PREMIER GNMA FUND
LETTER TO SHAREHOLDERS
Dear Shareholder:
With 1994 and the worst bond market in 70 years behind us, 1995 has been
a welcome relief. Since the beginning of the year the bond markets have
rallied substantially, right through the Federal Reserve Board's last
tightening in February when the Federal Funds rate was raised by 50 basis
points. The market continued to rally when the Federal Reserve then loosened
the Federal Funds rate in July by 25 basis points. After seven corrective
tightening moves totaling 300 basis points the Fed has finally started to
loosen credit.
As of June 30, 1995, the net asset value of Premier GNMA Fund was $14.33
per share for Class A shares and $14.34 for Class B shares. The total return
for your Fund for the six months ended June 30, 1995 was 9.43% for the Class
A shares and 9.15% for the Class B shares.* Dividends paid from net
investment income for the six-month period amounted to approximately $.469
per share for Class A shares and approximately $.433 for Class B shares. The
annualized distribution rate per share for the period was 6.30% for the Class
A shares and 6.09% for the Class B shares.**
Over the last six months the Fund's total return has lagged the Lehman
GNMA Index which posted a total return 10.84%.*** The main reason for the
six-month underperformance was that Lehman made a major correction in its
GNMA Index which we used as a benchmark for determining the duration of
securities in the Fund's portfolio. Because of the conservative manner in
which the Fund is managed, typically the Fund is no more than a year in
duration longer or shorter than the Index. For several months in late 1994
and early 1995, the Lehman GNMA Index did not accurately depict the overall
duration of the market until it was readjusted on January 30, 1995. We
immediately began to make changes in the portfolio to conform with the
corrected Lehman figures. Had the Index reflected the duration of the market
correctly, the Fund's performance would have been better on a relative basis.
To help eliminate this type of problem in the future, we will look to three
indexes in an attempt to come up with the proper duration for the market and
for the Fund.
During the six months ended June 30, 1995, the major strategy employed in
the Fund has been one of anticipating higher prepayment rates in May through
October 1995 and structuring the portfolio so that faster prepayments, if
they occur, should affect the Fund only marginally. Currently, approximately
34% of the portfolio is invested in mortgages that we consider somewhat
burned out. This means that these securities might have been through at least
one, sometimes two refinancing cycles and not been refinanced. Another 23% of
the portfolio is invested in Treasury securities which have no prepayment
exposure at all. The balance of the mortgages owned were purchased at
slightly below or slightly above par. Should these securities experience a
speed-up of prepayment, the fact that the cost is around par will have a less
negative effect on the portfolio.
We are hopeful that these strategies will result in higher yields for the
Fund along with better and more consistent returns. Of course, as economic or
market conditions dictate, the portfolio may be restructured accordingly.
Sincerely,
[Garitt A. Kono signature logo]
Garitt A. Kono
Portfolio Manager
July 31, 1995
New York, N.Y.
* Total return represents the change during the period in a hypothetical
account with dividends reinvested, without taking into account the maximum
initial sales charge in the case of Class A shares, or the applicable
contingent deferred sales charge imposed on redemptions in the case of Class
B shares.
**Annualized distribution rate per share is based upon dividends per share
paid from net investment income during the period, divided by the maximum
offering price at the end of the period in the case of Class A shares, or the
net asset value per share at the end of the period in the case of Class B
shares.
*** Source: Lipper Analytical Services, Inc. The Lehman GNMA Index is an
unmanaged total return performance benchmark for the GNMA market, consisting
of 15- and 30-year fixed-rate securities backed by mortgage pools of the
Government National Mortgage Association.
