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 SHORT TERM INCOME FUND
- -----------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to report the performance for Dreyfus Short 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 0.28%.*
This compares with a total return of 4.36% for the Merrill Lynch Corporate and
Government (1-4.99 years) Index during the same period.** Income dividends paid
from net investment income during the period amounted to approximately $0.389
per share, representing an annualized distribution rate per share of 6.56%.***
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
During 1998, U.S. interest rates reached new lows in yield, which occurred in
the fourth quarter. This can be mostly attributed to the tremendous flight to
quality, or perhaps more appropriately the financial panic that occurred in the
worldwide bond markets. With several Japanese-based global financial
institutions filing for bankruptcy protection, worldwide liquidity reached
dangerously low levels. This led to widespread demand for U.S. Treasuries,
pushing interest rates lower and mass liquidations of many types of fixed income
securities into a somewhat panicked marketplace.
As one might expect, the corporate bond market, as well as the mortgage-backed
securities market, faced a very difficult time, the most difficult being in the
months of September and October. As shown by the Mortgage Banker Association's
Index, homeowner refinancing activity reached an all-time high during the month
of October. This is the primary contributor to mortgage-backed securities
prepayments; hence agency and non-agency mortgage-backed securities prepayment
speeds also reached some of the highest levels in history. This all contributed
to the underperformance of mortgage-backed securities when compared to U.S.
Treasuries for the year.
The flight-to-quality frenzy that took place through the months of September
and October also had an impact on other areas of the fixed income markets. Most
notable was the liquidation of large holdings of the huge hedge fund Long Term
Capital. Their holdings included large quantities of high-quality corporate
bonds, plus residential and commercial mortgage-backed securities. Their forced
liquidation of billions of dollars of securities overwhelmed the market, causing
an imbalance of the supply and demand for these investments. This imbalance
resulted in the sudden widening of the yield spread by over 100 basis points on
several types of investment-grade securities.
Fortunately, since the Federal Reserve saw fit to continue cutting the Fed
Funds rate, this helped bring greater liquidity back into the market, and the
supply-and-demand imbalance has begun to normalize.
Portfolio Focus
The second half of 1998 was a difficult time for most credit-sensitive
securities markets. The fund underperformed the benchmark index during the last
6 months due to several market factors: market liquidity, sector weightings and
security selection. The fund's effective duration was also a factor, and was
adjusted several times during the past 6 months. For the first 3 months of the
reporting period the fund's effective duration was longer than that of the
Index, and over the last several months it had been shorter than that of the
Index. As of the end of the reporting period, it stood at 1.34 years.
During this turbulent time period in the fixed income markets we made several
adjustments to the fund's holdings. The main strategic focus was to increase
the fund's overall credit quality and market liquidity while seeking a high
level of income. Most significantly, we increased the fund's position in
asset-backed securities. Asset-backed securities are among the highest credit
quality securities, (almost always AAA rated) , and provide very abundant
liquidity in the marketplace.
We reduced our positions in several less liquid lower credit securities across
several portfolio sectors. These sales included mainly lower credit corporate
bonds in the following sectors: energy, finance, foreign credits and steel. We
continued to work towards raising the quality of the portfolio, but remained
fully invested in seeking high levels of current income, and continued to focus
on choosing corporate bond investments that we believed had improving
fundamentals.
Though the second half of 1998 was a difficult time for fixed income, it also
opened up several opportunities. We have been monitoring the fixed income
market, looking for attractive investment opportunities. We hope that with
consistent hard work and analysis, 1999 can provide a favorable investment
period for our shareholders.
Very truly yours,
[Michael Hoeh signature]
Michael Hoeh
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 Corporate and Government (1-4.99 Years) Index is an unmanaged
performance benchmark for investment-grade corporate securities and government
securities with maturities greater than or equal to one year, but no longer than
4.99 years; issues in the Index must have par amounts outstanding greater than
or equal to $100 million.
