UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-8703
Dreyfus High Yield Strategies Fund
(Exact name of Registrant as specified in charter)
c/o The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
(Address of principal executive offices) (Zip
code)
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and address of agent for service)
Registrant's telephone number, (212) 922-6000
including area code:
Date of fiscal year end: 3/31
Date of reporting period: 9/30/03
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS.
Dreyfus
High Yield
Strategies Fund
SEMIANNUAL REPORT September 30, 2003
DREYFUS HIGH YIELD STRATEGIES FUND
PROTECTING YOUR PRIVACY
OUR PLEDGE TO YOU
THE FUND IS COMMITTED TO YOUR PRIVACY. On this page, you will find the Fund's
policies and practices for collecting, disclosing, and safeguarding "nonpublic
personal information," which may include financial or other customer
information. These policies apply to individuals who purchase Fund shares for
personal, family, or household purposes, or have done so in the past. This
notification replaces all previous statements of the Fund's consumer privacy
policy, and may be amended at any time. We'll keep you informed of changes as
required by law.
YOUR ACCOUNT IS PROVIDED IN A SECURE ENVIRONMENT. The Fund maintains physical,
electronic and procedural safeguards that comply with federal regulations to
guard nonpublic personal information. The Fund's agents and service providers
have limited access to customer information based on their role in servicing
your account.
THE FUND COLLECTS INFORMATION IN ORDER TO SERVICE AND ADMINISTER YOUR ACCOUNT.
The Fund collects a variety of nonpublic personal information, which may
include:
* Information we receive from you, such as your name, address, and social
security number.
* Information about your transactions with us, such as the purchase or sale
of Fund shares.
* Information we receive from agents and service providers, such as proxy
voting information.
THE FUND DOES NOT SHARE NONPUBLIC PERSONAL INFORMATION WITH ANYONE, EXCEPT AS
PERMITTED BY LAW.
THANK YOU FOR THIS OPPORTUNITY TO SERVE YOU.
The views expressed in this report reflect those of the portfolio manager only
through the end of the period covered and do not necessarily represent the views
of Dreyfus or any other person in the Dreyfus organization. Any such views are
subject to change at any time based upon market or other conditions and Dreyfus
disclaims any responsibility to update such views. These views may not be relied
on as investment advice and, because investment decisions for a Dreyfus fund are
based on numerous factors, may not be relied on as an indication of trading
intent on behalf of any Dreyfus fund.
Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE FUND
--------------------------------------------------
2 Letter from the Chairman
3 Discussion of Fund Performance
6 Statement of Investments
20 Statement of Assets and Liabilities
21 Statement of Operations
22 Statement of Cash Flows
23 Statement of Changes in Net Assets
24 Financial Highlights
26 Notes to Financial Statements
37 Officers and Dirctors
FOR MORE INFORMATION
---------------------------------------------------------------------------
Back Cover
The Fund
Dreyfus High Yield
Strategies Fund
LETTER FROM THE CHAIRMAN
Dear Shareholder:
This semiannual report for Dreyfus High Yield Strategies Fund covers the
six-month period from April 1, 2003, through September 30, 2003. Inside, you'll
find valuable information about how the fund was managed during the reporting
period, including a discussion with Gerald E. Thunelius, portfolio manager and
Director of the Dreyfus Taxable Fixed Income Team that manages the fund.
After a prolonged period of sluggish growth, the U.S. economy has shown signs of
sustainable improvement. However, investor uncertainty regarding the strength of
the recovery has produced heightened volatility in the fixed-income markets.
After most areas of the bond market experienced sharp declines during the
summer, bond prices generally bounced back in September.
While we believe that investors generally should remain diversified across
multiple asset classes, including bonds, it may be a good time to consider
reviewing the fixed-income component of your portfolio for a potentially
stronger economic environment and the possibility that the multiyear decline of
interest rates has run its course. As always, we encourage you to talk with your
financial advisor about managing your investment portfolio as market conditions
evolve.
Thank you for your continued confidence and support.
Sincerely,
Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
October 15, 2003
DISCUSSION OF FUND PERFORMANCE
Gerald E. Thunelius, Portfolio Manager
Dreyfus Taxable Fixed Income Team
How did Dreyfus High Yield Strategies Fund perform during the period?
For the six-month period ended September 30, 2003, the fund achieved a total
return of 27.03% and produced aggregate income dividends of $0.30575 per
share.(1) In comparison, the Merrill Lynch High Yield Master II Index (the
"Index") achieved a total return of 12.90% for the same period.(2)
We attribute the fund's strong returns to a rebound in high-yield corporate bond
prices that was particularly steep among bonds that had been the hardest hit
during the prolonged weakness in the high-yield market over the prior years
preceding this reporting period. The fund enjoyed especially strong returns from
bonds issued by companies in the electric utilities, cable television system
operators and telecommunications sectors. In addition, the fund's total return
was enhanced by its leveraging strategy, which tends to magnify gains and
losses.
What is the fund's investment approach?
The fund primarily seeks high current income. The fund will also seek capital
growth as a secondary objective, to the extent consistent with its objective of
seeking high current income. The fund invests primarily in fixed-income
securities of below investment-grade credit quality. Issuers of below
investment-grade securities may include companies in early stages of development
and companies with a highly leveraged financial structure. To compensate
investors for taking on greater risk, such companies typically must offer higher
yields than those offered by more established or conservatively financed
companies.
The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
The fund' s investment process involves a "top-down" approach to sector and a
fundamental "bottom-up" approach to security selection. We look at a variety of
factors when assessing a potential investment, including the state of the
industry or sector, the company' s financial strength and the company's
management. We also employ leverage -- buying additional bonds with borrowed
money in an effort to increase the fund's return.
What other factors influenced the fund's performance?
Before the reporting period began, the fund held bonds of companies that had
been hit hard during the economic downturn, which we believed represented
compelling values at depressed price levels. Because of challenging business
conditions and, in some cases, company-specific problems, these bonds were
selling at price and yield levels that, in our view, compensated investors for
assuming certain risks, including the risk that these companies might fail. This
strategy proved rewarding when signs of economic growth began to emerge in the
fourth quarter of 2002, sparking a market rally that has persisted through the
third quarter of 2003. The fund received particularly strong contributions to
its performance from its holdings of "fallen angels" such as El Paso Production,
Calpine, Dynegy and CMS Energy in the utilities group, Qwest in the
telecommunications group and Adelphia Communications in the cable television
industry.
However, as the corporate bond rally continued, we became concerned that some of
the fund' s holdings no longer represented what we considered to be attractive
values. Yield differences between higher- and lower-rated bonds had narrowed
considerably, suggesting that investors were no longer being compensated as
generously for assuming extra risk. We began to pare back the fund's riskier
holdings, including many of the former "fallen angels" mentioned above. In many
cases, we shifted assets to more senior bonds from the same issuer, effectively
moving up in those companies' capital structures. In other cases, we redeployed
assets to bonds of other issuers that we considered more fundamentally sound,
such as companies in the gaming and forest products industries.
This shift to a higher-quality credit profile helped protect the fund from the
brunt of heightened market volatility in July, when investors' concerns about
the potential effects of a stronger economy on interest rates sparked one of the
most severe one-month declines in the investment-grade bond market's history.
However, the move to higher-quality securities also affected the fund's income
stream. Because higher-quality bonds tend to generate less income than their
lower-rated counterparts, we reduced the fund' s monthly cash dividend to
$0.04875 per share of beneficial interest on April 24, 2003. The reduction of
the fund' s dividend distribution rate also reflected the default of National
Equipment Services on its debt.
What is the fund's current strategy?
