Dreyfus
Intermediate
Term Income Fund
SEMIANNUAL REPORT
January 31, 2000
(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
- --------------------------------------------------
2 Letter from the President
3 Discussion of Fund Performance
6 Statement of Investments
11 Statement of Financial Futures
12 Statement of Assets and Liabilities
13 Statement of Operations
14 Statement of Changes in Net Assets
15 Financial Highlights
16 Notes to Financial Statements
FOR MORE INFORMATION
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Back Cover
The Fund
Dreyfus Intermediate Term Income Fund
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Intermediate Term
Income Fund, covering the six-month period from August 1, 1999 through January
31, 2000. Inside, you'll find valuable information about how the fund was
managed during the reporting period, including a discussion with Michael Hoeh,
portfolio manager and a member of the Dreyfus Taxable Fixed Income Team.
The past six months were challenging for most fixed-income investors. Faster
than expected economic growth in the U.S. and overseas fueled concerns that
long-dormant inflationary pressures might re-emerge, potentially reducing the
future value of bonds' interest and principal payments. These concerns prompted
the Federal Reserve Board to raise key short-term interest rates three times
during the summer and fall of 1999 in an attempt to prevent a reacceleration of
inflation. A fourth rate hike was announced just a few days after the reporting
period ended.
While U.S. Treasury and agency securities declined sharply in this environment,
prices of higher yielding securities -- such as corporate bonds and
mortgage-backed securities -- fell less severely. In an environment of robust
economic growth, investors appeared more comfortable owning bonds that are
influenced primarily by credit risk, and they avoided securities that are most
affected by interest-rate risk.
We appreciate your confidence over the past six months, and we look forward to
your continued participation in Dreyfus Intermediate Term Income Fund.
Sincerely,
/s/Stephen E. Canter
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
February 15, 2000
2
DISCUSSION OF FUND PERFORMANCE
Michael Hoeh, Portfolio Manager
Dreyfus Taxable Fixed Income Team
How did Dreyfus Intermediate Term Income Fund perform relative to its benchmark?
For the six-month period ended January 31, 2000, Dreyfus Intermediate Term
Income Fund produced a total return of 2.80%.(1) In comparison, the fund's
benchmark, the Merrill Lynch Domestic Master Index, provided a total return of
1.37% for the same period.(2)
We attribute the fund's good performance to its relatively short AVERAGE
DURATION -- a measure of sensitivity to changing interest rates -- in a rising
interest-rate environment. A relatively short average duration enabled the fund
to protect its share price and capture higher yields more readily as interest
rates rose.
What is the fund's investment approach?
The fund's objective is to provide as high a level of current income as is
consistent with the preservation of capital. At least 65% of the fund must be
invested in investment-grade fixed-income securities, including U.S. Government,
agency, corporate and mortgage-backed securities. Up to 35% of the fund may be
invested in securities rated below investment grade, including emerging market
securities.
When choosing investments for the fund, we evaluate four primary factors:
* The direction in which interest rates are likely to move under prevailing
economic conditions. If interest rates appear to be rising, we generally
reduce the fund's average duration to capture higher yielding securities as
they become available. If interest rates appear to be declining, we may
increase the fund's average duration to lock in prevailing yields.
* The differences in yields -- or SPREADS -- between fixed-income securities
of varying maturities.
The Fund 3
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
* The mix of security types within the fund, including relative exposure to
government securities, corporate securities, mortgage-backed securities,
foreign and high yield bonds.
* Credit characteristics of individual securities, including the financial
health of the issuer and the callability of the security.
What other factors influenced the fund's performance?
Both the fund and the intermediate-term sector of the bond market were adversely
affected by rising interest rates over the past six months.
When the reporting period began, global economic growth was greater than most
investors had previously anticipated. Economies in Japan and Southeast Asia were
recovering, and the growth of the U.S. economy was robust. In the United States,
consumer confidence was at a 30-year high and employment was strong, with hourly
wages rising.
This positive economic news raised concerns among investors that inflationary
pressures might re-emerge. The Federal Reserve Board had already increased
short-term interest rates once in late June, before the reporting period began.
