crisis brought on by defaults. Despite the fact that
an International Monetary Fund program was in place, Russia defaulted in
midsummer. As the prices of illiquid assets owned by leveraged hedge funds,
brokerage firms and banks dropped sharply, fear in financial circles escalated.
The Fed broke the momentum of financial stress by easing rates on three
successive occasions.
The period of financial crisis was brief enough that little damage was done to
the U.S. economy in 1998, as yet another year of above-trend economic growth
with quiescent inflation was recorded.
The U.S. and continental Europe experienced both good results and bad from the
Asian financial crisis. In this country, the housing and consumer sectors were
beneficiaries, while the industrial sector was weakened by the Asian recession.
Low inflation permitted credit to ease in both Europe and the U.S.
In 1998, the global economy survived a triple financial crisis focused on
Japan, on emerging market countries and on hyperleveraged financial
institutions. Overseas, excess capacity persists in many industries after years
of high capital spending followed by the onset of weakness in world demand.
Fortunately, the U.S. has led the world in making the transition from the
traditional industries to the new growth industries such as biotechnology,
software, hardware and the Internet. This contributed to the favorable
combination of a low unemployment rate and low inflation in the U.S., a
performance which has strengthened the forces for more efficient allocation of
capital elsewhere in the world. As 1999 began, the U.S. economy continued to
exhibit surprising strength.
Market Environment
The last time we wrote, we stated that the slower growth prospects were still
reverberating through the fixed income markets. Since that time, the bond
market has made a 180-degree turn from the October/November crisis. During the
crisis Treasury bond yields reached a new low in yield, while corporate (and
other non-Treasury securities) widened fairly dramatically. The conventional
thought was that global economic growth would drop precipitously due to the
global crisis emanating from Asia. As mentioned above, the Fed lowered rates,
averted the dire predictions, and rates have since retreated from the lows
reached at the depth of the crisis (the 30-year Treasury bond reached a low
yield of 4.7%).
The Treasury market appeared to take on a new focus: stronger growth may be
coming. Interest rates rose to reflect the stronger economic growth outlook.
There are a number of indicators worth mentioning that are signaling the
increased growth. The first is that the Asian economies, quite simply, stopped
falling. When Asia as a region came to what was apparently a "bottom,"
commodity prices in turn took their cue, and stopped falling, too. This is not
to say that Asia as a whole is out of the woods. It is more that Asia seems to
have moved past a period of intense pain attributed to the crises.
Domestically, unemployment remained exceptionally low; non-farm payroll job
growth remained strong. As a result, consumer confidence was still quite high.
In essence, that was not the best backdrop for lower interest rates.
Other non-Treasury securities, like corporate securities, performed much
better than at the peak of the crisis. In fact, some investment-grade corporate
bonds moved back towards the lower end of the historic spread relationship
range.
Portfolio Focus
We recognized that the valuations for corporate bonds were historically very
expensive early in 1998. We felt that if growth were to slow at all, then
corporate bonds were overvalued. In essence, we thought that investors would
begin to demand a higher compensation for the increased credit risk of corporate
securities. We began to reduce the fund's exposure to corporate bonds in early
1998. Corporate bonds still held by the fund through the end of the fiscal
period severely underperformed the Treasury market because rates on corporate
bonds increased.
We mentioned in the last letter that performance could be attributed to
several factors, one of those being duration/curve strategies. Our slower growth
outlook had led us to have a more favorable disposition towards Treasuries, and
in particular the 5-year part of the curve. We expressed this opinion of lower
Treasury rates by maintaining a longer duration component versus the benchmark.
The strategy worked out well as rates on Treasuries, as we have mentioned, moved
much lower.
During the reporting period, the widening of the spread was so dramatic that
it quickly offset any advantages from longer duration for the fund. However, the
fund began to perform well as the crisis appeared to fade, at least temporarily,
during December 1998. Treasuries began to underperform most other bond sectors
at that time. While we reduced our corporate position slightly, this was not
enough to make the impact of the late fall widening of the spread less severe
As always, we will be monitoring the fixed income markets for opportunities
for the fund.
