PREMIER GNMA FUND
PROSPECTUS MAY 1, 1996
AS REVISED DECEMBER 1, 1996
Registration Mark
Premier GNMA Fund (the "Fund") is an open-end, diversified,
management investment company, known as a mutual fund. The Fund's
investment objective is to provide you with as high a level of current
income as is consistent with the preservation of capital by investing
principally in instruments issued by the Government National
Mortgage Association.
By this Prospectus, the Fund is offering three Classes of
shares--Class A, Class B and Class C--which are described herein. See
"Alternative Purchase Methods."
The Fund provides free redemption checks with respect to
Class A, which you can use in amounts of $500 or more for cash or to pay
bills. You continue to earn income on the amount of the check until it
clears. You can purchase or redeem all Classes of shares by telephone
using the TELETRANSFER Privilege.
The Dreyfus Corporation professionally manages the Fund's
portfolio.
This Prospectus sets forth concisely information about the
Fund that you should know before investing. It should be read and
retained for future reference.
The Statement of Additional Information, dated May 1, 1996,
which may be revised from time to time, provides a further discussion of
certain areas in this Prospectus and other matters which may be of
interest to some investors. It has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The
Securities and Exchange Commission maintains a Web site
(http://www.sec.gov) that contains the Statement of Additional
Information, material incorporated by reference, and other information
regarding the Fund. For a free copy of the Statement of Additional
Information, write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale,
New York 11556-0144, or call 1-800-554-4611. When telephoning, ask for
Operator 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
Fee Table....................................... 3
Condensed Financial Information................. 4
Alternative Purchase Methods.................... 5
Description of the Fund......................... 6
Management of the Fund.......................... 8
How to Buy Shares............................... 9
Shareholder Services............................ 14
How to Redeem Shares............................ 19
Distribution Plan and Shareholder Services Plan. 24
Dividends, Distributions and Taxes.............. 24
Performance Information......................... 27
General Information............................. 28
Appendix........................................ 29
Page 2
<TABLE>
<CAPTION>
FEE TABLE
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
....... (as a percentage of offering price) 4.50% none none
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge) none* 4.00% 1.00%
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
Management Fees......................... .55% .55% .55%
12b-1 Fees.............................. none .50% .75%
Other Expenses ......................... .48% .50% .49%
Total Fund Operating Expenses........... 1.03% 1.55% 1.79%
Example
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) except where noted, redemption
at the end of each time period: CLASS A CLASS B CLASS C
1 Year................................... $ 55 $56/$16** $28/$18**
3 Years.................................. $ 76 $79/$49** $56
5 Years.................................. $ 99 $104/$84** $97
10 Years................................. $165 $158*** $211
</TABLE>
*A contingent deferred sales charge of 1.00% may be assessed on
certain redemptions of Class A shares purchased without an initial sales
charge as part of an investment of $1 million or more.
**........ Assuming no redemption of shares.
***Ten-year figure assumes conversion of Class B shares to Class A
shares at the end of the sixth year following the date of purchase.
The amounts listed in the example should not be considered as
representative of past or future expenses and actual expenses may be
greater or less than those indicated. Moreover, while the example assumes
a 5% annual return, the Fund's actual performance will vary and may
result in an actual return greater or less than 5%.
The purpose of the foregoing table is to assist you in
understanding the costs and expenses borne by the Fund and investors, the
payment of which will reduce investors' annual return. Long-term
investors in Class B or Class C shares could pay more in 12b-1 fees than
the economic equivalent of paying a front-end sales charge. The
information in the foregoing table does not reflect any fee waivers or
expense reimbursement arrangements that may be in effect. Certain Service
Agents (as defined below) may charge their clients direct fees for
effecting transactions in Fund shares; such fees are not reflected in the
foregoing table. See "Management of the Fund," "How to Buy Shares" and
"Distribution Plan and Shareholder Services Plan."
Page 3
CONDENSED FINANCIAL INFORMATION
The information in the following tables has been audited by
Ernst & Young LLP, the Fund's independent auditors, whose report thereon
appears in the Statement of Additional Information. Further financial
data and related notes are included in the Statement of Additional
Information, available upon request.
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.
<TABLE>
<CAPTION>
CLASS A SHARES
-------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------
PER SHARE DATA: 1987(1) 1988 1989 1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $14.50 $13.87 $14.01 $14.28 $14.38 $15.30 $14.90 $14.84 $13.54
------ ------ ------ ------ ------ ------ ------ ------ ------
Investment Operations:
Investment income-net 1.28 1.35 1.36 1.32 1.20 1.10 .95 .88 .91
Net realized and unrealized gain
(loss) on investments (.63) .40 .31 .10 .92 (.15) .24 (1.30) 1.12
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from Investment
Operations......... .65 1.75 1.67 1.42 2.12 .95 1.19 (.42) 2.03
------ ------ ------ ------ ------ ------ ------ ------ ------
Distributions:
Dividends from investment
income-net......... (1.28) (1.35) (1.36) (1.32) (1.20) (1.10) (.95)
(.88)(.91)
Dividends from net realized gain
on investments..... ._- (.26) (.04) ._- .-_ (.25) (.30) .-- .--
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (1.28) (1.61) (1.40) (1.32) (1.20) (1.35) (1.25) (.88) (.91)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year $13.87 $14.01 $14.28 $14.38 $15.30 $14.90 $14.84 $13.54 $14.66
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(2) 5.14%(3) 12.96% 12.51% 10.57% 15.43% 6.50% 8.20% (2.91%) 15.43%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets ._- .-_ ._- .08% .64% .71% .78% .94% 1.03%
Ratio of net investment
income to average net assets 9.86%(3) 9.28% 9.50% 9.28% 8.09% 7.23% 6.24% 6.20% 6.45%
Decrease reflected in above
expense ratios
due to undertakings by
The Dreyfus Corporation 1.50%(3) 1.50% 1.50% 1.20% .52% .36% .22% .06% .--
Portfolio Turnover Rate 64.18%(4) 2,089.62%(5) 1,069.14%(5) 19.44% 36.90% 60.12% 274.95% 427.27% 349.24%
Net Assets, end of year
(000's omitted) $7,265 $13,612 $30,068 $53,875 $113,434 $163,967 $197,239 $141,456 $134,545
(1) From January 29, 1987 (commencement of operations) to December 31, 1987.
(2) Exclusive of sales load.
(3) Annualized.
(4) Not annualized.
(5) The high portfolio turnover rate arose due to the selling off of large amounts of unsettled securities bought to take
advantage of favorable short-term market fluctuations.
</TABLE>
Page 3
<TABLE>
<CAPTION>
Class B Shares Class C Shares
-----------------------------------------------
Year Ended Year Ended
December 31, December 31,
-----------------------------------------------
1993(1) 1994 1995 1995(2)
------ ------ ------ -------
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year....... $14.98 $14.84 $13.55 $14.48
------ ------ ------ -------
INVESTMENT OPERATIONS:
Investment income-net.................... .83 .80 .84 .16
Net realized and unrealized gain (loss) on investments .16 (1.29) 1.12 .19
------ ------ ------ -------
TOTAL FROM INVESTMENT OPERATIONS......... .99 (.49) 1.96 .35
------ ------ ------ -------
DISTRIBUTIONS:
Dividends from investment income-net..... (.83) (.80) (.84) (.16)
Dividends from net realized gain on investments (.30) .-- .-- .--
------ ------ ------ -------
TOTAL DISTRIBUTIONS...................... (1.13) (.80) (.84) (.16)
------ ------ ------ -------
Net Asset Value, end of year............. $14.84 $13.55 $14.67 $14.67
====== ====== ====== =======
TOTAL INVESTMENT RETURN(3)................. 7.03%(4) (3.39)% 14.83% 11.47%(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.. 1.30%(4) 1.51% 1.55% 1.79%(4)
Ratio of net investment income
to average net assets.................... 5.38%(4) 5.61% 5.89% 5.25%(4)
Decrease reflected in above expense ratios
due to undertakings by
The Dreyfus Corporation.................. .20%(4) .05% .-- .--
Portfolio Turnover Rate.................. 274.95% 427.27% 349.24% 349.24%
Net Assets, end of year (000's omitted).. $29,648 $35,710 $41,934 $1
(1) From January 15, 1993 (commencement of initial offering) to December 31, 1993.
(2) From October 16, 1995 (commencement of initial offering) to December 31, 1995.
(3) Exclusive of sales load.
(4) Annualized.
</TABLE>
Further information about the Fund's performance is contained
in its annual report, which may be obtained without charge by writing to
the address or calling the number set forth on the cover page of this
Prospectus.
ALTERNATIVE PURCHASE METHODS
The Fund offers you three methods of purchasing Fund shares.
You may choose the Class of shares that best suits your needs, given the
amount of your purchase, the length of time you expect to hold your
shares and any other relevant circumstances. Each Fund share represents
an identical pro rata interest in the Fund's investment portfolio.
Class A shares are sold at net asset value per share plus a
maximum initial sales charge of 4.50% of the public offering price
imposed at the time of purchase. The initial sales charge may be reduced
or waived for certain purchases. See "How to Buy Shares_Class A Shares."
These shares are subject to an annual service fee at the rate of .25 of
1% of the value of the average daily net assets of Class A. See
"Distribution Plan and Shareholder Services Plan_ Shareholder Services
Plan."
Class B shares are sold at net asset value per share with no
initial sales charge at the time of purchase; as a result, the entire
purchase price is immediately invested in the Fund. Class B shares are
subject to a maximum 4% contingent deferred sales charge ("CDSC"), which
is assessed if you redeem Class B shares within six years of their
purchase. See "How to Buy Shares_Class B Shares" and "How to Redeem
Shares_Contingent Deferred Sales Charge_Class B Shares." These shares
also are subject to an
Page 5
annual service fee at the rate of .25 of 1% of the value of the average
daily net assets of Class B. In addition, Class B shares are subject to
an annual distribution fee at the rate of .50 of 1% of the value of the
average daily net assets of Class B. See "Distribution Plan and
Shareholder Services Plan." The distribution fee paid by Class B
will cause such Class to have a higher expense ratio and to pay lower
dividends than Class A. Approximately six years after the date of
purchase, Class B shares automatically will convert to Class A shares,
based on the relative net asset values for shares of each such Class, and
will no longer be subject to the distribution fee. Class B shares that
have been acquired through the reinvestment of dividends and distributions
will be converted on a pro rata basis together with other Class B shares,
in the proportion that a shareholder's Class B shares converting to
Class A shares bears to the total Class B shares not acquired through the
reinvestment of dividends and distributions.