Although the fund benefited from its leveraging strategy in the generally
constructive market environment, we recently reduced the degree of leverage in
order to maintain the flexibility we need to take advantage of future investment
opportunities as they arise. The bond market has shown signs of leveling off
after its steep rally and we believe that today's investment environment is
likely to reward investors who can manage risks effectively and have the ability
to take advantage of opportunities during periods of temporary market weakness.
October 15, 2003
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID,
BASED UPON NET ASSET VALUE PER SHARE. 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.
(2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE
APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MERRILL LYNCH HIGH YIELD MASTER II
INDEX IS AN UNMANAGED PERFORMANCE BENCHMARK COMPOSED OF U.S. DOMESTIC AND YANKEE
BONDS RATED BELOW INVESTMENT-GRADE WITH AT LEAST $100 MILLION PAR AMOUNT
OUTSTANDING AND GREATER THAN OR EQUAL TO ONE YEAR TO MATURITY.
The Fund
STATEMENT OF INVESTMENTS
September 30, 2003 (Unaudited)
Principal
BONDS AND NOTES--130.2% Amount(a) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
ADVERTISING--.4%
RH Donnelley Financial:
Sr. Notes, 8.875%, 2010 660,000 (b,c) 742,500
Sr. Sub. Notes, 10.875%, 2012 440,000 (b,c) 521,400
1,263,900
AEROSPACE & DEFENSE--.9%
BE Aerospace,
Sr. Sub. Notes, Ser. B, 8.875%, 2011 2,414,000 (b) 2,100,180
K&F Industries,
Sr. Sub. Notes, Ser. B 9.625%, 2010 657,000 (b) 725,985
2,826,165
AIRLINES--1.8%
AMR:
Deb., 9%, 2012 1,800,000 (b) 1,381,500
Deb., 9.75%, 2021 2,400,000 (b) 1,626,000
Air 2 US,
Enhanced Equipment Notes,
Ser. D, 12.226%, 2020 9,640,958 (c,d) 454,330
Aircraft Finance Trust,
Asset-Backed Notes,
Ser. 1999-1A, Cl. D, 11%, 2024 6,541,791 (b,c) 457,925
Delta Air Lines,
Sr. Notes, 10%, 2008 2,206,400 (b,c) 1,765,120
5,684,875
AUTOMOTIVE, TRUCKS & PARTS--2.0%
Airxcel,
Sr. Sub. Notes, Ser. B, 11%, 2007 3,329,000 (b) 2,846,295
Collins & Aikman Products,
Sr. Notes, 10.75%, 2011 2,216,000 (b) 1,927,920
Rexnord,
Sr. Sub. Notes, 10.125%, 2012 975,000 (b) 1,087,125
UIS,
Sr. Sub. Notes, 9.375%, 2013 675,000 (b,c) 705,375
6,566,715
BUILDING & CONSTRUCTION--1.6%
Owens Corning,
Deb., 7.5%, 2018 5,878,000 (d) 2,681,838
WCI Communities,
Sr. Sub. Notes, 10.625%, 2011 2,370,000 (b) 2,607,000
5,288,838
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
CHEMICALS--9.6%
Aqua Chemical,
Sr. Sub. Notes, 11.25%, 2008 2,000,000 (b) 1,640,000
Avecia,
Gtd. Sr. Notes, 11%, 2009 9,156,000 (b) 8,057,481
HMP Equity,
Units, 0%, 2008 436 (c,f) 213,640
Huntsman,
Secured Notes, 11.625%, 2010 3,674,000 (c) 3,600,520
Huntsman ICI Chemicals,
Sr. Sub. Notes, 10.125%, 2009 5,481,000 (b) 5,234,355
Lyondell Chemical,
Sr. Secured Notes, 11.125%, 2012 2,684,000 (b) 2,643,740
OM Group,
Sr. Sub. Notes, 9.25%, 2011 2,810,000 (b) 2,802,975
PolyOne,
Sr. Notes, 10.625%, 2010 887,000 (b) 753,950
Resolution Performance Products,
Sr. Sub. Notes, 13.5%, 2010 5,285,000 (b) 4,756,500
Rockwood Specialties,
Sr. Sub. Notes, 10.625%, 2011 1,380,000 (b,c) 1,476,600
31,179,761
COMMERCIAL SERVICES--3.4%
Alliance Laundry Systems,
Sr. Sub. Notes, Ser. B, 9.625%, 2008 2,000,000 (b) 2,040,000
Brickman,
Sr. Sub. Notes, Ser. B, 11.75%, 2009 888,000 (b) 1,003,440
Trico Marine Services,
Notes, 8.875%, 2012 3,495,000 (b) 2,568,825
United Rentals North America:
Sr. Notes, Ser. b, 10.75%, 2008 984,000 (b) 1,094,700
Sr. Notes, Ser. B, 10.75%, 2008 1,775,000 (b) 1,974,688
Williams Scotsman:
Sr. Notes, 9.875%, 2007 1,759,000 (b) 1,741,410
Sr. Secured Notes, 10%, 2008 477,000 (c) 510,390
10,933,453
CONSUMER PRODUCTS--.9%
Moore North American Finance,
Sr. Notes, 7.875%, 2011 560,000 (b,c) 597,800
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS (CONTINUED)
Playtex Products,
Sr. Sub. Notes, 9.375%, 2011 1,804,000 (b) 1,740,860
Rayovac,
Sr. Sub. Notes, 8.5%, 2013 465,000 (c) 481,275
2,819,935
DIVERSIFIED FINANCIAL SERVICE--3.1%
Acme Intermediate Holdings/Finance,
Sr. Secured Notes, Ser. B, 12%, 2005 1,312,000 1,312,000
Diamond,
Notes, 10%, 2008 GBP 885,000 (a) 1,471,224
FINOVA,
Notes, 7.5%, 2009 3,150,000 (b) 1,575,000
HLI Operating,
Sr. Notes, 10.5%, 2010 886,000 (b,c) 970,170
National Beef Packing/Finance,
Sr. Notes, 10.5%, 2011 904,000 (c) 989,880
Southern Star Central,
Sr. Secured Notes, 8.5%, 2010 1,152,000 (c) 1,226,880
Williams Holdings of Delaware,
Notes, 6.5%, 2008 2,558,000 (b) 2,494,050
10,039,204
ELECTRIC UTILITIES--11.8%
Allegheny Energy Statutory Trust 2001:
Secured Notes, 10.25%, 2007 85,539 (b,c) 83,401
Secured Notes, 10.25%, 2007 1,700,460 (b,c) 1,708,962
Allegheny Energy Supply,
Bonds, 8.75%, 2012 4,495,000 (b,c) 3,978,075
CMS Energy,
Sr. Notes, 9.875%, 2007 2,442,000 (b) 2,625,150
Calpine:
Secured Notes, 8.5%, 2010 8,226,000 (b,c) 7,609,050
Secured Notes, 8.75%, 2013 4,668,000 (b,c) 4,294,560
Sr. Notes, 7.75%, 2009 5,745,000 (b) 3,992,775
Calpine Canada Energy Finance,
Gtd. Sr. Notes, 8.5%, 2008 4,023,000 (b) 2,916,675
Mirant,