It subsequently raised interest rates twice more in August and November. A
fourth rate hike was implemented just after the reporting period ended, for a
total increase of 1.00 percentage points.
Although higher interest rates caused most bond prices to fall, some market
sectors were affected more than others. Prices of U.S. Treasury securities fell
more sharply than other types of bonds, while high quality government agency,
corporate and mortgage-backed securities saw more modest declines. This was due
to strong economic conditions that tended to support the credit quality of
corporate issuers. In addition, prices of mortgage-backed securities were helped
by fewer mortgage loans being refinanced by homeowners.
What is the fund's current strategy?
We have continued to strategically adjust the fund's average duration and mix of
assets to take advantage of prevailing market conditions.
Accordingly, we maintained an average duration that was shorter than our
benchmark, the Merrill Lynch Domestic Master Index. This posi-
4
<PAGE>
tion has given us the flexibility we need to protect principal in a rising
interest-rate environment, while enabling us to take advantage of current income
opportunities.
Within the portfolio, we've emphasized investment-grade corporate bonds,
mortgage-backed securities and U.S. Government agency notes. In the mortgage
sector, we have focused on premium bonds likely to benefit from lower mortgage
loan refinancing rates. We received particularly attractive returns from
adjustable-rate securities, such as GNMA ARMs and floating-rate asset-backed
securities. These securities' yields adjust to higher interest rates without
eroding their prices, which benefited the fund greatly as interest rates rose.
We also received good performance from our holdings of U.S. dollar-denominated
foreign securities, particularly those issued by European and Korean banks.
Before taking profits later in the reporting period, foreign securities
comprised up to 5% of the fund.
On the other hand, we have tended to avoid U.S. Treasury securities, which
continued to suffer from investors' preference for higher yielding securities.
We did, however, add to our holdings of Treasury Inflation Protection Securities
(TIPS), which provided better performance than traditional fixed-rate U.S.
Treasuries. Furthermore, we reduced our holdings of high yield corporate bonds
- -- those rated below investment grade -- from about 20% of the portfolio at the
start of the period to about 5% at the end, enabling us to avoid the brunt of
poor performance in that sector.
February 15, 2000
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND
INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION FUND SHARES MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. RETURN FIGURES PROVIDED
REFLECT THE ABSORPTION OF FUND EXPENSES BY THE DREYFUS CORPORATION PURSUANT
TO AN UNDERTAKING IN EFFECT THAT MAY BE EXTENDED, TERMINATED OR MODIFIED AT
ANY TIME. HAD THESE EXPENSES NOT BEEN ABSORBED, THE FUND'S RETURNS WOULD
HAVE BEEN LOWER.
(2) SOURCE: BLOOMBERG L.P. -- THE MERRILL LYNCH DOMESTIC MASTER INDEX IS AN
UNMANAGED PERFORMANCE BENCHMARK COMPOSED OF U.S. TREASURY AND AGENCY, AND
MORTGAGE AND INVESTMENT-GRADE CORPORATE SECURITIES WITH MATURITIES GREATER
THAN OR EQUAL TO ONE YEAR.