Class C shares are sold at net asset value per share with no
initial sales charge at the time of purchase; as a result, the entire
purchase price is immediately invested in the Fund. Class C shares are
subject to a 1% CDSC, which is assessed only if you redeem Class C shares
within one year of purchase. See "How to Buy Shares -- Class C Shares"
and "How to Redeem Shares -- Contingent Deferred Sales Charge -- Class C
Shares." These shares also are subject to an annual service fee at the
rate of .25 of 1%, and an annual distribution fee at the rate of .75 of
1%, of the value of the average daily net assets of Class C. See
"Distribution Plan and Shareholder Services Plan." The distribution fee
paid by Class C will cause such Class to have a higher expense ratio and
to pay lower dividends than Class A.
The decision as to which Class of shares is more beneficial
to you depends on the amount and intended length of time of your
investment. You should consider whether, during the anticipated life of
your investment in the Fund, the accumulated distribution fee and CDSC on
Class B or Class C shares would be less than the initial sales charge on
Class A shares purchased at the same time, and to what extent, if any,
such differential would be offset by the return of Class A. Additionally,
investors qualifying for reduced initial sales charges who expect to
maintain their investment for an extended period of time might consider
purchasing Class A shares because the accumulated continuing distribution
fees on Class B or Class C shares may exceed the initial sales charge on
Class A shares during the life of the investment. Finally, you should
consider the effect of the CDSC period and any conversion rights of the
Classes in the context of your own investment time frame. For example,
while Class C shares have a shorter CDSC period than Class B shares,
Class C shares do not have a conversion feature and, therefore, are
subject to an ongoing distribution fee. Thus, Class B shares may be more
attractive than Class C shares to investors with long term investment
outlooks. Generally, Class A shares may be more appropriate for investors
who invest $1,000,000 or more in Fund shares, and for investors who invest
between $100,000 and $999,999 in Fund shares with long term investment
outlooks. Class A shares will not be appropriate for investors who invest
less than $50,000 in Fund shares.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund's investment objective is to provide you with as
high a level of current income as is consistent with the preservation of
capital. It cannot be changed without approval by the holders of a
majority (as defined in the Investment Company
Page 6
Act of 1940, as amended (the "1940 Act")) of the Fund's outstanding
voting shares. There can be no assurance that the Fund's investment
objective will be achieved.
MANAGEMENT POLICIES
It is a fundamental policy of the Fund that it will invest at
least 65% of the value of its net assets (except when maintaining a
temporary defensive position) in "GNMA Certificates" (popularly called
"Ginnie Maes").
Ginnie Maes are backed by the full faith and credit of the
United States. Ginnie Maes are mortgage-backed securities representing
part ownership of a pool of mortgage loans which are insured by the
Federal Housing Administration or Farmers' Home Administration or
guaranteed by the Veterans' Administration. The Fund invests in Ginnie
Maes only of the "fully modified pass-through" type which are guaranteed
as to timely payment of principal and interest by the Government National
Mortgage Association, a U.S. Government corporation. The Fund may
purchase Ginnie Maes on a forward commitment basis as described under
"Appendix _ Investment Techniques _ Forward Commitments."
The Fund may purchase other securities issued or guaranteed
by, or exchangeable for securities issued or guaranteed by, the U.S.
Government or issued by its agencies or instrumentalities that are backed
by the full faith and credit of the U.S. Government. For temporary
defensive purposes, the entire portfolio may be so invested. A security
guaranteed by the U.S. Government is guaranteed only as to principal and
interest, and there is no guarantee of the security's market value. The
value of Fund shares is not guaranteed.
Securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities include U.S. Treasury securities, which
differ in their interest rates, maturities and times of issuance.
Obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are supported by the full faith and credit of the
U.S. Treasury include those issued by the United States Maritime
Administration.
INVESTMENT CONSIDERATIONS AND RISKS
MORTGAGE-RELATED SECURITIES -- Although certain mortgage-related
securities are guaranteed by a third party or otherwise similarly
secured, the market value of the security, which may fluctuate, is not
secured. If a mortgage-related security is purchased at a premium, all or
part of the premium may be lost if there is a decline in the market value
of the security, whether resulting from changes in interest rates or
prepayments on the underlying mortgage collateral. As with other
interest-bearing securities, the prices of certain mortgage-related
securities are inversely affected by changes in interest rates. However,
although the value of a mortgage-related security may decline when
interest rates rise, the converse is not necessarily true, since in
periods of declining interest rates the mortgages underlying the security
are more likely to be prepaid. For this and other reasons, a
mortgage-related security's stated maturity may be shortened by
unscheduled prepayments on the underlying mortgages, and, therefore, it
is not possible to predict accurately the security's return to the Fund.
Moreover, with respect to stripped mortgage-backed securities, if the
underlying mortgage securities experience greater than anticipated
prepayments of principal, the Fund may fail to fully recoup its initial
investment even if the securities are rated in the highest rating
category by a nationally recognized statistical rating organization.
During periods of rapidly rising interest rates, prepayments of
mortgage-related securities may occur at slower than expected rates.
Page 7
Slower prepayments effectively may lengthen a mortgage-related security's
expected maturity which generally would cause the value of such security
to fluctuate more widely in response to changes in interest rates. Were
the prepayments on the Fund's mortgage-related securities to decrease
broadly, the Fund's effective duration, and thus sensitivity to interest
rate fluctuations, would increase.
USE OF DERIVATIVES -- The Fund may invest in derivatives
("Derivatives"). These are financial instruments which derive their
value, at least in part, from the performance of an underlying asset,
index or interest rate. The Derivatives the Fund may use include
mortgage-related securities. While Derivatives can be used effectively in
furtherance of the Fund's investment objective, under certain conditions,
they can increase the volatility of the Fund's net asset value, can
decrease the liquidity of the Fund's portfolio and make more difficult
the accurate pricing of the Fund's portfolio. See "Appendix _ Investment
Techniques -- Use of Derivatives" below and "Investment Objective and
Management Policies _ Management Policies _ Derivatives" in the Statement
of Additional Information.
SIMULTANEOUS INVESTMENTS -- Investment decisions for the Fund are
made independently from those of other investment companies advised by
The Dreyfus Corporation. If, however, such other investment companies
desire to invest in, or dispose of, the same securities as the Fund,
available investments or opportunities for sales will be allocated
equitably to each investment company. In some cases, this procedure may
adversely affect the size of the position obtained for or disposed of by
the Fund or the price paid or received by the Fund.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- The Dreyfus Corporation, located at 200 Park
Avenue, New York, New York 10166, was formed in 1947 and serves as the
Fund's investment adviser. The Dreyfus Corporation is a wholly-owned
subsidiary of Mellon Bank, N.A., which is a wholly-owned subsidiary of
Mellon Bank Corporation ("Mellon"). As of September 30, 1996, The Dreyfus
Corporation managed or administered approximately $81 billion in assets
for more than 1.7 million investor accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the
Fund, subject to the authority of the Fund's Board in accordance with
Massachusetts law. The Fund's primary portfolio manager is Garitt A.
Kono. He has held that position since September 1993 and has been
employed by The Dreyfus Corporation since September 1992. For more than
five years prior to joining The Dreyfus Corporation, Mr. Kono was
Vice-President_Fixed Income at The First Boston Corporation. The Fund's
other portfolio managers are identified in the Statement of Additional
Information. The Dreyfus Corporation also provides research services for
the Fund and other funds advised by The Dreyfus Corporation through a
professional staff of portfolio managers and securities analysts.
Mellon is a publicly owned multibank holding company
incorporated under Pennsylvania law in 1971 and registered under the
Federal Bank Holding Company Act of 1956, as amended. Mellon provides a
comprehensive range of financial products and services in domestic and
selected international markets. Mellon is among the twenty-five largest
bank holding companies in the United States based on total assets.
Mellon's principal wholly-owned subsidiaries are Mellon Bank, N.A.,
Mellon
Page 8
Bank (DE) National Association, Mellon Bank (MD), The Boston
Company, Inc., AFCO Credit Corporation and a number of companies known as
Mellon Financial Services Corporations. Through its subsidiaries,
including The Dreyfus Corporation, Mellon managed more than $220 billion
in assets as of June 30, 1996, including approximately $83 billion in
proprietary mutual fund assets. As of June 30, 1996, Mellon, through
various subsidiaries, provided non-investment services, such as custodial
or administration services, for more than $876 billion in assets
including approximately $57 billion in mutual fund assets.
For the fiscal year ended December 31, 1995, the Fund paid
The Dreyfus Corporation a monthly management fee at the annual rate of
.55 of 1% of the value of the Fund's average daily net assets. From time
to time, The Dreyfus Corporation may waive receipt of its fees and/or
voluntarily assume certain expenses of the Fund, which would have the
effect of lowering the overall expense ratio of the Fund and increasing
yield to investors. The Fund will not pay The Dreyfus Corporation at a
later time for any amounts it may waive, nor will the Fund reimburse The
Dreyfus Corporation for any amounts it may assume.
In allocating brokerage transactions for the Fund, The
Dreyfus Corporation seeks to obtain the best execution of orders at the
most favorable net price. Subject to this determination, The Dreyfus
Corporation may consider, among other things, the receipt of research
services and/or the sale of shares of the Fund or other funds managed,
advised or administered by The Dreyfus Corporation as factors in the
selection of broker-dealers to execute portfolio transactions for the
Fund. See "Portfolio Transactions" in the Statement of Additional
Information.
The Dreyfus Corporation may pay the Fund's distributor for
shareholder services from The Dreyfus Corporation's own assets, including
past profits but not including the management fee paid by the Fund. The
Fund's distributor may use part or all of such payments to pay Service
Agents in respect of these services.