<TABLE>
<CAPTION>
PREMIER GNMA FUND
STATEMENT OF INVESTMENTS JUNE 30, 1995 (UNAUDITED)
PRINCIPAL
BONDS AND NOTES-87.9% AMOUNT VALUE
-------------- --------------
<S> <C> <C>
MORTGAGE-BACKED CERTIFICATES-67.7%
Government National Mortgage Association I:
7%, 10/15/2022-5/15/2024................................................ $ 32,640,012 $ 32,170,648
7 1/2%, 2/15/2022-12/15/2024............................................ 24,109,692 24,282,801
8%, 4/15/2017-10/15/2024................................................ 4,501,206 4,615,131
8 1/2%, 11/1/2019-3/15/2025............................................. 15,281,429 15,887,796
9%, 12/15/2009-12/15/2022............................................... 16,833,320 17,697,731
9 1/4%, 10/15/2023...................................................... 4,833,723 4,992,317
9 1/2%, 10/15/2016-12/15/2024........................................... 11,006,823 11,684,403
10%, 10/15/2016-10/15/2020.............................................. 1,659,176 1,809,531
10 1/2%, 2/15/2016-8/15/2019............................................ 658,445 724,290
11%, 2/15/2010-8/15/2019................................................ 3,268,219 3,629,750
11 1/2%, 1/15/2013...................................................... 228,015 260,794
-------------
117,755,192
-------------
Government National Mortgage Association II:
11%, 7/20/2013-10/20/2015............................................... 3,124,668 3,384,390
-------------
TOTAL MORTGAGE-BACKED CERTIFICATES.......................................... 121,139,582
=============
U.S. TREASURY BONDS-12.5%
7 1/2%, 11/15/2024...................................................... 9,000,000 9,977,346
8 3/4%, 5/15/2020....................................................... 10,000,000 12,412,500
-------------
TOTAL U.S. TREASURY BONDS................................................... 22,389,846
=============
U.S. TREASURY NOTES-7.7%
6 1/2%, 5/15/2005....................................................... 5,000,000 5,107,030
7 1/2%, 2/15/2005....................................................... 8,000,000 8,713,752
-------------
TOTAL U.S. TREASURY NOTES................................................... 13,820,782
=============
TOTAL BONDS AND NOTES
(cost $152,633,503)..................................................... $ 157,350,210
=============
SHORT-TERM INVESTMENTS-3.2%
U.S. TREASURY BILLS:
5.38%, 9/21/1995........................................................ $ 2,392,000 $ 2,362,387
6.15%, 8/17/1995........................................................ 2,899,000 2,878,475
6.31%, 8/3/1995......................................................... 535,000 532,432
-------------
TOTAL SHORT-TERM INVESTMENTS
(cost $5,773,294)....................................................... $ 5,773,294
=============
TOTAL INVESTMENTS
(cost $158,406,797)..................................................... 91.1% $ 163,123,504
======= ==============
CASH AND RECEIVABLES (NET).................................................. 8.9% $ 15,887,720
======= ==============
NET ASSETS.................................................................. 100.0% $ 179,011,224
======= ==============
See independent accountants' review report and notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER GNMA FUND
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1995 (UNAUDITED)
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $158,406,797)-see statement..................................... $163,123,504
Receivable for investment securities sold............................... 15,260,938
Interest receivable..................................................... 1,307,782
Receivable for shares of Beneficial Interest subscribed................. 7,480
Prepaid expenses........................................................ 18,439
-------------
179,718,143
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 81,528
Due to Distributor...................................................... 53,116
Due to Custodian........................................................ 315,969
Payable for shares of Beneficial Interest redeemed...................... 147,796
Accrued expenses........................................................ 108,510 706,919
---------- ----------
NET ASSETS ................................................................ $179,011,224
=============
REPRESENTED BY:
Paid-in capital......................................................... $186,868,583
Accumulated net realized (loss) on investments.......................... (12,574,066)
Accumulated net unrealized appreciation on investments-Note 3........... 4,716,707
-------------
NET ASSETS at value......................................................... $179,011,224
=============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 9,743,990
=============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 2,749,776
=============
NET ASSET VALUE per share:
Class A Shares
($139,583,956 / 9,743,990 shares)..................................... $14.33
=======
Class B Shares
($39,427,268 / 2,749,776 shares)...................................... $14.34
=======
See independent accountants' review report and notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER GNMA FUND
STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $ 6,876,073
EXPENSES:
Management fee-Note 2(a).............................................. $ 483,283
Shareholder servicing costs-Note 2(c)................................. 324,701
Distribution fees (Class B Shares)-Note 2(b).......................... 92,364
Custodian fees........................................................ 37,222
Registration fees..................................................... 20,689
Professional fees..................................................... 19,472
Trustees' fees and expenses-Note 2(d)................................. 16,800
Prospectus and shareholders' reports.................................. 708
Miscellaneous......................................................... 15,799
----------
TOTAL EXPENSES.................................................... 1,011,038
-----------
INVESTMENT INCOME-NET............................................. 5,865,035