The Fund 5
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS
January 31, 2000 (Unaudited)
Principal
BONDS AND NOTES--109.7% Amount ($) Value ($)
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<S> <C> <C>
AEROSPACE & DEFENSE--1.6%
Lockheed Martin,
Notes, 8.2%, 2009 750,000 739,022
AIRLINES--1.1%
Delta Airlines,
Notes, 7.9%, 2009 525,000 (a) 506,641
ASSET-BACKED CTFS.--6.0%
Air 2 US, Ser. A,
Enhanced Equipment Notes, 8.027%, 2019 425,000 (a) 419,086
Conseco Finance Securitizations,
Ser. 2000-1, Cl. A3, 7.3%, 2031 500,000 499,844
Fidelity Equipment Lease Trust,
Ser. 1999-2, Cl. A3, 6.96%, 2004 900,000 (a) 891,281
Inner Harbor CBO,
Ser. 1999-1, Cl. B2, 13.667%, 2012 290,000 (a) 279,858
Nomura Depositor Trust,
Ser. 1998-ST1, Cl. B2, 10.031%, 2003 750,000 (a,b) 682,617
2,772,686
ASSET-BACKED CTFS./AUTOMOBILE RECEIVABLES--3.2%
Flagship Auto Receivables Owner Trust,
Ser. 1999-2, Cl. A3, 6.835%, 2004 1,000,000 985,781
Provident Auto Lease ABS Trust,
Ser. 1999-1, Cl. A2, 7.025%, 2005 500,000 (a) 491,563
1,477,344
ASSET-BACKED CTFS./HOME EQUITY LOANS--.4%
GE Capital Mortgage Services,
REMIC, Ser. 1996-HE4, Cl. B4, 9.308%, 2026 409,565 (a,b) 204,783
CHEMICALS--2.0%
ICI Wilmington
(Gtd. by Imperial Chemical Industries),
Notes, 7.05%, 2007 1,000,000 944,127
COMMERCIAL MORTGAGE PASS-THROUGH CTFS.--7.5%
DLJ Mortgage Acceptance:
Ser. 1997-CF2, Cl. B3, 6.99%, 2009 1,000,000 (a) 793,455
Ser. 1998-STIA, Cl. B3, 7.875%, 2000 750,000 (a,b) 739,922
Ser. 1999-CG2, Cl. B2, 7.607%, 2009 500,000 (b) 443,203
Structured Asset Securities, REMIC,
Ser. 1996-CFL, Cl. H, 7.75%, 2028 1,000,000 (a) 686,865
TrizecHahn Office Properties Trust,
Ser. 1999-TOPA, Cl. D, 6.981%, 2007 800,000 (a,b) 793,250
3,456,695
6
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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COMPUTERS--.8%
IBM,
Deb., 7.125%, 2096 400,000 359,873
ENERGY--2.2%
Dual Drilling,
Sr. Sub. Notes, 9.875%, 2004 1,000,000 1,020,370
FINANCE--7.4%
Bombardier Capital,
Notes, 7.5%, 2004 1,000,000 (a) 974,822
Capital One Financial,
Sr. Notes, 7.25%, 2006 1,000,000 939,817
DLJ,
Medium-Term Notes, .4%, 2000 1,000,000 (a) 1,001,510
Lehman Brothers Holdings,
Notes, 7.875%, 2009 550,000 540,756
3,456,905
FOOD RETAILING--1.6%
Fred Meyer,
Bonds, 7.375%, 2005 750,000 730,980
FOREIGN/GOVERNMENTAL--3.7%
Republic of Argentina:
Deb., 11.25%, 2004 33,100 31,776
Notes, 12%, 2020 550,000 539,000
Ser. B, Notes, 0%, 2001 1,000,000 900,000
Republic of Costa Rica,
Notes, 9.335%, 2009 250,000 (a) 249,375
1,720,151
HOTELS & MOTELS--1.1%
Hyatt Equities,
Notes, 6.8%, 2000 500,000 (a) 499,438
INSURANCE--1.9%
Conseco,
Notes, 9%, 2006 900,000 904,541
OIL & GAS--1.3%
Yosemite Securities Trust I,
Bonds, 8.25%, 2004 600,000 (a) 590,356
PHARMACEUTICAL--1.0%
CVS,
Notes, 5.5%, 2004 500,000 468,221
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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RAILROAD--.5%
Terminal Railroad Association,
First Mortgage, 4%, 2019 345,000 246,083
REAL ESTATE--3.5%
Crescent Real Estate Equities,
Notes, 7%, 2002 1,000,000 907,297
Spieker Properties,
Deb., 7.35%, 2017 800,000 698,878
1,606,175
RESIDENTIAL MORTGAGE PASS-THROUGH CTFS.--11.6%
CountryWide Funding,