Sr. Notes, 7.4%, 2004 3,103,000 (c,d) 1,714,407
Mirant Americas Generation,
Sr. Notes, 7.625%, 2006 2,426,000 (d) 1,934,735
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES (CONTINUED)
Reliant Resources:
Sr. Secured Notes, 9.25%, 2010 6,909,000 (b,c) 6,287,190
Sr. Secured Notes, 9.5%, 2013 1,480,000 (c) 1,339,400
38,484,380
ELECTRICAL & ELECTRONICS--1.3%
Dresser,
Sr. Sub. Notes, 9.375%, 2011 3,669,000 3,870,795
Flextronics,
Sr. Sub. Notes, 6.5%, 2013 454,000 (c) 452,865
4,323,660
ENTERTAINMENT--3.4%
AMC Entertainment:
Sr. Sub. Notes, 9.5%, 2009 358,000 (b) 372,767
Sr. Sub. Notes, 9.875%, 2012 1,973,000 (b) 2,160,435
Argosy Gaming,
Sr. Sub. Notes, 9%, 2011 1,501,000 (b) 1,639,843
Bally Total Fitness,
Sr. Notes, 10.5%, 2011 1,579,000 (b,c) 1,669,792
Cinemark USA,
Sr. Sub. Notes, 9%, 2013 449,000 (b) 481,552
Old Evangeline Downs,
Sr. Secured Notes, 13%, 2010 1,474,000 (b) 1,512,692
Premier Parks,
Sr. Notes, 9.75%, 2007 1,321,000 (b) 1,304,487
Regal Cinemas,
Sr. Sub. Notes, Ser. B, 9.375%, 2012 455,000 (b) 514,150
Town Sports International,
Sr. Notes, 9.625%, 2011 1,335,000 (b) 1,428,450
11,084,168
ENVIRONMENTAL CONTROL--2.5%
Allied Waste,
Sr. Sub. Notes, Ser. B, 10%, 2009 6,619,000 (b) 7,206,436
Synagro Technologies,
Sr. Sub. Notes, 9.5%, 2009 896,000 (b) 985,600
8,192,036
FOOD & BEVERAGES--3.7%
Agrilink Foods,
Sr. Sub. Notes, 11.875%, 2008 898,000 (b) 953,003
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGES (CONTINUED)
Del Monte,
Sr. Sub Notes, 8.625%, 2012 1,879,000 (b,c) 2,062,202
Doane Pet Care,
Sr. Notes, 10.75%, 2010 1,350,000 (b) 1,491,750
Dole Foods:
Deb., 8.75%, 2013 665,000 (b) 714,875
Sr. Notes, 8.625%, 2009 919,000 983,330
Sr. Notes, 8.875%, 2011 1,333,000 (b) 1,426,310
Land O'Lakes,
Sr. Notes, 8.75%, 2011 4,742,000 (b) 4,006,990
Swift & Co.,
Sr. Notes, 10.125%, 2009 441,000 (b) 489,510
12,127,970
FOREIGN GOVERNMENTS--.9%
Argentina Government International Bond,
Gtd. Bonds, Ser. L-GP, 6%, 2023 5,700,000 (d) 2,821,500
Province of Quebec,
Deb., 3.3%, 2013 CAD 75,000 (g) 58,123
2,879,623
GAMING & LODGING--6.4%
Coast Hotels & Casinos,
Sr. Sub. Notes, 9.5%, 2009 1,336,000 (b) 1,432,860
Kerzner International,
Notes, 8.875%, 2011 450,000 (b) 489,938
Mandalay Resort,
Sr. Notes, 6.5%, 2009 1,825,000 (c) 1,866,063
Mohegan Tribal Gaming Authority:
Sr. Sub. Notes, 6.375%, 2009 1,800,000 (b,c) 1,824,750
Sr. Sub. Notes, 8.375%, 2011 877,000 (b) 960,315
Park Place Entertainment:
Sr. Notes, 7%, 2013 446,000 (b) 463,282
Sr. Sub. Notes, 7.875%, 2010 1,140,000 (b) 1,225,500
Sr. Sub. Notes, 8.875%, 2008 985,000 (b) 1,093,350
Resorts International Hotel and Casino,
First Mortgage, 11.5%, 2009 5,002,000 (b) 4,983,242
Station Casinos,
Sr. Sub. Notes, 9.875%, 2010 1,885,000 (b) 2,094,706
Trump Casino Holdings/Funding,
First Priority Mortgage Notes,
11.625%, 2010 2,141,000 (b) 1,924,224
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
GAMING & LODGING (CONTINUED)
Turning Stone Casino Entertainment,
Sr. Notes, 9.125%, 2010 636,000 (b,c) 686,085
Wynn Las Vegas,
Second Mortgage, 12%, 2010 1,390,000 (b) 1,591,550
20,635,865
HEALTH CARE--2.2%
Extended Stay America,
Sr. Sub. Notes, 9.875%, 2011 650,000 (b) 720,688
Extendicare Health Services,
Sr. Notes, 9.5%, 2010 791,000 (b) 862,190
Hanger Orthopedic,
Sr. Notes, 10.375%, 2009 1,350,000 (b) 1,513,687
Province Healthcare,
Sr. Sub. Notes, 7.5%, 2013 2,000,000 (b) 2,000,000
Seminis,
Sr. Sub. Notes, 10.25%, 2013 230,000 (c) 246,675
Tenet Healthcare:
Notes, 7.375%, 2013 885,000 (b) 896,062
Sr. Notes, 5%, 2007 1,000,000 (b) 965,000
7,204,302
MACHINERY--2.9%
Case New Holland:
Sr. Notes, 9.25%, 2011 907,000 (c) 979,560
Sr. Notes, 9.25%, 2011 1,338,000 (c) 1,445,040
Milacron,
Notes, 8.375%, 2004 1,199,000 941,215
National Equipment Services:
Sr. Sub. Notes, Ser. B, 10%, 2004 2,700,000 (d) 1,093,500
Sr. Sub. Notes, Ser. D, 10%, 2004 6,167,000 (d) 2,497,635
Terex,
Sr. Sub. Notes, Ser. B, 10.375%, 2011 2,250,000 (b) 2,531,250
9,488,200
MANUFACTURING--4.4%
Hexcel,
Sr. Sub. Notes, 9.75%, 2009 3,321,000 (b) 3,478,748
JB Poindexter & Co.,
Sr. Secured Notes, 12.5%, 2007 2,913,000 (b,h) 2,723,655
Key Components,
Sr. Notes, 10.5%, 2008 2,567,000 (b) 2,579,835
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
MANUFACTURING (CONTINUED)
Tyco International,
Gtd. Notes, 6.375%, 2005 5,416,000 (b) 5,659,720
14,441,958
MEDIA--12.8%
Adelphia Communications,
Sr. Notes, 9.375%, 2009 3,516,000 (d) 2,531,520
Charter Communications Holdings/Capital:
Sr. Discount Notes, 0/9.92%, 2011 1,343,000 (b,i) 956,888
Sr. Discount Notes, 0/11.75%, 2011 6,979,000 (b,i) 3,873,345
Sr. Discount Notes, 0/12.125%, 2011 1,345,000 (b,i) 699,400
Sr. Discount Notes, 0/13.5%, 2011 2,170,000 (b,i) 1,367,100
Sr. Notes, 10%, 2011 3,193,000 (b) 2,450,627
Sr. Notes, 10.75%, 2009 10,266,000 (b) 8,443,785
Dex Media West/Finance,
Sr. Sub. Notes, 9.875%, 2013 1,410,000 (c) 1,600,350
Echostar DBS,
Sr. Notes, 6.375%, 2011 1,129,000 (c) 1,134,645
Gray Communications Systems,
Sr. Sub. Notes, 9.25%, 2011 450,000 (b) 498,375
Houghton Mifflin,
Sr. Sub. Notes, 9.875%, 2013 445,000 (b) 473,925