DISTRIBUTOR -- The Fund's distributor is Premier Mutual Fund
Services, Inc. (the "Distributor"), located at 60 State Street, Boston,
Massachusetts 02109. The Distributor's ultimate parent is Boston
Institutional Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN -- Dreyfus
Transfer, Inc., a wholly-owned subsidiary of The Dreyfus Corporation,
P.O.Box 9671, Providence, Rhode Island 02940-9671, is the Fund's Transfer
and Dividend Disbursing Agent (the "Transfer Agent"). Mellon Bank, N.A.,
One Mellon Bank Center, Pittsburgh, Pennsylvania 15258, is the Fund's
Custodian.
HOW TO BUY SHARES
GENERAL -- Fund shares may be purchased only by clients of certain
financial institutions (which may include banks), securities dealers
("Selected Dealers"), and other industry professionals (collectively,
"Service Agents"), except that full-time or part-time employees of The
Dreyfus Corporation or any of its affiliates or subsidiaries, directors
of The Dreyfus Corporation, Board members of a fund advised by The
Dreyfus Corporation, including members of the Fund's Board, or the spouse
or minor child of any of the foregoing may purchase Class A shares
directly through the Distributor. Subsequent purchases may be sent
directly to the Transfer Agent or your Service Agent.
When purchasing Fund shares, you must specify which Class is
being purchased. Share certificates are issued only upon your written
request. No certificates are issued for fractional shares. The Fund
reserves the right to reject any purchase order.
Page 9
Service Agents may receive different levels of compensation
for selling different Classes of shares. Management understands that some
Service Agents may impose certain conditions on their clients which are
different from those described in this Prospectus, and, to the extent
permitted by applicable regulatory authority, may charge their clients
direct fees which would be in addition to any amounts which might be
received under the Distribution Plan or Shareholder Services Plan. You
should consult your Service Agent in this regard.
The minimum initial investment is $1,000. Subsequent
investments must be at least $100. The initial investment must be
accompanied by the Account Application. The Fund reserves the right to
offer Fund shares without regard to minimum purchase requirements to
employees participating in certain qualified or non-qualified employee
benefit plans or other programs where contributions or account
information can be transmitted in a manner and form acceptable to the
Fund. The Fund reserves the right to vary further the initial and
subsequent investment minimum requirements at any time.
You may purchase Fund shares by check or wire, or through the
TELETRANSFER Privilege described below. Checks should be made payable to
"The Dreyfus Family of Funds," or, if for Dreyfus retirement plan
accounts, to "The Dreyfus Trust Company, Custodian." Payments which are
mailed should be sent to Premier GNMA Fund, P.O. Box 6587, Providence,
Rhode Island 02940-6587. If you are opening a new account, please enclose
your Account Application indicating which Class of shares is being
purchased. For subsequent investments, your Fund account number should
appear on the check and an investment slip should be enclosed. For
Dreyfus retirement plan accounts, payments which are mailed should be
sent to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427. Neither initial nor subsequent investments
should be made by third party check.
Wire payments may be made if your bank account is in a
commercial bank that is a member of the Federal Reserve System or any
other bank having a correspondent bank in New York City. Immediately
available funds may be transmitted by wire to The Bank of New York,
together with the Fund's DDA #8900119322/Premier GNMA Fund, for purchase
of Fund shares in your name. The wire must include your Fund account
number (for new accounts, your Taxpayer Identification Number ("TIN")
should be included instead), account registration and dealer number, if
applicable, along with the Class of shares being purchased. If your
initial purchase of Fund shares is by wire, please call 1-800-645-6561
after completing your wire payment to obtain your Fund account number.
Please include your Fund account number on the Account Application and
promptly mail the Account Application to the Fund, as no redemptions will
be permitted until the Account Application is received. You may obtain
further information about remitting funds in this manner from your bank.
All payments should be made in U.S. dollars and, to avoid fees and
delays, should be drawn only on U.S. banks. A charge will be imposed if
any check used for investment in your account does not clear. The Fund
makes available to certain large institutions the ability to issue
purchase instructions through compatible computer facilities.
Fund shares also may be purchased through Dreyfus-Automatic
Asset BuilderRegistration Mark and the Government Direct Deposit
Privilege described under "Shareholder Services." These services enable
you to make regularly scheduled investments and may provide you with a
convenient way to invest for long-term financial goals. You
Page 10
should be aware, however, that periodic investment plans do not guarantee
a profit and will not protect an investor against loss in a declining
market.
Subsequent investments also may be made by electronic
transfer of funds from an account maintained in a bank or other domestic
financial institution that is an Automated Clearing House member. You
must direct the institution to transmit immediately available funds
through the Automated Clearing House to The Bank of New York with
instructions to credit your Fund account. The instructions must specify
your Fund account registration and your Fund account number PRECEDED BY
THE DIGITS "1111."
Fund shares are sold on a continuous basis. Net asset value
per share is determined as of the close of trading on the floor of the
New York Stock Exchange (currently 4:00 p.m., New York time), on each day
the New York Stock Exchange is open for business. Net asset value per
share of each Class is computed by dividing the value of the Fund's net
assets represented by such Class (i.e., the value of its assets less
liabilities) by the total number of shares of such Class outstanding. The
Fund's investments are valued each business day by an independent pricing
service approved by the Fund's Board and are valued at fair value as
determined by the pricing service. The pricing service's procedures are
reviewed under the general supervision of the Fund's Board. For further
information regarding the methods employed in valuing Fund investments,
see "Determination of Net Asset Value" in the Statement of Additional
Information.
If an order is received in proper form by the Transfer Agent
by the close of trading on the floor of the New York Stock Exchange
(currently 4:00 p.m., New York time) on any business day, Fund shares
will be purchased at the public offering price determined as of the close
of trading on the floor of the New York Stock Exchange on that day.
Otherwise, Fund shares will be purchased at the public offering price
determined as of the close of trading on the floor of the New York Stock
Exchange on the next business day, except where shares are purchased
through a dealer as provided below.
Orders for the purchase of Fund shares received by dealers by
the close of trading on the floor of the New York Stock Exchange on any
business day and transmitted to the Distributor or its designee by the
close of its business day (normally 5:15 p.m., New York time) will be
based on the public offering price per share determined as of the close
of trading on the floor of the New York Stock Exchange on that day.
Otherwise, the orders will be based on the next determined public
offering price. It is the dealer's responsibility to transmit orders so
that they will be received by the Distributor or its designee before the
close of its business day. For certain institutions that have entered
into agreements with the Distributor, payment for the purchase of Fund
shares may be transmitted, and must be received by the Transfer Agent,
within three business days after the order is placed. If such payment is
not received within three business days after the order is placed, the
order may be canceled and the institution could be held liable for
resulting fees and/or losses.
Plan sponsors, administrators or trustees, as applicable, are
responsible for notifying the Distributor when the relevant requirement
is satisfied. The Distributor may pay dealers a fee of up to .5% of the
amount invested through such dealers in Fund shares at net asset value by
employees participating in qualified or non-quali-
Page 11
fied employee benefit plans or other programs where (i) the employers or
affiliated employers maintaining such plans or programs have a minimum of
250 employees eligible for participation in such plans or programs, or
(ii) such plan's or program's aggregate investment in the Dreyfus Family
of Funds or certain other products made available by the Distributor to
such plans or programs exceeds $1,000,000 ("Eligible Benefit Plans").
Shares of funds in the Dreyfus Family of Funds then held by Eligible
Benefit Plans will be aggregated to determine the fee payable. The
Distributor reserves the right to cease paying these fees at any time.
The Distributor will pay such fees from its own funds, other than amounts
received from the Fund, including past profits or any other source
available to it.
Federal regulations require that you provide a certified TIN
upon opening or reopening an account. See "Dividends, Distributions and
Taxes" and the Account Application for further information concerning
this requirement. Failure to furnish a certified TIN to the Fund could
subject you to a $50 penalty imposed by the Internal Revenue Service (the
"IRS").
CLASS A SHARES -- The public offering price for Class A shares is the
net asset value per share of that Class plus a sales load as shown below:
<TABLE>
<CAPTION>
Total Sales Load
--------------------------------------
As a % of As a % of Dealers' Reallowance
offering price net asset value as a % of
Amount of Transaction per share per share offering price
-------------------- ---------------- ---------------- ---------------------------
<S> <C> <C> <C>
Less than $50,000......... 4.50 4.70 4.25
$50,000 to less than $100,000 4.00 4.20 3.75
$100,000 to less than $250,000 3.00 3.10 2.75
$250,000 to less than $500,000 2.50 2.60 2.25
$500,000 to less than $1,000,000 2.00 2.00 1.75
$1,000,000 or more........ -0- -0- -0-
</TABLE>
A CDSC of 1% will be assessed at the time of redemption of
Class A shares purchased without an initial sales charge as part of an
investment of at least $1,000,000 and redeemed within one year of
purchase. The terms contained in the section of the Fund's Prospectus
entitled "How to Redeem Shares -- Contingent Deferred Sales Charge"
(other than the amount of the CDSC and time periods) are applicable to
the Class A shares subject to a CDSC. Letter of Intent and Right of
Accumulation apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time
employees of other financial institutions which have entered into an
agreement with the Distributor pertaining to the sale of Fund shares (or
which otherwise have a brokerage related or clearing arrangement with an
NASD member firm or other financial institution with respect to the sale
of Fund shares) may purchase Class A shares for themselves directly or
pursuant to an employee benefit plan or other program, or for their
spouses or minor children, at net asset value, provided that they have
furnished the Distributor with such information as it may request from
time to time in order to verify eligibility for this privilege. This
privilege also applies to full-time employees of financial institutions
affiliated with NASD member firms whose full-time employees are eligible
to purchase Class A shares at net asset value. In addition, Class A
shares are offered at net asset value to full-time or part-time employees
of The Dreyfus Corporation or any of its affiliates or subsidiaries,
directors of The Dreyfus Corporation, Board members of a fund advised by
The Dreyfus
Page 12
Corporation, including members of the Fund's Board, or the spouse or
minor child of any of the foregoing.