Very truly yours,
[Gerald Thunelius signature]
Gerald Thunelius
Portfolio Manager
February 18, 1999
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains paid.
** SOURCE: MERRILL LYNCH, PIERCE, FENNER AND SMITH INC. -- Unlike the Fund, the
Merrill Lynch Domestic Master Index is an unmanaged performance benchmark
composed of U.S. Government, mortgage and BBB or higher-rated corporate
securities with maturities greater than or equal to one year; U.S. Treasury
securities in the Index must have par amounts outstanding greater than or equal
to $1 billion and corporate and generic mortgage-backed securities, $100 million
per coupon.
*** Distribution rate per share is based upon dividends per share paid from net
investment income during the period (annualized), divided by the net asset value
per share at the end of the period, adjusted for capital gain distributions.
<TABLE>
<CAPTION>
DREYFUS INTERMEDIATE TERM INCOME FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JANUARY 31, 1999 (UNAUDITED)
Principal
Bonds and Notes--76.4% Amount Value
- ------------------------------------------------------- ____________ ___________
<S> <C> <C>
Asset-Backed Ctfs.--9.3% Illinois Power Special Purpose Trust,
Transitional Funding Trust Notes,
Ser. 1998-1, Cl. A3, 5.31%, 2004 . . . . . . . . . $ 1,000,000 $ 1,000,937
Nomura Asset Securities,
Ser. 1998-D6, Cl. A4, 7.572%, 2028 . . . . . . . . 1,000,000 (a) 970,313
Nomura Depositor Trust,
Ser. 1998-ST I, Cl. B2, 9.25%, 2003 . . . . . . . 750,000 (a,b) 652,031
____________
2,623,281
____________
Commercial Mortgage
Pass-Through Ctfs.--13.2% DLJ Mortgage Acceptance:
Ser. 1997-CF2, Cl. B3, 6.99%, 2009 . . . . . . . . 1,000,000 (b) 943,750
Ser. 1998-CF2, Cl. A1A, 5.88%, 2031 . . . . . . . 995,389 1,003,166
GMAC Commercial Mortgage Securities,
Ser. 1996-C, Cl. E, 7.86%, 2006 . . . . . . . . . 600,000 547,125
Resolution Trust:
Ser. 1992-CHF, Cl. D, 8.25%, 2020 . . . . . . . . 247,681 246,597
Ser. 1993-C3, Cl. D, 7.10%, 2024 . . . . . . . . . 223,944 226,570
Structured Asset Securities, REMIC,
Ser. 1996-CFL, Cl. H, 7.75%, 2028 . . . . . . . . 1,000,000 (b) 745,000
____________
3,712,208
____________
Energy--7.7% Dual Drilling,
Sr. Sub. Notes, 9.875%, 2004 . . . . . . . . . . . 1,000,000 1,055,000
Rutherford-Moran Oil,
Sr. Sub. Notes, 10.75%, 2004 . . . . . . . . . . . 1,000,000 1,115,000
____________
2,170,000
____________
Foreign--1.9% Korea Electric Power,
Deb., Zero Coupon, 2016 . . . . . . . . . . . . . 5,000,000 (c) 533,105
____________
Foreign/Governmental--.1% Republic of Argentina (BOTE),
Floating Rate Notes, Ser. 10, 5.2875%, 2000 . . . 41,140 (a) 38,304
____________
Hotels & Motels--1.8% Hyatt Equities,
Notes, 6.8%, 2000 . . . . . . . . . . . . . . . . 500,000 (b) 505,896
____________
Insurance--4.6% Frank Russell,
Gtd. Notes, 5.625%, 2009 . . . . . . . . . . . . . 750,000 (b) 756,075
Presidential Life,
Sr. Notes, 9.5%, 2000 . . . . . . . . . . . . . . 525,000 536,528
____________
1,292,603
____________
Railroad--1.0% Terminal Railroad Association,
First Mortgage, 4%, 2019 . . . . . . . . . . . . . 345,000 297,150
____________
Real Estate Investment Trusts--6.8% Crescent Real Estate Equities,
Notes, 6.625%, 2002 . . . . . . . . . . . . . . . 1,000,000 963,992
Tanger Properties,
Notes, 7.875%, 2004 . . . . . . . . . . . . . . . 1,000,000 948,851
____________
1,912,843
____________
DREYFUS INTERMEDIATE TERM INCOME FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JANUARY 31, 1999 (UNAUDITED)
Principal
Bonds and Notes (continued) Amount Value
- ------------------------------------------------------- ____________ ___________
Residential Mortgage
Pass-Through Ctfs.--17.0% CountryWide Funding,
