Dreyfus High Yield
Strategies Fund
ANNUAL REPORT March 31, 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
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2 Letter from the Chairman
3 Discussion of Fund Performance
6 Selected Information
7 Statement of Investments
19 Statement of Assets and Liabilities
20 Statement of Operations
21 Statement of Cash Flows
22 Statement of Changes in Net Assets
23 Financial Highlights
25 Notes to Financial Statements
34 Independent Auditors' Report
35 Important Tax Information
36 Dividend Reinvestment Plan
41 Board Members Information
43 Officers of the Fund
45 Officers and Directors
FOR MORE INFORMATION
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Back Cover
The Fund
Dreyfus High Yield
Strategies Fund
LETTER FROM THE CHAIRMAN
Dear Shareholder:
This annual report for Dreyfus High Yield Strategies Fund covers the 12-month
period from April 1, 2002, through March 31, 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.
A number of economic and political factors continued to support higher overall
bond prices during the reporting period. Faced with escalating tensions leading
to the start of the war in Iraq, many investors preferred fixed-income
securities over stocks. We believe that rising geopolitical tensions also
contributed to the ongoing sluggishness of the U.S. economy, as many
corporations apparently decided to wait until the situation in Iraq is resolved
before committing to new capital spending. For its part, the Federal Reserve
Board contributed to the bond market's strength by further reducing short-term
interest rates in November 2002.
The result of these influences has been attractive total returns from many
fixed-income investments, especially those with relatively heavy exposure to
bonds that are more interest-rate-sensitive, such as most U.S. government
securities. While history suggests that bond prices should moderate if the
economy strengthens, we believe that the economy is unlikely to make significant
gains until current uncertainties are resolved.
In the meantime, we believe it is more important than ever to follow a
disciplined approach to investing. While it may be tempting to shift assets
between stocks and bonds in response to near-term economic and market forces,
adherence to your longstanding asset allocation strategy may be the most prudent
course for the long term. Your financial advisor can help you to ensure that
your portfolio reflects your investment needs, long-term goals and attitudes
toward risk.
Thank you for your continued confidence and support.
Sincerely,
/s/Stephen E. Canter
Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
April 25, 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 12-month period ended March 31, 2003, the fund achieved a total return
of -5.63% and produced aggregate income dividends of $0.744 per share.(1) In
comparison, the Merrill Lynch High Yield Master II Index (the "Index") achieved
a total return of 3.32% for the same period.(2)
The first half of the reporting period was an extremely difficult one for the
high-yield market and the fund. A weak economy, revelations of corporate
scandals and the continued deterioration of business conditions among technology
and telecommunications companies severely affected the market for lower-rated
corporate bonds, causing market-wide price declines. In addition, the fund's
return for the first half of the reporting period was considerably lower that
that of the Index because the fund was fully leveraged, which tends to magnify
gains and losses. Although the second half of the reporting period brought
better relative performance as a result of, among other factors, credit and
sector selection, the fund could not fully offset its earlier losses so its
returns for the overall reporting period lagged the Index.
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?
The U.S. high-yield bond market experienced both stunning declines and
encouraging rallies during the reporting period as investor sentiment shifted
from one extreme to the other. As mentioned above, early in the reporting period
the high-yield bond market was hurt by a combination of sluggish economic
growth, high-profile corporate scandals and deteriorating business conditions,
especially in the technology and telecommunications industry groups. At the same
time, rising international tensions contributed to growing risk-aversion among
investors, who generally shunned riskier corporate securities -- including
high-yield bonds -- in favor of relatively safe havens, such as U.S. government
securities.
During the fourth quarter of 2002, the market began to shake off these negative
influences, and investors appeared ready to recommit to corporate bonds. Some
investors responded to what they regarded as attractive valuations of high-yield
bonds whose prices had been beaten down in the market decline. Others turned to
corporate bonds for their relatively generous income streams in an environment
of historically low yields on U.S. Treasury securities. By the end of the
reporting period, high-yield bond prices had risen substantially above their
previous lows.
In this volatile market environment, we continued our efforts to restructure the
fund in a way that improved its overall credit profile. Although our ability to
sell certain securities was limited, we succeeded in reducing the fund's
positions in bonds from troubled issuers such as WorldCom, Microcell and
Adelphia. With those proceeds we purchased bonds from companies such as wireless
telephone provider Nextel, cellular infrastructure company American Tower and
cable television provider Cablevision. At the time, we preferred companies such
as these because their bond prices were more likely to be supported by tangible
assets with measurable resale values.
In addition, we focused a portion of the portfolio on "fallen angels," which are
companies we considered fundamentally sound and whose bonds had been hit hard
during the downturn. Holdings such as regional telephone company Qwest and
energy providers El Paso, Williams and Dynegy rebounded strongly from relatively
low price levels during the reporting period's second half.
What is the fund's current strategy?
Subsequent to the reporting period, the fund reduced its monthly cash dividend
to $0.04875 per share of beneficial interest, as of April 24, 2003. This
dividend reduction reflected possible future costs of establishing interest-rate
swaps or other hedges in respect of the fund's leverage, the possibility of
future defaults in portfolio securities, an effort to reduce the accumulated
distribution in excess of investment income-net and a lower reinvestment rate in
the market.
In such a current lower-yielding environment, management believed that an effort
to seek to maintain the fund's prior dividend could have involved an increase in
the overall risk of the portfolio. Although we maintain a positive outlook on
the high-yield market, we believe a move to greater risk for greater yield
potential would not have be prudent.
We continue to take steps to improve the fund's overall credit quality while
looking for opportunities to purchase bonds of fundamentally sound issuers at
low prices. When making new purchases, our primary focus is on asset-rich
companies that, in our view, have the ability to withstand challenging business
conditions. At the same time, we continue to emphasize broad diversification
among industry groups, issuers and securities. We believe that these are prudent
strategies in today's uncertain economic environment.
April 25, 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
SELECTED INFORMATION
March 31, 2003 (Unaudited)
Market Price per share March 31, 2003 $5.16
Shares Outstanding March 31, 2003 69,574,043
New York Stock Exchange Ticker Symbol DHF
MARKET PRICE (NEW YORK STOCK EXCHANGE)
Fiscal Year Ended March 31, 2003
-----------------------------------------------------------------------------------------------------------------------------------
Quarter Ended Quarter Ended Quarter Ended Quarter Ended
June 30, September 30, December 31, March 31,
2002 2002 2002 2003
-----------------------------------------------------------------------------------------------------------------------------------
High $5.67 $4.24 $4.24 $5.23
Low 4.19 3.48 3.44 3.93
Close 4.24 3.95 3.79 5.16
PERCENTAGE GAIN (LOSS) based on change in Market Price*
April 29, 1998 (commencement of operations) through March 31, 2003 (28.24)%
April 1, 2002 through March 31, 2003 14.22
July 1, 2002 through March 31, 2003 40.25
October 1, 2002 through March 31, 2003 43.43
January 1, 2003 through March 31, 2003 39.83
NET ASSET VALUE PER SHARE
April 29, 1998 (commencement of operations) $15.00
March 31, 2002 4.93
June 30, 2002 4.09
September 30, 2002 3.38
December 31, 2002 3.50
March 31, 2003 3.87
PERCENTAGE GAIN (LOSS) based on change in Net Asset Value*
April 29, 1998 (commencement of operations) through March 31, 2003 (45.96)%
April 1, 2002 through March 31, 2003 (5.63)
July 1, 2002 through March 31, 2003 9.48
October 1, 2002 through March 31, 2003 26.21
January 1, 2003 through March 31, 2003 14.01
* WITH DIVIDENDS REINVESTED.