Class A shares are offered at net asset value without a sales
load to employees participating in Eligible Benefit Plans. Class A shares
also may be purchased (including by exchange) at net asset value without
a sales load for Dreyfus-sponsored IRA "Rollover Accounts" with the
distribution proceeds from a qualified retirement plan or a
Dreyfus-sponsored 403(b)(7) plan, provided that, at the time of such
distribution, such qualified retirement plan or Dreyfus-sponsored
403(b)(7) plan (a) met the requirements of an Eligible Benefit Plan and
all or a portion of such plan's assets were invested in funds in the
Premier or Dreyfus Family of Funds or certain other products made
available by the Distributor to such plans, or (b) invested all of its
assets in certain funds in the Premier Family of Funds or the Dreyfus
Family of Funds or certain other products made available by the
Distributor to such plans.
Class A shares may be purchased at net asset value through
certain broker-dealers and other financial institutions which have
entered into an agreement with the Distributor, which includes a
requirement that such shares be sold for the benefit of clients
participating in a "wrap account" or a similar program under which such
clients pay a fee to such broker-dealer or other financial institution.
Class A shares also may be purchased at net asset value,
subject to appropriate documentation, through a broker-dealer or other
financial institution with the proceeds from the redemption of shares of
a registered open-end management investment company not managed by
The Dreyfus Corporation or its affiliates. The purchase of Class A shares
of the Fund must be made within 60 days of such redemption and the
shareholder must have either (i) paid an initial sales charge or a
contingent deferred sales charge or (ii)been obligated to pay at any time
during the holding period, but did not actually pay on redemption, a
deferred sales charge with respect to such redeemed shares.
Class A shares also may be purchased at net asset value,
subject to appropriate documentation, by (i) qualified separate accounts
maintained by an insurance company pursuant to the laws of any State or
territory of the United States, (ii) a State, county or city or
instrumentality thereof, (iii) a charitable organization (as defined in
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the
"Code")) investing $50,000 or more in Fund shares, and (iv) a charitable
remainder trust (as defined in Section 501(c)(3) of the Code).
The dealer reallowance may be changed from time to time but
will remain the same for all dealers. The Distributor, at its expense,
may provide additional promotional incentives to dealers that sell shares
of funds advised by The Dreyfus Corporation which are sold with a sales
load, such as Class A shares. In some instances, those incentives may be
offered only to certain dealers who have sold or may sell significant
amounts of shares.
CLASS B SHARES -- The public offering price for Class B shares is the
net asset value per share of that Class. No initial sales charge is
imposed at the time of purchase. A CDSC is imposed, however, on certain
redemptions of Class B shares as described under "How to Redeem Shares."
The Distributor compensates certain Service Agents for selling Class B
and Class C shares at the time of purchase from the Distributor's own
assets. The proceeds of the CDSC and the distribution fee, in part, are
used to defray these expenses.
Page 13
CLASS C SHARES -- The public offering price for Class C shares is the
net asset value per share of that Class. No initial sales charge is
imposed at the time of purchase. A CDSC is imposed, however, on
redemptions of Class C shares made within the first year of purchase. See
"Class B Shares" above and "How to Redeem Shares."
RIGHT OF ACCUMULATION -- CLASS A SHARES -- Reduced sales loads apply
to any purchase of Class A shares, shares of other funds in the Premier
Family of Funds, shares of certain other funds advised by The Dreyfus
Corporation which are sold with a sales load and shares acquired by a
previous exchange of such shares (hereinafter referred to as "Eligible
Funds"), by you and any related "purchaser" as defined in the Statement
of Additional Information, where the aggregate investment, including such
purchase, is $50,000 or more. If, for example, you have previously
purchased and still hold Class A shares of the Fund, or of any other
Eligible Fund or combination thereof, with an aggregate current market
value of $40,000 and subsequently purchase Class A shares of the Fund or
an Eligible Fund having a current value of $20,000, the sales load
applicable to the subsequent purchase would be reduced to 4% of the
offering price. All present holdings of Eligible Funds may be combined to
determine the current offering price of the aggregate investment in
ascertaining the sales load applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of a purchase
you or your Service Agent must notify the Distributor if orders are made
by wire, or the Transfer Agent if orders are made by mail. The reduced
sales load is subject to confirmation of your holdings through a check of
appropriate records.
TELETRANSFER PRIVILEGE -- You may purchase shares (minimum $500,
maximum $150,000 per day) by telephone if you have checked the
appropriate box and supplied the necessary information on the Account
Application or have filed a Shareholder Services Form with the Transfer
Agent. The proceeds will be transferred between the bank account
designated in one of these documents and your Fund account. Only a bank
account maintained in a domestic financial institution which is an
Automated Clearing House member may be so designated. The Fund may modify
or terminate this Privilege at any time or charge a service fee upon
notice to shareholders. No such fee currently is contemplated.
If you have selected the TELETRANSFER Privilege, you may
request a TELETRANSFER purchase of shares by calling 1-800-645-6561 or,
if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES
The services and privileges described under this heading may
not be available to clients of certain Service Agents and some Service
Agents may impose certain conditions on their clients which are different
from those described in this Prospectus. You should consult your Service
Agent in this regard.
FUND EXCHANGES
Clients of certain Service Agents may purchase, in exchange
for shares of a Class, shares of the same Class of certain other funds
managed or administered by The Dreyfus Corporation, to the extent such
shares are offered for sale in your state of residence. These funds have
different investment objectives which may be of interest to you. You also
may exchange your Fund shares that are subject to a CDSC for shares of
Dreyfus Worldwide Dollar Money Market Fund, Inc. The
Page 14
shares so purchased will be held in a special account created solely for
this purpose ("Exchange Account"). Exchanges of shares from an Exchange
Account only can be made into certain other funds managed or administered
by The Dreyfus Corporation. No CDSC is charged when an investor exchanges
into an Exchange Account; however, the applicable CDSC will be imposed
when shares are redeemed from an Exchange Account or other applicable Fund
account. Upon redemption, the applicable CDSC will be calculated without
regard to the time such shares were held in an Exchange Account. See "How
to Redeem Shares." Redemption proceeds for Exchange Account shares are
paid by Federal wire or check only. Exchange Account shares are eligible
for the Auto-Exchange Privilege, Dividend Sweep and the Automatic Withdrawal
Plan. To use the Fund Exchanges service, you should consult your Service
Agent or call 1-800-645-6561 to determine if it is available and whether
any conditions are imposed on its use.
To request an exchange, your Service Agent acting on your
behalf must give exchange instructions to the Transfer Agent in writing
or by telephone. Before any exchange, you must obtain and should review a
copy of the current prospectus of the fund into which the exchange is
being made. Prospectuses may be obtained by calling 1-800-645-6561.
Except in the case of personal retirement plans, the shares being
exchanged must have a current value of at least $500; furthermore, when
establishing a new account by exchange, the shares being exchanged must
have a value of at least the minimum initial investment required for the
fund into which the exchange is being made. The ability to issue exchange
instructions by telephone is given to all shareholders automatically,
unless you check the applicable "No" box on the Account Application,
indicating that you specifically refuse this Privilege. The Telephone
Exchange Privilege may be established for an existing account by written
request, signed by all shareholders on the account, or by a separate
signed Shareholder Services Form, available by calling 1-800-645-6561, or
by oral request from any of the authorized signatories on the account, by
calling 1-800-645-6561. If you have established the Telephone Exchange
Privilege, you may telephone exchange instructions (including over The
Dreyfus TouchRegistration Mark Automated Telephone System) by calling
1-800-645-6561. If you are calling from overseas, call 516-794-5452. See
"How to Redeem Shares_Procedures." Upon an exchange into a new account,
the following shareholder services and privileges, as applicable and
where available, will be automatically carried over to the fund into
which the exchange is being made: Telephone Exchange Privilege, Check
Redemption Privilege, TELETRANSFER Privilege and the dividend/capital
gain distribution option (except for Dividend Sweep) selected by the
investor.
Shares will be exchanged at the next determined net asset
value; however, a sales load may be charged with respect to exchanges of
Class A shares into funds sold with a sales load. No CDSC will be imposed
on Class B or Class C shares at the time of an exchange; however, Class B
or Class C shares acquired through an exchange will be subject to the
higher CDSC applicable to the exchanged or acquired shares. The CDSC
applicable on redemption of the acquired Class B or Class C shares will
be calculated from the date of the initial purchase of the Class B or
Class C shares exchanged, as the case may be. If you are exchanging Class
A shares into a fund that charges a sales load, you may qualify for share
prices which do not include the sales load or which reflect a reduced
sales load, if the shares you are exchanging were: (a) purchased with a
sales load, (b) acquired by a previous
Page 15
exchange from shares purchased with a sales load, or (c) acquired through
reinvestment of dividends or distributions paid with respect to the
foregoing categories of shares. To qualify, at the time of the exchange
your Service Agent must notify the Distributor. Any such qualification is
subject to confirmation of your holdings through a check of appropriate
records. See "Shareholder Services" in the Statement of Additional
Information. No fees currently are charged shareholders directly in
connection with exchanges, although the Fund reserves the right, upon not
less than 60 days' written notice, to charge shareholders a nominal fee in
accordance with rules promulgated by the Securities and Exchange
Commission. The Fund reserves the right to reject any exchange request in
whole or in part. The availability of Fund Exchanges may be modified or
terminated at any time upon notice to shareholders. See "Dividends,
Distributions and Taxes."
AUTO-EXCHANGE PRIVILEGE
Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares
of the Fund, in shares of the same Class of other funds in the Premier
Family of Funds or certain other funds in the Dreyfus Family of Funds of
which you are a shareholder. The amount you designate, which can be
expressed either in terms of a specific dollar or share amount ($100
minimum), will be exchanged automatically on the first and/or fifteenth
of the month according to the schedule you have selected. Shares will be
exchanged at the then-current net asset value; however, a sales load may
be charged with respect to exchanges of Class A shares into funds sold
with a sales load. No CDSC will be imposed on Class B or Class C shares
at the time of an exchange; however, Class B or Class C shares acquired
through an exchange will be subject on redemption to the higher CDSC
applicable to the exchanged or acquired shares. The CDSC applicable on
redemption of the acquired Class B or Class C shares will be calculated
from the date of the initial purchase of the Class B or Class C shares
exchanged, as the case may be. See "Shareholder Services" in the
Statement of Additional Information. The right to exercise this Privilege
may be modified or cancelled by the Fund or the Transfer Agent. You may
modify or cancel your exercise of this Privilege at any time by mailing
written notification to Premier GNMA Fund, P.O. Box 6587, Providence,
Rhode Island 02940-6587. The Fund may charge a service fee for the use of
this Privilege. No such fee currently is contemplated. For more
information concerning this Privilege and the funds in the Premier Family
of Funds or the Dreyfus Family of Funds eligible to participate in this
Privilege, or to obtain an Auto-Exchange Authorization Form, please call
toll free 1-800-645-6561. See "Dividends, Distributions and Taxes."