*** 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.
<TABLE>
<CAPTION>
DREYFUS SHORT TERM INCOME FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JANUARY 31, 1999 (UNAUDITED)
Principal
Bonds and Notes--89.4% Amount Value
- ------------------------------------------------------- _____________ _____________
<S> <C> <C>
Aircraft & Aerospace--3.2% Aircraft Lease Portfolio Securitisation 96-1
Pass-Through Trust, Ctfs.,
Cl. D, 12.75%, 2006 . . . . . . . . . . . . . . . $ 4,219,068 $ 4,071,401
America West Airlines Pass-Through Trusts, Ctfs.:
Ser. 1996-1, Cl. D, 8.16%, 2002 . . . . . . . . . 3,993,124 4,021,296
Ser. 1997-1, Cl. D, 8.12%, 2001 . . . . . . . . . 2,979,226 (a) 2,994,673
_____________
11,087,370
_____________
Asset-Backed Ctfs.--21.5% Bosque Asset,
Asset-Backed Notes,
7.66%, 2002 . . . . . . . . . . . . . . . . . . . 1,674,025 (a) 1,675,072
California Infrastructure and Economic Development Bank,
Special Purpose Trust PG&E-1, Rate Reduction Ctfs.,
Ser. 1997-1, Cl. A6, 6.32%, 2005 . . . . . . . . . 7,660,000 7,847,440
ComEd Transitional Funding Trust,
Transitional Funding Trust Notes,
Ser. 1998-1, Cl. A3, 5.34%, 2004 . . . . . . . . . 20,000,000 19,943,750
GE Capital Mortgage Services,
REMIC, Ser. 1997-HE3, Cl. A6, 6.72%, 2027 . . . . 5,000,000 5,128,125
Green Tree Home Improvement Loan Trust,
Ser. 1998-E, Cl. HEA4, 6.62%, 2027 . . . . . . . . 15,000,000 15,168,750
Nomura Depositor Trust:
Ser. 1998-ST I, Cl. A5, 6.25%, 2003 . . . . . . . 11,500,000 (a,b) 10,801,016
Ser. 1998-ST I, Cl. B2, 9.25%, 2003 . . . . . . . 6,750,000 (a,b) 5,868,281
Residential Asset Securities,
Ser. 1997-KS4, Cl. AI5, 6.98%, 2027 . . . . . . . 8,257,000 8,472,456
_____________
74,904,890
_____________
Auto Related--.6% Collins & Aikman Products,
Gtd. Sr. Sub. Notes, 11.5%, 2006 . . . . . . . . . 2,000,000 2,105,000
______________
Banking--1.5% Banco Nacional de Desenvolvi,
Notes, 15.224%, 2008 . . . . . . . . . . . . . . . 3,000,000 (b) 2,032,500
Fuji Finance,
Gtd. Floating Rate Notes, 6.403%, 2049 . . . . . . 5,000,000 (b) 3,050,000
______________
5,082,500
______________
Broadcasting--1.3% Scandinavian Broadcasting System:
Conv. Sub. Deb., 7%, 2004 . . . . . . . . . . . . 3,000,000 3,225,000
Conv. Sub. Deb., 7%, 2004 . . . . . . . . . . . . 1,200,000 (a) 1,290,000
______________
4,515,000
______________
Commercial Mortgage
Pass-Through Ctfs.--24.4% BKB Commercial Mortgage Trust, Ser. 1997-C1:
Cl. C, 7.45%, 2000 . . . . . . . . . . . . . . . . 8,000,000 (a) 7,995,000
Cl. E, 8.744%, 2001 . . . . . . . . . . . . . . . 4,000,000 (a,b) 3,867,500
BTC Mortgage Investors Trust,
Ser. 1997-S1, Cl. C, 6.645%, 2009 . . . . . . . . 10,395,000 (a) 10,395,000
DREYFUS SHORT TERM INCOME FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JANUARY 31, 1999 (UNAUDITED)
Principal
Bonds and Notes (continued) Amount Value
- ------------------------------------------------------- _____________ _____________
Commercial Mortgage
Pass-Through Ctfs. (continued) CRIIMI MAE Trust I,
Commercial Mortgage Bonds,
Ser. 1996-C1, Cl. A1, 6.77%, 2033 . . . . . . . . $ 2,317,418 (a) $ 2,305,831
Chase Commercial Mortgage Securities,