Lodgenet Entertainment,
Sr. Sub. Deb., 9.5%, 2013 1,105,000 (b) 1,176,825
Mediacom Broadband,
Sr. Notes, 11%, 2013 1,500,000 (b) 1,586,250
NTL,
Deb., 11.2%, 2007 5,468,000 (b) 5,502,175
Pegasus Communications,
Sr. Sub. Notes, Ser. B, 12.5%, 2007 5,205,000 4,190,025
Spanish Broadcasting System,
Sr. Sub. Notes, 9.625%, 2009 4,629,000 (b) 4,918,312
41,403,547
MINING & METALS--2.3%
AK Steel,
Sr. Notes, 7.75%, 2012 3,058,000 (b) 2,125,310
Consol Energy,
Notes, 7.875%, 2012 3,182,000 3,199,087
Haynes International,
Sr. Notes, 11.625%, 2004 2,000,000 (b) 1,050,000
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
MINING & METALS (CONTINUED)
U.S. Steel,
Sr. Notes, 10.75%, 2008 941,000 (b) 1,006,870
7,381,267
OIL & GAS--10.2%
Costal,
Sr. Deb., 6.5%, 2008 10,069,000 (b) 8,155,890
Eott Energy Partners/Finance:
Sr. Notes, 9%, 2010 3,392,614 3,392,614
Units, 11%, 2009 9,037,000 (j) 917,256
Hanover Equipment Trust,
Sr. Secured Notes, Ser. B,
8.75%, 2011 3,912,000 (b) 4,048,920
McMoRan Exploration,
Sr. Notes, 6%, 2008 4,497,000 (b,c) 4,570,076
Nuevo Energy,
Sr. Sub. Notes, Ser. B, 9.375%, 2010 5,296,000 (b) 5,759,400
Premcor Refining:
Sr. Notes, 9.25%, 2010 900,000 (b) 985,500
Sr. Notes, 9.5%, 2013 848,000 (b) 937,040
Wiser Oil,
Sr. Sub Notes, 9.5%, 2007 4,554,000 (b) 4,326,300
33,092,996
PACKAGING & CONTAINERS--3.3%
Graham Packaging,
Sr. Sub. Notes, 8.75%, 2008 1,535,000 (b,c) 1,577,213
Owens-Brockway:
Sr. Notes, 8.25%, 2013 450,000 (b,c) 461,250
Sr. Secured Notes, 7.75%, 2011 900,000 (b) 936,000
Sr. Secured Notes, 8.875%, 2009 1,000,000 (b) 1,070,000
Pliant:
Sr. Secured Notes, 11.125%, 2009 443,000 (b,c) 478,440
Sr. Sub. Notes, 13%, 2010 1,350,000 (b) 1,262,250
Stone Container:
Sr. Notes, 8.375%, 2012 662,000 (b) 698,410
Sr. Notes, 9.75%, 2011 1,138,000 (b) 1,246,110
Tekni-Plex,
Sr. Sub. Notes, Ser. B, 12.75%, 2010 3,045,000 (b) 2,999,325
10,728,998
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--5.8%
Appleton Papers,
Sr. Sub. Notes, Ser. B, 12.5%, 2008 850,000 (b) 930,750
Buckeye Technologies:
Sr. Notes, 8.5%, 2013 1,150,000 (c) 1,190,250
Sr. Sub. Notes, 8.5%, 2005 2,478,000 (b) 2,525,330
Sr. Sub. Notes, 9.25%, 2008 1,000,000 (b) 1,010,000
Georgia-Pacific:
Sr. Notes, 7.375%, 2008 1,772,000 (b,c) 1,836,235
Sr. Notes, 8.875%, 2010 3,967,000 (b) 4,363,700
Sr. Notes, 9.375%, 2013 3,454,000 (b) 3,872,797
U.S. Timberlands Klamath Falls/Finance,
Sr. Notes, 9.625%, 2007 5,750,000 (b) 3,133,750
18,862,812
PIPELINES--9.7%
ANR Pipeline,
Notes, 8.875%, 2010 2,230,000 (b) 2,397,250
Dynegy:
Secured Notes, 9.875%, 2010 3,948,000 (c) 4,145,400
Secured Notes, 10.125%, 2013 2,968,000 (c) 3,146,080
El Paso Production,
Gtd. Sr. Notes, 7.75%, 2013 6,385,000 (b) 6,097,675
Leviathan Gas Pipeline Partners,
Sr. Sub. Notes, 10.375%, 2009 986,000 (b) 1,124,040
Southern Natural Gas,
Notes, 8.875%, 2010 1,795,000 (b) 1,929,625
Williams Cos:
Notes, 6.5%, 2006 4,933,000 (b) 4,969,997
Notes, 6.625%, 2004 2,850,000 (b) 2,892,750
Notes, 7.125%, 2011 1,000,000 (b) 992,500
Notes, 9.25%, 2004 1,465,000 (b) 1,501,625
Putable Asset Term Securities,
Ser. A, 6.75%, 2006 556,000 (b) 561,560
Sr. Notes, 8.625%, 2010 1,723,000 (b) 1,839,303
31,597,805
RESIDENTIAL MORTGAGE PASS--THROUGH CTFS.--.3%
Country Wide Home Loans:
Ser. 2001-9, Cl. B4, 6.75%, 2031 486,138 (c) 464,851
Ser. 2001-9, Cl. B5, 6.75%, 2031 614,253 (c) 244,166
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL MORTGAGE PASS--THROUGH CTFS. (CONTINUED)
Residential Funding Mortgage Securities I, REMIC:
Ser. 2001-S19, Cl. B1, 6.5%, 2016 140,920 145,230
Ser. 2001-S19, Cl. B2, 6.5%, 2016 70,506 (c) 69,087
Ser. 2001-S19, Cl. B3, 6.5%, 2016 140,948 (c) 68,360
991,694
RETAIL--1.3%
Buffets,
Sr. Sub. Notes, 11.25%, 2010 448,000 (b) 468,160
JC Penney,
Sr. Notes, 8%, 2010 1,339,000 (b) 1,476,248
Remington Arms,
Sr. Notes, 10.5%, 2011 335,000 (b) 345,050
Rite Aid:
Sr. Secured Notes, 8.125%, 2010 892,000 (b,c) 954,440
Sr. Secured Notes, 12.5%, 2006 899,000 1,051,830
4,295,728
TECHNOLOGY--.6%
AMI Semiconductor,
Sr. Sub. Notes, 10.75%, 2013 1,790,000 (b) 2,031,650
TELECOMMUNICATIONS--18.0%
ACC Escrow,
Sr. Notes, 10%, 2011 1,355,000 (c) 1,463,400
American Tower:
Notes, 5%, 2010 452,000 410,755
Sr. Notes, 9.375%, 2009 4,177,000 (b) 4,281,425
American Tower Escrow,
Units, 0%, 2008 450,000 (b,c,f) 301,500
Call-Net Enterprises,
Sr. Secured Notes, 10.625%, 2008 2,000,000 (b) 1,805,000
Cincinnati Bell,
Notes, 7.25%, 2023 1,975,000 (b) 1,826,875
Crown Castle International:
Sr. Notes, 9.375%, 2011 1,386,000 (b) 1,486,485
Sr. Notes, 10.75%, 2011 1,000,000 (b) 1,115,000
Fairpoint Communications,
Sr. Notes, 11.875%, 2010 449,000 (b) 514,105
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS (CONTINUED)
Horizon PCS,
Sr. Notes, 13.75%, 2011 3,000,000 (b) 765,000
Innova S de RL,
Notes, 9.375%, 2013 2,297,000 (c) 2,322,841
Insight Midwest/Capital,
Sr. Notes, 9.75%, 2009 442,000 (b) 447,525
Level 3 Communications,
Sr. Discount Notes, 0/10.5%, 2008 746,000 (b,i) 630,370
Sr. Notes, 10.75%, 2011 1,393,000 (c) 1,393,000
Metromedia Fiber Network:
Sr. Notes, 10%, 2009 12,350,000 (d) 957,125
