Dreyfus Premier GNMA Fund
SEMIANNUAL REPORT June 30, 1999
(reg.tm)
<PAGE>
The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Year 2000 Issues (Unaudited)
The fund could be adversely affected if the computer systems used by The Dreyfus
Corporation and the fund's other service providers do not properly process and
calculate date-related information from and after January 1, 2000. The Dreyfus
Corporation is working to avoid Year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by Year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
<PAGE>
Contents
THE FUND
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2 Letter from the President
3 Discussion of Fund Performance
6 Statement of Investments
8 Statement of Assets and Liabilities
9 Statement of Operations
10 Statement of Changes in Net Assets
12 Financial Highlights
15 Notes to Financial Statements
FOR MORE INFORMATION
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Back Cover
<PAGE>
The Fund
Dreyfus Premier GNMA Fund
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Premier GNMA Fund,
covering the six-month period from January 1, 1999 through June 30, 1999.
Inside, you' ll find valuable information about how the fund was managed during
the reporting period, including a discussion with Michael Hoeh, portfolio
manager and a member of the Dreyfus Taxable Fixed Income Team.
The past six months have produced mixed results for fixed-income investors.
That' s because economic growth has been stronger than many analysts expected,
fueling fears that inflation pressures may re-emerge. Overseas economies that
had been in recession -- including Japan and the rest of Asia -- appear to have
begun to gain strength. The U.S. economy, which is now in its eighth year of
expansion, has also grown more robustly than expected. In response, the Federal
Reserve raised short-term interest rates modestly on June 30.
In this economic climate, U.S. Treasury securities declined, giving back all of
the gains they achieved during their remarkable rally last summer and fall.
Prices of other types of bonds fell less sharply or remained relatively
unchanged when investors shifted assets back into market sectors they had
previously avoided. Accordingly, many corporate bonds, mortgage-backed
securities, asset-backed securities and U.S. dollar-denominated foreign bonds
provided higher returns than U.S. Treasuries over the first half of 1999.
We appreciate your confidence over the past six months, and we look forward to
your continued participation in Dreyfus Premier GNMA Fund.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
July 15, 1999
<PAGE 2>
DISCUSSION OF FUND PERFORMANCE
Michael Hoeh, Portfolio Manager Dreyfus Taxable Fixed Income Team
How did Dreyfus Premier GNMA Fund perform relative to its benchmark?
For the six-month period ended June 30, 1999, Dreyfus Premier GNMA Fund
performed as shown in the following table:
<TABLE>
<CAPTION>
APPROXIMATE DISTRIBUTION RATE
TOTAL RETURN(1) INCOME DIVIDENDS PER SHARE(2
(_________________) ______________________ ______________________
<S> <C> <C>
Class A Shares -0.13% $0.361 4.78%
Class B Shares -0.06% $0.322 4.45%
Class C Shares -0.25% $0.304 4.21%
Lehman Brothers
GNMA Index(3) -0.57%
</TABLE>
The fund's performance was largely due to a rising interest rate environment, in
which mortgage rates have also increased. When mortgage rates rise, prices of
existing mortgage-backed securities tend to fall. That's because bond prices and
yields move in opposite directions. However, the effects of higher mortgage
rates were partially offset by a decline in prepayment risk as fewer homeowners
refinanced their mortgages.
What is the fund's investment approach?
The fund invests primarily in GNMA (Government National Mortgage Association)
and GNMA-related securities. The remainder may be allocated to other securities
issued or guaranteed by the U.S. government, such as U.S. Treasury securities.
The fund' s goal is to provide a high level of current income consistent with
capital preservation.
We use a four-step investment approach:
* PREPAYMENT TREND ANALYSIS. We carefully review prepayment indicators, as an
increase in this trend would cause a decline in the dividend income levels
payable by the fund.
* OPTION-ADJUSTED SPREAD ANALYSIS. This tool compares the "optionality" of
different mortgage-backed securities with "now optionable" The Fun
<PAGE 3>
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
securities (such as U.S. Treasuries). Homeowners have the right to prepay their
mortgage at any time. This essentially gives a call option to the homeowner,
exercisable against the mortgage-backed securities investor. Using this tool
helps us determine whether it is advisable to purchase optionable securities.