DREYFUS-AUTOMATIC ASSET BUILDER Registration Mark
Dreyfus-AUTOMATIC Asset Builder permits you to purchase Fund
shares (minimum of $100 and maximum of $150,000 per transaction) at
regular intervals selected by you. Fund shares are purchased by
transferring funds from the bank account designated by you. At your
option, the bank account designated by you will be debited in the
specified amount, and Fund shares will be purchased, once a month, on
either the first or fifteenth day, or twice a month, on both days. Only
an account maintained at a domestic financial institution which is an
Automated Clearing House member may be so designated. To establish a
Dreyfus-AUTOMATIC
Page 16
Asset Builder account, you must file an authorization form with the
Transfer Agent. You may obtain the necessary authorization form
by calling 1-800-645-6561. You may cancel your participation in this
Privilege or change the amount of purchase at any time by mailing written
notification to Premier GNMA Fund, P.O. Box 6587, Providence, Rhode
Island 02940-6587, or, if for Dreyfus retirement plan accounts, to The
Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence, Rhode Island
02940-6427, and the notification will be effective three business days
following receipt. The Fund may modify or terminate this Privilege at any
time or charge a service fee. No such fee currently is contemplated.
GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Government Direct Deposit Privilege enables you to purchase
Fund shares (minimum of $100 and maximum of $50,000 per transaction) by
having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into
your Fund account. You may deposit as much of such payments as you elect.
To enroll in Government Direct Deposit, you must file with the Transfer
Agent a completed Direct Deposit Sign-Up Form for each type of payment
that you desire to include in this Privilege. The appropriate form may be
obtained from your Service Agent or by calling
1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate
your participation by notifying in writing the appropriate Federal
agency. The Fund may terminate your participation upon 30 days' notice to
you.
DIVIDEND OPTIONS
Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by the Fund in
shares of the same Class of another fund in the Premier Family of Funds
or the Dreyfus Family of Funds of which you are a shareholder. Shares of
the other fund will be purchased at the then-current net asset value;
however, a sales load may be charged with respect to investments in
shares of a fund sold with a sales load. If you are investing in a fund
that charges a sales load, you may qualify for share prices which do not
include the sales load or which reflect a reduced sales load. If you are
investing in a fund that charges a CDSC, the shares purchased will be
subject on redemption to the CDSC, if any, applicable to the purchased
shares. See "Shareholder Services" in the Statement of Additional
Information. Dividend ACH permits you to transfer electronically dividends
or dividends and capital gain distributions, if any, from the Fund to a
designated bank account. Only an account maintained at a domestic
financial institution which is an Automated Clearing House member may be
so designated. Banks may charge a fee for this service.
For more information concerning these privileges or to
request a Dividend Options Form, please call toll free 1-800-645-6561.
You may cancel these privileges by mailing written notification to
Premier GNMA Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587.
Enrollment in or cancellation of these privileges is effective three
business days following receipt. These privileges are available only for
existing accounts and may not be used to open new accounts. Minimum
subsequent investments do not apply for Dividend Sweep. The Fund may
modify or terminate these privileges at any time or charge a service fee.
No such fee currently is
Page 17
contemplated. Shares held under Keogh Plans, IRAs or other retirement
plans are not eligible for Dividend Sweep.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request
withdrawal of a specified dollar amount (minimum of $50) on either a
monthly or quarterly basis if you have a $5,000 minimum account. An
application for the Automatic Withdrawal Plan can be obtained by calling
1-800-645-6561. The Automatic Withdrawal Plan may be ended at any time by
you, the Fund or the Transfer Agent. Shares for which certificates have
been issued may not be redeemed through the Automatic Withdrawal Plan.
No CDSC with respect to Class B shares will be imposed on
withdrawals made under the Automatic Withdrawal Plan, provided that the
amounts withdrawn under the plan do not exceed on an annual basis 12% of
the account value at the time the shareholder elects to participate in
the Automatic Withdrawal Plan. Withdrawals with respect to Class B shares
under the Automatic Withdrawal Plan that exceed on an annual basis 12% of
the value of the shareholder's account will be subject to a CDSC on the
amounts exceeding 12% of the initial account value. Class C shares
withdrawn pursuant to the Automatic Withdrawal Plan will be subject to
any applicable CDSC. Purchases of additional Class A shares where the
sales load is imposed concurrently with withdrawals of Class A shares
generally are undesirable.
RETIREMENT PLANS
The Fund offers a variety of pension and profit-sharing
plans, including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover Accounts,"
401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support services
also are available. You can obtain details on the various plans by
calling the following numbers toll free: for Keogh Plans, please call
1-800-358-5566; for IRAs and IRA "Rollover Accounts," please call
1-800-645-6561; or for SEP-IRAs, 401(k) Salary Reduction Plans and
403(b)(7) Plans, please call 1-800-322-7880.
LETTER OF INTENT -- CLASS A SHARES
By signing a Letter of Intent form, which can be obtained by
calling 1-800-645-6561, you become eligible for the reduced sales load
applicable to the total number of Eligible Fund shares purchased in a
13-month period pursuant to the terms and conditions set forth in the
Letter of Intent. A minimum initial purchase of $5,000 is required. To
compute the applicable sales load, the offering price of shares you hold
(on the date of submission of the Letter of Intent) in any Eligible Fund
that may be used toward "Right of Accumulation" benefits described above
may be used as a credit toward completion of the Letter of Intent.
However, the reduced sales load will be applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount
indicated in the Letter of Intent for payment of a higher sales load if
you do not purchase the full amount indicated in the Letter of Intent.
The escrow will be released when you fulfill the terms of the Letter of
Intent by purchasing the specified amount. If your purchases qualify for
a further sales load reduction, the sales load will be adjusted to
reflect your total purchase at the end of 13 months. If total purchases
are less than the amount specified, you will be requested to remit an
amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If
such remittance is not received within 20 days, the Transfer Agent, as
attor-
Page 18
ney-in-fact pursuant to the terms of the Letter of Intent, will
redeem an appropriate number of Class A shares held in escrow to realize
the difference. Signing a Letter of Intent does not bind you to purchase,
or the Fund to sell, the full amount indicated at the sales load in
effect at the time of signing, but you must complete the intended
purchase to obtain the reduced sales load. At the time you purchase Class
A shares, you must indicate your intention to do so under a Letter of
Intent. Purchases pursuant to a Letter of Intent will be made at the
then-current net asset value plus the applicable sales load in effect at
the time such Letter of Intent was executed.
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time.
Redemption requests should be transmitted to the Transfer Agent as
described below. When a request is received in proper form, the Fund will
redeem the shares at the next determined net asset value as described
below. If you hold Fund shares of more than one Class, any request for
redemption must specify the Class of shares being redeemed. If you fail
to specify the Class of shares to be redeemed or if you own fewer shares
of the Class than specified to be redeemed, the redemption request may be
delayed until the Transfer Agent receives further instructions from you
or your Service Agent.
The Fund imposes no charges (other than any applicable CDSC)
when shares are redeemed. Service Agents may charge their clients a
nominal fee for effecting redemptions of Fund shares. Any certificates
representing Fund shares being redeemed must be submitted with the
redemption request. The value of the shares redeemed may be more or less
than their original cost, depending upon the Fund's then-current net
asset value.
The Fund ordinarily will make payment for all shares redeemed
within seven days after receipt by the Transfer Agent of a redemption
request in proper form, except as provided by the rules of the Securities
and Exchange Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY
CHECK, BY THE TELETRANSFER PRIVILEGE OR THROUGH DREYFUS- AUTOMATIC ASSET
BUILDER AND SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO THE
TRANSFER AGENT, THE REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU
PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE CHECK, TELETRANSFER
PURCHASE OR DREYFUS-AUTOMATIC ASSET BUILDER ORDER, WHICH MAY TAKE UP TO
EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL NOT HONOR
REDEMPTION CHECKS UNDER THE CHECK REDEMPTION PRIVILEGE, AND WILL REJECT
REQUESTS TO REDEEM SHARES PURSUANT TO THE TELETRANSFER PRIVILEGE, FOR A
PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE
PURCHASE CHECK, THE TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET
BUILDER ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE
PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT,
OR IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT
TO COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS
EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU
WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP.
Fund shares will not be redeemed until the Transfer Agent has received
your Account Application.
The Fund reserves the right to redeem your account at its
option upon not less than 30 days' written notice if your account's net
asset value is $500 or less and remains so during the notice period.
Page 19
CONTINGENT DEFERRED SALES CHARGE
CLASS B SHARES -- A CDSC payable to the Distributor is imposed on any
redemption of Class B shares which reduces the current net asset value of
your Class B shares to an amount which is lower than the dollar amount of
all payments by you for the purchase of Class B shares of the Fund held
by you at the time of redemption. No CDSC will be imposed to the extent
that the net asset value of the Class B shares redeemed does not exceed
(i) the current net asset value of Class B shares acquired through
reinvestment of dividends or capital gain distributions, plus (ii)
increases in the net asset value of Class B shares above the dollar
amount of all your payments for the purchase of Class B shares of the
Fund held by you at the time of redemption.
If the aggregate value of the Class B shares redeemed has
declined below their original cost as a result of the Fund's performance,
a CDSC may be applied to the then current net asset value rather than the
purchase price.