Ser. 1994-8, Cl. B2, 6%, 2009 . . . . . . . . . . $ 742,132 (b) $ 638,465
GE Capital Mortgage Services,
REMIC, Ser. 1996-HE4, Cl. B4, 9.323%, 2026 . . . . 421,028 (a,b) 323,863
Norwest Asset Securities, REMIC:
Ser. 1998-9, Cl. B3, 6.5%, 2028 . . . . . . . . . 818,987 762,554
Ser. 1998-13, Cl. B3, 6.25%, 2028 . . . . . . . . 745,804 696,627
Residential Funding Mortgage Securities I, REMIC:
Ser. 1997-S16, Cl. M3, 6.75%, 2012 . . . . . . . . 732,224 696,726
Ser. 1997-S19, Cl. B3, 6.5%, 2012 . . . . . . . . 441,531 (b) 119,213
Ser. 1998-S1, Cl. M3, 6.5%, 2013 . . . . . . . . . 541,675 508,211
Ser. 1998-S16, Cl. B1, 6.5%, 2013 . . . . . . . . 303,237 248,702
Structured Asset Securities,
REMIC, Ser. Greenpoint 1996-A,
Cl. B3, 8.375%, 2027 . . . . . . . . . . . . . . . 701,086 (a) 791,351
____________
4,785,712
____________
Technology--3.6% Motorola,
Deb., 6.5%, 2028 . . . . . . . . . . . . . . . . . 1,000,000 1,027,540
____________
Tobacco--2.9% Philip Morris Cos.,
Notes, 6.95%, 2001 . . . . . . . . . . . . . . . . 800,000 (d) 822,250
____________
U.S. Government Agency/
Mortgage Backed--6.5% Federal Home Loan Mortgage,
Multiclass Mortgage Participation Ctfs., REMIC:
Ser. 1499, Cl. E, 7%, 4/15/2023
(Interest Only Obligation) . . . . . . . . . 850,000 (e) 258,868
Ser. 1610, Cl. PW, 6.5%, 4/15/2022
(Interest Only Obligation) . . . . . . . . . 1,867,492 (e) 433,053
Ser. 2048, Cl. QI, 6.5%, 4/15/2026
(Interest Only Obligation) . . . . . . . . . 975,805 (e) 162,228
Federal National Mortgage Association,
9%, 8/1/2026 . . . . . . . . . . . . . . . . . . . 437,441 464,916
Government National Mortgage Association I:
9%, 11/15/2017 . . . . . . . . . . . . . . . . . . 85,135 91,893
Project Loan,
6.625%, 7/15/2033 . . . . . . . . . . . . . . . 398,607 409,194
____________
1,820,152
____________
TOTAL BONDS AND NOTES
(cost $21,575,059) . . . . . . . . . . . . . . . . $21,541,044
____________
------------
DREYFUS INTERMEDIATE TERM INCOME FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JANUARY 31, 1999 (UNAUDITED)
Equity-Related Securities--5.1% Shares Value
- ------------------------------------------------------- ____________ ___________
Preferred Stocks--4.5%
Broadcasting; Spanish Broadcasting System,
Ser. A, Cum., $142.50 . . . . . . . . . . . . . . 1,204 $ 1,276,240
____________
Warrants--.6%
Broadcasting; Spanish Broadcasting System . . . . . . . . . . . . . 750 (b) 153,750
____________
TOTAL EQUITY-RELATED SECURITIES
(cost $1,221,771) . . . . . . . . . . . . . . . . $ 1,429,990
____________
------------
Principal
Short-Term Investments--18.4% Amount
- ------------------------------------------------------------------------------------------- ____________
U.S. Government Agencies--17.9% Federal Home Loan Banks,
4.62%, 2/1/1999 . . . . . . . . . . . . . . . . . $ 5,040,000 $ 5,040,000
____________
U.S. Treasury Bills--.5% 4.35%, 3/18/1999 . . . . . . . . . . . . . . . . . . . 50,000 (f) 49,715
4.48%, 4/1/1999 . . . . . . . . . . . . . . . . . . . 65,000 (f) 64,520
4.32%, 4/8/1999 . . . . . . . . . . . . . . . . . . . 35,000 (f) 34,720
____________
148,955
____________
TOTAL SHORT-TERM INVESTMENTS
(cost $5,188,974) . . . . . . . . . . . . . . . . $ 5,188,955
____________
------------
TOTAL INVESTMENTS (cost $27,985,804 ). . . . . . . . . . . . . . . . . . . . . . . . . . . 99.9% $28,159,989
_______ ____________
------- ------------
CASH AND RECEIVABLES (NET) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1% $ 18,539
_______ ____________
------- ------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $28,178,528
_______ ____________
------- ------------
Notes to Statements of Investments:
</TABLE>
- -----------------------------------------------------------------------------