* CASH FLOW STRUCTURE ANALYSIS. We review cash flows of different types of
securities. Our analysis currently indicates that GNMA project loans have a
strong cash flow, which is a favorable sign. The loans, issued for multi-family,
government-sponsored housing, do not allow prepayments. This feature provided
protection against prepayment risk and helped improve the fund's overall return
* TOTAL-RATE-OF-RETURN SCENARIOS. We calculate expected rates of return for each
security over a six-month time horizon. This helps us estimate whether a
security is or is not likely to be able to surpass the return generated by its
benchmark.
What other factors influenced the fund's performance?
Our position in GNMA project loans, which we acquired in the second half of 1998
and maintained in the first half of 1999, contributed positively to performance.
We purchased these bonds when their valuations were low, and they have since
recovered significantly, which has served to boost the portfolio's returns
Another positive driver of performance was our substantial position in
adjustable-rate GNMA adjustable-rate mortgages ("ARM"), which we added in the
first quarter of 1999. In contrast to a fixed-rate mortgage, in which the
interest rate remains the same for the life of the loan, the rate on an ARM
changes periodically, usually in relation to an index. We added ARMs because, in
a rising interest rate environment, their yields tend to increase to a greater
extent than those on U.S. Treasuries. When interest rates rose during the
period, prices of ARMs remained approximately the same, while those of U.S.
Treasury bonds declined significantly. ARMs thus added price stability to the
fund, as well as high yield, which helped raise the fund's total return.
<PAGE 4>
On the other hand, another change we initiated during the last six months --
increasing our holdings in higher-coupon securities other than GNMA ARMs -- was
not as favorable. We purchased these securities because the mortgages underlying
them carry higher interest rates. As a result, holders of these types of bonds
tend to prepay at a much slower rate when interest rates rise. Generally, the
more slowly a pool of mortgages is prepaid, the greater the potential income for
mortgage investors. However, in the last six months, the performance of
higher-coupon securities fell short of our expectations, mainly due to a large
supply of them on the market.
What is the fund's current strategy?
We anticipated the Federal Reserve's June 30 interest rate increase. Because
rate hikes have historically been implemented in clusters, we continue to
position the fund for the possibility of higher interest rates ahead.
Accordingly, we are keeping the fund's duration short -- currently 4.15 years.
And, we are maintaining our positions in GNMA ARMs, higher-coupon GNMA
securities and other mortgage debt and de-emphasizing U.S. Treasuries.
July 15, 1999
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID
AND DOES NOT TAKE INTO CONSIDERATION THE MAXIMUM INITIAL SALES CHARGE IN THE
CASE OF CLASS A SHARES, OR THE APPLICABLE CONTINGENT DEFERRED SALES CHARGE
IMPOSED ON REDEMPTIONS IN THE CASE OF CLASS B AND CLASS C SHARES. HAD THESE
CHARGES BEEN REFLECTED, RETURNS WOULD HAVE BEEN LOWER. NEITHER THE MARKET VALUE
OR GNMA SECURITIES NOR THE VALUE OF THE FUND'S SHARES ARE GUARANTEED. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND INVESTMENT
RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, FUND SHARES MAY BE WORTH MORE OR
LESS THAN THEIR ORIGINAL COST.
(2) DISTRIBUTION RATE PER SHARE IS BASED UPON DIVIDENDS PER SHARE PAID FROM NET
INVESTMENT INCOME DURING THE PERIOD (ANNUALIZED), DIVIDED BY THE MAXIMUM
OFFERING PRICE PER SHARE IN THE CASE OF CLASS A SHARES, OR THE NET ASSET PER
SHARE IN THE CASE OF CLASS B AND C SHARES AT THE END OF THE PERIOD.
(3) SOURCE: LEHMAN BROTHERS -- THE LEHMAN BROTHERS GNMA INDEX IS AN UNMANAGED,
TOTAL RETURN PERFORMANCE BENCHMARK FOR THE GNMA MARKET, CONSISTING OF 15- AND
30-YEAR FIXED-RATE SECURITIES BACKED BY MORTGAGE POOLS OF THE GOVERNMENT
NATIONAL MORTGAGE ASSOCIATION.
