DREYFUS BASIC GNMA FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
NOVEMBER 1, 1995
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus BASIC GNMA Fund (the "Fund"), dated November 1, 1995, as it may be
revised from time to time. To obtain a copy of the Fund's Prospectus,
please write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York
11556-0144, or call the following numbers:
Call Toll Free 1-800-645-6561
In New York City - Call 1-718-895-1206
Outside the U.S. and Canada - Call 516-794-5452
The Dreyfus Corporation (the "Manager") serves as the Fund's investment
adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . . . . . . B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . B-9
Management Agreement. . . . . . . . . . . . . . . . . . . . B-13
Shareholder Services Plan . . . . . . . . . . . . . . . . . B-15
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . B-16
Redemption of Fund Shares . . . . . . . . . . . . . . . . . B-16
Fund Exchanges. . . . . . . . . . . . . . . . . . . . . . . B-18
Determination of Net Asset Value. . . . . . . . . . . . . . B-19
Performance Information . . . . . . . . . . . . . . . . . . B-20
Dividends, Distributions and Taxes. . . . . . . . . . . . . B-21
Portfolio Transactions. . . . . . . . . . . . . . . . . . . B-22
Information about the Fund. . . . . . . . . . . . . . . . . B-23
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors . . . . . . . . . . . B-23
Financial Statements . . . . . . . . . . . . . . . . . . . B-25, B-34
Report of Independent Auditors. . . . . . . . . . . . . . . B-33
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Description of the
Fund."
Portfolio Securities
Ginnie Maes. Ginnie Maes are created by an "issuer," which is a
Federal Housing Administration ("FHA") approved mortgagee that also meets
criteria imposed by the Government National Mortgage Association (the
"GNMA"). The issuer assembles a pool of FHA, Farmers' Home Administration
or Veterans' Administration ("VA") insured or guaranteed mortgages which are
homogeneous as to interest rate, maturity and type of dwelling. Upon
application by the issuer, and after approval by GNMA of the pool, GNMA
provides its commitment to guarantee timely payment of principal and
interest on the Ginnie Maes backed by the mortgages included in the pool.
The Ginnie Maes, endorsed by GNMA, then are sold by the issuer through
securities dealers. The Fund will only invest in Ginnie Maes of the "fully
modified pass-through" type which are guaranteed as to timely payment of
principal and interest by the GNMA, a U.S. Government corporation.
GNMA is authorized under the National Housing Act to guarantee timely
payment of principal and interest on Ginnie Maes. This guarantee is backed
by the full faith and credit of the United States. GNMA may borrow U.S.
Treasury funds to the extent needed to make payments under its guarantee.
When mortgages in the pool underlying a Ginnie Mae are prepaid by
mortgagors or by result of foreclosure, such principal payments are passed
through to the certificate holders. Accordingly, the life of the Ginnie Mae
is likely to be substantially shorter than the stated maturity of the
mortgages in the underlying pool. Because of such variation in prepayment
rates, it is not possible to predict the life of a particular Ginnie Mae,
but FHA statistics indicate that 25- to 30-year single family dwelling
mortgages have an average life of approximately 12 years. The majority of
Ginnie Maes are backed by mortgages of this type, and accordingly the
generally accepted practice treats Ginnie Maes as 30-year securities which
prepay fully in the 12th year.
Ginnie Maes bear a stated "coupon rate" which represents the effective
FHA-VA mortgage rate at the time of issuance, less 0.5%, which constitutes
the GNMA's and issuer's fees. For providing its guarantee, the GNMA
receives an annual fee of 0.06% of the outstanding principal on certificates
backed by single family dwelling mortgages, and the issuer receives an
annual fee of 0.44% for assembling the pool and for passing through monthly
payments of interest and principal.
Payments to holders of Ginnie Maes consist of the monthly distributions
of interest and principal less the GNMA's and issuer's fees. The actual
yield to be earned by a holder of a Ginnie Mae is calculated by dividing
interest payments by the purchase price paid for the Ginnie Mae (which may
be at a premium or a discount from the face value of the certificate).
Monthly distributions of interest, as contrasted to semi-annual
distributions which are common for other fixed interest investments, have
the effect of compounding and thereby raising the effective annual yield
earned on Ginnie Maes. Because of the variation in the life of the pools of
mortgages which back various Ginnie Maes, and because it is impossible to
anticipate the rate of interest at which future principal payments may be
reinvested, the actual yield earned from a portfolio of Ginnie Maes will
differ significantly from the yield estimated by using an assumption of a
12-year life for each Ginnie Mae included in such a portfolio as described
above.
Government-Related Securities. Mortgage-related securities issued by
the Federal National Mortgage Association (the "FNMA") include FNMA
Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes")
which are solely the obligations of the FNMA and are not backed by or
entitled to the full faith and credit of the United States. The FNMA is a
government-sponsored organization owned entirely by private stockholders.
Fannie Maes are guaranteed as to timely payment of principal and interest by
the FNMA.
Mortgage-related securities issued by the Federal Home Loan Mortgage
Corporation (the "FHLMC") include FHLMC Mortgage Participation Certificates
(also known as "Freddie Macs" or "PCs"). The FHLMC is a corporate
instrumentality of the United States, created pursuant to an Act of
Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs
are not guaranteed by the United States or by any Federal Home Loan Bank and
do not constitute a debt or obligation of the United States or of any
Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment
of interest, which is guaranteed by the FHLMC. The FHLMC guarantees either
ultimate collection or timely payment of all principal payments on the
underlying mortgage loans. While the FHLMC does not guarantee timely
payment of principal, the 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. Collateralized mortgage
obligations or "CMOs" are debt obligations collateralized by mortgage loans
or mortgage pass-through securities. Typically, CMOs are collateralized by
Ginnie Mae, Fannie Mae or Freddie Mac Certificates, but also may be
collateralized by whole loans or Private Pass-Throughs, described below
(such collateral collectively hereinafter referred to as "Mortgage Assets").
Multiclass pass-through securities may be equity interests in a trust
composed of Mortgage Assets. Unless the context indicates otherwise, all
references herein to CMOs include multiclass pass-through securities.
Payments of principal of and interest on the Mortgage Assets, and any
reinvestment income thereon, provide the funds to pay debt service on the
CMOs or make scheduled distributions on the multiclass pass-through
securities. CMOs may be issued by agencies or instrumentalities of the U.S.
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. The
issuer of a series of CMOs may elect to be treated as a Real Estate Mortgage
Investment Conduit.
Private Mortgage Pass-Through Securities. Private mortgage pass-
through securities ("Private Pass-Throughs") 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, including
savings and loan associations, mortgage banks, commercial banks, investment
banks and special purpose subsidiaries of the foregoing. Private Pass-
Throughs usually are backed by a pool of conventional fixed rate or
adjustable rate mortgage loans. Since Private Pass-Throughs 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.
Stripped Mortgage-Backed Securities. Stripped mortgage-backed
securities ("SMBS") are derivative multiclass mortgage securities. SMBS may
be issued by agencies or instrumentalities of the U.S. 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.
SMBS usually are structured with two classes that receive different
proportions of the interest and principal distributions on a pool of
Mortgage Assets. A common type of SMBS will have one class receiving some
of the interest and most of the principal from the Mortgage Assets, while
the other class will receive most of the interest and the remainder of the
principal. In the most extreme case, one class will receive all of the
interest (the interest-only or "IO" class), while the other class will
receive all of the principal (the principal-only or "PO" class). The yield
to maturity on an IO class is extremely sensitive to the rate of principal
payments (including prepayments) on the related underlying Mortgage Assets,
and a rapid rate of principal payments may have a material adverse effect on
the Fund's yield to maturity. If the underlying Mortgage Assets experience
greater than anticipated prepayments of principal, the Fund may fail to
fully recoup its initial investment in these securities even if the
securities are rated in the highest rating category by any nationally
recognized statistical rating organization. In addition, no assurance can
be given as to the liquidity of the market for certain SMBS. Determination
as to the liquidity of such securities will be made in accordance with
guidelines established by the Fund's Board of Trustees. In accordance with
such guidelines, the Manager will monitor the Fund's investments in such
securities with particular regard to trading activity, availability of
reliable price information and other relevant information. The Fund will
not invest more than 15% of the value of its net assets in securities that
are illiquid.