Ser. 1994-8, Cl. B2, 6%, 2009 657,874 (a) 538,634
Norwest Asset Securities, REMIC:
Ser. 1998-9, Cl. B3, 6.5%, 2028 809,917 686,814
Ser. 1998-13, Cl. B3, 6.25%, 2028 737,399 597,063
Ser. 1999-22, Cl. B4, 6.5%, 2014 393,301 (a) 301,428
Ser. 1999-27, Cl. B4, 6.75%, 2014 299,041 (a) 228,486
Residential Funding Mortgage Securities I, REMIC:
Ser. 1995-J1, Cl. 2, 7.52%, 2023 485,587 (a,b) 383,842
Ser. 1997-S10, Cl. B2, 7%, 2012 274,278 (a) 215,424
Ser. 1997-S16, Cl. M3, 6.75%, 2012 696,935 610,975
Ser. 1997-S19, Cl. B3, 6.5%, 2012 421,464 (a) 113,795
Ser. 1998-S1, Cl. M3, 6.5%, 2013 517,348 446,300
Ser. 1998-S7, Cl. B1, 6.5%, 2013 472,536 (a) 369,391
Ser. 1998-S16, Cl. B1, 6.5%, 2013 288,458 (a) 216,974
Structured Asset Securities,
REMIC, Ser. Greenpoint 1996-A,
Cl. B3, 8.341%, 2027 687,702 (b) 693,719
5,402,845
RETAIL--1.9%
Tricon Global Restaurants,
Sr. Notes, 7.45%, 2005 945,000 901,556
TELECOMMUNICATIONS--1.2%
RCN,
Sr. Notes, 10.125%, 2010 590,000 576,725
U.S. GOVERNMENT--26.4%
U. S. Treasury Inflation Protection Securities,
3.625%, 2008 2,000,000 (c) 1,987,464
U. S. Treasury Notes:
5.875%, 2004 1,000,000 966,970
6%, 2009 9,749,000 9,293,039
12,247,473
8
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY/MORTGAGE BACKED--17.2%
Federal Home Loan Mortgage,
Multiclass Mortgage Participation Ctfs., REMIC
(Interest Only Obligation):
Ser. 1499, Cl. E, 7%, 4/15/2023 850,000 (d) 392,029
Ser. 1610, Cl. PW, 6.5%, 4/15/2022 1,867,492 (d) 365,337
Government National Mortgage Association I:
6.5%, 2/15/2029 890,000 (e) 822,413
7.5%, 2/15/2029 1,500,000 (e) 1,462,965
8%, 2/15/2029 2,450,000 (e) 2,443,875
Project Loan,
6.625%, 7/15/2033 395,675 368,840
Government National Mortgage Association II,
Adjustable Rate Mortgage:
5.5%, 2/20/2030 1,000,000 (e) 970,310
6%, 2/20/2030 1,165,000 (e) 1,146,069
7,971,838
UTILITIES-TELEPHONE--.6%
AT&T Canada,
Notes, 7.65%, 2006 300,000 296,915
YANKEE--4.0%
Bayer HypoVereinsbank,
Notes, 8.741%, 2031 900,000 (a) 888,016
Korea Development Bank,
Bonds, 6.625%, 2003 1,000,000 947,741
1,835,757
TOTAL BONDS AND NOTES
(cost $52,522,793) 50,937,500
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COMMON STOCKS--1.2% Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
BROADCASTING;
Spanish Broadcasting System, Cl. B
(cost $75,000) 16,050 (a,f) 549,713
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PREFERRED STOCKS--1.8%
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TELECOMMUNICATIONS;
Winstar Communications, Ser. C,
Cum., $142.50
(cost $658,200) 750 832,500
The Fund 9
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
SHORT-TERM INVESTMENTS--.4% Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER--.3%
Xerox Credit,
5.82%, 2/1/2000 130,000 130,000
U.S. TREASURY BILLS--.1%
5.3%, 4/20/2000 50,000 (g) 49,391
TOTAL SHORT-TERM INVESTMENTS
(cost $179,419) 179,391
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TOTAL INVESTMENTS (cost $53,435,412) 113.1% 52,499,104
LIABILITIES, LESS CASH AND RECEIVABLES (13.1%) (6,090,824)
NET ASSETS 100.0% 46,408,280
(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,
2000, THESE SECURITIES AMOUNTED TO $13,610,525 OR 29.3% OF NET ASSETS.
(b) VARIABLE RATE SECURITY--INTEREST RATE SUBJECT TO PERIODIC CHANGE.