The Fund
<PAGE 5>
STATEMENT OF INVESTMENTS
June 30, 1999 (Unaudited)
Principal
BONDS AND NOTES--104.7% Amount ($) Value ($)
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MORTGAGE-BACKED SECURITIES--104.0%
Government National Mortgage Association I:
6.5%, 5/15/2009-3/15/2029 26,554,934 (a) 26,102,880
7% 7,500,000 (b) 7,421,069
7%, 2/15/2022-10/15/2023 22,667,121 22,594,994
7.5% 2,700,000 (b) 2,728,674
7.5%, 3/15/2002-12/15/2023 8,040,319 8,203,130
8%, 4/15/2008-12/15/2022 9,469,157 (a) 9,780,983
8.5%, 10/15/2017-12/15/2022 2,829,278 2,996,045
9%, 4/15/2016-12/15/2022 3,396,583 3,642,512
9.5%, 12/15/2016-1/15/2025 2,909,531 3,167,191
11.5%, 1/15/2013 35,610 38,782
86,676,260
Government National Mortgage Association I:
Project Loans:
6.25%, 11/15/2018 1,478,239 1,428,348
6.32%, 10/15/2033 1,522,550 1,465,926
6.35%, 6/15/2030-2/15/2034 4,174,804 4,024,092
6.375%, 2/15/2028 1,480,885 1,442,012
6.45%, 8/15/2033-11/15/2033 4,848,104 4,759,557
6.5%, 7/15/2033 929,512 914,696
6.625%, 7/15/2033-11/15/2033 3,308,739 3,266,294
6.7%, 2/15/2033 3,736,350 (a) 3,694,316
7.12%, 2/15/2039 1,987,566 (a) 2,040,972
23,036,213
Government National Mortgage Association II:
5% 7,500,000 (b,c) 7,354,650
5.5%, 4/20/2028 5,657,447 (c) 5,721,093
8%, 10/20/2026 7,711,266 7,906,439
9%, 7/20/2025 2,435,180 2,563,783
11%, 12/20/2013-9/20/2015 794,228 888,848
24,434,813
TOTAL MORTGAGE-BACKED SECURITIES 134,147,286
U.S. GOVERNMENTS--.7%
U.S. Treasury Bonds,
5.25%, 2/15/2029 1,000,000 897,880
TOTAL BONDS AND NOTES
(cost $135,892,617) 135,045,166
<PAGE 6>
Principal
SHORT-TERM INVESTMENTS--6.9% Amount ($) Value ($)
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U.S. TREASURY BILLS:
4.42%, 7/1/1999 266,000 (a) 266,000
5.08%, 7/22/1999 835,000 (a) 833,003
4.46%, 8/5/1999 1,245,000 (a) 1,240,331
4.93%, 8/19/1999 5,031,000 (a) 5,001,005
4.6%, 9/2/1999 230,000 (a) 228,193
4.4%, 9/16/1999 1,380,000 (a) 1,366,480
TOTAL SHORT-TERM INVESTMENTS
(cost $8,934,426) 8,935,012
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TOTAL INVESTMENTS
(cost $144,827,043) 111.6% 143,980,178
LIABILITIES, LESS CASH AND RECEIVABLES (11.6%) (14,998,971)
NET ASSETS 100.0% 128,981,207
(A) SECURITIES HELD IN WHOLE OR IN PART BY THE CUSTODIAN IN A SEGREGATED
ACCOUNT AS COLLATERAL FOR SECURITIES PURCHASED ON A FORWARD COMMITMENT BASIS.
(B) PURCHASED ON A FORWARD COMMITMENT BASIS.