Repurchase Agreements. The Fund's custodian or sub-custodian will have
custody of, and will hold in a segregated account, securities acquired by
the Fund under a repurchase agreement. Repurchase agreements are considered
by the staff of the Securities and Exchange Commission to be loans by the
Fund. In an attempt to reduce the risk of incurring a loss on a repurchase
agreement, the Fund will enter into repurchase agreements only with domestic
banks with total assets in excess of one billion dollars or primary
government securities dealers reporting to the Federal Reserve Bank of New
York, with respect to securities of the type in which the Fund may invest,
and will require that additional securities be deposited with it if the
value of the securities purchased should decrease below resale price.
Management Policies
Leverage Through Borrowing. For borrowings for investment purposes,
the Investment Company Act of 1940, as amended (the "Act"), requires the
Fund to maintain continuous asset coverage (that is, total assets including
borrowings, less liabilities exclusive of borrowings) of 300% of the amount
borrowed. If the required coverage should decline as a result of market
fluctuations or other reasons, the Fund may be required to sell some of its
portfolio holdings within three days to reduce the debt and restore the 300%
asset coverage, even though it may be disadvantageous from an investment
standpoint to sell at that time. The Fund also may be required to maintain
minimum average balances in connection with such borrowing or to pay a
commitment or other fee to maintain a line of credit; either of those
requirements would increase the cost of borrowing over the stated interest
rate. To the extent the Fund enters into a reverse repurchase agreement,
the Fund will maintain in a segregated custodial account cash or U.S.
Government securities or other high quality liquid debt securities at least
equal to the aggregate amount of its reverse repurchase obligations, plus
accrued interest, in certain cases, in accordance with releases promulgated
by the Securities and Exchange Commission. The Securities and Exchange
Commission views reverse repurchase transactions as collateralized
borrowings by the Fund.
Short-Selling. The Fund may engage in short-selling. Until the Fund
closes its short position or replaces the borrowed security, the Fund will:
(a) maintain a segregated account, containing cash or U.S. Government
securities, at such a level that (i) the amount deposited in the account
plus the amount deposited with the broker as collateral will equal the
current value of the security sold short and (ii) the amount deposited in
the segregated account plus the amount deposited with the broker as
collateral will not be less than the market value of the security at the
time it was sold short; or (b) otherwise cover its short position.
Derivatives. The Fund may invest in Derivatives (as defined in the
Prospectus) in furtherance of its investment objective. These investments
may be purchased on established exchanges or through privately negotiated
transactions referred to as over-the-counter Derivatives. Exchange-traded
Derivatives generally are guaranteed by the clearing agency which is the
issuer or counterparty to such Derivatives. This guarantee usually is
supported by a daily payment system (i.e., margin requirements) operated by
the clearing agency in order to reduce overall credit risk. As a result,
unless the clearing agency defaults, there is relatively little counterparty
credit risk associated with Derivatives purchased on an exchange. By
contrast, no clearing agency guarantees over-the-counter Derivatives.
Therefore, each party to an over-the-counter Derivative bears the risk that
the counterparty will default. Accordingly, the Manager will consider the
creditworthiness of counterparties to over-the-counter Derivatives in the
same manner as it would review the credit quality of a security to be
purchased by the Fund. Over-the-counter Derivatives are less liquid than
exchange-traded Derivatives since the other party to the transaction may be
the only investor with sufficient understanding of the Derivative to be
interested in bidding for it.
Futures Transactions--In General. The Fund may enter into interest
rate futures contracts on U.S. domestic markets. Engaging in these
transactions involves risk of loss to the Fund which could adversely affect
the value of the Fund's net assets. Although the Fund intends to purchase
or sell futures contracts only if there is an active market for such
contracts, no assurance can be given that a liquid market will exist for any
particular contract at any particular time. Many futures exchanges and
boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit or trading may be suspended for specified periods during
the trading day. Futures contract prices could move to the limit for
several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and potentially
subjecting the Fund to substantial losses.
Successful use of futures by the Fund also is subject to the Manager's
ability to predict correctly movements in the direction of the relevant
market and, to the extent the transaction is entered into for hedging
purposes, to ascertain the appropriate correlation between the transaction
being hedged and the price movements of the futures contract. For example,
if the Fund uses futures to hedge against the possibility of a decline in
the market value of securities held in its portfolio and the prices of such
securities instead increase, the Fund will lose part or all of the benefit
of the increased value of securities which it has hedged because it will
have offsetting losses in its futures positions. In addition, in such
situations, if the Fund has insufficient cash, it may have to sell
securities to meet daily variation margin requirements. Such sales of
securities may, but will not necessarily, be at increased prices which
reflect the rising market. The Fund may have to sell securities at a time
when it may be disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities
and Exchange Commission, the Fund may be required to segregate cash or high
quality money market instruments in connection with its commodities
transactions in an amount generally equal to the value of the underlying
commodity. The segregation of such assets will have the effect of limiting
the Fund's ability otherwise to invest those assets.
Specific Futures Transactions. The Fund may purchase and sell interest
rate futures contracts. An interest rate future obligates the Fund to
purchase or sell an amount of a specific debt security at a future date at a
specific price.
Options--In General. The Fund may purchase and write (i.e., sell) call
or put options with respect to specific securities. A call option gives the
purchaser of the option the right to buy, and obligates the writer to sell,
the underlying security or securities at the exercise price at any time
during the option period, or at a specific date. Conversely, a put option
gives the purchaser of the option the right to sell, and obligates the
writer to buy, the underlying security or securities at the exercise price
at any time during the option period.
A covered call option written by the Fund is a call option with respect
to which the Fund owns the underlying security or otherwise covers the
transaction by segregating cash or other securities. A put option written
by the Fund is covered when, among other things, cash or liquid securities
having a value equal to or greater than the exercise price of the option are
placed in a segregated account with the Fund's custodian to fulfill the
obligation undertaken. The principal reason for writing covered call and
put options is to realize, through the receipt of premiums, a greater return
than would be realized on the underlying securities alone. The Fund
receives a premium from writing covered call or put options which it retains
whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any
particular option or any particular time, and for some options no such
secondary market may exist. A liquid secondary market in an option may
cease to exist for a variety of reasons. In the past, for example, higher
than anticipated trading activity or order flow, or other unforeseen events,
at times have rendered certain of the clearing facilities inadequate and
resulted in the institution of special procedures, such as trading
rotations, restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be possible
to effect closing transactions in particular options. If, as a covered call
option writer, the Fund is unable to effect a closing purchase transaction
in a secondary market, it will not be able to sell the underlying security
until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.
Forward Commitments. Securities purchased on a forward commitment or
when-issued basis are subject to changes in value (generally changing in the
same way, i.e., appreciating when interest rates decline and depreciating
when interest rates rise) based upon the public's perception of the
creditworthiness of the issuer and changes, real or anticipated, in the
level of interest rates. Securities purchased on a forward commitment or
when-issued basis may expose the Fund to risks because they may experience
such fluctuations prior to their actual delivery. Purchasing securities on
a when-issued basis can involve the additional risk that the yield available
in the market when the delivery takes place actually may be higher than that
obtained in the transaction itself. Purchasing securities on a forward
commitment or when-issued basis when the Fund is fully or almost fully
invested may result in greater potential fluctuation in the value of the
Fund's net assets and its net asset value per share.
Future Developments. The Fund may take advantage of opportunities in
the area of options and futures contracts and options on futures contracts
and any other Derivatives which are not presently contemplated for use by
the Fund or which are not currently available but which may be developed, to
the extent such opportunities are both consistent with the Fund's investment
objective and legally permissible for the Fund. Before entering into such
transactions or making any such investment, the Fund will provide
appropriate disclosure in its prospectus or statement of additional
information.