(c) PRINCIPAL AMOUNT FOR ACCRUAL PURPOSES IS PERIODICALLY ADJUSTED BASED ON
CHANGES TO THE CONSUMER PRICE INDEX.
(d) NOTIONAL FACE AMOUNT SHOWN.
(e) PURCHASED ON A FORWARD COMMITMENT BASIS.
(f) NON-INCOME PRODUCING.
(g) HELD BY THE CUSTODIAN IN A SEGREGATED ACCOUNT AS COLLATERAL FOR OPEN
FINANCIAL FUTURES POSITIONS.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF FINANCIAL FUTURES
January 31, 2000 (Unaudited)
Unrealized
Market Value Appreciation
Covered by (Depreciation)
Contracts Contracts ($) Expiration at 1/31/00 ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL FUTURES LONG
U.S. Treasury 10 year Notes 72 6,824,250 March 2000 (8,719)
FINANCIAL FUTURES SHORT
U.S. Treasury 5 year Notes 31 3,002,641 March 2000 52,570
U.S. Treasury 30 year Bonds 25 2,305,469 March 2000 (52,398)
(8,547)
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Fund 11
STATEMENT OF ASSETS AND LIABILITIES
January 31, 2000 (Unaudited)
Cost Value
- --------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of Investments 53,435,412 52,499,104
Cash 465,604
Interest receivable 780,907
Receivable for investment securities sold 759,000
Receivable for futures variation margin--Note 4(a) 14,453
Receivable for shares of Common Stock subscribed 13,500
Paydowns receivable 13,078
Prepaid expenses and other assets 6,946
Due from The Dreyfus Corporation and affliliates 321
54,552,913
- --------------------------------------------------------------------------------
LIABILITIES ($):
Due to Distributor 9,594
Payable for investment securities purchased 7,966,560
Payable for shares of Common Stock redeemed 139,999
Accrued expenses 28,480
8,144,633
- --------------------------------------------------------------------------------
NET ASSETS ($) 46,408,280
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 47,581,392
Accumulated undistributed investment income--net 71,095
Accumulated net realized gain (loss) on investments and
financial futures
(299,352)
Accumulated net unrealized appreciation (depreciation) on investments
[including ($8,547) net unrealized (depreciation) on financial
futures]--Note 4(b) (944,855)
- --------------------------------------------------------------------------------
NET ASSETS ($) 46,408,280
- --------------------------------------------------------------------------------
SHARES OUTSTANDING
(500 million shares of $.001 par value Common Stock authorized) 3,804,531
NET ASSET VALUE, offering and redemption price per share ($) 12.20
SEE NOTES TO FINANCIAL STATEMENTS.
12
STATEMENT OF OPERATIONS
Six Months Ended January 31, 2000 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME ($):
Interest 1,518,285
Cash dividends 153,945
TOTAL INCOME 1,672,230
EXPENSES:
Management fee--Note 3(a) 116,034
Shareholder servicing costs--Note 3(b) 74,223
Prospectus and shareholders' reports 17,270
Registration fees 13,176
Custodian fees--Note 3(b) 11,812
Auditing fees 9,736
Directors' fees and expenses--Note 3(c) 2,215
Interest expense--Note 2 2,127
Legal fees 932
Miscellaneous 2,954
TOTAL EXPENSES 250,479
Less--reduction in management fee due to
undertaking--Note 3(a) (110,846)
NET EXPENSES 139,633
INVESTMENT INCOME--NET 1,532,597
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (351,804)
Net realized gain (loss) on financial futures 278,487
NET REALIZED GAIN (LOSS) (73,317)
Net unrealized appreciation (depreciation) on investments
[including ($111,844) net unrealized (depreciation)
on financial futures] (292,771)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (366,088)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 1,166,509
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund 13
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
January 31, 2000 Year Ended
(Unaudited) July 31, 1999
- --------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 1,532,597 1,943,814
Net realized gain (loss) on investments (73,317) 338,665
Net unrealized appreciation (depreciation)
on investments (292,771) (1,142,922)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 1,166,509 1,139,557
- --------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net (1,481,801) (1,950,844)
Net realized gain on investments (479,970) (1,161,459)
TOTAL DIVIDENDS (1,961,771) (3,112,303)
- --------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS ($):
Net proceeds from shares sold 18,234,988 27,727,923
Dividends reinvested 1,281,213 1,974,470
Cost of shares redeemed (10,143,965) (12,874,875)
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL STOCK TRANSACTIONS 9,372,236 16,827,518
TOTAL INCREASE (DECREASE) IN NET ASSETS 8,576,974 14,854,772
- --------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 37,831,306 22,976,534
END OF PERIOD 46,408,280 37,831,306
Undistributed investment income--net 71,095 20,299
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold 1,481,710 2,185,703
Shares issued for dividends reinvested 104,366 157,408
Shares redeemed (824,471) (1,017,204)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 761,605 1,325,907
SEE NOTES TO FINANCIAL STATEMENTS.