(a) Variable rate security-interest rate subject to periodic change.
(b) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At January
31, 1999, these securities amounted to $4,838,043 or 17.2% of net assets.
(c) Zero coupon until year shown at which time a stated coupon rate becomes
effective.
(d) Reflects date security can be redeemed at holders' option; the stated
maturity date is 6/1/2006.
(e) Notional face amount shown.
(f) Held by the custodian in a segregated account as collateral for open
financial futures positions.
SEE NOTES TO FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
DREYFUS INTERMEDIATE TERM INCOME FUND
- -----------------------------------------------------------------------------
STATEMENT OF FINANCIAL FUTURES JANUARY 31, 1999 (UNAUDITED)
Market Value Unrealized
Covered (Depreciation)
Financial Futures Long Contracts by Contracts Expiration at 1/31/99
___________________ ___________ _____________ _____________ _____________
<S> <C> <C> <C> <C>
U.S. Treasury 5 year Notes . . . . . . . . . . . . . . . 108 $12,251,250 March '99 $(94,515)
________
--------
Financial Futures Short
____________________
U.S. Treasury 10 year Notes. . . . . . . . . . . . . . . 8 953,500 March '99 $ (5,250)
________
--------
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS INTERMEDIATE TERM INCOME FUND
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES JANUARY 31, 1999 (UNAUDITED)
Cost Value
____________ ___________
<S> <C> <C> <C>
ASSETS: Investments in securities--See Statement of Investments . . $27,985,804 $28,159,989
Interest receivable . . . . . . . . . . . . . . . . . . . 239,541
Receivable for futures variation margin--Note 4(a) . . . 6,000
Receivable for shares of Common Stock subscribed . . . . 250
Prepaid expenses and other assets . . . . . . . . . . . . 28,474
____________
28,434,254
____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates . . . . . . 6,156
Due to Distributor . . . . . . . . . . . . . . . . . . . 5,788
Cash overdraft due to Custodian . . . . . . . . . . . . . 7,537
Payable for shares of Common Stock redeemed . . . . . . . 213,856
Interest payable--Note 2 . . . . . . . . . . . . . . . . 1,479
Accrued expenses . . . . . . . . . . . . . . . . . . . . 20,910
____________
255,726
____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,178,528
____________
------------
REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . $27,746,566
Accumulated undistributed investment income--net . . . . 20,750
Accumulated net realized gain (loss) on investments . . . 336,792
Accumulated net unrealized appreciation (depreciation)
on investments [including ($99,765) net unrealized
(depreciation) on financial futures]--Note 4(b) . . . . 74,420
____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,178,528
____________
------------
SHARES OUTSTANDING
(500 MILLION SHARES OF $.001 PAR VALUE COMMON STOCK AUTHORIZED). . . . . . . . . . . . . . 2,212,051
NET ASSET VALUE, offering and redemption price per share . . . . . . . . . . . . . . . . . $12.74
_______
-------
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS INTERMEDIATE TERM INCOME FUND
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS SIX MONTHS ENDED JANUARY 31, 1999 (UNAUDITED)
INVESTMENT INCOME
<S> <C> <C>
INCOME: Interest . . . . . . . . . . . . . . . . . . . . . . . . $ 873,507
Cash dividends . . . . . . . . . . . . . . . . . . . . . 132,029
___________
Total Income . . . . . . . . . . . . . . . . . . . $1,005,536
EXPENSES: Management fee--Note 3(a) . . . . . . . . . . . . . . . . 69,610
Shareholder servicing costs--Note 3(b) . . . . . . . . . 45,283
Interest expense--Note 2 . . . . . . . . . . . . . . . . 24,138
Registration fees . . . . . . . . . . . . . . . . . . . . 12,820