Ser. 1998-SN1A, Cl. D, 5.706%, 2001 . . . . . . . 4,250,000 (a,b) 4,111,875
DLJ Commercial Mortgage,
Ser. 1998-ST1A, Cl. B1, 6.005%, 2000 . . . . . . . 7,700,000 (a,b) 7,562,844
DLJ Mortgage Acceptance:
Ser. 1994-MF11, Cl. B1, 8.1%, 2004 . . . . . . . . 7,000,000 7,441,770
Ser. 1997-CF2, Cl. B3, 6.99%, 2009 . . . . . . . . 3,100,000 (a) 2,925,625
Ser. 1998-CF2, Cl. A1A, 5.88%, 2031 . . . . . . . 9,953,890 10,031,655
GS Mortgage Securities II,
Ser. 1998-GS1, Cl. D, 5.806%, 2000 . . . . . . . . 18,912,000 (a,b) 18,462,840
Merrill Lynch Mortgage Investors,
Ser. 1997-SD1, Cl. E, 6.280%, 2010 . . . . . . . . 4,500,000 (a) 4,237,031
Resolution Trust:
Ser. 1992-CHF, Cl. D, 8.25%, 2020 . . . . . . . . 524,633 522,338
Ser. 1993-C3, Cl. D, 7.10%, 2024 . . . . . . . . . 447,888 453,140
Ser. 1994-C2, Cl. D, 8%, 2025 . . . . . . . . . . 4,570,727 4,696,536
_____________
85,008,985
_____________
Consumer--1.0% Philip Morris Cos.,
Notes, 6.95%, 2001 . . . . . . . . . . . . . . . . 2,000,000 (c) 2,055,624
Signature Brands USA,
Sr. Sub. Notes, 13%, 2002 (Units) . . . . . . . . 1,250,000 (d) 1,406,250
_____________
3,461,874
_____________
Energy--8.4% DeepTech International,
Sr. Secured Notes, 11%, 2000 . . . . . . . . . . . 7,850,000 (a) 7,967,750
Dual Drilling,
Gtd. Sr. Sub. Notes, 9.875%, 2004 . . . . . . . . 14,750,000 15,561,250
Rutherford-Moran Oil,
Sr. Sub. Notes, 10.75%, 2004 . . . . . . . . . . . 5,000,000 5,575,000
_____________
29,104,000
_____________
Entertainment--1.5% Time Warner,
Notes, 7.95%, 2000 . . . . . . . . . . . . . . . . 5,000,000 5,116,475
_____________
Food & Beverage--.5% Envirodyne Industries,
Sr. Notes, 10.25%, 2001 . . . . . . . . . . . . . 2,000,000 1,610,000
_____________
Foreign/Governmental--1.0% Republic of Argentina,
Floating Rate Notes:
14.25%, 2002 . . . . . . . . . . . . . . . . . 3,000,000 (b) 2,715,000
(BOTE), Ser. 10, 5.2875%, 2000 . . . . . . . . 1,028,500 (b) 957,606
_____________
3,672,606
_____________
Gaming--.9% Waterford Gaming/Finance,
Sr. Notes, 12.75%, 2003 . . . . . . . . . . . . . 2,838,000 3,121,800
_____________
DREYFUS SHORT TERM INCOME FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JANUARY 31, 1999 (UNAUDITED)
Principal
Bonds and Notes (continued) Amount Value
- ------------------------------------------------------- _____________ _____________
Insurance--3.1% Presidential Life,
Sr. Notes, 9.5%, 2000 . . . . . . . . . . . . . . $ 4,575,000 $ 4,675,462
Transamerica Finance, Ser. E,
Sr. Medium-Term Notes, 6.125%, 2001 . . . . . . . 6,000,000 6,090,000
_____________
10,765,462
_____________
Mining & Metals--.5% Inco,
Conv. Deb., 5.75%, 2004 . . . . . . . . . . . . . 2,000,000 1,772,500
_____________
Publishing--1.5% A.H. Belo,
Sr. Notes, 6.875%, 2002 . . . . . . . . . . . . . 5,000,000 5,155,480
_____________
Real Estate Investment Trusts--2.8% Crescent Real Estate Equities,
Notes, 6.625%, 2002 . . . . . . . . . . . . . . . 10,000,000 9,639,920
_____________
Retail--.1% K Mart,
Medium-Term Notes, 7.96%, 1999 . . . . . . . . . . 500,000 502,109
_____________
Technology--.7% Quantum,
Conv. Sub. Notes, 7%, 2004 . . . . . . . . . . . . 2,500,000 2,484,375
_____________
Telecommunications--.7% U.S. West Capital Funding,