Sr. Notes, Ser. B, 10%, 2008 6,600,000 (d) 511,500
MJD Communications,
Floating Rate Notes,
Ser. B, 5.477%, 2008 4,930,000 (b,e) 4,091,900
Nextel Partners,
Sr. Notes, 12.5%, 2009 1,569,000 (b) 1,796,505
Pegasus Satellite Communications,
Sr. Notes, 12.375%, 2006 230,000 (b) 185,150
Qwest:
Bank Note, Ser. A, 5.97%, 2007 2,645,000 (e) 2,704,512
Bank Note, Ser. B, 5.97%, 2007 4,161,000 (e) 4,056,975
Qwest Capital Funding,
Notes, 5.875%, 2004 2,000,000 (b) 1,990,000
Qwest Services:
Notes, 13.5%, 2010 6,755,000 (b,c) 7,903,350
Sr. Secured Notes, 13%, 2007 2,740,000 (b,c) 3,082,500
Roger Wireless,
Sr. Secured Notes, 9.625%, 2011 1,000,000 (b) 1,155,000
SBA Communications,
Sr. Notes, 10.25%, 2009 1,500,000 (b) 1,357,500
Spectrasite,
Sr. Notes, 8.25%, 2010 1,329,000 (b,c) 1,408,740
US West Capital Funding,
Notes, 6.25%, 2005 3,944,000 (b) 3,884,840
Western Wireless,
Sr. Notes, 9.25%, 2013 1,373,000 (b,c) 1,407,325
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS (CONTINUED)
Williams Communication,
Bank Note, 6.313%, 2006 1,153,846 1,090,385
Worldcom:
Bonds, 8.25%, 2031 2,258,000 (d) 750,785
Notes, 6.5%, 2004 2,259,000 (d) 751,118
Sr. Notes, 7.75%, 2007 2,258,000 (d) 750,785
58,599,276
TEXTILES & APPARREL--1.1%
Levi Strauss & Co.,
Sr. Notes, 12.25%, 2012 2,166,000 (b) 1,743,630
Simmons,
Sr. Sub. Notes, Ser. B, 10.25%, 2009 1,684,000 (b) 1,797,670
3,541,300
TRANSPORTATION--1.6%
TFM, S.A. de C.V.,
Sr. Notes, 10.25%, 2007 5,000,000 (b) 5,175,000
TOTAL BONDS AND NOTES
(cost $441,178,835) 423,167,081
------------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--5.3% Shares Value ($)
------------------------------------------------------------------------------------------------------------------------------------
MINING AND METALS--1.2%
Kaiser Group Holdings,
Cum., $3.85 75,565 3,891,598
DIVERSIFIED FINANCIAL SERVICE--.1%
Williams Holdings Of Delaware,
Cum. Conv., 2.75%, 2033 6,650 (c) 402,325
MEDIA--4.0%
CSC Holdings,
Ser. H, Cum. $117.50 69,166 7,245,139
Paxson Communications:
Cum., $1,325 6 5,650
Cum. Conv., $975 7,265 (c) 5,521,237
12,772,026
TOTAL PREFERRED STOCKS
(cost $15,910,922) 17,065,949
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
COMMON STOCKS--1.9% Shares Value ($)
------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS--1.8%
EOTT Energy 389,754 (k) 5,943,749
TELECOMMUNICATIONS--.1%
Neon Communications 158,722 (j,k) 207,925
Stellex Aerostructures 2,793 (j,k) 0
207,925
TOTAL COMMON STOCKS
(cost $5,620,253) 6,151,674
------------------------------------------------------------------------------------------------------------------------------------
OTHER--.0%
------------------------------------------------------------------------------------------------------------------------------------
MINING AND METALS--.0%
Kaiser Group Holdings (rights) 108,168 (j,k) 1
Imperial Credit Industries (warrants) 118,282 (j,k) 1
2
TELECOMMUNICATIONS--.0%
American Tower (warrants) 450 (k) 64,380
Loral Cyberstar (warrants) 6,980 (k) 70
Neon Communications (warrants) 158,722 (j,k) 2
64,452
TOTAL OTHER
(cost $240,937) 64,454
------------------------------------------------------------------------------------------------------------------------------------
OTHER INVESTMENTS--5.1%
------------------------------------------------------------------------------------------------------------------------------------
REGULATED INVESTMENT COMPANIES:
Dreyfus Institutional Advantage Fund 5,524,334 (l) 5,524,334
Dreyfus Institutional Advantage Plus Fund 5,524,333 (l) 5,524,333
Dreyfus Institutional Preferred Plus Money Market Fund 5,524,333 (l) 5,524,333
TOTAL OTHER INVESTMENTS
(cost $16,573,000) 16,573,000
Principal
SHORT-TERM INVESTMENTS--.1% Amount(a) Value ($)
--------------------------------------------------------------------------------
U.S. TREASURY BILLS;
.78%, 10/23/2003
(cost $419,799) 420,000 419,799
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $479,943,746) 142.6% 463,441,957
LIABILITES, LESS CASH AND RECEIVABLES (42.6%) (138,408,141)
NET ASSETS 100.0% 325,033,816
(A) PRINCIPAL AMOUNT STATED IN U.S DOLLARS UNLESS OTHERWISE NOTED.
CAD--CANADIAN DOLLARS
GBP--BRITISH POUND STERLING
(B) COLLATERAL FOR REVOLVING CREDIT AND SECURITY AGRREEMENT.
(C) 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 SEPTEMBER 30,
2003, THESE SECURITIES AMOUNTED TO $106,206,618 OR 32.7% OF NET ASSETS.
(D) NON-INCOME PRODUCING--SECURITY IN DEFAULT.
(E) VARIABLE RATE SECURITY--INTEREST RATE SUBJECT TO PERIODIC CHANGE.
(F) UNITS REPRESENT BOND WITH WARRANTS ATTACHED TO PURCHASE COMMON STOCK.
(G) PRINCIPAL AMOUNT FOR ACCRUAL PURPOSES IS PERIODICALLY ADJUSTED BASED ON
CHANGES TO THE CANADIAN CONSUMER PRICE INDEX.
(H) PAYMENT IN KIND BOND.
(I) ZERO COUPON UNTIL A SPECIFIED DATE AT WHICH TIME THE STATED COUPON RATE
BECOMES EFFECTIVE UNTIL MATURITY.
(J) THE VALUE OF THESE SECURITIES HAS BEEN DETERMINED IN GOOD FAITH UNDER THE
DIRECTION OF THE BOARD OF TRUSTEES.
(K) NON-INCOME PRODUCING SECURITY.
(L) INVESTMENTS IN AFFILIATED MONEY MARKET FUNDS--SEE NOTE 3(D).