Lending Portfolio Securities. The Fund may lend its portfolio
securities to brokers, dealers and other financial institutions. In
connection with its securities lending transactions, the Fund may return to
the borrower or a third party which is unaffiliated with the Fund, and which
is acting as a "placing broker," a part of the interest earned from the
investment of collateral received for securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned:
(1) the Fund must receive at least 100% cash collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value of
the securities rises above the level of such collateral; (3) the Fund must
be able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any dividends, interest or other
distributions payable on the loaned securities, and any increase in market
value; (5) the Fund may pay only reasonable custodian fees in connection
with the loan; and (6) while voting rights on the loaned securities may pass
to the borrower, the Fund's Board of Trustees must terminate the loan and
regain the right to vote the securities if a material event adversely
affecting the investment occurs. These conditions may be subject to future
modification.
Investment Restrictions. The Fund has adopted investment restrictions
numbered 1 through 8 as fundamental policies, which cannot be changed
without approval by the holders of a majority (as defined in the Act) of the
Fund's outstanding voting shares. Investment restrictions numbered 9
through 13 are not fundamental policies and may be changed by a vote of a
majority of the Fund's Trustees at any time. The Fund may not:
1. Invest more than 25% of the value of its total assets in the
securities of issuers in any single industry, provided that there shall be
no limitation on the purchase of Ginnie Maes or other securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
2. Invest in commodities, except that the Fund may purchase and sell
options, forward contracts, futures contracts, including those relating
indices, and options on futures contracts or indices.
3. Purchase, hold or deal in real estate, or oil, gas or other
mineral leases or exploration or development programs, provided that the
Fund may purchase Ginnie Maes without limitation and purchase and sell
securities that are secured by real estate or issued by companies that
invest or deal in real estate, real estate investment trust securities and
mortgage-backed securities.
4. Borrow money, except to the extent permitted under the Act (which
currently limits borrowing to no more than 33 1/3% of the value of the Fund's
total assets). For purposes of this Investment Restriction, the entry into
options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices shall not constitute
borrowing.
5. Make loans to others, except through the purchase of debt
obligations or the entry into repurchase agreements. However, the Fund may
lend its portfolio securities in an amount not to exceed 33 1/3% of the value
of its total assets. Any loans of portfolio securities will be made
according to guidelines established by the Securities and Exchange
Commission and the Fund's Trustees.
6. Act as an underwriter of securities of other issuers.
7. Issue any senior security (as such term is defined in Section
18(f) of the Act), except to the extent the activities permitted in
Investment Restriction Nos. 2, 4 and 10 may be deemed to give rise to a
senior security.
8. Purchase securities on margin, but the Fund may make margin
deposits in connection with transactions in options, forward contracts,
futures contracts, including those relating to indices, and options on
futures contracts or indices.
9. Invest in the securities of a company for the purpose of
exercising management or control.
10. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to the extent necessary to secure permitted borrowings and to the
extent related to the deposit of assets in escrow in connection with writing
covered put and call options and the purchase of securities on a forward
commitment basis and collateral and initial or variation margin arrangements
with respect to options, forward contracts, futures contracts, including
those relating to indices, and options on futures contracts or indices.
11. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid, if,
in the aggregate, more than 15% of the value of the Fund's net assets would
be so invested.
12. Invest in securities of other investment companies, except to the
extent permitted under the Act.
13. Purchase common stocks, preferred stocks, warrants or other equity
securities, or purchase corporate bonds or debentures, state bonds,
municipal bonds or industrial bonds.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from a change in values or assets will
not constitute a violation of that restriction.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states.
Should the Fund determine that a commitment is no longer in the best
interests of the Fund and its investors, the Fund reserves the right to
revoke the commitment by terminating the sale of Fund shares in the state
involved.
MANAGEMENT OF THE FUND
Trustees and officers of the Fund, together with information as to
their principal business occupations during at least the last five years,
are shown below. Each Trustee who is deemed to be an "interested person" of
the Fund, as defined in the Act, is indicated by an asterisk.
Trustees of the Fund
GORDON J. DAVIS, Trustee. Since October 1994, senior partner with the
law firm of LeBoeuf, Lamb, Greene & MacRae. From 1983 to September
1994, Mr. Davis was a senior partner with the law firm of Lord Day &
Lord, Barrett Smith. From 1978 to 1983, he was Commissioner of Parks
and Recreation for the City of New York. He is also a Director of
Consolidated Edison, a utility company, and Phoenix Home Life Insurance
Company and a member of various other corporate and not-for-profit
boards of directors and trustees. He is 54 years old and his address
is 241 Central Park West, New York, New York 10024.
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman
of the Board of various funds in the Dreyfus Family of Funds. For more
than five years prior thereto, he was President, a director and, until
August 1994, Chief Operating Officer of the Manager and Executive Vice
President and a director of Dreyfus Service Corporation, a wholly-owned
subsidiary of the Manager and, until August 24, 1994, the Fund's
distributor. From August 1994 to December 31, 1994, he was a director
of Mellon Bank Corporation. He is Chairman of the Board of Directors
of the Noel Group, Inc., a venture capital company; a trustee of
Bucknell University; and a director of the Muscular Dystrophy
Association, HealthPlan Services Corporation, Belding Heminway Company,
Inc., a manufacturer and marketer of industrial threads, specialty
yarns, home furnishings and fabrics, Curtis Industries Inc., a national
distributor of security products, chemicals and automotive and other
hardware, Simmons Outdoor Corporation and Staffing Resources, Inc. He
is 52 years old and his address is 200 Park Avenue, New York, New York
10166.
*DAVID P. FELDMAN, Trustee. Chairman and Chief Executive Officer of AT&T
Investment Management Corporation. He is also a trustee of Corporate
Property Investors, a real estate investment company. He is 55 years
old and his address is One Oak Way, Berkeley Heights, New Jersey 07922.
LYNN MARTIN, Trustee. Holder of the Davee Chair at the J.L. Kellogg
Graduate School of Management, Northwestern University. During the
Spring Semester 1993, she was a Visiting Fellow at the Institute of
Policy, Kennedy School of Government, Harvard University. Ms. Martin
also is a consultant to the international accounting firm of Deloitte &
Touche, and chairwoman of its Council on the Advancement of Women.
From January 1991 through January 1993, Ms. Martin served as Secretary
of the United States Department of Labor. From 1981 to 1991, she was
United States Congresswoman for the State of Illinois. She is also a
director of Harcourt General Corporation, a publishing, insurance and
retailing company, Ameritech Corporation, a telecommunications and
information company, and Ryder Systems Incorporated, a transportation
company. She is 55 years old and her address is 3750 Lake Shore Drive,
Chicago, Illinois 60613.
EUGENE McCARTHY, Trustee. Writer and columnist; former Senator from
Minnesota from 1958 to 1970. He is also a director of Harcourt Brace
Jovanovich, Inc., publishers. He is 79 years old and his address is
271 Hawlin Road, Woodville, Virginia 22749.
DANIEL ROSE, Trustee. President and Chief Executive Officer of Rose
Associates, Inc., a New York based real estate development and
management firm. In July 1994, Mr. Rose received a Presidential
appointment to serve as a Director of the Baltic-American Enterprise
Fund, which will make equity investments and loans and provide
technical business assistance to new business concerns in the Baltic
states. He is also chairman of the Housing Committee of The Real
Estate Board of New York, Inc., and a trustee of Corporate Property
Investors, a real estate investment company. He is 66 years old and
his address is c/o Rose Associates, Inc., 380 Madison Avenue, New York,
New York 10017.
SANDER VANOCUR, Trustee. Since January 1994, Mr. Vanocur has served as
Visiting Professional Scholar at the Freedom Forum First Amendment
Center at Vanderbilt University. Since January 1992, Mr. Vanocur has
been the President of Old Owl Communications, a full-service
communications firm, and since November 1989, he has served as a
Director of the Damon Runyon-Walter Winchell Cancer Research Fund.
From June 1986 to December 1991, he was a Senior Correspondent of ABC
News and, from October 1986 to December 1991, he was Anchor of the ABC
News program "Business World," a weekly business program on the ABC
television network. Mr. Vanocur joined ABC News in 1977. He is 67
years old and his address is 2928 P Street, N.W., Washington, D.C.
20007.