Auditing fees . . . . . . . . . . . . . . . . . . . . . . 6,484
Prospectus and shareholders' reports . . . . . . . . . . 4,662
Custodian fees--Note 3(b) . . . . . . . . . . . . . . . . 3,346
Directors' fees and expenses--Note 3(c) . . . . . . . . . 1,462
Legal fees . . . . . . . . . . . . . . . . . . . . . . . 830
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 1,473
___________
Total Expenses . . . . . . . . . . . . . . . . . . 170,108
Less--reduction in management fee due to
undertaking--Note 3(a) . . . . . . . . . . . . . . . . (63,704)
___________
Net Expenses . . . . . . . . . . . . . . . . . . . 106,404
___________
INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 899,132
___________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments . . . . . . . . . $ 7,674
Net realized gain (loss) on financial futures . . . . . . 413,848
___________
Net Realized Gain (Loss) . . . . . . . . . . . . . 421,522
Net unrealized appreciation (depreciation) on investments
[including ($102,234) net unrealized (depreciation) on
financial futures] . . . . . . . . . . . . . . . . . . (416,418)
___________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . . . . 5,104
___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . $ 904,236
___________
-----------
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS INTERMEDIATE TERM INCOME FUND
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
January 31, 1999 Year Ended
(Unaudited) July 31, 1998
____________ _____________
<S> <C> <C>
OPERATIONS:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 899,132 $ 1,592,260
Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . 421,522 1,444,678
Net unrealized appreciation (depreciation) on investments . . . . . . . . . . . . . . (416,418) (634,086)
____________ ____________
Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . . . . . . 904,236 2,402,852
____________ ____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (905,711) (1,564,931)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,161,459) (559,454)
____________ ____________
Total Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,067,170) (2,124,385)
____________ ____________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,859,818 11,729,347
Dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,331,635 1,408,285
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,826,525) (12,383,164)
____________ ____________
Increase (Decrease) in Net Assets from Capital Stock Transactions . . . . . . . . . 6,364,928 754,468
____________ ____________
Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . . . . . . 5,201,994 1,032,935
NET ASSETS:
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,976,534 21,943,599
____________ __________
------------ ----------
End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,178,528 $22,976,534
____________ ____________
UNDISTRIBUTED INVESTMENT INCOME--Net . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,750 $ 27,329
____________ ____________
Shares Shares
____________ ____________
CAPITAL SHARE TRANSACTIONS:
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 845,132 878,894
Shares issued for dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . 106,189 106,245
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (456,289) (927,231)
____________ ____________
Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . . . . . . 495,032 57,908
____________ ____________
------------ ------------
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS INTERMEDIATE TERM INCOME FUND
- -----------------------------------------------------------------------------
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.