STATEMENT OF INVESTMENTS
March 31, 2003
Principal
BONDS AND NOTES--133.4% Amount(a) Value ($)
-----------------------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--2.6%
BE Aerospace,
Sr. Sub. Notes, Ser. B, 8.875%, 2011 3,361,000 (o) 2,117,430
Hexcel,
Sr. Sub. Notes, 9.75%, 2009 4,703,000 (o) 4,279,730
K&F Industries,
Sr. Sub. Notes, Ser. B, 9.625%, 2010 657,000 (o) 699,705
7,096,865
AIRLINES--1.2%
AMR:
Deb., 9%, 2012 1,800,000 (o) 396,000
Deb., 9.75%, 2021 2,400,000 (o) 528,000
Air 2 US,
Enhanced Equipment Notes,
Ser. D, 12.266%, 2020 9,640,958 (b,c) 407,089
Aircraft Finance Trust,
Asset-Backed Notes,
Ser. 1999-1A, Cl. D, 11%, 2024 6,698,992 (b,o) 669,899
Delta Air Lines,
Notes, 7.7%, 2005 1,970,000 (o) 1,172,150
3,173,138
AUTOMOTIVE, TRUCKS & PARTS--6.4%
Advanced Accessory Systems/Capital,
Sr. Sub. Notes, Ser. B, 9.75%, 2007 6,300,000 (o) 6,394,500
Airxcel,
Sr. Sub. Notes, Ser. B, 11%, 2007 4,200,000 (o) 3,444,000
Collins & Aikman Products,
Sr. Notes, 10.75%, 2011 2,216,000 (o) 2,151,293
J.B. Poindexter & Co.,
Gtd. Sr. Notes, 12.5%, 2004 5,000,000 (o) 3,650,000
Rexnord,
Sr. Sub. Notes, 10.125%, 2012 975,000 (b,o) 1,040,812
TRW Automotive,
Sr. Notes, 9.375%, 2013 494,000 (b,o) 496,470
17,177,075
BANKING--.4%
Williams Communication,
Bank Note, 6.313%, 2006 1,153,846 1,003,846
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
BUILDING & CONSTRUCTION--2.0%
Owens Corning:
Deb., 7.5%, 2018 6,700,000 (c) 1,641,500
Notes, 7.7%, 2008 50,000 (c) 12,250
Resolution Performance Products,
Sr. Sub. Notes, 13.5%, 2010 1,354,000 (o) 1,435,240
WCI Communities,
Sr. Sub. Notes, 10.625%, 2011 2,370,000 (o) 2,429,250
5,518,240
CABLE & MEDIA--12.5%
Acme Intermediate Holdings/Finance,
Sr. Secured Notes, Ser. B, 12%, 2005 5,800,000 (o) 5,974,000
Charter Communications Holdings/Capital:
Sr. Discount Notes, 0/9.92%, 2011 1,343,000 (d,o) 557,345
Sr. Discount Notes, 0/11.75%, 2011 7,934,000 (d,o) 2,459,540
Sr. Discount Notes, 0/12.125%, 2012 1,345,000 (d,o) 396,775
Sr. Discount Notes, 0/13.5%, 2011 2,170,000 (d,o) 661,850
Sr. Notes, 10%, 2011 3,193,000 (o) 1,404,920
Sr. Notes, 10.75%, 2009 11,637,000 (o) 5,440,297
Coaxial Communications/Phoenix,
Sr. Notes, 10%, 2006 2,218,000 (o) 2,226,317
Gray Communications Systems,
Sr. Sub. Notes, 9.25%, 2011 450,000 (o) 489,937
Houghton Mifflin,
Sr. Sub. Notes, 9.875%, 2013 445,000 (b,o) 482,825
Mediacom Broadband,
Gtd. Sr. Notes, 11%, 2013 1,500,000 (o) 1,683,750
NTL,
Deb., 11.2%, 2007 7,790,000 5,803,550
Pegasus Communications,
Sr. Sub. Notes, Ser. B, 12.5%, 2007 6,100,000 (o) 4,819,000
RH Donnelley Financial:
Sr. Notes, 8.875%, 2010 660,000 (b,o) 730,950
Sr. Sub. Notes, 10.875%, 2012 440,000 (b,o) 504,900
33,635,956
CHEMICALS--10.8%
Aqua Chemical,
Sr. Sub. Notes, 11.25%, 2008 2,000,000 (o) 1,560,000
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
CHEMICALS (CONTINUED)
Avecia,
Gtd. Sr. Notes, 11%, 2009 10,529,000 (o) 9,002,295
Huntsman ICI Chemicals,
Sr. Sub. Notes, 10.125%, 2009 11,081,000 (o) 10,554,652
Lyondell Chemical:
Gtd. Sr. Secured Notes, Ser. B, 9.875%, 2007 295,000 (o) 296,475
Notes, 6.5%, 2006 250,000 (o) 225,170
Sr. Secured Notes, 9.5%, 2008 1,475,000 (b,o) 1,438,125
Sr. Secured Notes, 11.125%, 2012 433,000 (o) 448,155
OM Group,
Sr. Sub. Notes, 9.25%, 2011 6,954,000 (o) 5,458,890
28,983,762
COMMERCIAL SERVICES--1.4%
Brickman,
Sr. Sub. Notes, 11.75%, 2009 888,000 (b,o) 967,920
United Rentals:
Sr. Notes, 10.75%, 2008 984,000 (b,o) 1,023,360
Sr. Notes, Ser. B, 10.75%, 2008 1,775,000 (o) 1,846,000
3,837,280
CONSUMER PRODUCTS--2.0%
Doane Pet Care,
Sr. Notes, 10.75%, 2010 1,350,000 (b,o) 1,390,500
Moore North American Finance,
Sr. Notes, 7.875%, 2011 560,000 (b,o) 582,400
Sleepmaster,
Sr. Sub. Notes, Ser. B, 11%, 2009 17,631,000 (c) 3,349,890
5,322,790
DIVERSIFIED FINANCIAL SERVICE--6.8%
Elgin National Industries,
Sr. Notes, Ser. B, 11%, 2007 6,026,000 (o) 2,741,830
Finova,
Notes, 7.5%, 2009 1,365,000 (o) 487,988
Key Components/Finance,
Sr. Notes, 10.5%, 2008 2,567,000 (o) 2,502,825
Trump Holdings/Funding,
First Mortgage, 11.625%, 2010 900,000 (b,o) 866,250
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICE (CONTINUED)
Tyco International,
Gtd. Notes, 6.375%, 2005 7,389,000 (o) 7,352,055
Williams Holdings of Delaware,
Notes, 6.5%, 2008 2,558,000 (o) 2,148,720
Williams Scotsman,
Sr. Notes, 9.875%, 2007 2,229,000 (o) 2,178,847
18,278,515
ELECTRIC UTILITIES--10.8%
Allegheny Energy:
Bonds, 8.75%, 2012 4,495,000 (b,o) 3,438,675
Secured Notes, 10.25%, 2007 85,539 (b,o) 80,834
Secured Notes, 10.25%, 2007 1,700,460 (b,o) 1,717,465
CMS Energy,
Sr. Notes, 9.875%, 2007 4,739,000 (o) 4,407,270
Calpine:
Sr. Notes, 7.625%, 2006 2,000,000 (o) 1,210,000
Sr. Notes, 7.75%, 2009 7,290,000 (o) 4,082,400
Calpine Canada Energy Finance,
Gtd. Sr. Notes, 8.5%, 2008 7,314,000 (o) 4,242,120
Centerpoint Energy Resources,
Bond Mortgage, 7.875%, 2013 875,000 (b,o) 910,464
Dynegy,
Sr. Notes, 8.125%, 2005 4,011,000 (o) 3,268,965
Mirant Americas Generation:
Sr. Notes, 7.2%, 2008 3,379,000 (o) 1,740,185
Sr. Notes, 7.625%, 2006 6,380,000 (o) 3,891,800
28,990,178
ENTERTAINMENT--2.6%
AMC Entertainment:
Sr. Sub. Notes, 9.5%, 2009 358,000 (o) 358,895
Sr. Sub. Notes, 9.875%, 2012 986,000 (o) 988,465
Bally Total Fitness,
Sr. Sub. Notes, Ser. D, 9.875%, 2007 1,330,000 (o) 1,150,450
Buffets,
Sr. Sub. Notes, 11.25%, 2010 448,000 (o) 388,640
Old Evangeline Downs,