ANNE WEXLER, Trustee. Chairman of the Wexler Group, consultants
specializing in government relations and public affairs. She is also a
director of American Cyanamid Company, Alumax, The Continental
Corporation, Comcast Corporation, The New England Electric System, NOVA
and a member of the board of the Carter Center of Emory University, the
Council of Foreign Relations, the National Parks Foundation; Visiting
Committee of the John F. Kennedy School of Government at Harvard
University and the Board of Visitors of the University of Maryland
School of Public Affairs. She is 65 years old and her address is c/o
The Wexler Group, 1317 F Street, Suite 600, N.W., Washington, D.C.
20004.
REX WILDER, Trustee. Financial Consultant. He is 75 years old and his
address is 290 Riverside Drive, New York, New York 10025.
For so long as the Fund's plan described in the section captioned
"Shareholder Services Plan" remains in effect, the Trustees of the Fund who
are not "interested persons" of the Fund, as defined in the Act, will be
selected and nominated by the Trustees who are not "interested persons" of
the Fund.
Meetings of shareholders will not be held for the purpose of electing
Trustees unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders, at which time the Trustees
then in office will call a shareholders' meeting for the election of
Trustees. Under the Act, shareholders of record of not less than two-thirds
of the outstanding shares of the Fund may remove a Trustee through a
declaration in writing or by vote cast in person or by proxy at a meeting
called for that purpose. The Trustees are required to call a meeting of
shareholders for the purpose of voting upon the question of removal of any
such Trustee when requested in writing to do so by the shareholders of
record of not less than 10% of the Fund's outstanding shares.
The Fund typically pays its Trustees an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the
Board receives an additional 25% of such compensation. Emeritus Board
members are entitled to receive an annual retainer and a per meeting fee of
one-half the amount paid to them as Board members. For the fiscal year
ended December 31, 1994, the aggregate amount of compensation paid to each
Trustee by the Fund and by all other funds in the Dreyfus Family of Funds
for which such person is a Board member (the number of which is set forth in
parenthesis next to each Board member's total compensation) was as follows:
<TABLE>
(5)
(3) Total
(2) Pension or (4) Compensation from
(1) Aggregate Retirement Benefits Estimated Annual Fund and Fund
Name of Board Compensation from Accrued as Part of Benefits Upon Complex Paid to
Member Fund* Fund's Expenses Retirement Board Member
- ------------- ------------------- --------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Gordon J. Davis $3,500 none none $ 29,602 (26)
Joseph S. DiMartino $4,375** none none $445,000** (94)
David P. Feldman $3,250 none none $ 85,631 (28)
Lynn Martin $3,250 none none $ 26,852 (12)
Eugene McCarthy $3,500 none none $ 29,403 (12)
Daniel Rose $3,250 none none $ 62,006 (22)
Sander Vanocur $3,500 none none $ 62,006 (22)
Anne Wexler $1,181 none none $ 26,329 (17)
Rex Wilder $3,500 none none $ 29,403 (12)
- -------------------------------
</TABLE>
* Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $455 for all Trustees as a group.
** Estimated amounts for the current fiscal year ending December 31, 1995.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President and Chief
Operating Officer of the Distributor and an officer of other investment
companies advised or administered by the Manager. From December 1991 to
July 1994, she was President and Chief Compliance Officer of Funds
Distributor, Inc., the ultimate parent company of which is Boston
Institutional Group, Inc. Prior to December 1991, she served as Vice
President and Controller, and later as Senior Vice President, of The Boston
Company Advisors, Inc. She is 38 years old.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President and
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From February 1992
to July 1994, he served as Counsel for The Boston Company Advisors,
Inc. From August 1990 to February 1992, he was employed as an
associate at Ropes & Gray. He is 31 years old.
ERIC B. FISCHMAN, Vice President and Assistant Secretary. Associate General
Counsel of the Distributor and an officer of other investment companies
advised or administered by the Manager. From September 1992 to August
1994, he was an attorney with the Board of Governors of the Federal
Reserve System. He is 30 years old.
FREDERICK C. DEY, Vice President and Assistant Treasurer. Senior Vice
President of the Distributor and an officer of other investment
companies advised or administered by the Manager. From 1988 to August
1994, he was manager of the High Performance Fabric Division of Springs
Industries Inc. He is 33 years old.
JOSEPH S. TOWER, III, Assistant Treasurer. Senior Vice President, Treasurer
and Chief Financial Officer of the Distributor and an officer of other
investment companies advised or administered by the Manager. From July
1988 to August 1994, he was employed by The Boston Company, Inc. where
he held various management positions in the Corporate Finance and
Treasury areas. He is 33 years old.
JOHN J. PYBURN, Assistant Treasurer. Assistant Treasurer of the Distributor
and an officer of other investment companies advised or administered by
the Manager. From 1984 to July 1994, he was Assistant Vice President
in the Mutual Fund Accounting Department of the Manager. He is 60
years old.
RUTH D. LEIBERT, Assistant Secretary. Assistant Vice President of the
Distributor of an officer of other investment companies advised or
administered by the Manager. From March 1992 to July 1994, she was a
Compliance Officer for The Managers Funds, a registered investment
company. From March 1990 until September 1991, she was Development
Director of The Rockland Center for the Arts. She is 50 years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
The Fund's Trustees and officers, as a group, owned less than 1% of the
Fund's voting securities outstanding on October 9, 1995.
MANAGEMENT AGREEMENT
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the Fund."
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") dated August 24, 1994 with the Fund, which is
subject to annual approval by (i) the Fund's Trustees or (ii) vote of a
majority (as defined in the Act) of the outstanding voting securities of the
Fund, provided that in either event the continuance also is approved by a
majority of the Trustees who are not "interested persons" (as defined in the
Act) of the Fund or the Manager, by vote cast in person at a meeting called
for the purpose of voting such approval. The Agreement was approved by
shareholders on August 3, 1994, and was last approved by the Fund's Board of
Trustees, including a majority of the Trustees who are not "interested
persons" of any party to this Agreement, at a meeting held on November 7,
1994. The Agreement is terminable without penalty, on 60 days' notice, by
the Fund's Trustees or by vote of the holders of a majority of the Fund's
outstanding securities, or, on 90 days' notice, by the Manager. The
Agreement will terminate automatically in the event of its assignment (as
defined in the Act).
The following persons are officers and/or directors of the Manager:
Howard Stein, Chairman of the Board and Chief Executive Officer; W. Keith
Smith, Vice Chairman of the Board; Robert E. Riley, President, Chief
Operating Officer and a director; Stephen E. Canter, Vice Chairman, Chief
Investment Officer and a director; Lawrence S. Kash, Vice Chairman--
Distribution and a director; Philip L. Toia, Vice Chairman--Operations and
Administration and a director; Barbara E. Casey, Vice President--Dreyfus
Retirement Services; Diane M. Coffey, Vice President--Corporate
Communications; Elie M. Genadry, Vice President--Institutional Sales;
William F. Glavin, Jr., Vice President--Corporate Development; Henry D.
Gottmann, Vice President--Retail Sales and Service; Mark N. Jacobs, Vice
President--Legal and Secretary; Daniel C. Maclean, Vice President and
General Counsel; Jeffrey N. Nachman, Vice President--Mutual Fund Accounting;
Andrew S. Wasser, Vice President--Information Services; Katherine C.
Wickham, Vice President--Human Resources; Maurice Bendrihem, Controller;
Elvira Oslapas, Assistant Secretary; and Mandell L. Berman, Frank V.
Cahouet, Alvin E. Friedman, Lawrence M. Greene, Julian M. Smerling and David
B. Truman, directors.
The Manager manages the Fund's portfolio of investments in accordance
with the stated policies of the Fund, subject to the approval of the Fund's
Trustees. The Manager is responsible for investment decisions, and provides
the Fund with portfolio managers who are
authorized by the Trustees to execute purchases and sales of securities.
The Fund's portfolio managers are Garitt A. Kono and Gerald E. Thunelius.