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2003 (Unaudited)
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 479,943,746 463,441,957
Interest receivable 10,654,175
Receivable for investment securities sold 5,124,810
Dividends receivable 203,175
Unrealized appreciation on interest rate swaps--Note 4 13,313
Prepaid expenses 24,420
479,461,850
--------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates--Note 3 317,209
Due to Shareholder Servicing Agent--Note 3(b) 26,948
Cash overdraft due to Custodian 2,228,597
Loan payable--Note 2 148,000,000
Payable for investment securities purchased 3,512,742
Interest payable--Note 2 180,836
Accrued expenses 161,702
154,428,034
--------------------------------------------------------------------------------
NET ASSETS ($) 325,033,816
--------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 983,885,837
Accumulated distributions in excess of investment income--net (2,722,319)
Accumulated net realized gain (loss) on investments (639,642,103)
Accumulated net unrealized appreciation (depreciation)
on investments, foreign currency transactions
and swap transactions (16,487,599)
--------------------------------------------------------------------------------
NET ASSETS ($) 325,033,816
--------------------------------------------------------------------------------
SHARES OUTSTANDING
(unlimited number of $.001 par value shares of
Beneficial Interest authorized) 70,446,520
NET ASSET VALUE, per share ($) 4.61
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
Six Months Ended September 30, 2003 (Unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME ($):
Interest 22,667,745
Dividends 1,025,798
TOTAL INCOME 23,693,543
EXPENSES:
Management fee--Note 3(a) 1,992,172
Interest expense--Note 2 & 4 1,779,776
Shareholder servicing costs--Note 3(a,b) 240,006
Trustees' fees and expenses--Note 3(c) 92,115
Professional fees 81,610
Shareholders' reports 38,715
Registration fees 33,352
Custodian fees--Note 3(a) 23,983
Miscellaneous 13,675
TOTAL EXPENSES 4,295,404
Less--reduction in management fee and shareholder
servicing fees due to undertakings--Note 3(a,b) (287,758)
NET EXPENSES 4,007,646
INVESTMENT INCOME--NET 19,685,897
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments and foreign currency
transactions 1,660,390
Net realized gain (loss) on forward currency exchange contracts (74,888)
Net realized gain (loss) on financial futures 1,955
Net realized gain (loss) on swap transactions (375,968)
NET REALIZED GAIN (LOSS) 1,211,489
Net unrealized appreciation (depreciation) on investments
foreign currency transactions and swap transactions 52,215,496
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 53,426,985
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 73,112,882
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF CASH FLOWS
Six Months Ended September 30, 2003 (Unaudited)
--------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES ($):
Interest received 18,952,577
Dividends received 682,236
Interest and loan commitment fees paid (1,786,103)
Swap expenses paid (655,469)
Operating expenses paid (615,797)
Paid to The Dreyfus Corporation (1,662,009) 14,915,435
--------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES ($):
Purchases of portfolio securities (404,032,623)
Net purchases of short-term portfolio securities (12,943,933)
Proceeds from sales of portfolio securities 392,579,661
FEC transactions (35,571)
Swap Transactions (375,968)
Futures transactions 1,955 (24,806,479)
--------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES ($):
Dividends paid (17,259,998)
Loan payments 24,000,000 6,740,002
Decrease in cash (3,151,042)
Cash at beginning of period 922,445
--------------------------------------------------------------------------------
CASH AT END OF PERIOD (2,228,597)
--------------------------------------------------------------------------------
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES ($):
Net Decrease in Net Assets Resulting From Operations 73,112,882
ADJUSTMENTS TO RECONCILE NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS TO NET CASH USED BY OPERATING ACTIVITIES ($):
Decrease in interest receivable 1,386,740
Decrease in dividends receivable 26,438
Decrease in interest and loan commitment fees (6,327)
Decrease in swap payable (13,292)
Decrease in accrued operating expenses (127,890)
Increase in prepaid expenses 35,549
Increase in due to The Dreyfus Corporation 42,405
Net interest sold on investments (1,724,162)
Net realized gain on investments (1,211,489)
Net unrealized appreciation on investments (52,215,496)
Noncash dividends (370,000)
Net amortization of discount and premium on investments (4,019,923)
--------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 14,915,435
--------------------------------------------------------------------------------
SUPPLEMENTARY DISCLOSURE NONCASH FINANCING ACTIVITIES ($):
Reinvestment of dividends which increases paid-in capital. 4,149,532
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
September 30, 2003 Year Ended
(Unaudited) March 31, 2003
--------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 19,685,897 46,814,842
Net realized gain (loss) on investments 1,211,489 (118,614,023)
Net unrealized appreciation (depreciation)
on investments 52,215,496 50,424,756
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 73,112,882 (21,374,425)
--------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
INVESTMENT INCOME--NET (21,409,530) (50,965,977)
--------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS ($):
DIVIDENDS REINVESTED--NOTE 1(C) 4,149,532 9,039,309
TOTAL INCREASE (DECREASE) IN NET ASSETS 55,852,884 (63,301,093)
--------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 269,180,932 332,482,025
END OF PERIOD 325,033,816 269,180,932
--------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (SHARES):
SHARES ISSUED FOR DIVIDENDS REINVESTED 872,477 2,190,307
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
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 and market price data for the fund's shares.
Six Months Ended
September 30, 2003 Year Ended March 31,
----------------------------------------------------------------
(Unaudited) 2003 2002(a) 2001 2000 1999(b)
-------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value,
beginning of period 3.87 4.93 6.35 10.06 11.83 15.00
Investment Operations:
Investment income--net .28(c) .68(c) .81(c) 1.14 1.46 1.38
Net realized and unrealized
gain (loss) on investments .77 (1.00) (1.33) (3.57) (1.75) (3.35)
Total from Investment Operations 1.05 (.32) (.52) (2.43) (.29) (1.97)
Distributions:
Dividends from
investment income--net (.31) (.74) (.90) (1.28) (1.48) (1.20)
Net asset value, end of period 4.61 3.87 4.93 6.35 10.06 11.83
Market value, end of period 5.00 5.16 5.41 6.47 8 7_8 11 7_8
-------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%)(D) 3.33(e) 14.22 (1.84) (14.09) (14.35) (14.12)(f)
-------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses
to average net assets 1.45(f) 1.54 1.52 1.61 1.50 1.46(f)
Ratio of interest expense
to average net assets 1.16(f) 1.45 2.99 3.13 2.21 2.17(f)
Ratio of net investment income
to average net assets 12.82(f) 17.66 14.95 14.35 13.20 11.64(f)
Decrease reflected in above
expense ratios due to
undertakings by
The Dreyfus Corporation
and UBS Warburg LLC .19(f,g) .19(g) .19(g) -- -- --
Portfolio Turnover Rate 91.94(e) 186.19 239.11 42.61 28.37 59.40(e)
-------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
($ x 1,000) 325,034 269,181 332,482 415,597 646,676 742,833
Six Months Ended
September 30, 2003 Year Ended March 31,
-----------------------------------------------------------------
(Unaudited) 2003 2002(a) 2001 2000 1999(b)
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
(CONTINUED)
Average borrowings
outstanding ($ x 1,000) 136,503 126,350 174,415 232,205 268,770 303,386
Weighted average number of
fund shares outstanding
(x 1,000) 70,073 68,538 66,400 64,724 63,785 61,387
Average amount of debt
per share ($) 1.95 1.84 2.63 3.59 4.21 4.94
(A) AS REQUIRED, EFFECTIVE APRIL 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS
OF AICPA AND AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN
AMORTIZING DISCOUNT OR PREMIUM ON FIXED INCOME SECURITIES ON A SCIENTIFIC BASIS
AND INCLUDING PAYDOWN GAINS AND LOSSES IN INTEREST INCOME. THE EFFECT OF THESE
CHANGES FOR THE PERIOD ENDED MARCH 31, 2002 WAS TO DECREASE NET INVESTMENT
INCOME PER SHARE BY $.05, INCREASE NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS PER SHARE BY $.05 AND DECREASE THE RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS FROM 15.96% TO 14.95%. PER SHARE DATA AND RATIOS/SUPPLEMENT
DATA FOR PERIODS PRIOR TO APRIL 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THESE
CHANGES IN PRESENTATION.
(B) FROM APRIL 29,1998 (COMMENCEMENT OF OPERATIONS) TO MARCH 31, 1999.
(C) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(D) CALCULATED BASED ON MARKET VALUE.
(E) NOT ANNUALIZED.
(F) ANNUALIZED.
(G) REPRESENTS WAIVER OF .10 OF 1% OF MANAGED ASSETS BY THE DREYFUS CORPORATION
AND .03 OF 1% OF MANAGED ASSETS BY UBS WARBURG LLC.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus High Yield Strategies Fund (the "fund" ) is registered under the
Investment Company Act of 1940, as amended (the "Act") as a non-diversified
closed-end management investment company. The fund' s primary investment
objective is to seek high current income by investing at least 65% of its total
assets in income securities rated below investment grade. The Dreyfus
Corporation (the "Manager" ) serves as the fund' s investment manager and
administrator. The Manager is a wholly-owned subsidiary of Mellon Bank, N.A.