Sr. Secured Notes, 13%, 2010 900,000 (b,o) 909,000
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT (CONTINUED)
Premier Parks,
Sr. Notes, 9.75%, 2007 2,888,000 (o) 2,815,800
Regal Cinemas,
Sr. Sub. Notes, Ser. B, 9.375%, 2012 455,000 (o) 497,088
7,108,338
ENVIRONMENTAL--2.9%
Allied Waste,
Sr. Sub. Notes, Ser. B, 10%, 2009 6,541,000 (o) 6,818,993
Synagro Technologies,
Sr. Sub. Notes, 9.5%, 2009 896,000 (o) 963,200
7,782,193
FOOD & BEVERAGES--2.8%
Del Monte,
Sr. Sub Notes, 8.625%, 2012 1,879,000 (b,o) 2,001,135
Dole Foods,
Sr. Notes, 8.875%, 2011 444,000 (b,o) 463,980
Land O'Lakes,
Sr. Notes, 8.75%, 2011 4,742,000 (o) 2,975,605
R.A.B Enterprises,
Gtd. Sr. Notes, 10.5%, 2005 3,047,000 (e,o) 1,538,735
Swift & Co.,
Sr. Notes, 10.125%, 2009 441,000 (b,o) 438,795
7,418,250
FOREIGN/GOVERNMENTAL--1.0%
Mexican Government,
Bonds, 10.5%, 2011 MXN 20,000,000 1,903,463
Quebec Province,
Deb., 3.3%, 2013 CAD 1,170,000 (f) 814,058
2,717,521
GAMING & LODGING--3.8%
Host Marriott,
Sr. Notes, Ser. I, 9.5%, 2007 450,000 (o) 450,563
Park Place Entertainment,
Sr. Sub. Notes, 8.875%, 2008 985,000 (o) 1,049,025
Resorts International Hotel and Casino,
First Mortgage, 11.5%, 2009 5,002,000 (o) 4,376,750
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
GAMING & LODGING (CONTINUED)
Riviera,
Gtd. Sr. Secured Notes, 11%, 2010 1,350,000 (o) 1,171,125
Station Casinos,
Sr. Sub. Notes, 9.875%, 2010 449,000 (o) 495,022
Turning Stone Casino Entertainment,
Sr. Notes, 9.125%, 2010 1,113,000 (b,o) 1,168,650
Wynn Las Vegas,
Second Mortgage, 12%, 2010 1,390,000 (o) 1,459,500
10,170,635
HEALTH CARE--1.5%
Extendicare Health Services,
Sr. Sub. Notes, 9.35%, 2007 1,124,000 (o) 916,060
Healthsouth,
Sr. Notes, 7%, 2008 4,320,000 (c,o) 2,008,800
PerkinElmer,
Sr. Sub. Notes, 8.875%, 2013 1,227,000 (b,o) 1,288,350
4,213,210
MACHINERY--3.4%
Alliance Laundry Systems,
Sr. Sub. Notes, Ser. B, 9.625%, 2008 4,000,000 (o) 3,660,000
Day International,
Sr. Notes, Ser. B, 11.125%, 2005 1,000,000 (o) 1,035,000
National Equipment Services:
Sr. Sub. Notes, Ser. B, 10%, 2004 4,700,000 (o) 963,500
Sr. Sub. Notes, Ser. C, 10%, 2004 6,487,000 (o) 1,329,835
Terex,
Sr. Sub. Notes, Ser. B, 10.375%, 2011 2,250,000 (o) 2,340,000
9,328,335
MANUFACTURING--.3%
Dresser,
Sr. Sub. Notes, 9.375%, 2011 975,000 (o) 965,250
MINING & METALS--.4%
Haynes International,
Sr. Notes, 11.625%, 2004 2,000,000 (o) 1,090,000
OIL & GAS--21.8%
ANR Pipeline,
Sr. Notes, 8.875%, 2010 2,230,000 (b,o) 2,374,950
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS (CONTINUED)
Belden & Blake,
Sr. Sub. Notes, Ser. B, 9.875%, 2007 4,947,000 (o) 4,501,770
Coastal:
Notes, 7.625%, 2008 2,891,000 (o) 2,413,985
Sr. Deb., 6.5%, 2008 12,518,000 (o) 10,139,580
EOTT Energy Partners/Finance,
Gtd. Sr. Notes, 11%, 2009 6,746,000 (c) 4,249,980
El Paso Energy Partners,
Sr. Sub. Notes, 10.625%, 2012 1,765,000 (b,o) 1,959,150
Hanover Equipment Trust,
Sr. Secured Notes, Ser. B, 8.75%, 2011 3,912,000 (o) 3,814,200
Leviathan Gas Pipeline Partners,
Sr. Sub. Notes, 10.375%, 2009 986,000 (o) 1,035,300
Nuevo Energy,
Sr. Sub. Notes, Ser. B, 9.375%, 2010 2,690,000 (o) 2,784,150
Petrobras International Finance,
Sr. Notes, 9.875%, 2008 2,000,000 1,995,000
Premcor Refining:
Sr. Notes, 9.25%, 2010 900,000 (b,o) 963,000
Sr. Notes, 9.5%, 2013 1,120,000 (b,o) 1,209,600
Southern Natural Gas,
Sr. Notes, 8.875%, 2010 1,795,000 (b,o) 1,902,700
Tesoro Petroleum,
Sr. Sub. Notes, Ser. B, 9%, 2008 3,418,000 (o) 2,939,480
Williams Cos.:
Notes, 6.5%, 2006 4,933,000 (o) 4,489,030
Notes, 7.125%, 2011 1,997,000 (o) 1,727,405
Notes, 8.125%, 2012 4,275,000 (b,o) 3,762,000
Puttable Asset Term Securities,
Ser. A, 6.75%, 2006 2,785,000 (h,o) 2,576,125
Wiser Oil,
Sr. Sub Notes, 9.5%, 2007 4,543,000 (o) 3,793,405
58,630,810
PACKAGING--2.4%
Pliant,
Sr. Sub. Notes, 13%, 2010 1,350,000 (o) 1,235,250
Radnor,
Sr. Notes, 11%, 2010 650,000 (b,o) 633,750
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
PACKAGING (CONTINUED)
Riverwood International,
Sr. Sub. Notes, 10.875%, 2008 1,339,000 (o) 1,392,560
Tekni-Plex,
Sr. Sub. Notes, Ser. B, 12.75%, 2010 3,488,000 (o) 3,191,520
6,453,080
PAPER & FORESTRY PRODUCTS--4.9%
Appleton Papers,
Sr. Sub. Notes, Ser. B, 12.5%, 2008 850,000 (o) 962,625
Buckeye Cellulose:
Sr. Sub. Notes, 8.5%, 2005 2,478,000 (o) 2,403,660
Sr. Sub Notes, 9.25%, 2008 1,000,000 (o) 945,000
Georgia-Pacific:
Sr. Notes, 8.875%, 2010 845,000 (b,o) 880,913
Sr. Notes, 9.375%, 2013 1,480,000 (b,o) 1,568,800
Tembec Industries,
Sr. Notes, 8.5%, 2011 1,343,000 (o) 1,381,611
U.S. Timberlands Klamath Falls/Finance,
Sr. Notes, 9.625%, 2007 7,750,000 (o) 4,998,750
13,141,359
RAILROADS--1.7%
TFM, S.A. de C.V.,
Sr. Notes, 10.25%, 2007 5,000,000 (o) 4,512,500
RESIDENTIAL MORTGAGE PASS-THROUGH CTFS.--.4%
Countrywide Home Loans:
Ser. 2001-9, Cl. B4, 6.75%, 2031 488,799 (b) 434,848
Ser. 2001-9, Cl. B5, 6.75%, 2031 710,781 (b) 265,974
Residential Funding Mortgage Securities I, REMIC:
Ser. 2001-S19, Cl. B1, 6.5%, 2016 143,494 146,756
Ser. 2001-S19, Cl. B2, 6.5%, 2016 71,794 (b) 67,904
Ser. 2001-S19, Cl. B3, 6.5%, 2016 143,522 (b) 66,020
981,502
RETAILING--.8%
Hollywood Entertainment,
Sr. Sub. Notes, 9.625%, 2011 888,000 (o) 930,180
JC Penney,
Sr. Notes, 8%, 2010 896,000 (o) 931,840
Remington Arms,
Sr. Notes, 10.5%, 2011 335,000 (b,o) 360,125
2,222,145
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
STRUCTURED INDEX--2.5%
JP Morgan HYDI-100,