(C) ADJUSTABLE RATE MORTGAGE--INTEREST RATE SUBJECT TO CHANGE PERIODICALLY.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
<PAGE 7>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999 (Unaudited)
Cost Value
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ASSETS ($):
Investments in securities--See Statement of
Investments 144,827,043 143,980,178
Receivable for investment securities sold 5,835,889
Interest receivable 781,903
Receivable for shares of Beneficial Interest subscribed 222,624
Prepaid expenses 27,118
150,847,712
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LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 84,339
Due to Distributor 43,270
Cash overdraft due to Custodian 774,065
Payable for investment securities purchased 17,560,326
Payable for shares of Beneficial Interest redeemed 3,335,904
Accrued expenses 68,601
21,866,505
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NET ASSETS ($) 128,981,207
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COMPOSITION OF NET ASSETS ($):
Paid-in capital 133,676,983
Accumulated undistributed investment income--net 126,648
Accumulated net realized gain (loss) on investments (3,975,559)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 (846,865)
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NET ASSETS ($) 128,981,207
NET ASSET VALUE PER SHARE
<TABLE>
<CAPTION>
Class A Class B Class C
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Assets ($) 90,989,844 34,912,192 3,079,171
Shares Outstanding 6,251,602 2,396,484 211,419
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE ($) 14.55 14.57 14.56
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<PAGE 8>
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1999 (Unaudited)
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INVESTMENT INCOME ($):
INTEREST INCOME 4,158,680
EXPENSES:
Management fee--Note 3(a) 373,019
Shareholder servicing costs--Note 3(c) 236,182
Distribution fees--Note 3(b) 103,350
Professional fees 37,029
Registration fees 19,652
Custodian fees--Note 3(c) 17,178
Trustees' fees and expenses--Note 3(d) 14,380
Prospectus and shareholders' reports 8,052
Loan commitment fees--Note 2 321
Miscellaneous 4,184
TOTAL EXPENSES 813,347
INVESTMENT INCOME--NET 3,345,333
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (230,228)
Net unrealized appreciation (depreciation) on investments (2,926,662)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (3,156,890)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 188,443
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
<PAGE 9>
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 1999 Year Ended
(Unaudited) December 31, 1998
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OPERATIONS ($):
Investment income--net 3,345,333 7,114,363
Net realized gain (loss) on investments (230,228) 2,797,330
Net unrealized appreciation (depreciation)
on investments (2,926,662) (1,696,582)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 188,443 8,215,111
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DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net:
Class A shares (2,358,128) (5,149,217)
Class B shares (805,207) (1,926,683)
Class C shares (61,786) (39,780)
TOTAL DIVIDENDS (3,225,121) (7,115,680)
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BENEFICIAL INTEREST TRANSACTIONS ($):
Net proceeds from shares sold:
Class A shares 22,333,942 56,066,526
Class B shares 6,710,331 12,810,406
Class C shares 1,817,949 2,868,856
Dividends reinvested:
Class A shares 1,611,225 3,495,046
Class B shares 549,729 1,344,579
Class C shares 19,091 23,643
Cost of shares redeemed:
Class A shares (25,169,910) (61,029,061)
Class B shares (13,307,802) (11,479,877)
Class C shares (1,251,486) (450,210)
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS (6,686,931) 3,649,908
TOTAL INCREASE (DECREASE) IN NET ASSETS (9,723,609) 4,749,339
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NET ASSETS ($):
Beginning of Period 138,704,816 133,955,477
END OF PERIOD 128,981,207 138,704,816
Undistributed investment income--net 126,648 6,436
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE 10>
Six Months Ended
June 30, 1999 Year Ended
(Unaudited) December 31, 1998
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CAPITAL SHARE TRANSACTIONS:
CLASS A
Shares sold 1,510,385 3,776,757
Shares issued for dividends reinvested 109,194 235,306
Shares redeemed (1,706,681) (4,112,467)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (87,102) (100,404)
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CLASS B
Shares sold 452,926 861,589
Shares issued for dividends reinvested 37,211 90,452
Shares redeemed (897,282) (772,433)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (407,145) 179,608
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CLASS C
Shares sold 122,589 193,103
Shares issued for dividends reinvested 1,293 1,589
Shares redeemed (84,342) (30,238)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 39,540 164,454
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
<PAGE 11>
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the
fiscal periods indicated. Certain information reflects financial results for a
single fund share. Total return shows how much your investment in the fund would
have increased (or decreased) during each period, assuming you had reinvested
all dividends and distributions. These figures have been derived from the fund's
financial statements.
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999 Year Ended December 31,
--------------------------------------------
CLASS A SHARES (Unaudited) 1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA ($):
Net asset value,
beginning of period 14.89 14.76 14.37 14.66 13.54 14.84
Investment Operations:
Investment income--net .36 .81 .85 .88 .91 .88
Net realized and unrealized
gain (loss) on investments (.34) .13 .39 (.29) 1.12 (1.30)
Total from Investment Operations .02 .94 1.24 .59 2.03 (.42)
Distributions:
Dividends from investment
income--net (.36) (.81) (.85) (.88) (.91) (.88)
Net asset value, end of period 14.55 14.89 14.76 14.37 14.66 13.54
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TOTAL RETURN (%)(A) .26(b) 6.51 8.91 4.25 15.43 (2.91)
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RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average
net assets 1.04(b) 1.05 1.05 1.04 1.03 .94
Ratio of net investment income
to average net assets 5.10(b) 5.44 5.87 6.17 6.45 6.20
Decrease reflected in above
expense ratios due to
undertakings by the Manager -- -- -- -- -- .06
Portfolio Turnover Rate 214.41(c) 283.20 518.62 267.22 349.24 427.27
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Net Assets, end of period
($ x 1,000) 90,990 94,369 95,071 111,267 134,545 141,456
(A) EXCLUSIVE OF SALES LOAD.