In circumstances where the CDSC is imposed, the amount of the
charge will depend on the number of years from the time you purchased the
Class B shares until the time of redemption of such shares. Solely for
purposes of determining the number of years from the time of any payment
for the purchase of Class B shares, all payments during a month will be
aggregated and deemed to have been made on the first day of the month
The following table sets forth the rates of the CDSC for
Class B shares, except as set forth below:
<TABLE>
<CAPTION>
Year Since CDSC as a % of Amount
Purchase Payment Invested or Redemption
Was Made Proceeds
----------------- ------------------------
<S> <C>
First.................................................... 4.00
Second................................................... 4.00
Third.................................................... 3.00
Fourth................................................... 3.00
Fifth.................................................... 2.00
Sixth.................................................... 1.00
The following table sets forth the rates of the CDSC for
Class B shares purchased by shareholders who beneficially owned Class B
shares on November 30, 1996:
Year Since CDSC as a % of Amount
Purchase Payment Invested or Redemption
Was Made Proceeds
----------------- ------------------------
First.................................................... 3.00
Second................................................... 3.00
Third.................................................... 2.00
Fourth................................................... 2.00
Fifth.................................................... 1.00
Sixth.................................................... 0.00
</TABLE>
In determining whether a CDSC is applicable to a redemption,
the calculation will be made in a manner that results in the lowest
possible rate. It will be assumed that the redemption is made first of
amounts representing shares acquired pursuant to the reinvestment of
dividends and distributions; then of amounts representing the increase
in net asset value of Class B shares above the total amount of payments
for the purchase of Class B shares made during the preceding six years
(five years for shareholders beneficially owning Class B shares on
November 30, 1996): then of amounts representing the cost of shares
purchased six years (five years for share-
Page 20
holders beneficially owning Class B shares on November 30, 1996) prior to
the redemption; and finally, of amounts representing the cost of shares
held for the longest period of time within the applicable six-year period
(five-year period for shareholders beneficially owning Class B shares on
November 30, 1996).
For example, assume an investor purchased 100 shares at $10
per share for a cost of $1,000. Subsequently, the shareholder acquired
five additional shares through dividend reinvestment. During the second
year after the purchase the investor decided to redeem $500 of his or her
investment. Assuming at the time of the redemption the net asset value
had appreciated to $12 per share, the value of the investor's shares
would be $1,260 (105 shares at $12 per share). The CDSC would not be
applied to the value of the reinvested dividend shares and the amount
which represents appreciation ($260). Therefore, $240 of the $500
redemption proceeds ($500 minus $260) would be charged at a rate of 4%
(the applicable rate in the second year after purchase) for a total CDSC
of $9.60.
CLASS C SHARES -- A CDSC of 1% payable to the Distributor is imposed
on any redemption of Class C shares within one year of the date of
purchase. The basis for calculating the payment of any such CDSC will be
the method used in calculating the CDSC for Class B shares. See
"Contingent Deferred Sales Charge -- Class B Shares" above.
WAIVER OF CDSC -- The CDSC may be waived in connection with (a)
redemptions made within one year after the death or disability, as
defined in Section 72(m)(7) of the Code, of the shareholder, (b)
redemptions by employees participating in Eligible Benefit Plans, (c)
redemptions as a result of a combination of any investment company with
the Fund by merger, acquisition of assets or otherwise, (d) a
distribution following retirement under a tax-deferred retirement plan or
upon attaining age 701/2 in the case of an IRA or Keogh plan or custodial
account pursuant to Section 403(b) of the Code and (e) redemptions
pursuant to the Automatic Withdrawal Plan, as described in the Fund's
Prospectus. If the Fund's Board determines to discontinue the waiver of
the CDSC, the disclosure in the Fund's Prospectus will be revised
appropriately. Any Fund shares subject to a CDSC which were purchased
prior to the termination of such waiver will have the CDSC waived as
provided in the Fund's Prospectus at the time of the purchase of such
shares.
To qualify for a waiver of the CDSC, at the time of
redemption you must notify the Transfer Agent or your Service Agent must
notify the Distributor. Any such qualification is subject to confirmation
of your entitlement.
PROCEDURES
You may redeem shares by using the regular redemption
procedure through the Transfer Agent, or, if you have checked the
appropriate box and supplied the necessary information on the Account
Application or have filed a Shareholder Services Form with the Transfer
Agent, through the Check Redemption Privilege with respect to Class A
shares only, or the TELETRANSFER Privilege. If you are a client of a
Selected Dealer, you may redeem shares through the Selected Dealer. If
you have given your Service Agent authority to instruct the Transfer
Agent to redeem shares and to credit the proceeds of such redemptions to
a designated account at your Service Agent, you may redeem shares only in
this manner and in accordance with the regular redemption procedure
described below. If you wish to use the other redemption methods
Page 21
described below, you must arrange with your Service Agent for delivery of
the required application(s) to the Transfer Agent. Other redemption
procedures may be in effect for clients of certain Service Agents and
institutions. The Fund makes available to certain large institutions the
ability to issue redemption instructions through compatible computer
facilities. The Fund reserves the right to refuse any request made by
telephone, including requests made shortly after a change of address, and
may limit the amount involved or the number of such requests. The Fund
may modify or terminate any redemption Privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is
contemplated. Shares held under Keogh Plans, IRAs or other retirement
plans, and shares for which certificates have been issued, are not
eligible for the Check Redemption or TELETRANSFER Privilege.
Your redemption request may direct that the redemption
proceeds be used to purchase shares of other funds advised or
administered by The Dreyfus Corporation that are not available through
the Exchange Privilege. The applicable CDSC will be charged upon the
redemption of Class B or Class C shares. Your redemption proceeds will be
invested in shares of the other fund on the next business day. Before you
make such a request, you must obtain and should review a copy of the
current prospectus of the fund being purchased. Prospectuses may be
obtained by calling 1-800-645-6561. The prospectus will contain
information concerning minimum investment requirements and other
conditions that may apply to your purchase.
You may redeem Fund shares by telephone if you have checked
the appropriate box on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent. If you select the
TELETRANSFER redemption privilege or telephone exchange privilege (which is
granted automatically unless you refuse it), you authorize the Transfer
Agent to act on telephone instructions (including over The Dreyfus
TouchRegistration Mark Automated Telephone System) from any person
representing himself or herself to be you, or a representative of your
Service Agent, and reasonably believed by the Transfer Agent to be
genuine. The Fund will require the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to
confirm that instructions are genuine and, if it does not follow such
procedures, the Fund or the Transfer Agent may be liable for any losses
due to unauthorized or fraudulent instructions. Neither the Fund nor the
Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.
During times of drastic economic or market conditions, you
may experience difficulty in contacting the Transfer Agent by telephone
to request a TELETRANSFER redemption or an exchange of Fund shares. In
such cases, you should consider using the other redemption procedures
described herein. Use of these other redemption procedures may result in
your redemption request being processed at a later time than it would
have been if TELETRANSFER redemption had been used. During the delay, the
Fund's net asset value may fluctuate.
REGULAR REDEMPTION -- Under the regular redemption procedure, you may
redeem shares by written request mailed to Premier GNMA Fund, P.O. Box
6587, Providence, Rhode Island 02940-6587. Redemption requests must be
signed by each shareholder, including each owner of a joint account, and
each signature must be guaranteed. The Transfer Agent has adopted
standards and procedures pursuant to which signature-guarantees in proper
form generally will be accepted from domes-
Page 22
tic banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings
associations, as well as from participants in the New York Stock Exchange
Medallion Signature Program, the Securities Transfer Agents Medallion
Program ("STAMP") and the Stock Exchanges Medallion Program. If you have
any questions with respect to signature-guarantees, please contact your
Service Agent or call the telephone number listed on the cover of this
Prospectus.
Redemption proceeds of at least $1,000 will be wired to any
member bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
CHECK REDEMPTION PRIVILEGE -- CLASS A SHARES -- You may write
Redemption Checks drawn on your Fund account. Redemption Checks may be
made payable to the order of any person in the amount of $500 or more.
Potential fluctuations in the net asset value of Class A shares should be
considered in determining the amount of the check. Redemption Checks
should not be used to close your account. Redemption Checks are free, but
the Transfer Agent will impose a fee for stopping payment of a Redemption
Check upon your request or if the Transfer Agent cannot honor the
Redemption Check due to insufficient funds or other valid reason. You
should date your Redemption Checks with the current date when you write
them. Please do not postdate your Redemption Checks. If you do, the
Transfer Agent will honor, upon presentment, even if presented before the
date of the check, all postdated Redemption Checks which are dated within
six months of presentment for payment, if they are otherwise in good
order. If you hold shares in a Dreyfus sponsored IRA account, you may be
permitted to make withdrawals from your IRA account using checks
furnished to you by The Dreyfus Trust Company. This Privilege will be
terminated immediately, without notice, with respect to any account which
is, or becomes, subject to backup withholding on redemptions (see
"Dividends, Distributions and Taxes"). Any Redemption Check written on an
account which has become subject to backup withholding on redemptions
will not be honored by the Transfer Agent.
TELETRANSFER PRIVILEGE -- You may request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your
Fund account and your bank account. Only a bank account maintained in a
domestic financial institution which is an Automated Clearing House
member may be designated. Redemption proceeds will be on deposit in your
account at an Automated Clearing House member bank ordinarily two days
after receipt of the redemption request or, at your request, paid by
check (maximum $150,000 per day) and mailed to your address. Holders of
jointly registered Fund or bank accounts may redeem through the
TELETRANSFER Privilege for transfer to their bank account not more than
$250,000 within any 30-day period.
If you have selected the TELETRANSFER Privilege, you may
request a TELETRANSFER redemption of shares by calling 1-800-645-6561 or,
if you are calling from overseas, call 516-794-5452.
REDEMPTION THROUGH A SELECTED DEALER -- If you are a customer of a
Selected Dealer, you may make redemption requests to your Selected
Dealer. If the Selected Dealer transmits the redemption request so that
it is received by the Transfer Agent prior to the close of trading on the
floor of the New York Stock Exchange (currently 4:00 p.m., New York
time), the redemption request will be effective on that day. If a
redemption request is received by the Transfer Agent after the close of
trading on
Page 23
the floor of the New York Stock Exchange, the redemption
request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited
to your account with the Selected Dealer. See "How to Buy Shares" for a
discussion of additional conditions or fees that may be imposed upon
redemption.