("Mellon"), which is a wholly-owned subsidiary of Mellon Financial Corporation.
The fund' s financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America, 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) are valued each business day by an
independent pricing service (the "Service") approved by the Board of Trustees.
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 Trustees.
Short-term investments, excluding U.S. Treasury Bills, are carried at amortized
cost, which approximates value. Financial futures and options are valued at the
last sales price on the securities exchange on which such securities are
primarily traded. Investments denominated in foreign
currencies are translated to U.S. dollars at the prevailing rates of exchange.
Swap transactions are valued daily based upon quotations from counterparties as
market makers utilizing the net present value of all future cash settlements
based on implied forward interest rates.
(b) Foreign currency transactions: The fund does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized foreign exchange gains or losses arise from sales and maturities of
short-term securities, sales of foreign currencies, currency gains or losses
realized on securities transactions and the difference between the amounts of
dividends, interest, and foreign withholding taxes recorded on the fund's books
and the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value of
assets and liabilities other than investments in securities, resulting from
changes in exchange rates. Such gains and losses are included with net realized
and unrealized gain or loss on investments.
(c) Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income, including, where
applicable, accretion of discount and amortization of premiums on investments is
recognized on a scientific basis. Under the terms of the custody agreement, the
fund receives net earnings credits based on available cash balances left on
deposit.
(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net are declared and paid monthly. Dividends
from net realized capital gain, if any, are declared and paid at least annually.
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.
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
For shareholders who elect to receive their distributions in additional shares
of the fund, in lieu of cash, such distributions will be reinvested at the lower
of the market price or net asset value per share (but not less than 95% of the
market price) based on the record date's respective prices. If the net asset
value per share on the record date is lower than the market price per share,
shares will be issued by the fund at the record date's net asset value on the
payable date of the distribution. If the net asset value per share is less than
95% of the market value, shares will be issued by the fund at 95% of the market
value. If the market price is lower than the net asset value per share on the
record date, Mellon will purchase fund shares in the open market commencing on
the payable date and reinvest those shares accordingly. As a result of
purchasing fund shares in the open market, fund shares outstanding will not be
affected by this form of reinvestment.
On September 24, 2003, the Board of Trustees declared a cash dividend of $.04875
per share from investment income-net, payable on October 22, 2003 to
shareholders of record as of the close of business on October 8, 2003.
(e) Concentration of risk: The fund invests primarily in debt securities.
Failure of an issuer of the debt securities to make timely interest or principal
payments, or a decline or the perception of a decline in the credit quality of a
debt security, can cause the debt security's price to fall, potentially lowering
the fund' s share price. High yield ("junk") bonds involve greater credit risk,
including the risk of default, than investment grade bonds, and are considered
predominantly speculative with respect to the issuer's continuing ability to
make principal and interest payments. In addition, the value of debt securities
may decline due to general market conditions that are not specifically related
to a particular company, such as real or perceived adverse economic conditions,
changes in outlook for corporate earnings, changes in interest or currency rates
or adverse investor sentiment. They may also decline because of factors that
affect a particular industry.
(f) Federal income taxes: It is the policy of the fund to continue to qualify as
a regulated investment company, if such qualification is in the best interests
of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code of 1986, as amended, 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 $590,289,465 available for
federal income tax purposes to be applied against future net securities profits,
if any, realized subsequent to March 31, 2003. If not applied, $32,078,398 of
the carryover expires in fiscal 2007, $32,334,001 expires in fiscal 2008,
$136,674,723 expires in fiscal 2009, $283,731,643 expires in fiscal 2010 and
$105,470,700 expires in fiscal 2011.
The tax character of distributions paid to shareholders during the fiscal year
ended March 31, 2003 was as follows: ordinary income $50,965,977. The tax
character of current year distributions will be determined at the end of the
current fiscal year.
NOTE 2--Borrowings:
The fund has entered into a $175,000,000 Revolving Credit and Security Agreement
(the "Agreement" ), which expires on June 15, 2006. Under the terms of the
Agreement, the fund may borrow Advances (including Eurodollar Advances), on a
collateralized basis with certain fund assets used as collateral; the yield to
be paid by the fund on such Advances is determined with reference to the
principal amount of each Advance (and/or Eurodollar Advance) outstanding from
time to time. The fund pays certain other fees associated with the Agreement.
During the period ended September 30, 2003, $385,121 applicable to those fees
was included in interest expense.
The average daily amount of borrowings outstanding during the period ended
September 30, 2003, under the Agreement, was approximately $136,503,000, with a
related weighted average annualized interest rate of 1.20%.
NOTE 3--Management Fee and Other Transactions With Affiliates:
(a) Pursuant to a management and administration agreement with the Manager, the
management and administration fee is computed at the
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
annual rate of .90 of 1% of the value of the fund's average weekly total assets
minus the sum of accrued liabilities (other than the aggregate indebtedness
constituting financial leverage) (the "Managed Assets") and is payable monthly.
For the period from April 1, 2003 through April 4, 2004, the Manager has agreed
to waive receipt of a portion of the fund's management fee in the amount of .10
of 1% of the Managed Assets. The reduction in management fee, pursuant to the
undertaking, amounted to $221,352 during the period ended September 30, 2003.
The fund compensates Mellon Investor Services, L.L.C., an affiliate 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 September 30, 2003, the fund was charged $6,000 pursuant to the transfer
agency agreement.
The fund compensates Mellon, an affiliate of the Manager, under a custody
agreement for providing custodial services for the fund. During the period ended
September 30, 2003, the fund was charged $23,983 pursuant to the custody
agreement.
(b) In accordance with the Shareholder Servicing Agreement, UBS Warburg LLC Inc.
provides certain shareholder services for which the fund pays a fee computed at
the annual rate of .10 of 1% of the value of the fund's average weekly Managed
Assets. During the period ended September 30, 2003, the fund was charged
$221,352 pursuant to the Shareholder Servicing Agreement.
For the period from April 1, 2003 through April 4, 2004, UBS Warburg LLC has
agreed to waive receipt of a portion of the fund's shareholder services fee in
the amount of .03 of 1% of the Managed Assets. The reduction in shareholder
servicing fee, pursuant to the undertaking, amounted to $66,406 during the
period ended September 30, 2003.
(c) Each Trustee who is not an "interested person" of the fund as defined in the
Act receives $17,000 per year plus $1,000 for each Board meeting attended and
$2,000 for separate committee meetings attended which are not held in
conjunction with a regularly scheduled
Board meeting. In the event that there is a joint committee meeting of the
Dreyfus /Laurel funds, Inc., The Dreyfus/Laurel Tax-Free Municipal Funds, The
Dreyfus/Laurel Funds Trust, collectively, (the "Dreyfus/Laurel Funds") and the
fund, the $2,000 fee will be allocated between the Dreyfus/Laurel Funds and the
fund. Each Trustee who is not an interested person also receives $500 for Board
meetings and separate committee meetings attended that are conducted by
telephone. The fund also reimburses each Trustee who is not an "interested
person" of the fund for travel and out-of-pocket expenses. The Chairman of the
Board receives an additional 25% of such compensation (with the exception of
reimbursable amounts).
(d) Pursuant to an exemptive order from the Securities and Exchange Commission,
the fund may invest its available cash balances in affiliated money market funds
as shown in the fund's Statement of Investments. Management fees are not charged
to these accounts. The fund derived $52,863 in income from these investments,
which is included as dividend income in the fund's Statement of Operations.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales (including paydowns) of investment
securities, excluding short-term securities, financial futures, swaps and
forward currency exchange contracts, during the period ended September 30, 2003,
amounted to $396,042,547 and $387,517,067, respectively.