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $3,315,881
Net unrealized appreciation on investments.............................. 6,709,533
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 10,025,414
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $15,890,449
=============
See independent accountants' review report and notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER GNMA FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
------------------ ---------------
<S> <C> <C>
OPERATIONS:
Investment income-net.................................................. $ 12,477,594 $ 5,865,035
Net realized gain (loss) on investments................................ (15,855,259) 3,315,881
Net unrealized appreciation (depreciation) on investments for the period (3,139,629) 6,709,533
------------------ ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.. (6,517,294) 15,890,449
------------------ ---------------
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net:
Class A shares....................................................... (10,554,358) (4,709,835)
Class B shares....................................................... (1,923,236) (1,155,200)
------------------ ---------------
TOTAL DIVIDENDS.................................................. (12,477,594) (5,865,035)
------------------ ---------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares....................................................... 17,118,960 10,792,464
Class B shares....................................................... 14,080,674 4,078,157
Dividends reinvested:
Class A shares....................................................... 7,266,865 3,181,198
Class B shares....................................................... 1,207,098 710,114
Cost of shares redeemed:
Class A shares....................................................... (64,284,402) (23,765,974)
Class B shares....................................................... (6,115,464) (3,176,329)
------------------ ---------------
(DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS... (30,726,269) (8,180,370)
------------------ ---------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........................ (49,721,157) 1,845,044
NET ASSETS:
Beginning of period.................................................. 226,887,337 177,166,180
------------------ ---------------
End of period........................................................ $177,166,180 $179,011,224
=================== ==============
</TABLE>
<TABLE>
<CAPTION>
SHARES
--------------------------------------------------------------------------
CLASS A CLASS B
------------------------------------ ------------------------------------
YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1995 DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED) 1994 (UNAUDITED)
-------------- ---------- --------- --------------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold......................... 1,204,210 776,404 989,793 291,108
Shares issued for dividends reinvested 516,077 227,282 85,980 50,667
Shares redeemed..................... (4,564,951) (1,709,966) (437,183) (227,809)
-------------- ---------- --------- -----------
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING.......... (2,844,664) (706,280) 638,590 113,966
============= =========== ========= ==========
See independent accountants' review report and notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
PREMIER GNMA FUND
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Fund's financial statements.
CLASS A SHARES CLASS B SHARES
------------------------------------------------------ ----------------------------
YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1995 DECEMBER 31, JUNE 30, 1995
------------------------------------------------------- --------------------------
PER SHARE DATA: 1990 1991 1992 1993 1994 (UNAUDITED) 1993(1) 1994 (UNAUDITED)
------- ------- ------- ------- -------- -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.28 $14.38 $15.30 $14.90 $14.84 $13.54 $14.98 $14.84 $13.55
------- ------- ------- ------- -------- ------ ------ ------- ---------
INVESTMENT OPERATIONS:
Investment income-net.............. 1.32 1.20 1.10 .95 .88 .47 .83 .80 .43
Net realized and unrealized gain (loss)
on investments................... .10 .92 (.15) .24 (1.30) .79 .16 (1.29) .79
------- ------- ------- ------- -------- -------- ------- ------- ---------
TOTAL FROM INVESTMENT OPERATIONS. 1.42 2.12 .95 1.19 (.42) 1.26 .99 (.49) 1.22
------- ------- ------- ------- -------- -------- ------- ------- ---------
DISTRIBUTIONS:
Dividends from investment income-net (1.32) (1.20) (1.10) (.95) (.88) (.47) (.83) (.80) (.43)
Dividends from net realized gain
on investments................... -- -- (.25) (.30) -- -- (.30) -- --
------- ------- ------- ------- -------- -------- ------- ------- ---------
TOTAL DISTRIBUTIONS.............. (1.32) (1.20) (1.35) (1.25) (.88) (.47) (1.13) (.80) (.43)
------- ------- ------- ------- -------- -------- ------- ------- --------
Net asset value, end of period..... $14.38 $15.30 $14.90 $14.84 $13.54 $14.33 $14.84 $13.55 $14.34
------- ------- ------- ------- -------- -------- ------- ------- ---------
TOTAL INVESTMENT RETURN(2)............. 10.57% 15.43% 6.50% 8.20% (2.91%) 19.02%(3) 7.03%(3) (3.39%) 18.45%(3)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .08% .64% .71% .78% .94% 1.04%(3) 1.30%(3) 1.51% 1.56%(3)
)
Ratio of net investment income to average
net assets....................... 9.28% 8.09% 7.23% 6.24% 6.20% 6.79%(3) 5.38%(3) 5.61% 6.25%(3)
Decrease reflected in above expense ratios
due to undertakings by the Manager 1.20% .52% .36% .22% .06% -- .20%(3) .05% --
Portfolio Turnover Rate............ 19.44% 36.90% 60.12% 274.95% 427.27% 259.41%(4) 274.95% 427.27% 259.41%(4)
Net Assets, end of period (000's Omitted) $53,875 $113,434 $163,967 $197,239 $141,456 $139,584 $29,648 $35,710 $39,427
(1) From January 15, 1993 (commencement of initial offering) to December 31, 1993.
(2) Exclusive of sales load.
(3) Annualized.
(4) Not annualized.
See independent accountants' review report and notes to financial statements.