In addition, the Distributor or its designee will accept
orders from Selected Dealers with which the Distributor has sales
agreements for the repurchase of shares held by shareholders. Repurchase
orders received by dealers by the close of trading on the floor of the
New York Stock Exchange on any business day and transmitted to the
Distributor or its designee prior to the close of its business day
(normally 5:15 p.m., New York time) are effected at the price determined
as of the close of trading on the floor of the New York Stock Exchange on
that day. Otherwise, the shares will be redeemed at the next determined
net asset value. It is the responsibility of the Selected Dealer to
transmit orders on a timely basis. The Selected Dealer may charge the
shareholder a fee for executing the order. This repurchase arrangement is
discretionary and may be withdrawn at any time.
REINVESTMENT PRIVILEGE -- Upon written request, you may reinvest up
to the number of Class A or Class B shares you have redeemed, within 45
days of redemption, at the then-prevailing net asset value without a
sales load, or reinstate your account for the purpose of exercising the
Exchange Privilege. Upon reinvestment, with respect to Class B shares, or
Class A shares if such shares were subject to a CDSC, the shareholder's
account will be credited with an amount equal to the CDSC previously paid
upon redemption of the Class A or Class B shares reinvested. The
Reinvestment Privilege may be exercised only once.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
Class B and Class C shares are subject to a Distribution Plan
and Class A, Class B and Class C shares are subject to a Shareholder
Services Plan.
DISTRIBUTION PLAN
Under the Distribution Plan, adopted pursuant to Rule 12b-1
under the 1940 Act, the Fund pays the Distributor for distributing the
Fund's Class B and Class C shares at an annual rate of .50 of 1% of the
value of the average daily net assets of Class B and .75 of 1% of the
value of the average daily net assets of Class C.
SHAREHOLDER SERVICES PLAN
Under the Shareholder Services Plan, the Fund pays the
Distributor for the provision of certain services to the holders of Class
A, Class B and Class C shares a fee at the annual rate of .25 of 1% of
the value of the average daily net assets of each such Class. 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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily declares dividends from its net
investment income on each day the New York Stock Exchange is open for
business. Fund shares begin earning income dividends on the day
immediately available funds ("Federal Funds"
Page 24
(monies of member banks within the Federal Reserve System which are held
on deposit at a Federal Reserve Bank)) are received by the Transfer Agent
in written or telegraphic form. If a purchase order is not accompanied by
remittance in Federal Funds, there may be a delay between the time the
purchase order becomes effective and the time the shares purchased start
earning dividends. If your payment is not made in Federal Funds, it must
be converted into Federal Funds. This usually occurs within one business
day of receipt of a bank wire and within two business days of receipt of a
check drawn on a member bank of the Federal Reserve System. Checks drawn
on banks which are not members of the Federal Reserve System may take
considerably longer to convert into Federal Funds.
Dividends usually are paid on the last calendar day of each
month, and are automatically reinvested in additional shares of the Class
from which they were paid at net asset value without a sales load or, at
your option, paid in cash. The Fund's earnings for Saturdays, Sundays and
holidays are declared as dividends on the preceding business day. If you
redeem all shares in your account at any time during the month, all
dividends to which you are entitled will be paid to you along with the
proceeds of the redemption. If you are an omnibus accountholder and
indicate in a partial redemption request that a portion of any accrued
dividends to which such account is entitled belongs to an underlying
accountholder who has redeemed all shares in his or her account, such
portion of the accrued dividends will be paid to you along with the
proceeds of the redemption. Distributions from net realized securities
gains, if any, generally are declared and paid once a year, but the Fund
may make distributions on a more frequent basis to comply with the
distribution requirements of the Code, in all events in a manner
consistent with the provisions of the 1940 Act. The Fund will not make
distributions from net realized securities gains unless capital loss
carryovers, if any, have been utilized or have expired. You may choose
whether to receive dividends and distributions in cash or to reinvest in
additional shares at net asset value. All expenses are accrued daily and
deducted before declaration of dividends to investors. Dividends paid by
each Class will be calculated at the same time and in the same manner and
will be of the same amount, except that the expenses attributable solely
to a particular Class will be borne exclusively by such Class. Class B
and Class C shares will receive lower per share dividends than Class A
shares because of the higher expenses borne by the relevant Class. See
"Fee Table."
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of
certain market discount bonds, paid by the Fund generally are taxable as
ordinary income, whether received in cash or reinvested in additional
shares. Distributions from net realized long-term securities gains of the
Fund generally are subject to Federal income tax as long-term capital
gains, regardless of how long shareholders have held their Fund shares
and whether such distributions are received in cash or reinvested in Fund
shares. The Code provides that the net capital gain of an individual
generally will not be subject to Federal income tax at a rate in excess
of 28%. No dividends or distributions will qualify for the dividends
received deduction allowable to certain U.S. corporations. Dividends and
distributions may be subject to state and local taxes.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized
Page 25
from the sale or other disposition of certain market discount bonds, paid
by the Fund to a foreign investor generally are subject to U.S.
nonresident withholding taxes at the rate of 30%, unless the investor
claims the benefit of a lower rate specified in a tax treaty.
Distributions from net realized long-term securities gains paid by the
fund to a foreign investor as well as the proceeds of any redemptions from
a foreign investor's account, regardless of the extent to which gain or
loss may be realized, generally will not be subject to U.S. nonresident
withholding tax. However, such distributions and redemption proceeds may
be subject to backup withholding, as described below, unless the foreign
investor certifies his non-U.S. residency status.
The exchange of shares of one fund for shares of another is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder may
realize a taxable gain or loss.
Notice as to the tax status of your dividends and
distributions will be mailed to you annually. You also will receive
periodic summaries of your account which will include information as to
dividends and distributions from securities gains, if any, paid during
the year.
The Code provides for the "carryover" of some or all of the
sales load imposed on Class A shares if you exchange your Class A shares
for shares of another fund advised by The Dreyfus Corporation within 91
days of purchase and such other fund reduces or eliminates its otherwise
applicable sales load for the purpose of the exchange. In this case, the
amount of the sales load charge for Class A shares, up to the amount of
the reduction of the sales load charged in the exchange, is not included
in the basis of such shares for purposes of computing gain or loss on the
exchange, and instead is added to the basis of the fund shares received
on the exchange.
Federal regulations generally require the Fund to withhold
("backup withholding") and remit to the U.S. Treasury 31% of dividends,
distributions from net realized securities gains of the Fund and the
proceeds of any redemption, regardless of the extent to which gain or
loss may be realized, paid to a shareholder if such shareholder fails to
certify either that the TIN furnished in connection with opening an
account is correct or that such shareholder has not received notice from
the IRS of being subject to backup withholding as a result of a failure
to properly report taxable dividend or interest income on a Federal
income tax return. Furthermore, the IRS may notify the Fund to institute
backup withholding if the IRS determines a shareholder's TIN is incorrect
or if a shareholder has failed to properly report taxable dividend and
interest income on a Federal income tax return.
A TIN is either the Social Security number or employer
identification number of the record owner of the account. Any tax
withheld as a result of backup withholding does not constitute an
additional tax imposed on the record owner of the account, and may be
claimed as a credit on the record owner's Federal income tax return.
Management of the Fund believes that the Fund has qualified
for the fiscal year ended December 31, 1995 as a "regulated investment
company" under the Code. The Fund intends to continue to so qualify if
such qualification is in the best interests of its shareholders. Such
qualification relieves the Fund of any liability for Federal income tax
to the extent its earnings are distributed in accordance with applicable
provisions of the Code. The Fund is subject to a non-deductible 4% excise
tax, measured with respect to certain undistributed amounts of taxable
investment income and capital gains.
Page 26
You should consult your tax adviser regarding specific
questions as to Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance for each Class of
shares may be calculated on several bases, including current yield,
average annual total return and/or total return. These total return
figures reflect changes in the price of the shares and assume that any
income dividends and/or capital gain distributions made by the Fund
during the measuring period were reinvested in shares of the same Class.
Class A total return figures include the maximum initial sales charge and
Class B and Class C total return figures include any applicable CDSC.
These figures also take into account any applicable service and
distribution fees. As a result, at any given time, the performance of
Class B and Class C should be expected to be lower than that of Class A.
Performance for each Class will be calculated separately.
Current yield refers to the Fund's annualized net investment
income per share over a 30-day period, expressed as a percentage of the
net asset value (or maximum offering price in the case of Class A) per
share at the end of the period. For purposes of calculating current
yield, the amount of net investment income per share during that 30 day
period, computed in accordance with regulatory requirements, is
compounded by assuming that it is reinvested at a constant rate over a
six-month period. An identical result is then assumed to have occurred
during a second six-month period which, when added to the result for the
first six months, provides an "annualized" yield for an entire one-year
period. Calculations of the Fund's current yield may reflect absorbed
expenses pursuant to any undertaking that may be in effect. See
"Management of the Fund."
Average annual total return is calculated pursuant to a
standardized formula which assumes that an investment in the Fund was
purchased with an initial payment of $1,000 and that the investment was
redeemed at the end of a stated period of time, after giving effect to
the reinvestment of dividends and distributions during the period. The
return is expressed as a percentage rate which, if applied on a
compounded annual basis, would result in the redeemable value of the
investment at the end of the period. Advertisements of the Fund's
performance will include the Fund's average annual total return for one,
five and ten year periods, or for shorter periods depending upon the
length of time during which the Fund has operated.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the
income and principal changes for a specified period and dividing by the
net asset value (maximum offering price in the case of Class A) per share
at the beginning of the period. Advertisements may include the percentage
rate of total return or may include the value of a hypothetical
investment at the end of the period which assumes the application of the
percentage rate of total return. Total return also may be calculated by
using the net asset value per share at the beginning of the period
instead of the maximum offering price per share at the beginning of the
period for Class A shares or without giving effect to any applicable CDSC
at the end of the period for Class B or Class C shares. Calculations
based on the net asset value per share do not reflect the deduction of
the applicable sales charge on Class A shares, which, if reflected, would
reduce the performance quoted.