The Manager also maintains a research department with a professional staff
of portfolio managers and securities analysts who provide research services
for the Fund as well as for other funds advised by the Manager. All
purchases and sales are reported for the Board of Trustees' review at the
meeting subsequent to such transactions.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The
expenses borne by the Fund include: taxes, interest, loan commitment fees,
interest and distributions paid on securities sold short, brokerage fees and
commissions, if any, fees of Trustees who are not officers, directors,
employees or holders of 5% or more of the outstanding voting securities of
the Manager, Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of maintaining
the Fund's existence, costs of independent pricing services, costs
attributable to investor services (including, without limitation, telephone
and personnel expenses), costs of shareholders' reports and meetings, costs
of preparing and printing prospectuses and statements of additional
information for regulatory purposes and for distribution to existing
shareholders, and any extraordinary expenses.
The Manager maintains office facilities on behalf of the Fund and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund.
As compensation for its services, the Fund has agreed to pay the
Manager a monthly management fee at the annual rate of .60 of 1% of the
value of the Fund's average daily net assets. All fees and expenses are
accrued daily and deducted before declaration of dividends to investors.
For the fiscal years ended December 31, 1992, 1993 and 1994 the management
fees payable to the Manager were $231,376, $317,545 and $285,899,
respectively, which were reduced by $231,376, $317,545 and $285,899,
respectively, as a result of undertakings by The Dreyfus Corporation. Thus,
no management fees were paid by the Fund pursuant to such undertakings by
the Manager for the fiscal years ended December 31, 1992, 1993 and 1994.
The Manager has agreed that if in any fiscal year the aggregate
expenses of the Fund, exclusive of taxes, brokerage, interest on borrowings
and (with the prior written consent of the necessary state securities
commissions) extraordinary expenses, but including the management fee,
exceed the expense limitation of any state having jurisdiction over the
Fund, the Fund may deduct from the payment to be made to the Manager under
the Agreement, or the Manager will bear, such excess expense to the extent
required by state law. Such deduction or payment, if any, will be estimated
daily, and reconciled and effected or paid, as the case may be, on a monthly
basis.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of the Fund's net assets increases.
SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services
Plan."
The Fund has adopted a Shareholder Services Plan (the "Plan") pursuant
to which the Fund reimburses Dreyfus Service Corporation for certain
allocated expenses of providing personal services and/or maintaining
shareholder accounts. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder inquiries
regarding the Fund and providing reports and other information, and services
related to the maintenance of shareholder accounts.
A quarterly report of the amounts expended under the Plan, and the
purposes for which such expenditures were incurred, must be made to the
Trustees for their review. In addition, the Plan provides that material
amendments of the Plan must be approved by the Board of Trustees, and by the
Trustees who are not "interested persons" (as defined in the Act) of the
Fund and have no direct or indirect financial interest in the operation of
the Plan by vote cast in person at a meeting called for the purpose of
considering such amendments. The Plan is subject to annual approval by such
vote of the Trustees cast in person at a meeting called for the purpose of
voting on the Plan. The Plan is terminable at any time by vote of a
majority of the Trustees who are not "interested persons" and have no direct
or indirect financial interest in the operation of the Plan.
For the fiscal year ended December 31, 1994, Dreyfus Service
Corporation waived receipt of $107,507 payable by the Fund pursuant to the
Plan.
PURCHASE OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for other funds in the Dreyfus Family of Funds and for
certain other investment companies. In some states, certain other financial
institutions effecting transactions in Fund shares may be required to
register as dealers pursuant to state law.
Reopening an Account. An investor may reopen an account with a minimum
investment of $10,000 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Fund
Shares."
Check Redemption Privilege. An investor may indicate on the Account
Application or by later written request that the Fund provide Redemption
Checks ("Checks") drawn on the Fund's account. Checks will be sent only to
the registered owner(s) of the account and only to the address of record.
The Account Application or later written request must be manually signed by
the registered owner(s). Checks may be made payable to the order of any
person in an amount of $1,000 or more. When a Check is presented for
payment to The Shareholder Services Group, Inc., the Fund's transfer and
dividend disbursing agent (the "Transfer Agent"), the Transfer Agent, as the
investor's agent, will cause the Fund to redeem a sufficient number of full
and fractional shares in the investor's account to cover the amount of the
Check and the $2.00 charge. Dividends are earned until the Check clears.
After clearance, a copy of the Check will be returned to the investor.
Investors generally will be subject to the same rules and regulations that
apply to checking accounts, although election of this Privilege creates only
a shareholder-transfer agent relationship with the Transfer Agent.
If the amount of the Check, plus any applicable charges, is greater
than the value of the shares in an investor's account, the Check will be
returned marked "insufficient funds." Checks should not be used to close an
account.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor and reasonably believed by the Transfer Agent to be genuine. An
investor will be charged a $5.00 fee for each wire redemption from the Fund,
which will be deducted from the investor's account and paid to the Transfer
Agent. Ordinarily, the Fund will initiate payment for shares redeemed
pursuant to this Privilege on the next business day after receipt by the
Transfer Agent of a redemption request in proper form. Redemption proceeds
($5,000 minimum) will be transferred by Federal Reserve wire only to the
commercial bank account specified by the investor on the Account Application
or Shareholder Services Form or to a correspondent bank if the investor's
bank is not a member of the Federal Reserve System. Fees ordinarily are
imposed by such bank and usually borne by the investor. Immediate
notification by the correspondent bank to the investor's bank is necessary
to avoid a delay in crediting the funds to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
---------------- ---------------------
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at
1-800-654-7171, toll free. Investors should advise the operator that the
above transmittal code must be used and should also inform the operator of
the Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Share Certificates; Signatures."
Share Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each investor, including each
owner of a joint account, and each signature must be guaranteed. Signatures
on endorsed certificates submitted for redemption also must be guaranteed.
The Transfer Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
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. Guarantees
must be signed by an authorized signatory of the guarantor and
"Signature-Guaranteed" must appear with the signature. The Transfer Agent
may request additional documentation from corporations, executors,
administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular
verification. For further information with respect to signature-guarantees,
investors may call one of the telephone numbers listed on the cover.
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any investor of record, limited in amount during
any 90-day period to the lesser of $250,000 or 1% of the value of the Fund's
net assets at the beginning of such period. Such commitment is irrevocable
without the prior approval of the Securities and Exchange Commission. In
the case of requests for redemption in excess of such amount, the Board of
Trustees reserve the right to make payments in whole or part in securities
or other assets of the Fund in case of an emergency or any time a cash
distribution would impair the liquidity of the Fund to the detriment of the
existing shareholders. In such event, the securities would be valued in the
same manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (b)
when trading in the markets the Fund ordinarily utilizes is restricted, or
when an emergency exists as determined by the Securities and Exchange
Commission so that disposal of the Fund's investments or determination of
its net asset value is not reasonably practicable, or (c) for such other
periods as the Securities and Exchange Commission by order may permit to
protect the Fund's shareholders.
FUND EXCHANGES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Fund Exchanges."
Shares of other funds purchased by exchange will be purchased on the
basis of relative net asset value per share as follows:
A. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load, and additional shares acquired through reinvestment of
dividends or distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, investors must notify the
Transfer Agent of their prior ownership of fund shares and their account
number.
To request an exchange, an investor must give exchange instructions to
the Transfer Agent in writing or by telephone. The ability to issue
exchange instructions by telephone is given to all Fund shareholders
automatically, unless the investor checks the applicable "No" box on the
Account Application, indicating that the investor specifically refuses this
privilege. By using the Telephone Exchange Privilege, the investor
authorizes the Transfer Agent to act on telephonic instructions from any
person representing himself or herself to be the investor, and reasonably
believed by the Transfer Agent to be genuine. Telephone exchanges may be
subject to limitations as to the amount involved or the number of telephone
exchanges permitted. Shares issued in certificate form are not eligible for
telephone exchange. Investors will be charged a $5.00 fee for each exchange
made out of the Fund, which will be deducted from the investor's account and
paid to the Transfer Agent.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made. For Dreyfus-
sponsored Keogh Plans, IRAs and Simplified Employee Pension Plans ("SEP-
IRAs") with only one participant, the minimum initial investment is $750.
To exchange shares held in Corporate Plans, 403(b)(7) Plans and SEP-IRAs
with more than one participant, the minimum initial investment is $100 if
the plan has at least $2,500 invested among the funds in the Dreyfus Family
of Funds. To exchange shares held in personal retirement plans, the shares
exchanged must have a current value of at least $100.