Gtd. Notes, 6.125%, 2002 . . . . . . . . . . . . . 2,400,000 2,466,017
_____________
Utilities--7.5% Niagara Mohawk Power,
Sr. Notes, Ser. E, 7.375%, 2003 . . . . . . . . . 25,000,000 25,941,325
_____________
U.S. Government Agency/
Mortgage Backed--6.7% Federal Home Loan Mortgage Corp.:
Multiclass Mortgage Participation Ctfs., REMIC:
Ser. 1547, Cl. B, 7%, 2/15/2022
(Interest Only Obligation) . . . . . . . . . 6,474,821 (e) 1,040,309
Ser. 1987, Cl. PI, 7%, 9/15/2012
(Interest Only Obligation) . . . . . . . . . 2,650,764 (e) 427,489
Ser. 1999, Cl. PW, 7%, 8/15/2026
(Interest Only Obligation) . . . . . . . . . 13,500,000 (e) 2,248,594
Federal National Mortgage Association:
9%, 6/1/2026-8/1/2026 . . . . . . . . . . . . . . 8,488,278 9,021,427
REMIC Trust, Gtd. Pass-Through Ctfs.:
Ser. 1993-198, Cl. M, 6.5%, 10/25/2023
(Interest Only Obligation) . . . . . . . . . 4,830,000 (e) 1,260,147
Ser. 1997-56, Cl. PM, 7%, 6/18/2026
(Interest Only Obligation) . . . . . . . . . 3,000,000 (e) 500,310
Government National Mortgage Association I:
8%, 9/15/2008 . . . . . . . . . . . . . . . . . . 4,343,890 4,531,199
9%, 11/15/2017 . . . . . . . . . . . . . . . . . . 3,940,234 4,252,970
_____________
23,282,445
_____________
TOTAL BONDS AND NOTES
(cost $314,277,479) . . . . . . . . . . . . . . . $310,800,133
=============
DREYFUS SHORT TERM INCOME FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JANUARY 31, 1999 (UNAUDITED)
Preferred Stocks--2.5% Shares Value
- ------------------------------------------------------- _____________ _____________
Broadcasting--1.2% Spanish Broadcasting System, Ser. A,
Cum., $142.50 . . . . . . . . . . . . . . . . . . 4,000 $ 4,240,000
_____________
Consumer--1.3% Paxson Communications,
Cum., $1,325 . . . . . . . . . . . . . . . . . . . 533 4,637,970
_____________
TOTAL PREFERRED STOCKS
(cost $9,378,783) . . . . . . . . . . . . . . . . $ 8,877,970
==============
Principal
Short-Term Investments--6.4% Amount
- ------------------------------------------------------------------------------------------- _____________
Time Deposit--5.9% Chase Manhattan Bank (London),
4.75%, 2/1/1999 . . . . . . . . . . . . . . . . . $ 20,544,000 $ 20,544,000
_____________
Treasury Bills--.5% 4.46%, 2/4/1999 . . . . . . . . . . . . . . . . . . . 910,000 (f) 909,426
4.48%, 4/1/1999 . . . . . . . . . . . . . . . . . . . 100,000 (f) 99,261
4.32%, 4/8/1999 . . . . . . . . . . . . . . . . . . . 770,000 (f) 763,840
_____________
1,772,527
_____________
TOTAL SHORT-TERM INVESTMENTS
(cost $22,316,824) . . . . . . . . . . . . . . . . $ 22,316,527
=============
TOTAL INVESTMENTS (cost $345,973,086). . . . . . . . . . . . . . . . . . . . . . . . . . . 98.3% $341,994,630
===== ============
CASH AND RECEIVABLES (NET) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7% $ 5,799,739
===== ==============
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $347,794,369
====== ============
</TABLE>
Notes to Statements of Investments:
- -----------------------------------------------------------------------------
(a) 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 $92,460,338 or 26.6% of net assets.