(B) ANNUALIZED.
(C) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<PAGE 12>
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999 Year Ended December 31,
-----------------------
CLASS B SHARES (Unaudited) 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA ($):
Net asset value,
beginning of period 14.90 14.78 14.38 14.67 13.55 14.84
Investment Operations:
Investment income--net .32 .73 .78 .81 .84 .80
Net realized and unrealized
gain (loss) on investments (.33) .12 .40 (.29) 1.12 (1.29)
Total from Investment Operations (.01) .85 1.18 .52 1.96 (.49)
Distributions:
Dividends from investment
income--net (.32) (.73) (.78) (.81) (.84) (.80)
Net asset value, end of period 14.57 14.90 14.78 14.38 14.67 13.55
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TOTAL RETURN (%)(A) (.12)(b) 5.90 8.43 3.71 14.83 (3.39)
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RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average
net assets 1.56(b) 1.56 1.55 1.55 1.55 1.51
Ratio of net investment income
to average net assets 4.53(b) 4.93 5.36 5.65 5.89 5.61
Decrease reflected in above
expense ratios due to
undertakings by the Manager -- -- -- -- -- .05
Portfolio Turnover Rate 214.41(c) 283.20 518.62 267.22 349.24 427.27
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Net Assets, end of period
($ x 1,000) 34,912 41,775 38,775 39,833 41,934 35,710
(A) EXCLUSIVE OF SALES LOAD.
(B) ANNUALIZED.
(C) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Fund
<PAGE 13>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999 Year Ended December 31,
-----------------------
CLASS C SHARES (Unaudited) 1998 1997 1996 1995(a)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA ($):
Net asset value, beginning of period 14.90 14.77 14.38 14.67 14.48
Investment Operations:
Investment income--net .30 .68 .75 .77 .16
Net realized and unrealized gain (loss)
on investments (.34) .13 .39 (.29) .19
Total from Investment Operations (.04) .81 1.14 .48 .35
Distributions:
Dividends from investment income--net (.30) (.68) (.75) (.77) (.16)
Net asset value, end of period 14.56 14.90 14.77 14.38 14.67
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%)(B) (.50)(c) 5.62 8.13 3.44 11.47(c)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets 1.84(c) 1.80 1.80 1.79 1.79(c)
Ratio of net investment income
to average net assets 4.36(c) 4.40 5.11 5.42 5.25(c)
Portfolio Turnover Rate 214.41(d) 283.20 518.62 267.22 349.24
- ---------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 3,079 2,561 110 17 1
(A) FROM OCTOBER 16, 1995 (COMMENCEMENT OF INITIAL OFFERING) TO DECEMBER 31, 1995.
(B) EXCLUSIVE OF SALES LOAD.
(C) ANNUALIZED.
(D) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<PAGE 14>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Premier GNMA Fund (the "fund" ) is registered under the Investment
Company Act of 1940, as amended (the "Act" ), as a diversified open-end
management investment company. The fund's investment objective is to provide
investors with as high a level of current income as is consistent with the
preservation of capital by investing principally in instruments issued by the
Government National Mortgage Association. The Dreyfus Corporation (the
" Manager" ) serves as the fund's investment adviser. The Manager is a direct
subsidiary of Mellon Bank, N.A. ("Mellon").
Premier Mutual Fund Services, Inc. (the "Distributor") is the distributor of the
fund' s shares. The fund is authorized to issue an unlimited number of $.001 par
value shares in the following classes of shares: Class A, Class B and Class C.
Class A shares are subject to a sales charge imposed at the time of purchase,
Class B shares are subject to a contingent deferred sales charge ("CDSC")
imposed on Class B share redemptions made within six years of purchase (five
years for shareholders beneficially owning Class B shares on November 30, 1996)
and Class C shares are subject to a CDSC imposed on shares redeemed within one
year of purchase. Other differences between the classes include the services
offered to and the expenses borne by each class and certain voting rights.
The fund' s financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: Investments in securities (excluding short-term
investments other than U.S. Treasury Bills) are valued each business day by an
independent pricing service (" Service" ) approved by the Board of Trustees.