The Fund Exchanges service is available to shareholders resident in any
state in which shares of the fund being acquired may legally be sold.
Shares may be exchanged only between accounts having identical names and
other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The availability of the Fund
Exchanges service may be modified or terminated at any time upon notice to
shareholders.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund Shares."
Valuation of Portfolio Securities. The Fund's investments are valued
each business day using available market quotations or at fair value as
determined by one or more independent pricing services (collectively, the
"Service") approved by the Board of Trustees. The Service may use available
market quotations, employ electronic data processing techniques and/or a
matrix system to determine valuations. The procedures of the Service are
reviewed by the officers of the Fund under the general supervision of the
Board of Trustees. Expenses and fees, including the management fees
(reduced by the expense limitation, if any), are accrued daily and are taken
into account for the purpose of determining the net asset value of Fund
shares.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance
Information."
The Fund's current yield for the 30-day period ended June 30, 1995 was
6.93%, which reflects the absorption of expenses pursuant to expense
limitations in effect. See "Management of the Fund" in the Prospectus. Had
expenses not been absorbed, the Fund's yield for the same period would have
been 6.03%. Current yield is computed pursuant to a formula which operates
as follows: the amount of the Fund's expenses accrued for the 30-day period
(net of reimbursements) is subtracted from the amount of the dividends and
interest earned (computed in accordance with regulatory requirements) by the
Fund during the period. That result is then divided by the product of:
(a) the average daily number of shares outstanding during the period that
were entitled to receive dividends, and (b) the net asset value per share on
the last day of the period less any undistributed earned income per share
reasonably expected to be declared as a dividend shortly thereafter. The
quotient is then added to 1, and that sum is raised to the 6th power, after
which 1 is subtracted. The current yield is then arrived at by multiplying
the result by 2.
The Fund's average annual total return for the 1, 5 and 7.904 year
periods ended June 30, 1995 was 11.17%, 8.50% and 8.76%, respectively. The
Fund's average annual total return for the 3.855 year period beginning with
the effectiveness of the Fund's current investment objective, fundamental
investment policies and investment restrictions on August 23, 1991 and
ending June 30, 1995 was 8.58%. The Fund's average annual total return
figures referenced above reflect the absorption of certain expenses. Had
these expenses not been absorbed, average annual total return would have
been lower. Average annual total return is calculated by determining the
ending redeemable value of an investment purchased with a hypothetical
$1,000 payment made at the beginning of the period (assuming the
reinvestment of dividends and distributions), dividing by the amount of the
initial investment, taking the "n"th root of the quotient (where "n" is the
number of years in the period) and subtracting 1 from the result.
Total return is calculated by subtracting the amount of the Fund's net
asset value per share at the beginning of a stated period from the net asset
value per share at the end of the period (after giving effect to the
reinvestment of dividends and distributions during the period), and dividing
the result by the net asset value per share at the beginning of the period.
The Fund's total return for the period from August 5, 1987 to June 30, 1995,
and the period August 23, 1991 to June 30, 1995, was 94.20% and 37.34%,
respectively. The Fund's total return figures referenced above reflect the
absorption of certain expenses. Had these expenses not been absorbed, total
return would have been lower.
Because of the Fund's organizational structure and its investment
policies, as of the date hereof, the Fund has the ability to seek higher
yields than those generally available from other GNMA funds. From time to
time, advertising materials for the Fund may include this information.
Advertising materials for the Fund, from time to time, also may include
comparisons to FDIC-insured bank investments, such as certificates of
deposit.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Distributions
and Taxes."
Management of the Fund believes that the Fund has qualified for the
fiscal year ended December 31, 1994 as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"). The Fund
intends to continue to so qualify if such qualification is in the best
interests of its shareholders. As a regulated investment company, the Fund
pays no Federal income tax on net investment income and net realized capital
gains to the extent that such income and gains are distributed to
shareholders. The term "regulated investment company" does not imply the
supervision of management or investment practices or policies by any
government agency.
Any dividend or distribution declared and paid shortly after an
investor's purchase may have the effect of reducing the net asset value of
his shares below the cost of his investment. Such a distribution would be a
return on investment in an economic sense although taxable as stated above.
In addition, the Code provides that if a shareholder has not held his shares
for more than six months and has received a capital gains dividend with
respect to such shares, any loss incurred on the sale of such shares will be
treated as long-term capital loss.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain or loss. However, all or a portion of any gains
realized from the sale or other disposition of certain market discount bonds
will be treated as ordinary income under Section 1276 of the Code. In
addition, all or a portion of the gain realized from engaging in "conversion
transactions" may be treated as ordinary income under Section 1258 of the
Code. "Conversion transactions" are defined to include certain forward,
futures, option and "straddle" transactions, transactions marketed or sold
to produce capital gains, or transactions described in Treasury regulations
to be issued in the future.
Under Section 1256 of the Code, any gain or loss the Fund realizes from
certain futures and options transactions will be treated as 60% long-term
capital gain or loss and 40% short-term capital gain or loss. Gain or loss
will arise upon exercise or lapse of such futures contracts and options as
well as from closing transactions. In addition, any such futures contracts
or options remaining unexercised at the end of the Fund's taxable year will
be treated as sold for their then fair market value, resulting in additional
gain or loss to the Fund characterized in the manner described above.
Offsetting positions held by the Fund involving certain futures
contracts or options may constitute "straddles." "Straddles" are defined to
include "offsetting positions" in actively traded personal property. The
tax treatment of "straddles" is governed by Sections 1092 and 1258 of the
Code, which, in certain circumstances, overrides or modifies the provisions
of Section 1256 of the Code. As such, all or a portion of any short or
long-term capital gain from certain "straddle" transactions may be
recharacterized to ordinary income.
If the Fund were treated as entering into "straddles" by reason of its
futures or options transactions, such "straddles" would be characterized as
"mixed straddles" if the futures or options transactions comprising a part
of such "straddles" were governed by Section 1256 of the Code. The Fund may
make one or more elections with respect to "mixed straddles." Depending on
which election is made, if any, the results to the Fund may differ. If no
election is made to the extent the "straddle" rules apply to positions
established by the Fund, losses realized by the Fund will be deferred to the
extent of unrealized gain in the offsetting position. Moreover, as a result
of the "straddle" and conversion transaction rules, short-term capital loss
on "straddle" positions may be recharacterized as long-term capital loss,
and long-term capital gain may be treated as short-term capital gain or
ordinary income.
Investment by the Fund in securities issued at a discount or providing
for deferred interest or for payment of interest in the form of additional
obligations could cause the Fund to recognize income prior to the receipt of
cash payments. For example, the Fund could be required to accrue as income
each year a portion of the discount (or deemed discount) at which such
securities were issued. A portion of such income would be allocable to an
investor even though no corresponding distribution were made to the
investor, thus causing the investor's income to exceed distributions to him.
PORTFOLIO TRANSACTIONS
Portfolio securities are purchased from and sold to parties acting as
either principal or agent. Newly-issued securities ordinarily are purchased
directly from the issuer or from an underwriter; other purchases and sales
usually are placed with those dealers from whom it appears that the best
price or execution will be obtained. Usually no brokerage commissions, as
such, are paid by the Fund for such purchases and sales, although the price
paid usually includes an undisclosed compensation to the dealer acting as
agent. The prices paid to underwriters of newly-issued securities usually
include a concession paid by the issuer to the underwriter, and purchases of
after-market securities from dealers ordinarily are executed at a price
between the bid and asked price. No brokerage commissions have been paid by
the Fund to date.
Transactions are allocated to various dealers by the Fund's portfolio
managers in their best judgment. The primary consideration is prompt and
effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected for research, statistical or
other services to enable the Manager to supplement its own research and
analysis with the views and information of other securities firms.
Research services furnished by brokers through which the Fund effects
securities transactions may be used by the Manager in advising other funds
it advises and, conversely, research services furnished to the Manager by
brokers in connection with other funds the Manager advises may be used by
the Manager in advising the Fund. Although it is not possible to place a
dollar value on these services, it is the opinion of the Manager that the
receipt and study of such services from brokers should not reduce the
overall expenses of its research department.