Page 27
Performance will vary from time to time and past results are
not necessarily representative of future results. You should remember
that performance is a function of portfolio management in selecting the
type and quality of portfolio securities and is affected by operating
expenses. Performance information, such as that described above, may not
provide a basis for comparison with other investments or other investment
companies using a different method of calculating performance.
Comparative performance information may be used from time to
time in advertising or marketing the Fund's shares, including data from
Lipper Analytical Services, Inc., Morningstar, Inc., Bank Rate
Monitortrademark, N. Palm Beach, Fla. 33408, Moody's Bond Survey Bond
Index, Lehman Brothers Mortgage Backed Bond Index, Salomon Brothers
Corporate Bond Rate-of-Return Index, Bond Buyer's 20-Bond Index and
mortgage trade and other publications. In addition, data may be used in
comparing the difference in yields between Ginnie Maes and comparable
term Treasury Notes (which are direct obligations of the U.S.
Government).
GENERAL INFORMATION
The Fund was organized as an unincorporated business trust
under the laws of the Commonwealth of Massachusetts pursuant to an
Agreement and Declaration of Trust (the "Trust Agreement") dated
September 19, 1986, and commenced operations on January 29, 1987. The
Fund is authorized to issue an unlimited number of shares of beneficial
interest, par value $.001 per share. The Fund's shares are classified
into three classes_Class A, Class B and Class C. Each share has one vote
and shareholders will vote in the aggregate and not by class except as
otherwise required by law. Only holders of Class B or Class C shares, as
the case may be, will be entitled to vote on matters submitted to
shareholders pertaining to the Distribution Plan.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Trust Agreement disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be
given in each agreement, obligation or instrument entered into or
executed by the Fund or a Trustee. The Trust Agreement provides for
indemnification from the Fund's property for all losses and expenses of
any shareholder held personally liable for the obligations of the Fund.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Fund
itself would be unable to meet its obligations, a possibility which
management believes is remote. Upon payment of any liability incurred by
the Fund, the shareholder paying such liability will be entitled to
reimbursement from the general assets of the Fund. The Fund intends to
conduct its operations in such a way so as to avoid, as far as possible,
ultimate liability of the shareholders for liabilities of the Fund. As
discussed under "Management of the Fund" in the Statement of Additional
Information, the Fund ordinarily will not hold shareholder meetings;
however, shareholders under certain circumstances may have the right to
call a meeting of shareholders for the purpose of voting to remove
Trustees.
The Transfer Agent maintains a record of your ownership and
sends you confirmations and statements of account.
Shareholder inquiries may be made to your Service Agent or by
writing to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York
11556-0144.
Page 28
APPENDIX
INVESTMENT TECHNIQUES
FORWARD ROLL TRANSACTIONS -- To enhance current income, the Fund may
enter into forward roll transactions with respect to mortgage-related
securities. In a forward roll transaction, the Fund sells a
mortgage-related security to a financial institution, such as a bank or
broker-dealer, and simultaneously agrees to purchase a similar security
from the institution at a later date at an agreed upon price. The
securities that are purchased will bear the same interest rate as those
sold, but generally will be collateralized by different pools of
mortgages with different prepayment histories than those sold. During the
period between the sale and purchase, the Fund will not be entitled to
receive interest and principal payments on the securities sold. Proceeds
of the sale typically will be invested in short-term instruments,
particularly repurchase agreements, and the income from these
investments, together with any additional fee income received on the sale
will generate income for the Fund exceeding the yield on the securities
sold. Forward roll transactions involve the risk that the market value of
the securities sold by the Fund may decline below the purchase price of
those securities. A segregated account of the Fund consisting of
permissible liquid assets at least equal to the amount of the repurchase
price (including accrued interest) will be established and maintained at
the Fund's custodian bank.
FORWARD COMMITMENTS -- The Fund may purchase Ginnie Maes and other
mortgage-related securities on a forward commitment or when-issued basis,
which means that delivery and payment take place a number of days after
the date of the commitment to purchase. The payment obligation and the
interest rate receivable on a forward commitment or when-issued security
are fixed when the Fund enters into the commitment, but the Fund does not
make payment until it receives delivery from the counterparty. The Fund
will commit to purchase such securities only with the intention of
actually acquiring the securities, but the Fund may sell these securities
before the settlement date if it is deemed advisable. A segregated
account of the Fund consisting of permissible liquid assets at least equal
at all times to the amount of the commitments will be established and
maintained at the Fund's custodian bank.
LEVERAGE -- Leveraging exaggerates the effect on net asset value of
any increase or decrease in the market value of the Fund's portfolio.
Money borrowed for leveraging will be limited to 331/3% of the value of
the Fund's total assets. These borrowings would be subject to interest
costs which may or may not be recovered by appreciation of the securities
purchased; in certain cases, interest costs may exceed the return
received on the securities purchased.
The Fund may enter into reverse repurchase agreements with
banks, brokers or dealers. This form of borrowing involves the transfer
by the Fund of an underlying debt instrument in return for cash proceeds
based on a percentage of the value of the security. The Fund retains the
right to receive interest and principal payments on the security. At an
agreed upon future date, the Fund repurchases the security at principal
plus accrued interest. Except for these transactions, the Fund's
borrowings generally will be unsecured.
USE OF DERIVATIVES -- The Fund may invest in the types of Derivatives
enumerated under "Description of the Fund -- Investment Considerations
and Risks -- Use of Derivatives." These instruments and certain related
risks are described more specifically under "Investment Objective and
Management Policies -- Management Policies -- Derivatives" in the
Statement of Additional Information.
Page 29
Derivatives can be volatile and involve various types and
degrees of risk, depending upon the characteristics of the particular
Derivative and the portfolio as a whole. Derivatives permit the Fund to
increase or decrease the level of risk, or change the character of the
risk, to which its portfolio is exposed in much the same way as the Fund
can increase or decrease the level of risk, or change the character of
the risk, of its portfolio by making investments in specific securities.
Derivatives may entail investment exposures that are greater
than their cost would suggest, meaning that a small investment in
Derivatives could have a large potential impact on the Fund's
performance.
If the Fund invests in Derivatives at inappropriate times or
judges the market conditions incorrectly, such investments may lower the
Fund's return or result in a loss. The Fund also could experience losses
if it were unable to liquidate its position because of an illiquid
secondary market. The market for many Derivatives is, or suddenly can
become, illiquid. Changes in liquidity may result in significant, rapid
and unpredictable changes in the prices for Derivatives.
CERTAIN PORTFOLIO SECURITIES
MORTGAGE-RELATED SECURITIES -- Mortgage-related securities issued by
FNMA include FNMA Guaranteed Mortgage Pass-Through Certificates (also
known as "Fannie Maes") which are solely the obligations of FNMA and are
not backed by or entitled to the full faith and credit of the United
States, but are guaranteed as to timely payment of principal and interest
by FNMA. Mortgage-related securities issued by FHLMC include FHLMC
Mortgage Participation Certificates (also known as "Freddie Macs" or
"PCs"). Freddie Macs are not guaranteed by the United States and do not
constitute a debt or obligation of the United States. Freddie Macs
entitle the holder to timely payment of interest, which is guaranteed by
FHLMC. The FHLMC guarantees either ultimate collection or timely payment
of all principal payments on the underlying mortgage loans. When FHLMC
does not guarantee timely payment of principal, FHLMC may remit the
amount due on account of its guarantee of ultimate payment of principal
at any time after default on an underlying mortgage, but in no event
later than one year after it becomes payable.
Collateralized mortgage obligations, which include those
issued through real estate mortgage investment conduits or REMICs, are
debt securities that are structured to pay principal and interest based
on payments received on a pool of mortgage-related securities pledged to
secure the obligations. The issuers of collateralized mortgage
obligations typically do not have assets other than those pledged to
secure separately the obligations. Holders of these obligations must rely
principally on distributions on the underlying mortgage-related
securities and other collateral securing the obligations for payments of
principal and interest on the obligations. Typically, collateralized
mortgage obligations are collateralized by Ginnie Mae, Fannie Mae or
Freddie Mac Certificates, but also may be collateralized by whole loans
or private mortgage pass-through securities. Although the
mortgage-related securities securing these obligations may be subject to
a government guarantee or third-party support, the obligations are not so
guaranteed. Consequently, if the collateral securing the obligations is
insufficient to make payments on the obligations, a holder could sustain
a loss.
The Fund may invest in private mortgage pass-through
securities that are structured similarly to the Ginnie Mae, Fannie Mae
and Freddie Mac mortgage pass-through securities and are issued by
originators of, or investors in, mortgage loans. Private mortgage
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pass-through securities usually are backed by a pool of conventional fixed
rate or adjustable rate mortgage loans. Since these securities typically
are not guaranteed by an entity having the credit status of Ginnie Mae,
Fannie Mae or Freddie Mac, such securities generally are structured with
one or more types of credit enhancement.
The Fund also may invest in stripped mortgage-backed
securities issued by agencies or instrumentalities of the United States
government, or by private originators of, or investors in, mortgage
loans, including savings and loan associations, mortgage banks,
commercial banks, investment banks and special purpose subsidiaries of
the foregoing. Stripped mortgage-backed securities usually are structured
with two classes that receive different proportions of interest and
principal distributions on a pool of mortgage-backed securities or whole
loans. A common type of stripped mortgage-backed security will have one
class receiving some of the interest and most of the principal from the
mortgage collateral, while the other class will receive most of the
interest and the remainder of the principal.
ILLIQUID SECURITIES -- The Fund may invest up to 15% of the value of
its net assets in securities as to which a liquid trading market does not
exist, provided such investments are consistent with the Fund's
investment objective. Such securities may include securities that are
not readily marketable, such as certain securities that are subject to
legal or contractual restrictions on resale, and certain mortgage-related
securities, such as collateralized mortgage obligations and stripped
mortgage-backed securities. As to these securities, the Fund is subject
to a risk that should the Fund desire to sell them when a ready buyer is
not available at a price the Fund deems representative of their value,
the value of the Fund's net assets could be adversely affected.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS
AND IN THE FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER
OF THE FUND'S SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH,
OR TO ANY PERSON TO WHOM, SUCH OFFERING MAY NOT LAWFULLY BE MADE.
027P120196
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