Investments for which quoted bid prices are readily available and are
representative of the bid side of the market in the judgment of the Service are
valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such secu
The Fund <PAGE 15>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
rities) . Other investments (which constitute a majority of the portfolio
securities) are carried at fair value as determined by the Service, based on
methods which include consideration of: yields or prices of securities of
comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions. Short-term investments, excluding U.S.
Treasury Bills, are carried at amortized cost, which approximates value.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income
(including, where applicable, amortization of discount on short-term
investments) is recognized on the accrual basis. Under the terms of the custody
agreement, the fund receives net earnings credits based on available cash
balances left on deposit.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the fund to declare dividends
daily from investment income-net. Such dividends are paid monthly. Dividends
from net realized capital gain are normally declared and paid annually, but the
fund may make distributions on a more frequent basis to comply with the
distribution requirements of the Internal Revenue Code of 1986, as amended (the
" Code" ). To the extent that net realized capital gain can be offset by capital
loss carryovers, it is the policy of the fund not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the fund to continue to qualify as
a regulated investment company, if such qualification is in the best interests
of its shareholders, by complying with the applicable provisions of the Code,
and to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes.
The fund has an unused capital loss carryover of approximately $3,705,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to December 31, 1998. If not
applied, the carryover expires in fiscal 2002.
<PAGE 16>
NOTE 2--Bank Line of Credit:
The fund participates with other Dreyfus-managed funds in a $600 million
redemption credit facility (the "Facility" ) to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the fund has agreed to pay commitment fees on its pro rata portion of
the Facility. Interest is charged to the fund at rates based on prevailing
market rates in effect at the time of borrowings. During the period ended June
30, 1999, the fund did not borrow under the Facility.
NOTE 3--Management Fee and Other Transactions With Affiliates:
(A) Pursuant to a management agreement with the Manager, the management fee is
computed at the annual rate of .55 of 1% of the value of the fund's average
daily net assets and is payable monthly.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager, retained
$558 during the period ended June 30, 1999, from commissions earned on sales of
the fund's shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act,
Class B and Class C shares pay the Distributor for distributing their shares at
an annual rate of .50 of 1% of the value of the average daily net assets of
Class B shares and .75 of 1% of the value of the average daily net assets of
Class C shares. During the period ended June 30, 1999, Class B and Class C
shares were charged $92,246 and $11,104, respectively, pursuant to the
Distribution Plan.
(C) Under the Shareholder Services Plan, Class A, Class B and Class C shares pay
the Distributor at an annual rate of .25 of 1% of the value of their average
daily net assets for the provision of certain services. The services provided
may include personal services relating to shareholder accounts, such as
answering shareholder inquiries regarding the fund and providing reports and
other information, and services related to the main
The Fund <PAGE 17>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
tenance of shareholder accounts. The Distributor may make payments to Service
Agents (a securities dealer, financial institution or other industry
professional) in respect of these services. The Distributor determines the
amounts to be paid to Service Agents. During the period ended June 30, 1999,
Class A, Class B and Class C shares were charged $119,730, $46,122 and $3,702,
respectively, pursuant to the Shareholder Services Plan.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the
Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the fund. During the period
ended June 30, 1999, the fund was charged $50,112 pursuant to the transfer
agency agreement.
The fund compensates Mellon under a custody agreement for providing custodial
services for the fund. During the period ended June 30, 1999, the fund was
charged $17,178 pursuant to the custody agreement.
(D) Each trustee who is not an "affiliated person" as defined in the Act
receives from the fund an annual fee of $2,500 and an attendance fee of $500 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales (including paydowns) of investment
securities, excluding short-term securities, during the period ended June 30,
1999, amounted to $311,197,156 and $330,140,392, respectively.
At June 30, 1999, accumulated net unrealized depreciation on investments was
$846,865, consisting of $1,000,605 gross unrealized appreciation and $1,847,470
gross unrealized depreciation.
At June 30, 1999, the cost of investments for Federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
<PAGE 18>
NOTES
<PAGE 19>
For More Information
Dreyfus Premier GNMA Fund
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent & Dividend Disbursing Agent
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Distributor
Premier Mutual Fund Services, Inc.
60 State Street
Boston, MA 02109
To obtain information:
BY TELEPHONE Call your financial representative or 1-800-554-4611
BY MAIL Write to: The Dreyfus Premier Family of Funds 144 Glenn Curtiss
Boulevard Uniondale, NY 11556-0144
(c) 1999 Dreyfus Service Corporation 027/614SA996