Linked Ctf. of Deposit, 8.75%, 2007 5,000,000 (b,g,o) 5,212,500
Linked Ctf. of Deposit, 9.7%, 2007 1,500,000 (b,g,o) 1,565,625
6,778,125
TECHNOLOGY--.7%
AMI Semiconductor,
Sr. Sub. Notes, 10.75%, 2013 1,790,000 (b,o) 1,888,450
TELECOMMUNICATIONS--12.4%
Call-Net Enterprises,
Sr.Secured Notes, 10.625%, 2008 2,000,000 (o) 1,410,000
Fairpoint Communications:
Sr. Notes, 11.875%, 2010 449,000 (b,o) 473,695
Sr. Sub. Notes, 12.5%, 2010 555,000 (o) 505,050
Insight Midwest/Insight Capital,
Sr. Notes, 9.75%, 2009 885,000 (b,o) 918,188
Loral Cyberstar,
Sr. Notes, 10%, 2006 2,198,000 (o) 912,170
MJD Communications,
Floating Rate Notes,
Ser. B, 5.806%, 2008 5,000,000 (h,o) 3,725,000
Marconi,
Bonds, 8.375%, 2030 5,586,000 (c) 1,494,255
Metromedia Fiber Network:
Sr. Notes, 10%, 2009 12,350,000 (c) 432,250
Sr. Notes, Ser. B, 10%, 2008 6,600,000 (c) 231,000
Northeast Optic Network,
Sr. Notes, 12.75%, 2008 2,960,000 (c) 222,000
Qwest Capital Funding,
Notes, 5.875%, 2004 2,000,000 (o) 1,820,000
Qwest Services:
Notes, 13.5%, 2010 6,119,000 (b,o) 6,486,140
Notes, 14%, 2014 1,458,000 (b,o) 1,578,285
Sr. Secured Notes, 13%, 2007 1,800,000 (b,o) 1,903,500
Star Choice Communications,
Sr. Secured Notes, 13%, 2005 7,750,000 (o) 7,924,375
US West Capital Funding,
Notes, 6.25%, 2005 3,944,000 (o) 3,342,540
33,378,448
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
TEXTILES & APPARREL--1.3%
Levi Strauss & Co.,
Sr. Notes, 11.625%, 2008 3,676,000 (o) 3,492,200
U.S. GOVERNMENT--.9%
U.S. Treasury Inflation Protection Securities:
3.625%, 1/15/2008 1,041,324 (i) 1,165,472
3.875%, 1/15/2009 1,025,795 (i) 1,168,934
2,334,406
U.S. GOVERNMENT AGENCIES/MORTGAGE-BACKED--.0%
Federal Home Loan Mortgage Corp.,
REMIC, Gtd. Multiclass Mortgage Participation Ctfs.,
Ser. 2470, Cl. BI, 6.5%, 2/15/2022
(Interest Only Obligation) 902,628 (j) 282
Federal National Mortgage Association,
REMIC Trust, Gtd. Pass-Through Ctfs.,
Ser. 2001-52, Cl. VI, 6.5%, 2021
(Interest Only Obligation) 3,999,284 (j) 4,920
5,202
WIRELESS TELECOMMUNICATIONS--8.0%
American Tower,
Sr. Notes, 9.375%, 2009 4,184,000 (o) 3,786,520
American Tower Escrow,
Units, 0%, 2008 450,000 (b,k,o) 299,250
Alamosa Holdings:
Sr. Discount Notes, 0/12.875%, 2010 580,000 (d,o) 182,700
Sr. Notes, 13.625%, 2011 730,000 (o) 368,650
Crown Castle International:
Sr. Notes, 9.375%, 2011 1,386,000 (o) 1,275,120
Sr. Notes, 10.75%, 2011 1,000,000 (o) 980,000
Horizon PCS,
Sr. Notes, 13.75%, 2011 3,000,000 (o) 435,000
Nextel Communications:
Conv. Sub. Deb., 5.25%, 2010 2,500,000 (o) 2,159,375
Sr. Serial Redeemable Notes, 9.375%, 2009 945,000 (o) 996,975
Nextel Partners,
Sr. Notes, 12.5%, 2009 3,170,000 (o) 3,265,100
Roger Wireless,
Sr. Secured Notes, 9.625%, 2011 1,000,000 (o) 1,070,000
SBA Communications,
Sr. Notes, 10.25%, 2009 1,500,000 (o) 1,080,000
Principal
BONDS AND NOTES (CONTINUED) Amount(a) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATIONS (CONTINUED)
Telesystem International Wireless:
Sr. Notes, 14%, 2003 207,000 (b,o) 193,545
Sr. Notes, 14%, 2003 2,173,000 (o) 2,031,755
WorldCom:
Notes, 7.5%, 2011 7,000,000 (c) 1,890,000
Notes, 7.875%, 2003 5,550,000 (c) 1,498,500
21,512,490
TOTAL BONDS AND NOTES
(cost $425,317,875) 359,142,094
------------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--7.4% Shares Value ($)
------------------------------------------------------------------------------------------------------------------------------------
CABLE & MEDIA--2.0%
Paxson Communications:
Cum., $1,325 214 1,666,408
Cum. Conv., $975 769 (b) 3,842,915
5,509,323
MINING AND METALS--1.2%
Kaiser Group Holdings,
Cum., $3.85 75,565 3,098,165
OIL & GAS--1.2%
EXCO Resources,
Cum. Conv., $1.05 184,924 3,326,783
TELECOMMUNICATIONS--3.0%
CSC Holdings,
Ser. H, Cum. $117.50 78,166 8,051,098
TOTAL PREFERRED STOCKS
(cost $22,678,472) 19,985,369
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--.7%
------------------------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--.0%
Stellex Aerostructures 2,793 (l,m) 0
BROADCASTING & MEDIA--.7%
Sirius Satellite Radio 2,621,068 (m,o) 1,913,380
TOTAL COMMON STOCKS
(cost $1,245,007) 1,913,380
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
OTHER--0% Shares Value ($)
------------------------------------------------------------------------------------------------------------------------------------
MINING AND METALS--.0%
Kaiser Group Holdings (rights) 108,168 (l,m) 0
Imperial Credit Industries (warrants) 118,282 (l,m) 0
0
TELECOMMUNICATION--.0%
Loral Cyberstar (warrants) 6,980 (m) 70
TOTAL OTHER
(cost $3,490) 70
------------------------------------------------------------------------------------------------------------------------------------
OTHER INVESTMENTS--2.1%
------------------------------------------------------------------------------------------------------------------------------------
REGISTERED INVESTMENT COMPANIES:
Dreyfus Institutional Advantage Fund 1,851,334 (n) 1,851,334
Dreyfus Institutional Advantage Plus Fund 1,851,333 (n) 1,851,333
Dreyfus Institutional Preferred Plus Money Market Fund 1,851,333 (n) 1,851,333
TOTAL OTHER INVESTMENTS
(cost $5,554,000) 5,554,000
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT (cost $454,798,844) 143.6% 386,594,913
LIABILITIES, LESS CASH AND RECEIVABLES (43.6%) (117,413,981)
NET ASSETS 100.0% 269,180,932
(A) PRINCIPAL AMOUNT STATED IN U.S DOLLARS UNLESS OTHERWISE NOTED.