(b) Variable rate security-interest rate subject to periodic change.
(c) Reflects date security can be redeemed at holders' option; the stated
maturity date is 6/1/2006.
(d) With warrants to purchase common stock.
(e) Notional face amount shown.
(f) Held by the custodian in a segregated account as collateral for open
financial futures position.
SEE NOTES TO FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
DREYFUS SHORT 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 . . . . . . . . . . . . . . . 385 $43,673,438 March '99 $(271,000)
==========
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS SHORT 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 . . $345,973,086 $341,994,630
Receivable for investment securities sold . . . . . . . . 6,078,949
Interest receivable . . . . . . . . . . . . . . . . . . . 4,908,818
Receivable for shares of Common Stock subscribed . . . . 110,628
Receivable for futures variation margin--Note 4(a) . . . 24,064
Prepaid expenses and other assets . . . . . . . . . . . . 3,344
_____________
353,120,433
_____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates . . . . . . 195,151
Due to Distributor . . . . . . . . . . . . . . . . . . . 58,460
Cash overdraft due to Custodian . . . . . . . . . . . . . 1,890,804
Payable for investment securities purchased . . . . . . . 2,430,893
Payable for shares of Common Stock redeemed . . . . . . . 676,786
Interest payable--Note 2 . . . . . . . . . . . . . . . . 3,058
Accrued expenses . . . . . . . . . . . . . . . . . . . . 70,912
_____________
5,326,064
_____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $347,794,369
=============
REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . $368,611,197
Accumulated undistributed investment income--net . . . . 490,254
Accumulated net realized gain (loss) on investments . . . (17,057,626)
Accumulated net unrealized appreciation (depreciation)
on investments [including ($271,000) net unrealized
(depreciation) on financial futures]--Note 4(b) . . . . (4,249,456)
_____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $347,794,369
==============
SHARES OUTSTANDING
(500 MILLION SHARES OF $.001 PAR VALUE COMMON STOCK AUTHORIZED). . . . . . . . . . . . . . 29,553,428
NET ASSET VALUE, offering and redemption price per share . . . . . . . . . . . . . . . . . $11.77
=======
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS SHORT TERM INCOME FUND
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS SIX MONTHS ENDED JANUARY 31, 1999 (UNAUDITED)
INVESTMENT INCOME
<S> <C> <C>
INCOME: Interest . . . . . . . . . . . . . . . . . . . . . . . . $ 12,708,332
Cash dividends . . . . . . . . . . . . . . . . . . . . . 573,158
_____________
Total Income . . . . . . . . . . . . . . . . . . . $ 13,281,490
EXPENSES: Management fee--Note 3(a) . . . . . . . . . . . . . . . . 894,449
Shareholder servicing costs--Note 3(b) . . . . . . . . . 557,978
Registration fees . . . . . . . . . . . . . . . . . . . . 41,129
Professional fees . . . . . . . . . . . . . . . . . . . . 24,382
Custodian fees--Note 3(b) . . . . . . . . . . . . . . . . 22,017
Prospectus and shareholders' reports . . . . . . . . . . 21,571
Directors' fees and expenses--Note 3(c) . . . . . . . . . 11,911
Interest expense--Note 2 . . . . . . . . . . . . . . . . 5,834
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 7,109
_____________
Total Expenses . . . . . . . . . . . . . . . . . . 1,586,380
_____________
INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,695,110
_____________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments . . . . . . . . . $ (7,724,178)
Net realized gain (loss) on financial futures . . . . . . 261,965
_____________
Net Realized Gain (Loss) . . . . . . . . . . . . . (7,462,213)
Net unrealized appreciation (depreciation) on investments
[including ($122,562) net unrealized (depreciation) on
financial futures] . . . . . . . . . . . . . . . . . . (3,412,377)
_____________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . . . . (10,874,590)
_____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . $ 820,520
=============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS SHORT 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,695,110 $ 21,700,737
Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . (7,462,213) 5,313,929
Net unrealized appreciation (depreciation) on investments . . . . . . . . . . . . (3,412,377) (3,579,898)
_____________ _____________
Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . . . . 820,520 23,434,768
_____________ _____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,706,052) (21,330,080)
_____________ _____________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . 105,909,090 213,054,516
Dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,389,155 18,595,594
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (115,344,548) (154,170,131)
_____________ _____________
Increase (Decrease) in Net Assets from Capital Stock Transactions . . . . . . . (46,303) 77,479,979