<TABLE>
<CAPTION>
Six Months Ended
January 31, 1999 Year Ended July 31,
______________________________
PER SHARE DATA: (Unaudited) 1998 1997 1996(1)
__________ ______ ______ ______
<S> <C> <C> <C> <C>
Net asset value, beginning of period . . . . . . . . . . . $13.38 $13.23 $12.22 $12.50
______ ______ ______ ______
Investment Operations:
Investment income--net . . . . . . . . . . . . . . . . . . .46 .91 .95 .46
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . . . . . (.06) .47 1.01 (.28)
______ ______ ______ ______
Total from Investment Operations . . . . . . . . . . . . . .40 1.38 1.96 .18
______ ______ ______ ______
Distributions:
Dividends from investment income--net . . . . . . . . . . . (.46) (.89) (.95) (.46)
Dividends from net realized gain on investments . . . . . . (.58) (.34) -- --
______ ______ ______ ______
Total Distributions . . . . . . . . . . . . . . . . . . . . (1.04) (1.23) (.95) (.46)
______ ______ ______ ______
Net asset value, end of period . . . . . . . . . . . . . . $12.74 $13.38 $13.23 $12.22
______ ______ ______ ______
------ ------ ------ ------
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . . . . . 6.49%(2) 10.93% 16.70% 3.05%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses to average net assets . . . . . .65%(2) .80% .52% --
Ratio of interest expense to average net assets . . . . . . .19%(2) .34% .06% --
Ratio of net investment income to average net assets . . . 7.10%(2) 6.81% 7.45% 7.70%(2)
Decrease reflected in above expense ratios due to
undertakings by the Manager (limited to the expense
limitation provision of the management agreement) . . . .50%(2) .49% .98% 2.50%(2)
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . 56.38%(3) 170.52% 321.59% 139.38%(3)
Net Assets, end of period (000's Omitted) . . . . . . . . . $28,179 $22,977 $21,944 $9,756
- -----------------------------
(1) From February 2, 1996 (commencement of operations) to July 31, 1996.
(2) Annualized.
(3) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS INTERMEDIATE TERM INCOME FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Intermediate Term Income Fund (the "Fund") is a separate diversified
series of Dreyfus Investment Grade Bond Funds, Inc. (the "Company") which is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company and operates as a series company
currently offering two series including the Fund. The Fund's investment
objective is to provide investors with as high a level of current income as is
consistent with the preservation of capital. The Dreyfus Corporation (the
"Manager") serves as the Fund's investment adviser. The Manager is a direct
subsidiary of Mellon Bank, N.A. ("Mellon"). Premier Mutual Fund Services, Inc.
(the "Distributor") is the distributor of the Fund's shares, which are sold to
the public without a sales charge.
The Company accounts separately for the assets, liabilities and operations of
each fund. Expenses directly attributable to each fund are charged to that
fund's operations; expenses which are applicable to all funds are allocated
among them on a pro rata basis.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: Investments in securities (excluding short-term
investments, other than U.S. Treasury Bills, 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 judgment
of the Service are valued at the mean between the quoted bid prices (as obtained
by the Service from dealers in such securities) and asked prices (as calculated
by the Service based upon its evaluation of the market for such securities).