CAD--CANADIAN DOLLARS
MXN--MEXICAN PESOS
(B) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT
OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT MARCH 31,
2003, THESE SECURITIES AMOUNTED TO $63,830,675 OR 23.7% OF NET ASSETS.
(C) NON-INCOME PRODUCING--SECURITY IN DEFAULT.
(D) ZERO COUPON UNTIL A SPECIFIED DATE AT WHICH TIME THE STATED COUPON RATE
BECOMES EFFECTIVE UNTIL MATURITY.
(E) GUARANTEED BY THE B. MANISCHEWITZ CO. AND MILLBROOK DISTRIBUTION SERVICES.
(F) PRINCIPAL AMOUNT FOR ACCRUAL PURPOSES IS PERIODICALLY ADJUSTED BASED ON
CHANGES TO THE CANADIAN CONSUMER PRICE INDEX.
(G) SECURITY LINKED TO A PORTFOLIO OF HIGH YIELD DEBT SECURITIES.
(H) VARIABLE RATE SECURITY--INTEREST RATE SUBJECT TO PERIODIC CHANGE.
(I) PRINCIPAL AMOUNT FOR ACCRUAL PURPOSES IS PERIODICALLY ADJUSTED BASED ON
CHANGES IN THE CONSUMER PRICE INDEX.
(J) NOTIONAL FACE AMOUNT SHOWN.
(K) UNITS REPRESENT BOND WITH WARRANTS ATTACHED TO PURCHASE COMMON STOCK.
(L) THE VALUE OF THESE SECURITIES HAS BEEN DETERMINED IN GOOD FAITH UNDER THE
DIRECTION OF THE BOARD OF TRUSTEES.
(M) NON-INCOME PRODUCING SECURITY.
(N) INVESTMENTS IN AFFILIATED MONEY MARKET FUNDS--SEE NOTE 3(D)
(O) COLLATERAL FOR REVOLVING CREDIT AND SECURITY AGREEMENT.
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2003
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 454,798,844 386,594,913
Cash 922,445
Interest receivable 12,040,915
Receivable for investment securities sold 6,663,477
Dividend receivable 229,613
Prepaid expenses 59,969
406,511,332
--------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates--Note 3 274,804
Due to Shareholder Servicing Agent--Note 3(b) 22,599
Loan payable--Note 2 124,000,000
Payable for investment securities purchased 7,686,376
Dividends payable 4,313,591
Unrealized depreciation on interest rate swaps--Note 4 495,373
Interest payable--Note 2 200,455
Payable for foreign exchange contracts 39,318
Net unrealized depreciation on forward currency
exchange contracts--Note 4 3,943
Accrued expenses 293,941
137,330,400
NET ASSETS ($) 269,180,932
COMPOSITION OF NET ASSETS ($):
Paid-in capital 979,736,305
Accumulated distributions in excess of investment income--net (998,686)
Accumulated net realized gain (loss) on investments (640,853,592)
Accumulated net unrealized appreciation (depreciation) (68,703,095)
on investments, foreign currency transactions and
swap transactions
NET ASSETS ($) 269,180,932
SHARES OUTSTANDING
(unlimited number of $.001 par value 69,574,043
shares of Beneficial Interest authorized)
NET ASSET VALUE, per share ($) 3.87
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF OPERATIONS
Year Ended March 31, 2003
--------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INCOME:
Interest 51,979,782
Dividends 2,765,018
TOTAL INCOME 54,744,800
EXPENSES:
Management fee--Note 3(a) 3,522,455
Interest expense--Note 2 3,840,268
Shareholder servicing costs--Note 3(a,b) 419,267
Trustees' fees and expenses--Note 3(c) 190,254
Professional fees 167,023
Shareholders' reports 150,572
Registration fees 72,460
Custodian fees--Note 3(a) 34,713
Miscellaneous 41,745
TOTAL EXPENSES 8,438,757
Less--reduction in management and shareholder servicing fees
due to undertakings--Note 3(a,b) (508,799)
NET EXPENSES 7,929,958
INVESTMENT INCOME--NET 46,814,842
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments and foreign currency
transactions (112,985,410)
Net realized gain (loss) on forward currency exchange contracts (44,638)
Net realized gain (loss) on financial futures (94,555)
Net realized gain (loss) on swap transactions (5,037,771)
Net realized gain (loss) on options transactions (451,649)
NET REALIZED GAIN (LOSS) (118,614,023)
Net unrealized appreciation (depreciation) on investments
foreign currency transactions and swap transactions 50,424,756
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (68,189,267)
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (21,374,425)
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF CASH FLOWS
Year Ended March 31, 2003
--------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES ($):
Interest Received 43,324,351
Dividends Received 1,455,881
Interest and loan commitment fees paid (3,990,764)
Operating expenses paid (1,030,255)
Paid to The Dreyfus Corporation (3,094,800) 36,664,413
CASH FLOWS FROM INVESTING ACTIVITIES ($):
Purchases of portfolio securities (724,551,807)
Net purchases of short-term portfolio securities (4,941,283)
Proceeds from sales of portfolio securities 783,658,346
FEC Transactions (1,421,910)
Options Transactions (451,649)
Swap Transactions (5,037,771)
Futures Transactions (94,555) 47,159,371
CASH FLOWS FROM FINANCING ACTIVITIES ($):
Dividends paid (42,680,334)
Loan Payments (41,000,000) (83,680,334)
Increase in cash 143,450
Cash at beginning of period 778,995
CASH AT END OF PERIOD 922,445
RECONCILIATION OF NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES ($):
Net Decrease in Net Assets Resulting From Operations (21,374,425)
ADJUSTMENTS TO RECONCILE NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS TO NET CASH USED BY OPERATING ACTIVITIES ($):
Decrease in interest receivable 3,728,353
Decrease in interest and loan commitment fees (118,365)
Increase in swap payable 13,292
Increase in accrued operating expenses 40,792
Decrease in prepaid expenses 4,987
Decrease in payable due to The Dreyfus Corporation (81,144)
Net Interest sold on investments (2,654,853)
Net realized loss on investments 118,614,023
Net unrealized appreciation on investments (50,424,756)
Noncash Dividends (1,079,524)
Increase in Dividends receivable (229,613)
Net amortization of discount and premium on investments (9,774,354)
NET CASH PROVIDED BY OPERATING ACTIVITIES 36,664,413
SUPPLEMENTARY DISCOSURE NONCASH FINANCING ACTIVITIES ($):
Reinvestment of dividends which increases paid-in capital 9,039,309
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF CHANGES IN NET ASSETS
Year Ended March 31,
-----------------------------------
2003 2002
--------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 46,814,842 53,543,419
Net realized gain (loss) on investments (118,614,023) (212,319,993)
Net unrealized appreciation
(depreciation) on investments 50,424,756 124,523,400
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (21,374,425) (34,253,174)
--------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
INVESTMENT INCOME--NET (50,965,977) (59,887,317)
--------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS ($):
DIVIDENDS REINVESTED--NOTE 1(C) 9,039,309 11,025,306
TOTAL INCREASE (DECREASE) IN NET ASSETS (63,301,093) (83,115,185)
--------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 332,482,025 415,597,210
END OF PERIOD 269,180,932 332,482,025
--------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (SHARES):
SHARES ISSUED FOR DIVIDENDS REINVESTED 2,190,307 1,967,569
SEE NOTES TO FINANCIAL STATEMENTS.