_____________ _____________
Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . . . . (10,931,835) 79,584,667
NET ASSETS:
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 358,726,204 279,141,537
_____________ _____________
End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 347,794,369 $ 358,726,204
============= =============
UNDISTRIBUTED INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . $ 490,254 $ 789,612
_____________ _____________
Shares Shares
_____________ _____________
CAPITAL SHARE TRANSACTIONS:
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,947,506 17,595,243
Shares issued for dividends reinvested . . . . . . . . . . . . . . . . . . . . . . 798,507 1,537,622
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,796,771) (12,738,692)
_____________ _____________
Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . . . . (50,758) 6,394,173
============== =============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS SHORT 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 1995 1994
__________ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period . . . . . $12.12 $12.03 $11.86 $11.89 $11.94 $12.47
______ ______ ______ ______ ______ ______
Investment Operations:
Investment income--net . . . . . . . . . . . . .39 .84 .86 .78 .85 .84
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . (.35) .08 .17 (.04) (.05) (.54)
______ ______ ______ ______ ______ ______
Total from Investment Operations . . . . . . . .04 .92 1.03 .74 .80 .30
______ ______ ______ ______ ______ ______
Distributions:
Dividends from investment income--net . . . . . (.39) (.83) (.86) (.77) (.85) (.83)
______ ______ ______ ______ ______ ______
Net asset value, end of period . . . . . . . . $11.77 $12.12 $12.03 $11.86 $11.89 $11.94
______ ______ ______ ______ ______ ______
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . .56%(1) 7.92% 8.95% 6.42% 7.05% 2.47%
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses to average net assets . . .89%(1) .87% .80% .80% .61% .24%
Ratio of interest expense to average net assets . . .00%(1,2) .02% .02% -- -- --
Ratio of net investment income
to average net assets . . . . . . . . . . . 6.54%(1) 7.01% 7.28% 6.52% 7.26% 6.79%
Decrease reflected in above expense ratios
due to undertakings by the Manager . . . . -- .00%(2) .11% .14% .34% .71%
Portfolio Turnover Rate . . . . . . . . . . . . 107.25%(3) 185.77% 292.99% 291.35% 511.62% 74.90%
Net Assets, end of period (000's Omitted) . . . $347,794 $358,726 $279,142 $189,693 $210,524 $277,028
- -----------------------------
(1) Annualized.
(2) Amount represents less than .01%.
(3) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS SHORT TERM INCOME FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Short Term Income Fund (the "Fund") is a separate non-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 receives net
earnings credits based on available cash balances left on deposit.
(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, 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.
The Fund has an unused capital loss carryover of approximately $9,708,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to July 31, 1998. If not
applied, $5,447,000 of the carryover expires in fiscal 2003, $2,947,000 expires
in fiscal 2004 and $1,314,000 expires in fiscal 2005.
DREYFUS SHORT TERM INCOME FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
During the period ended January 31, 1999, the Fund reclassified $288,416
between accumulated undistributed investment income-net and accumulated net
realized gain (loss) on investments. Net assets were not affected by this
reclassification.
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 $203,800, with a
related weighted average annualized interest rate of 5.68%.
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 .50 of 1% of the value of the Fund's
average daily net assets and is payable monthly.
(B) Under the Shareholder Services Plan, the Fund pays the Distributor at the
annual rate of .20 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 $357,780 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 $114,552 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 $22,017 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 of investment securities
(including paydowns) , excluding short-term securities and financial futures,
during the period ended January 31, 1999 amounted to $350,976,404 and
$369,300,021, 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 market value of the contracts at the close
of each day's trading. Accordingly, variation margin payments are received or
made to reflect daily unrealized gains and 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
DREYFUS SHORT TERM INCOME FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 depreciation on
investments and financial futures was $4,249,456, consisting of $5,008,930 gross
unrealized appreciation and $9,258,386 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 SHORT 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. 083SA991
Short Term
Income Fund
Semi-Annual
Report
January 31, 1999