14
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements.
<TABLE>
<CAPTION>
Six Months Ended
January 31, 2000 Year Ended July 31,
-----------------------------------------------------------------------
(Unaudited) 1999 1998 1997 1996(a)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA ($):
Net asset value, beginning of period 12.43 13.38 13.23 12.22 12.50
Investment Operations:
Investment income--net .45 .87 .91 .95 .46
Net realized and unrealized
gain (loss) on investments (.11) (.36) .47 1.01 (.28)
Total from Investment Operations .34 .51 1.38 1.96 .18
Distributions:
Dividends from investment income--net (.43) (.88) (.89) (.95) (.46)
Dividends from net realized gain on investments (.14) (.58) (.34) -- --
Total Distributions (.57) (1.46) (1.23) (.95) (.46)
Net asset value, end of period 12.20 12.43 13.38 13.23 12.22
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 5.55(b) 4.18 10.93 16.70 3.05(b)
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses to average net assets .65(b) .65 .80 .52 --
Ratio of interest expense to average net assets .01(b) .08 .34 .06 --
Ratio of net investment income
to average net assets 7.24(b) 6.79 6.81 7.45 7.70(b)
Decrease reflected in above expense ratios
due to undertakings
by The Dreyfus Corporation .52(b) .51 .49 .98 2.50(b)
Portfolio Turnover Rate 203.81(c) 166.80 170.52 321.59 139.38(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 46,408 37,831 22,977 21,944 9,756
(a) FROM FEBRUARY 2, 1996 (COMMENCEMENT OF OPERATIONS) TO JULY 31, 1996.
(b) ANNUALIZED.
(c) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Fund 15
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"), which is a wholly-owned subsidiary
of Mellon Financial Corporation. 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 series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series 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)
16
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, 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.
The Fund 17
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, 2000 was approximately $73,400, with a
related weighted average annualized interest rate of 5.75%.
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, 2000, 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 $110,846 during the period ended
January 31, 2000.
(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
18
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, 2000,
the fund was charged $52,743 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, 2000, the fund was charged $15,898 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, 2000, the fund was
charged $11,812 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 $250
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, 2000, amounted to $99,863,212 and
$88,861,966, 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 unrealized gains or losses. When the contracts are
closed, the fund
The Fund 19
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NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
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, 2000 are set forth in the
Statement of Financial Futures.
(b) At January 31, 2000, accumulated net unrealized depreciation on investments
and financial futures was $944,855, consisting of $844,614 gross unrealized
appreciation and $1,789,469 gross unrealized depreciation.
At January 31, 2000, the cost of investments for Federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
NOTE 5--Subsequent Event:
At a meeting of the fund's Board of Directors held on January 20, 2000, the
Board approved the termination of the fund's Distribution Agreement with Premier
Mutual Fund Services, Inc., and approved a new Distribution Agreement with
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager. The new
Distribution Agreement with Dreyfus Service Corporation is slated for
effectiveness on March 16, 2000.
<PAGE>
For More Information
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
Distributor
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
To obtain information:
BY TELEPHONE Call 1-800-645-6561
BY MAIL Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Information can be viewed online or downloaded from:
http://www.dreyfus.com
(c) 2000 Dreyfus Service Corporation 082SA001
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