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.
Year Ended March 31,
-------------------------------------------------------------------
2003 2002(a) 2001 2000 1999(b)
------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value, beginning of period 4.93 6.35 10.06 11.83 15.00
Investment Operations:
Investment income--net .68(c) .81(c) 1.14 1.46 1.38
Net realized and unrealized
gain (loss) on investments (1.00) (1.33) (3.57) (1.75) (3.35)
Total from Investment Operations (.32) (.52) (2.43) (.29) (1.97)
Distributions:
Dividends from investment income--net (.74) (.90) (1.28) (1.48) (1.20)
Net asset value, end of period 3.87 4.93 6.35 10.06 11.83
Market value, end of period 5.16 5.41 6.47 8-7/8 11-7/8
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%)(D) 14.22 (1.84) (14.09) (14.35) (14.12)(e)
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses
to average net assets 1.54 1.52 1.61 1.50 1.46(e)
Ratio of interest expense
to average net assets 1.45 2.99 3.13 2.21 2.17(e)
Ratio of net investment income
to average net assets 17.66 14.95 14.35 13.20 11.64(e)
Decrease reflected in above expense
ratios due to undertakings by
The Dreyfus Corporation
and UBS Warburg LLC .19(f) .19(f) -- -- --
Portfolio Turnover Rate 186.19 239.11 42.61 28.37 59.40(g)
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 269,181 332,482 415,597 646,676 742,833
The Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
Year Ended March 31,
----------------------------------------------
2003 2002(a) 2001 2000 1999(b)
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%)
(CONTINUED):
Average borrowings outstanding
($ x 1,000) 126,350 174,415 232,205 268,770 303,386
Weighted average number of
fund shares oustanding (x 1,000) 68,538 66,400 64,724 63,785 61,387
Average amount of debt per share ($) 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) ANNUALIZED.
(F) REPRESENTS WAIVER OF .10 OF 1% OF MANAGED ASSETS BY THE DREYFUS CORPORATION
AND .03 OF 1% OF MANAGED ASSETS BY UBS WARBURG LLC.
(G) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
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 direct 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 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 trans-
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
actions 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, amortization of discount or premium on investments is recognized on
the accrual basis. Under the terms of the custody agreement, the fund received
net earnings credits of $5,722 during the period ended March 31, 2003 based on
available cash balances left on deposit. Income earned under this arrangement is
included in interest income.
(D) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net are 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.
For shareholders who elect to receive their distributions in additional shares
of the fund, in lieu of cash, such distributions will be reinvested either (i)
through receipt of additional unissued but authorized shares from the fund
(" newly issued shares") or (ii) by purchase of outstanding shares on the open
market of the New York Stock Exchange or elsewhere as defined in the dividend
reinvestment plan.
On March 26, 2003, the Board of Trustees declared a cash dividend of $.062 per
share from investment income-net, payable on April 23, 2003 to shareholders of
record as of the close of business on April 9, 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.
At March 31, 2003, the components of accumulated earnings on a tax basis were as
follows: undistributed ordinary income $3,319,956, accumulated capital losses
$590,289,465 and unrealized depreciation $72,832,312. In addition, the fund had
$49,885,865 of capital losses
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
realized after October 31, 2002, which were deferred for tax purposes to the
first day of the following fiscal year.
The accumulated capital loss carryover is available 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 years
ended March 31, 2 003 and March 31, 2002, were as follows: ordinary income
$50,965,977 and $59,887,317, respectively.
During the period ended March 31, 2003, as a result of permanent book to tax
differences, the fund increased accumulated undistributed investment income-net
by $4,074,070, decreased net realized gain (loss) on investments by $4,126,503
and increased paid-in capital by $52,433. Net assets were not affected by this
reclassification.
NOTE 2--Borrowings:
The fund has entered into a $300,000,000 Revolving Credit and Security Agreement
(" 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 March 31, 2003, $786,465 applicable to those fees was
included in interest expense.
The average daily amount of borrowings outstanding during the period ended March
31, 2003, under the Agreement, was approximately $126,350,000, with a related
weighted average annualized interest rate of 1.71%.
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 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, 2002 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 $391,384 during the period ended March 31, 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 March 31, 2003, the fund was charged $9,000 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
March 31, 2003, the fund was charged $34,713 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 March 31, 2003, the fund was charged $391,384
pursuant to the Shareholder Servicing Agreement.
For the period from April 1, 2002 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
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
reduction in shareholder servicing fee, pursuant to the undertaking, amounted to
$117,415 during the period ended March 31, 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 $55,707 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 and financial futures, during the
period ended March 31, 2003, amounted to $706,852,481 and $755,541,467,
respectively.
The fund may use various derivatives, including options, futures contracts,
forward 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 may enter 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 periodic 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 March 31,
2003, there were no credit default swaps outstanding.
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 adjustment to interest income.
Interest rate swaps are marked-to-market daily and the 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 March
31, 2003:
Unrealized
Notional Amount ($) Description (Depreciation) ($)
--------------------------------------------------------------------------------
25,000,000 Agreement with Merrill Lynch terminating (495,373)
March 26, 2013 to pay a fixed rate of 4.48%
and to receive 3 month LIBOR
25,000,000 Agreement with Merrill Lynch terminating --
April 2, 2013 to pay a fixed rate of 4.289%
and to receive 3 month LIBOR
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
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 March 31,
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. The following summarizes open forward
currency exchange contracts at March 31, 2003:
Foreign
Forward Currency Currency Unrealized
Exchange Contracts Amounts Proceeds ($) Value ($) (Depreciation) ($)
------------------------------------------------------------------------------------------------------------------------------------
SALES:
Canadian dollar,
expiring 6/23/2003 590,000 395,502 399,445 (3,943)
At March 31, 2003, the cost of investments for federal income tax purposes was
$458,932,003 accordingly, accumulated net unrealized depreciation on investments
was $72,337,090, consisting of $18,097,495 gross unrealized appreciation and
$90,434,585 gross unrealized depreciation.
NOTE 5--Change in Accounting Principle:
As required, effective April 1, 2001, the fund has adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies (the "Guide") and
began amortizing discount or premium on fixed income securities on a scientific
basis. In addition, the Guide now requires paydown gains and losses to be
included in interest income. Prior to April 1, 2001, the fund did not amortize
premiums on fixed income securities and amortized discount on a straight line
basis and included paydown gains and losses in net realized gains on
investments. The cumulative effect of this accounting change had no impact on
total net assets of the fund, but resulted in a $3,758,896 reduction in
accumulated undistributed investment income-net and a corresponding $3,758,896
increase in accumulated net unrealized appreciation (depreciation), based on
securities held by the fund on March 31, 2001.
NOTE 6--Subsequent Event Note:
On April 24, 2003, the Board of Trustees declared a cash dividend of $.04875 per
share from investment income-net, payable on May 22, 2003 to shareholders of
record as of the close of business on May 8, 2003. The previous cash dividend
declared on March 26, 2003 was $.062 per share from investment income-net.