</TABLE>
PREMIER GNMA FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940 ("Act")
as a diversified open-end management investment company. Premier Mutual Fund
Services, Inc. (the "Distributor") acts as the distributor of the Fund's
shares. The Distributor, located at One Exchange Place, Boston, Massachusetts
02109, is a wholly-owned subsidiary of FDI Distribution Services, Inc., a
provider of mutual fund administration services, which in turn is a
wholly-owned subsidiary of FDI Holdings, Inc., the parent company of which is
Boston Institutional Group, Inc. The Dreyfus Corporation ("Manager") serves
as the Fund's investment adviser. The Manager is a direct subsidiary of
Mellon Bank, N.A.
The Fund offers both Class A and Class B shares. Class A shares are
subject to a sales charge imposed at the time of purchase and Class B shares
are subject to a contingent deferred sales charge imposed at the time of
redemption on redemptions made within five years of purchase. Other
differences between the two Classes include the services offered to and the
expenses borne by each Class and certain voting rights.
(A) PORTFOLIO VALUATION: The Fund's investments (excluding short-term
investments) are valued each business day by an independent pricing service
("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. Short-term investments are carried at amortized cost, which
approximates value.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, including, where applicable, amortization of discount on short-term
investments, is recognized on the accrual basis.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the Fund not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
The Fund has an unused capital loss carryover of approximately
$10,221,000 available for Federal income tax purposes to be applied against
future net securities profits, if any, realized subsequent to December 31,
1994. The carryover does not include net realized securities losses from
November 1,
PREMIER GNMA FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1994 through December 31, 1994 which are treated, for Federal income tax
purposes, as arising in fiscal 1995. If not applied, the carryover expires in
fiscal 2002.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .55 of 1% of the average
daily value of the Fund's net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Fund's
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Fund for any full year. The most stringent state
expense limitation applicable to the Fund presently requires reimbursement of
expenses in any full year that such expenses (exclusive of distribution
expenses and certain expenses as described above) exceed 2 1/2% of the first
$30 million, 2% of the next $70 million and 1 1/2% of the excess over $100
million of the average value of the Fund's net assets in accordance with
California "blue sky" regulations. There was no expense reimbursement for the
six months ended June 30, 1995.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $830 during the six months ended June 30, 1995 from commissions
earned on sales of the Fund's shares.
(B) Under the Distribution Plan (the "Class B Distribution Plan")
pursuant to Rule 12b-1 under the Act, the Fund pays the Distributor for
distributing the Fund's Class B shares at an annual rate of .50 of 1% of the
value of the average daily net assets of Class B shares. During the six
months ended June 30, 1995, $92,364 was charged to the Fund pursuant to the
Class B Distribution Plan.
(C) Under the Shareholder Services Plan, the Fund pays the Distributor,
at an annual rate of .25 of 1% of the value of the average daily net assets
of Class A and Class B shares for servicing shareholder accounts. The
services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Fund and
providing reports and other information, and services related to the
maintenance of shareholder accounts. The Distributor may make payments to
Service Agents in respect of these services. The Distributor determines the
amounts to be paid to Service Agents. For the six months ended June 30, 1995,
$173,492 and $46,182 were charged to Class A and Class B shares,
respectively, by the Distributor pursuant to the Shareholder Services Plan.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $500
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales (including paydowns) of
investment securities, excluding short-term securities, during the six months
ended June 30, 1995, amounted to $419,501,377 and $441,966,713, respectively.
At June 30, 1995, accumulated net unrealized appreciation on investments
was $4,716,707, consisting of $4,976,672 gross unrealized appreciation and
$259,965 gross unrealized depreciation.
At June 30, 1995, 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).
PREMIER GNMA FUND
REVIEW REPORT OF ERNST & YOUNG LLP, INDEPENDENT ACCOUNTANTS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER GNMA FUND
We have reviewed the accompanying statement of assets and liabilities of
Premier GNMA Fund, including the statement of investments, as of June 30,
1995, and the related statements of operations and changes in net assets and
financial highlights for the six month period ended June 30, 1995. These
financial statements and financial highlights are the responsibility of the
Fund's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which
will be performed for the full year with the objective of expressing an
opinion regarding the financial statements and financial highlights taken as
a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the interim financial statements and financial highlights
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the statement of changes in net assets for the year ended
December 31, 1994 and financial highlights for each of the five years in the
period ended December 31, 1994 and in our report dated February 8, 1995, we
expressed an unqualified opinion on such statement of changes in net assets
and financial highlights.
[Ernst and Young LLP signature logo]
New York, New York
August 2, 1995
[Dreyfus lion "d" logo]
PREMIER GNMA FUND
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
The Shareholder Services Group, Inc.
P.O. Box 9671
Providence, RI 02940
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A. 027/614SA956
[Dreyfus lion logo]
Semi-Annual Report
Premier
GNMA Fund
June 30, 1995