Other investments (which constitute a majority of the portfolio securities) are
carried at fair value as determined by the Service, based on methods which
include consideration of: yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to values from dealers; and general
market conditions. Securities for which there are no such valuations are valued
at fair value as determined in good faith under the direction of the Board of
Directors. Short-term investments, excluding U.S. Treasury Bills, are carried at
amortized cost, which approximates value. Financial futures are valued at the
last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market on
each business day.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions
are recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income, including, where
applicable, amortization of discount on investments, is recognized on the
accrual basis. Under the terms of the custody agreement, the Fund received net
earnings credits of $579 during the period ended January 31, 1999 based on
available cash balances left on deposit. Income earned under this arrangement is
included in interest income.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to comply
with the distribution requirements of the Internal Revenue Code of 1986, as
amended (the "Code"). To the extent that net realized capital gain can be offset
by capital loss carryovers, if any, it is the policy of the Fund not to
distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to qualify
as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Code, and to make distributions of taxable income sufficient to relieve it
from substantially all Federal income and excise taxes.
DREYFUS INTERMEDIATE TERM INCOME FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 2--BANK LINES OF CREDIT:
The Fund may borrow up to $10 million for leveraging purposes under a
short-term unsecured line of credit and participates with other Dreyfus-managed
funds in a $100 million unsecured line of credit primarily to be utilized for
temporary or emergency purposes, including the financing of redemptions.
Interest is charged to the Fund at rates which are related to the Federal Funds
rate in effect at the time of borrowings.
The average daily amount of borrowings outstanding under both arrangements
during the period ended January 31, 1999 was approximately $803,200, with a
related weighted average annualized interest rate of 5.96%.
NOTE 3--MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement with the Manager, the management fee
is computed at the annual rate of .55 of 1% of the value of the Fund's average
daily net assets and is payable monthly. The Manager had undertaken through
January 31, 1999, to reduce the management fee paid by the Fund, to the
extent that the Fund's aggregate expenses exclusive of taxes, brokerage,
interest on borrowings, commitment fees and extraordinary expenses exceeded .65
of 1% of the value of the Fund's average daily net assets. The reduction in
management fee, pursuant to the undertaking, amounted to $63,704 during the
period ended January 31, 1999.
(B) Under the Shareholder Services Plan, the Fund pays the Distributor at the
annual rate of .25 of 1% of the value of the Fund's average daily net assets for
the provision of certain services. The services provided may include personal
services relating to shareholder accounts, such as answering shareholder
inquiries regarding the Fund and providing reports and other information, and
services related to the maintenance of shareholder accounts. The Distributor may
make payments to Service Agents (a securities dealer, financial institution or
other industry professional) in respect of these services. The Distributor
determines the amounts to be paid to Service Agents. During the period ended
January 31, 1999, the Fund was charged $31,641 pursuant to the Shareholder
Services Plan.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the
Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. During the period
ended January 31, 1999, the Fund was charged $9,538 pursuant to the transfer
agency agreement.
The Fund compensates Mellon under a custody agreement for providing custodial
services for the Fund. During the period ended January 31, 1999, the Fund was
charged $3,346 pursuant to the custody agreement.
(C) Each director who is not an "affiliated person" as defined in the Act
receives from the Company an annual fee of $2,500 and an attendance fee of $625
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 4--SECURITIES TRANSACTIONS:
(A) The aggregate amount of purchases and sales (including paydowns) of
investment securities, excluding short-term securities and financial futures,
during the period ended January 31, 1999 amounted to $13,761,203 and
$17,514,197, respectively.
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
DREYFUS INTERMEDIATE TERM INCOME FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 January 31, 1999 are set forth in the Statement of Financial
Futures.
(B) At January 31, 1999, accumulated net unrealized appreciation on
investments and financial futures was $74,420, consisting of $957,826 gross
unrealized appreciation and $883,406 gross unrealized depreciation.
At January 31, 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).
[reg.tm logo]
(reg.tm)
DREYFUS INTERMEDIATE TERM
INCOME FUND
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 082SA991
Intermediate Term
Income Fund
Semi-Annual
Report
January 31, 1999