The Fund
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders Dreyfus High Yield Strategies Fund
We have audited the accompanying statement of assets and liabilities of Dreyfus
High Yield Strategies Fund (the "Fund"), including the statement of investments,
as of March 31,2003, and the related statement of operations and cash flows for
the year then ended, and the statement of changes in net assets for each of the
two years in the period then ended, and financial highlights for each of the
years or periods indicated herein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our procedures
included confirmation of securities owned as of March 31, 2003, by
correspondence with the custodian and brokers. As to securities purchased or
sold but not yet received or delivered, we performed other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreyfus High Yield Strategies Fund as of March 31, 2003, the results of its
operations and its cash flows for the year then ended, and the changes in its
net assets and financial highlights for each of the years or periods indicated
herein, in conformity with accounting principles generally accepted in the
United States of America.
New York, New York
May 14, 2003
IMPORTANT TAX INFORMATION (Unaudited)
For federal tax purposes, the fund hereby designates 4.07% of the ordinary
dividends paid during the fiscal year ended March 31, 2003 as qualifying for the
corporate dividends received deduction. Shareholders will receive notification
in January 2004 of the percentage applicable to the preparation of their 2003
income tax returns.
The Fund
DIVIDEND REINVESTMENT PLAN (Unaudited)
To participate automatically in the Dividend Reinvestment Plan (the "Plan") of
the Dreyfus High Yield Strategies Fund (the "fund"), fund shares must be
registered in either your name, or, if your fund shares are held in nominee or
"street" name through your broker-dealer, your broker-dealer must be a
participant in the Plan. You may terminate your participation in the Plan, as
set forth below. All shareholders participating (the "Participants") in the Plan
will be bound by the following provisions:
Mellon Investor Services, L.L.C (the "Agent") will act as Agent for each
Participant, and will open an account for each Participant under the Plan in the
same name as their present shares are registered, and put into effect for them
the dividends reinvestment option of the plan as of the first record date for a
dividend or capital gains distribution.
Whenever the fund declares income dividend or capital gains distribution payable
in shares of the fund or cash at the option of the shareholders, each
Participant that does not opt for cash distributions shall take such
distribution entirely in shares. If on the payment date for a dividend or
capital gains distribution, the net asset value is equal to or less than the
market price per share plus estimated brokerage commissions, the Agent shall
automatically receive such shares, including fractions, for each Participant's
account except in the circumstances described in the following paragraph. Except
in such circumstances, the number of additional shares to be credited to each
Participant' s account shall be determined by dividing the dollar amount of the
income dividend or capital gains distribution payable on their shares by the
greater of the net asset value per share determined as of the date of purchase
or 95% of the then current market price per share of the fund's shares on the
payment date.
Should the net asset value per share of the fund shares exceed the market price
per share plus estimated brokerage commissions on the payment date for a share
or cash income dividend or capital gains distribution, the Agent or a
broker-dealer selected by the Agent shall endeavor, for a purchase period of 30
days to apply the amount of such dividend or capital gains distribution on each
Participant's shares (less their pro rata share of brokerage commissions
incurred with respect to the Agent' s open-market purchases in connection with
the reinvestment of such dividend or distribution) to purchase shares of the
fund on the open market for each Participant' s account. In no event may such
purchase be made more than 30 days after the payment date for such dividend or
distribution except where temporary curtailment or suspension of purchase is
necessary to comply with applicable provisions of federal securities laws. If,
at the close of business on any day during the purchase period the net asset
value per share equals or is less than the market price per share plus estimated
brokerage commissions, the Agent will not make any further open-market purchases
in connection with the reinvestment of such dividend or distribution. If the
Agent is unable to invest the full dividend or distribution amount through
open-market purchases during the purchase period, the Agent shall request that,
with respect to the uninvested portion of such dividend or distribution amount,
the fund issue new shares at the close of business on the earlier of the last
day of the purchase period or the first day during the purchase period on which
the net asset value per share equals or is less than the market price per share,
plus estimated brokerage commissions. These newly issued shares will be valued
at the then-current market price per share of the fund's shares at the time such
shares are to be issued.
For purposes of making the dividend reinvestment purchase comparison under the
Plan, (a) the market price of the fund's shares on a particular date shall be
the last sales price on the New York Stock Exchange on that date, or, if there
is no sale on such Exchange on that date, then the mean between the closing bid
and asked quotations for such shares on such Exchange on such date and (b) the
net asset value per share of the fund's shares on a particular date shall be the
net asset value per share most recently calculated by or on behalf of the fund.
Open-market purchases provided for above may be made on any securities exchange
where the fund's shares are traded, in the over-the-counter market or in
negotiated transactions and may be on such terms as to price, delivery and
otherwise as the Agent shall determine.
The Fund
DIVIDEND REINVESTMENT PLAN (Unaudited) (CONTINUED)
Each Participant's uninvested funds held by the Agent will not bear interest,
and it is understood that, in any event, the Agent shall have no liability in
connection with any inability to purchase shares within 30 days after the
initial date of such purchase as herein provided, or with the timing of any
purchase effected. The Agent shall have no responsibility as to the value of the
fund's shares acquired for each Participant's account. For the purpose of cash
investments, the Agent may commingle each Participant's fund with those of other
shareholders of the fund for whom the Agent similarly acts as Agent, and the
average price (including brokerage commissions) of all shares purchased by the
Agent as Agent shall be the price per share allocable to each Participant in
connection therewith.
The Agent may hold each Participant' s shares acquired pursuant to the Plan
together with the shares of other shareholders of the fund acquired pursuant to
the Plan in noncertificated form in the Agent's name or that of the Agent's
nominee. The Agent will forward to each Participant any proxy solicitation
material; and will vote any shares so held for each Participant first in
accordance with the instructions set forth on proxies returned by the
participant to the fund, and then with respect to any proxies not returned by
the participant to the fund in the same portion as the agent votes proxies
returned by the participants to the fund. Upon a Participant's written request,
the Agent will deliver to the Participant, without charge, a certificate or
certificates for the full shares.
The Agent will confirm to each Participant each acquisition made for their
account as soon as practicable but not later than 60 days after the date
thereof. Although each Participant may from time to time have an undivided
fractional interest (computed to four decimal places) in a share of the fund, no
certificates for a fractional share will be issued. However, dividends and
distributions on fractional shares will be credited to each Participant's
account. In the event of termination of a Participant's account under the Plan,
the Agent will adjust for any such undivided fractional interest in cash at the
market value of the fund's shares at the time of termination.
Any share dividends or split shares distributed by the fund on shares held by
the Agent for Participants will be credited to their accounts. In the event that
the fund makes available to its shareholders rights to purchase additional
shares of other securities, the shares held for each Participant under the Plan
will be added to other shares held by the Participant in calculating the number
of rights to be issued to each Participant.
The Agent's service fee for handling capital gains distributions or income
dividends will be paid by the fund. Each Participant will be charged their pro
rata share of brokerage commissions on all open-market purchases.
Each Participant my terminate their account under the Plan by notifying the
Agent in writing. Such termination will be effectively immediately if the
Participant's notice is received by the Agent not less than ten days prior to
any dividend or distribution record date, otherwise such termination will be
effective shortly after the investment of such dividend distributions with
respect to any subsequent dividend or distribution. The Plan may be terminated
by the Agent or the fund upon notice in writing mailed to each Participant at
least 90 days prior to any record date for the payment of any dividend or
distribution by the fund. Upon any termination, the Agent will cause a
certificate or certificates to be issued for the full shares held for each
Participant under the Plan and cash adjustment for any fraction to be delivered
to them without charge. If a Participant elects by notice to the Agent in
writing in advance of such termination to have the Agent sell part or all of
their shares and remit the proceeds to them, the Agent is authorized to deduct a
$5.00 fee plus brokerage commission for this transaction from the proceeds.