The use of investment techniques such as forward roll transactions,
leverage through borrowing, short-selling and engaging in financial futures
and options transactions may produce higher than normal portfolio turnover.
Portfolio turnover may vary from year to year, as well as within a year.
During the fiscal year 1994, the use of forward roll transactions and the
sale of large amounts of unsettled securities bought to take advantage of
favorable short-term market fluctuations caused a significant increase in
the Fund's portfolio turnover rate. The Fund's portfolio turnover rate
increased from 34.02% for the fiscal year ended December 31, 1993 to 290.20%
for the fiscal year ended December 31, 1994.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the fund's Prospectus entitled "General Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Fund shares are of one class and have equal rights as to dividends and in
liquidation. Shares have no preemptive, subscription or conversion rights
and are freely transferable.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
Effective November 1, 1995, the Fund changed its name from Dreyfus
Investors GNMA Fund to Dreyfus BASIC GNMA Fund. On August 23, 1991, the
Fund had changed its name from Dreyfus Foreign Investors GNMA Fund, L.P. to
Dreyfus Investors GNMA Fund, L.P. Effective January 1, 1994, the Fund began
operating as a Massachusetts business trust.
Effective August 23, 1991, the Fund changed its investment objective
from that of providing investors with as high a level of current income,
free of U.S. Federal income tax and U.S. tax withholding requirements for
qualifying foreign investors, as is consistent with the preservation of
capital to its current investment objective, and changed certain of its
fundamental policies and investment restrictions to permit the Fund to
invest at least 65% of its assets in GNMA Certificates, invest in other
mortgage-related securities, engage in options and futures transactions,
borrow and pledge its assets for investment and temporary or emergency
purposes, enter into repurchase agreements and invest in illiquid
securities.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT,
COUNSEL AND INDEPENDENT AUDITORS
The Bank of New York, 90 Washington Street, New York, New York 10286,
acts as custodian of the Fund's investments. The Shareholder Services
Group, Inc., a subsidiary of First Data Corporation, P.O. Box 9671,
Providence, Rhode Island 02940-9671, acts as transfer and dividend
disbursing agent. Neither The Bank of New York nor The Shareholder Services
Group, Inc. has any part in determining the investment policies of the Fund
or which securities are to be purchased or sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York
10004-2696, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the
shares of beneficial interest being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
the Prospectus and elsewhere in this report.
<TABLE>
<CAPTION>
DREYFUS INVESTORS GNMA FUND
STATEMENT OF INVESTMENTS DECEMBER 31, 1994
PRINCIPAL
BONDS AND NOTES--92.5% AMOUNT VALUE
----------- -------------
<S> <C> <C>
MORTGAGE-BACKED CERTIFICATES--73.5%
Government National Mortgage Association I:
7 1/2%, 2/15/2022-8/15/2024............................................. $ 4,976,514 $ 4,626,566
8%, 8/15/2006-7/15/2024................................................. 7,376,515 7,130,631
8 1/2%, 7/15/2017-12/15/2024............................................ 7,623,571 7,506,777
9% (a).................................................................. 1,000,000 1,010,930
9%, 12/15/2009-6/15/2018................................................ 2,960,637 2,994,850
9 1/4%, 10/15/2023...................................................... 970,029 966,081
9 1/2%, 1/15/2017-8/15/2020............................................. 260,720 269,519
-----------
24,505,354
-----------
Government National Mortgage Association II:
9%, 3/20/2016-9/20/2021................................................. 313,112 312,229
9 1/2%, 9/20/2021-12/20/2021............................................ 532,670 542,322
-----------
854,551
-----------
Federal Home Loan Mortgage Corp.,
Real Estate Mortgage Investment Conduit:
Ser. 77, Cl. F,
8 1/2%, 6/15/2017..................................................... 200,000 198,448
Ser. 86, Cl. F,
9%, 10/15/2020........................................................ 300,000 300,030
Ser.128, Cl. H,
8 3/4%, 9/15/2019..................................................... 1,000,000 993,880
Ser.1030, Cl. E,
9%, 3/15/2019......................................................... 1,000,000 1,004,670
Ser.1092, Cl. J,
8 1/2%, 5/15/2020..................................................... 1,000,000 979,450
Ser.1395, Cl. C,
6%, 11/15/2018........................................................ 2,000,000 1,880,260
Ser.1455, Cl. K,
7%, 6/15/2020......................................................... 1,500,000 1,391,265
-----------
6,748,003
-----------
Federal National Mortgage Association,
Real Estate Mortgage Investment Conduit;
Cl. G27-E,
8 1/2%, 2/25/2018....................................................... 910,115 895,090
-----------
TOTAL MORTGAGE-BACKED CERTIFICATES.......................................... 33,002,998
===========
U.S. TREASURY BONDS--8.9%
8%, 11/15/2021.......................................................... 4,000,000 4,016,876
===========
U.S. TREASURY NOTES--10.1%
4 5/8%, 2/15/1996....................................................... 600,000 582,281
7 1/4%, 11/30/1996...................................................... 4,000,000 3,969,376
-----------
TOTAL U.S. TREASURY NOTES................................................... 4,551,657
===========
TOTAL BONDS AND NOTES
(cost $42,490,318)...................................................... $41,571,531
===========
DREYFUS INVESTORS GNMA FUND
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1994
PRINCIPAL
SHORT-TERM INVESTMENTS--8.7% AMOUNT VALUE
------------- -------------
REPURCHASE AGREEMENT;
Daiwa Securities America Inc., 5 1/4%
Dated 12/30/1994, Due 1/3/1995 in the amount of $3,932,293 (fully collateralized
by $4,070,000 U.S. Treasury Bills, due 5/18/1995, value $3,976,759) (b)
(cost $3,930,000)....................................................... $ 3,930,000 $ 3,930,000
============
TOTAL INVESTMENTS
(cost $46,420,318)...................................................... 101.2% $45,501,531
==== ===========
LIABILITIES, LESS CASH AND RECEIVABLES...................................... (1.2%) $(564,332)
==== ===========
NET ASSETS ........................................................... 100.0% $44,937,199
==== ===========
NOTES TO STATEMENT OF INVESTMENTS:
(a) Purchased on a when-issued basis.
(b) Held by the custodian in a segregated account for when-issued
securities purchased.
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS INVESTORS GNMA FUND
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1994
ASSETS:
<S> <C> <C>
Investments in securities, at value--Note 1(b)
(cost $46,420,318)--see statement..................................... $45,501,531
Cash.................................................................... 392,428
Interest receivable..................................................... 311,424
Prepaid expenses........................................................ 12,479
Due from The Dreyfus Corporation........................................ 387,034
-------------
46,604,896
LIABILITIES:
Payable for investment securities purchased............................. $1,374,339
Payable for shares of Beneficial Interest redeemed...................... 148,815
Accrued expenses........................................................ 144,543 1,667,697
-------------- -----------
NET ASSETS ................................................................ $44,937,199
============
REPRESENTED BY:
Paid-in capital......................................................... $47,814,293
Accumulated undistributed investment income_net......................... 8,952
Accumulated net realized (loss) on investments.......................... (1,967,259)
Accumulated net unrealized (depreciation) on investments_Note 4......... (918,787)
-------------
NET ASSETS at value applicable to 3,174,555 shares outstanding
(unlimited number of $.001 par value shares of
Beneficial Interest authorized)......................................... $44,937,199
============
NET ASSET VALUE, offering and redemption price per share
($44,937,199 / 3,174,555 shares)........................................ $14.16
======
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1994
INVESTMENT INCOME:
INTEREST INCOME......................................................... $3,530,067
EXPENSES:
Management fee--Note 3(a)............................................. $ 285,899
Shareholder servicing costs_Note 3(b)................................. 183,183
Registration fees..................................................... 41,653
Auditing fees......................................................... 37,315
Prospectus and shareholders' reports.................................. 27,909
Trustees' fees and expenses_Note 3(c)................................. 27,293
Custodian fees........................................................ 21,116
Legal fees............................................................ 14,409
Miscellaneous......................................................... 71,714
-------------
710,491
Less_expense reimbursement from Manager due to
undertakings_Note 3(a)............................................ 679,933
-------------
TOTAL EXPENSES.................................................. 30,558
------------
INVESTMENT INCOME--NET.......................................... 3,499,509
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized (loss) on investments--Note 4.............................. $(1,967,259)
Net unrealized (depreciation) on investments............................ (2,115,432)
-------------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS............... (4,082,691)
------------
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...................... $ (583,182)
============
See notes to financial statements.