The fund may use various derivatives, including options, futures contracts,
forward currency exchange contracts, mortgage-related securities, asset-backed
securities and swaps. The fund may invest in, or enter into, these financial
instruments for a variety of reasons, including to hedge certain market trends,
to provide a substitute for purchasing or selling particular securities or to
increase potential income gain.
The fund enters into credit default swaps which involve commitments to pay a
fixed rate in exchange for payment if a credit event affecting a third party
(the referenced company) occurs. Credit events may include a failure to pay
interest, bankruptcy, or restructuring. Net peri-
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
odic interest payments to be received or paid are accrued daily and are recorded
in the Statement of Operations as an adjustment to interest income. Credit
default swaps are marked-to-market daily and the change, if any, is recorded as
unrealized appreciation or depreciation in the Statement of Operations. As of
September 30, 2003, there were no credit default swaps.
The fund may enter into interest rate swaps which involve the exchange of
commitments to pay and receive interest based on a notional principal amount.
Net periodic interest payments to be received or paid are accrued daily and are
recorded in the Statement of Operations as an interest expense. Interest rate
swaps are marked-to-market daily and change, if any, is recorded as unrealized
appreciation or depreciation in the Statement of Operations.
Realized gains or losses on maturity or termination of swaps are presented in
the Statement of Operations.
Risks may arise upon entering into these agreements from the potential inability
of the counterparties to meet the terms of the agreement and are generally
limited to the amount of net payments to be received, if any, at the date of
default.
The following summarizes interest rate swaps entered into by the fund at
September 30, 2003:
Unrealized
Notional Amount ($) Description Appreciation ($)
--------------------------------------------------------------------------------
5,500,000 Forward Yield Curve Swap 13,313
Agreement with Merrill Lynch terminating
August 23, 2023 to pay 3 month LIBOR
and receive 10 yr CMS-17bps starting
August 23, 2013
The fund may invest in financial futures contracts which expose the fund to
market risk as a result of changes in the value of the underlying financial
instruments. Investments in financial futures require the fund to "mark to
market" on a daily basis, which reflects the change in the market value of the
contracts at the close of each day' s trading. Typically, variation margin
payments are received or made to reflect
daily unrealized gains or losses. When the contracts are closed, the fund
recognizes a realized gain or loss. These investments require initial margin
deposits with a custodian, which consist of cash or cash equivalents, up to
approximately 10% of the contract amount. The amount of these deposits is
determined by the exchange or Board of Trade on which the contract is traded and
is subject to change. At September 30, 2003, there were no financial futures
contracts outstanding.
The fund may enter into forward currency exchange contracts. When executing
forward currency exchange contracts, the fund is obligated to buy or sell a
foreign currency at a specified rate on a certain date in the future. With
respect to sales of forward currency exchange contracts, the fund would incur a
loss if the value of the contract increases between the date the forward
contract is opened and the date the forward contract is closed. The fund
realizes a gain if the value of the contract decreases between those dates. With
respect to purchases of forward currency exchange contracts, the fund would
incur a loss if the value of the contract decreases between the date the forward
contract is opened and the date the forward contract is closed. The fund
realizes a gain if the value of the contract increases between those dates. The
fund is also exposed to credit risk associated with counter party nonperformance
on these forward currency exchange contracts which is typically limited to the
unrealized gain on each open contract. At September 30, 2003, there were no open
forward currency exchange contracts.
At September 30, 2003, accumulated net unrealized depreciation on investments
was $16,501,789, consisting of $28,459,347 gross unrealized appreciation and
$44,961,136 gross unrealized depreciation.
At September 30, 2003, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
The Fund
NOTES
NOTES
OFFICERS AND DIRECTORS
Dreyfus High Yield Strategies Fund
200 Park Avenue
New York, NY 10166
DIRECTORS
Joseph S. DiMartino, Chairman
James M. Fitzgibbons
J. Tomlinson Fort
Kenneth A. Himmel
Stephen J. Lockwood
Roslyn M. Watson
Benaree Pratt Wiley
OFFICERS
President
Stephen E. Canter
Executive Vice President
Stephen R. Byers
Gerald E. Thunelius
Vice President
Mark N. Jacobs
Secretary
Steven F. Newman
Assistant Secretaries
Jeff Prusnofsky
Michael A. Rosenberg
Treasurer
James Windels
Assistant Treasurers
Erik D. Naviloff
Kenneth J. Sandgren
PORTFOLIO MANAGERS
Keith Chan
Martin F. Fetherston
Michael Hoeh
William Howarth
Kenneth D. Smalley
Gerald E. Thunelius
Samuel Weinstock
INVESTMENT ADVISER
The Dreyfus Corporation
CUSTODIAN
Mellon Bank, N.A.
COUNSEL
Kirkpatrick & Lockhart LLP
TRANSFER AGENT, DIVIDEND DISBURSING AGENT
Mellon Investor Services LLC
STOCK EXCHANGE LISTING
NYSE Symbol: DHF
INITIAL SEC EFFECTIVE DATE
4/23/98
THE NET ASSET VALUE APPEARS IN THE FOLLOWING PUBLICATIONS: BARRON'S, CLOSED-END
BOND FUNDS SECTION UNDER THE HEADING "MUNICIPAL BOND FUNDS" EVERY MONDAY; WALL
STREET JOURNAL, MUTUAL FUNDS SECTION UNDER THE HEADING "CLOSED-END BOND FUNDS"
EVERY MONDAY; NEW YORK TIMES, BUSINESS SECTION UNDER THE HEADING "CLOSED-END
BOND FUNDS--SINGLE STATE MUNICIPAL BOND FUNDS" EVERY SUNDAY.
NOTICE IS HEREBY GIVEN IN ACCORDANCE WITH SECTION 23(C) OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED, THAT THE FUND MAY PURCHASE SHARES OF ITS COMMON
STOCK IN THE OPEN MARKET WHEN IT CAN DO SO AT PRICES BELOW THE THEN CURRENT NET
ASSET VALUE PER SHARE.
The Fund
For More Information
Dreyfus
High Yield Strategies 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
Mellon Investor Services LLC
Overpeck Centre
85 Challenger Road
Ridgefield Park, NJ 07660
(c) 2003 Dreyfus Service Corporation 430SA0903
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The Registrant's principal executive and principal financial officers
have concluded, based on their evaluation of the Registrant's disclosure
controls and procedures as of a date within 90 days of the filing date of
this report, that the Registrant's disclosure controls and procedures are
reasonably designed to ensure that information required to be disclosed by
the Registrant on Form N-CSR is recorded, processed, summarized and reported
within the required time periods and that information required to be
disclosed by the Registrant in the reports that it files or submits on Form
N-CSR is accumulated and communicated to the Registrant's management,
including its principal executive and principal financial officers, as
appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes to the Registrant's internal control over
financial reporting that occurred during the Registrant's most recently ended
fiscal half-year that has materially affected, or is reasonably likely to
materially affect, the Registrant's internal control over financial
reporting.
ITEM 10. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications of principal executive and principal financial
officers as required by Rule 30a-2(a) under the Investment Company Act of
1940.
(b) Certification of principal executive and principal financial officers as
required by Rule 30a-2(b) under the Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Dreyfus High Yield Strategies Fund
By: /s/ Stephen E. Canter
---------------------
Stephen E. Canter
President
Date: November 21, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this Report has been signed
below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
By: /s/ Stephen E. Canter
---------------------
Stephen E. Canter
Chief Executive Officer
Date: November 21, 2003
By: /s/ James Windels
------------------
James Windels
Chief Financial Officer
Date: November 21, 2003
EXHIBIT INDEX
(a)(2) Certifications of principal executive and principal financial
officers as required by Rule 30a-2(a) under the Investment Company Act
of 1940. (EX-99.CERT)
(b) Certification of principal executive and principal financial
officers as required by Rule 30a-2(b) under the Investment Company Act
of 1940. (EX-99.906CERT)