These terms and conditions may be amended or supplemented by the Agent or the
Fund at any time or times but, except when necessary or appropriate to comply
with applicable law or the rules or policies of the Securities and Exchange
Commission or any other regulatory authority, only by mailing to each
Participant appropriate written notice at least 30 days prior to the effective
date thereof. The amendment or supplement shall be deemed to be accepted by each
Participant unless, prior to
The Fund
DIVIDEND REINVESTMENT PLAN (Unaudited) (CONTINUED)
the effective date thereof, the Agent receives written notice of the termination
of their account under the Plan. Any such amendment may include an appointment
by the Agent in its place and stead of a successor Agent under these terms and
conditions, with full power and authority to perform all or any of the acts to
be performed by the Agent under these terms and conditions. Upon any such
appointment of any Agent for the purpose of receiving dividends and
distributions, the fund will be authorized to pay to such successor Agent, for
each Participant's account, all dividends and distributions payable on shares of
the fund held in their name or under the Plan for retention or application by
such successor Agent as provided in these terms and conditions.
The Agent shall at all times act in good faith and agree to use its best efforts
within reasonable limits to insure the accuracy of all services performed under
this Agreement and to comply with applicable law, but assumes no responsibility
and shall not be liable for loss or damage due to errors unless such error is
caused by the Agent's negligence, bad faith, or willful misconduct or that of
its employees.
These terms and conditions shall be governed by the laws of the State of New
York.
BOARD MEMBERS INFORMATION (Unaudited)
JOSEPH S. DIMARTINO (59)
CHAIRMAN OF THE BOARD (1998)
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* Corporate Director and Trustee
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* The Muscular Dystrophy Association, Director
* Levcor International, Inc., an apparel fabric processor, Director
* Century Business Services, Inc., a provider of outsourcing functions for small
and medium size companies, Director
* The Newark Group, a provider of a national market of paper recovery
facilities, paperboard mills and paperboard converting plants, Director
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 191
--------------
JAMES FITZGIBBONS (68)
BOARD MEMBER (1998)
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* Chairman of the Board, Davidson Cotton Company (1998-2001)
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* Howes Leather Corporation, Director
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 25
--------------
J. TOMLINSON FORT (74)
BOARD MEMBER (1998)
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* Of Counsel, Reed Smith LLP (1998-Present)
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 25
--------------
KENNETH A. HIMMEL (56)
BOARD MEMBER (1998)
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* President and CEO, Related Urban Development Company, a real estate developmen
company (1996-Present)
* President and CEO, Himmel & Company, a real estate development company
(1980-Present)
* CEO, American Food Management, a restaurant company (1983-Present)
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 25
The Fund
BOARD MEMBERS INFORMATION (Unaudited) (CONTINUED)
STEPHEN J. LOCKWOOD (55)
BOARD MEMBER (1998)
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* Chairman of the Board, Stephen J. Lockwood and Company LLC, an investment
company (2000-Present)
* Chairman of the Board and CEO, LDG Reinsurance Corporation (1977-2000)
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* BDML Holdings, an insurance company, Chairman of the Board
* Affiliated Managers Group, an investment management company, Director
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 25
--------------
ROSLYN WATSON (53)
BOARD MEMBER (1998)
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* Principal, Watson Ventures, Inc., a real estate investment company
(1993-Present)
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* American Express Centurion Bank, Director
* The Hyams Foundation Inc., a Massachusetts Charitable Foundation, Trustee
* National Osteoporosis Foundation, Trustee
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 25
--------------
BENAREE PRATT WILEY (56)
BOARD MEMBER (1998)
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* President and CEO, The Partnership, an organization dedicated to increasing
the Representation of African Americans in positions of leadership, influence
and decision-making in Boston, MA (1991-Present)
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* Boston College, Trustee
* The Greater Boston Chamber of Commerce, Director
* The First Albany Companies, Inc., an investment bank, Director
* Mass. Development, Director
* Commonwealth Institute, Director
* Efficacy Institute, Director
* PepsiCo Africa-America, Advisory Board
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 25
--------------
ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL
INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS IS AVAILABLE IN THE
FUND'S STATEMENT OF ADDITIONAL INFORMATION WHICH CAN BE OBTAINED FROM DREYFUS
FREE OF CHARGE BY CALLING THIS TOLL FREE NUMBER: 1-800-554-4611.
RUTH MARIE ADAMS, EMERITUS BOARD MEMBER
FRANCIS P. BRENNAN, EMERITUS BOARD MEMBER
OFFICERS OF THE FUND (Unaudited)
STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000.
Chairman of the Board, Chief Executive Officer and Chief Operating Officer
of the Manager, and an officer of 94 investment companies (comprised of 188
portfolios) managed by the Manager. Mr. Canter also is a Board member and, where
applicable, an Executive Committee Member of the other investment management
subsidiaries of Mellon Financial Corporation, each of which is an affiliate of
the Manager. He is 57 years old and has been an employee of the Manager since
May 1995.
STEPHEN R. BYERS, EXECUTIVE VICE PRESIDENT SINCE NOVEMBER 2002.
Chief Investment Officer, Vice Chairman and a Director of the Manager, and
an officer of 94 investment companies (comprised of 188 portfolios) managed by
the Manager. Mr. Byers also is an Officer, Director or an Executive Committee
Member of certain other investment management subsidiaries of Mellon Financial
Corporation, each of which is an affiliate of the Manager. He is 49 years old
and has been an employee of the Manager since January 2000. Prior to joining the
Manager, he served as an Executive Vice President-Capital Markets, Chief
Financial Officer and Treasurer at Gruntal & Co., L.L.C.
GERALD E. THUNELIUS, EXECUTIVE VICE PRESIDENT SINCE NOVEMBER 2001.
Director of the Long Term Taxable Fixed Income Team and Senior Portfolio
Manager of the Manager, and an officer of 1 investment company (comprised of 1
portfolio) managed by the Manager. He is 38 years old and has been an employee
of the Manager since May 1989.
MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000.
Executive Vice President, Secretary and General Counsel of the Manager, and
an officer of 95 investment companies (comprised of 204 portfolios) managed by
the Manager. He is 57 years old and has been an employee of the Manager since
June 1977.
STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000.
Associate General Counsel and Assistant Secretary of the Manager, and an
officer of 95 investment companies (comprised of 204 portfolios) managed by the
Manager. He is 53 years old and has been an employee of the Manager since July
1980.
JEFF PRUSNOFSKY, ASSISTANT SECRETARY SINCE MARCH 2000.
Associate General Counsel of the Manager, and an officer of 23 investment
companies (comprised of 82 portfolios) managed by the Manager. He is 37 years
old and has been an employee of the Manager since October 1990.
MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000.
Associate General Counsel of the Manager, and an officer of 93 investment
companies (comprised of 200 portfolios) managed by the Manager. He is 42 years
old and has been an employee of the Manager since October 1991.
The Fund
OFFICERS OF THE FUND (Unaudited) (CONTINUED)
JAMES WINDELS, TREASURER SINCE NOVEMBER 2001.
Director - Mutual Fund Accounting of the Manager, and an officer of 95
investment companies (comprised of 204 portfolios) managed by the Manager. He is
44 years old and has been an employee of the Manager since April 1985.
ERIK D. NAVILOFF, ASSISTANT TREASURER SINCE DECEMBER 2002.
Senior Accounting Manager - Taxable Fixed Income Funds of the Manager, and
an officer of 18 investment companies (comprising 76 portfolios) managed by the
Manager. He is 34 years old and had been an employee of the Manager since
November 1992.
KENNETH J. SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001.
Mutual Funds Tax Director of the Manager, and an officer of 95 investment
companies (comprised of 204 portfolios) managed by the Manager. He is 48 years
old and has been an employee of the Manager since June 1993.
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
Louis Geser
Michael Hoeh
William Howarth
Greg Jordan
Kenneth D. Smalley
Gerald E. Thunelius
Samual 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 430AR0303