DREYFUS INVESTORS GNMA FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1994
------------- -----------
OPERATIONS:
Investment income--net.................................................. $ 3,785,367 $ 3,499,509
Net realized (loss) on investments...................................... (60,023) (1,967,259)
Net unrealized appreciation (depreciation) on investments for the year.. 574,560 (2,115,432)
------------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS....... 4,299,904 (583,182)
------------- -----------
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income--net.................................................. (3,785,367) (3,490,557)
------------- -----------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold........................................... 33,607,000 18,193,639
Dividends reinvested.................................................... 2,722,292 2,338,409
Cost of shares redeemed................................................. (27,899,871) (25,744,866)
------------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 8,429,421 (5,212,818)
------------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS........................... 8,943,958 (9,286,557)
NET ASSETS:
Beginning of year....................................................... 45,279,798 54,223,756
------------- -----------
End of year (including undistributed investment income_net;
$8,952 in 1994)....................................................... $54,223,756 $44,937,199
=========== ===========
SHARES SHARES
------------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 2,165,927 1,237,307
Shares issued for dividends reinvested.................................. 175,569 159,653
Shares redeemed......................................................... (1,798,971) (1,744,696)
------------- -----------
NET INCREASE (DECREASE) IN SHARES OUTSTANDING......................... 542,525 (347,736)
=========== ===========
See notes to financial statements.
</TABLE>
DREYFUS INVESTORS GNMA FUND
FINANCIAL HIGHLIGHTS
Reference is made to page 4 of the Fund's Prospectus dated November
1, 1995.
See notes to financial statements.
DREYFUS INVESTORS GNMA FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940
("Act") as a diversified open-end management investment company. Dreyfus
Service Corporation, until August 24, 1994, acted as the exclusive
distributor of the Fund's shares, which are sold to the public without a
sales charge. Dreyfus Service Corporation is a wholly-owned subsidiary of The
Dreyfus Corporation ("Manager"). Effective August 24, 1994, the Manager
became a direct subsidiary of Mellon Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The Distributor,
located at One Exchange Place, Boston, Massachusetts 02109, is a wholly-owned
subsidiary of Institutional Administration Services, Inc., a provider of
mutual fund administration services, the parent company of which is Boston
Institutional Group, Inc.
Effective January 1, 1994, the Fund was reorganized as a
Massachusetts business trust under the name of Dreyfus Investors GNMA Fund.
(A) PORTFOLIO VALUATION: The Fund's investments (excluding short-term
investments) are valued each business day by an independent pricing service
("Service") approved by the Fund's Board of Trustees. Investments for which
quoted bid prices are readily available and are representative of the bid
side of the market in the judgment of the Service are valued at the mean
between the quoted bid prices (as obtained by the Service from dealers in
such securities) and asked prices (as calculated by the Service based upon
its evaluation of the market for such securities). Other investments, which
constitute a majority of the portfolio securities, are carried at fair value
as determined by the Service, based on methods which include consideration
of: yields or prices of securities of comparable quality, coupon, maturity
and type; indications as to values from dealers; and general market
conditions. Short-term investments are carried at amortized cost, which
approximates value.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income (including, where applicable, amortization of discount on short-term
investments) is recognized on the accrual basis.
The Fund may enter into repurchase agreements with financial
institutions, deemed to be creditworthy by the Fund's Manager, subject to the
seller's agreement to repurchase and the Fund's agreement to resell such
securities at a mutually agreed upon price. Securities purchased subject to
repurchase agreements are deposited with the Fund's custodian and, pursuant
to the terms of the repurchase agreement, must have an aggregate market value
greater than or equal to the repurchase price plus accrued interest at all
times. If the value of the underlying securities falls below the value of the
repurchase price plus accrued interest, the Fund will require the seller to
deposit additional collateral by the next business day. If the request for
additional collateral is not met, or the seller defaults on its repurchase
obligation, the Fund maintains the right to sell the underlying securities at
market value and may claim any resulting loss against the seller.
(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, if any, are normally
declared and paid annually, but the Fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code. To the extent that net realized capital gain can be offset by
capital loss carryovers, if any, it is the policy of the Fund not to
distribute such gain.
DREYFUS INVESTORS GNMA FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Prior to January 1, 1994 the Fund was a limited partnership and was
not required to distribute realized capital gains to avoid Federal income and
excise taxes. Prior years' gains and losses had been allocated to
shareholders and not paid, in accordance with the limited partnership
structure. This resulted in a difference between financial reporting purposes
versus Federal Income tax purposes, with respect to the treatment of such
allocated gains and losses. The Fund has therefore reclassified $100,016 from
accumulated net realized loss on investments to paid-in-capital. This amount
represented the cumulative effect of such differences. Results of operations
and net assets were not effected by this reclassification.
(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 interest of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
The Fund has an unused capital loss carryover of approximately of
$1,040,000 available for Federal income tax purposes to be applied against
future net securities profits, if any realized subsequent to December 31,
1994. The carryover does not include net realized securities losses from
November 1, 1994 through December 31, 1994 which are treated, for Federal
income tax purposes, as arising in fiscal 1995. If not applied, the carryover
expires in fiscal 2002.
NOTE 2--BANK LINE OF CREDIT:
In accordance with an agreement with a bank, the Fund may borrow up
to the lesser of 25 percent of its net assets or $5,000,000 under a
short-term unsecured line of credit. Interest on borrowings is charged at
rates which are related to Federal Funds rates in effect from time to time.
There were no borrowings during the year ended December 31, 1994.
NOTE 3--MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the
Manager, the management fee is computed at the annual rate of .60 of 1% of
the average daily value of the Fund's net assets and is payable monthly. The
Agreement provides for an expense reimbursement from the Manager should the
Fund's aggregate expenses, exclusive of taxes, interest on borrowings,
brokerage and extraordinary expenses, exceed the expense limitation of any
state having jurisdiction over the Fund. The most stringent state expense limi
tation applicable to the Fund presently requires reimbursement of expenses in
any full fiscal year that such expenses (exclusive of certain expenses as
described above) exceed 21/2% of the first $30 million, 2% of the next $70
million and 11/2% of the excess over $100 million of the average value of the
Fund's net assets in accordance with California "blue sky" regulations.
However, the Manager had undertaken from January 1, 1994 through March 31,
1995, or until such time as the net assets of the Fund exceed $100 million,
regardless of whether they remain at that level, to waive receipt of the
management fee payable to it by the Fund. In addition, during the year ended
December 31, 1994, the Manager voluntarily assumed all or part of the remainin
g expenses of the Fund. The expense reimbursement pursuant to the
undertakings amounted to $679,933 for the year ended December 31, 1994.
The undertaking may be modified by the Manager from time to time,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
(B) Pursuant to the Fund's Shareholder Services Plan, the Fund
reimburses the Dreyfus Service Corporation an amount not to exceed an annual
rate of .25 of 1% of the value of the Fund's average
DREYFUS INVESTORS GNMA FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
daily net assets for servicing shareholder accounts. The services provided
may include personal services relating to shareholder accounts, such as
answering shareholder inquiries regarding the Fund and providing reports and
other information, and services related to the maintenance of shareholder
accounts. During the year ended December 31, 1994, the Fund was charged an
aggregate of $107,507 pursuant to the Shareholder Services Plan.
(C) Prior to August 24, 1994, certain officers and trustees of the
Fund were "affiliated persons," as defined in the Act, of the Manager and/or
Dreyfus Service Corporation. Each trustee who is not an "affiliated person"
receives an annual fee of $2,500 and an attendance fee of $250 per meeting.
NOTE 4--SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales (including paydowns) of
investment securities, excluding short-term securities, during the year ended
December 31, 1994, amounted to $122,867,054 and $127,276,240, respectively.
At December 31, 1994, accumulated net unrealized depreciation on
investments was $918,787, consisting of $17,869 gross unrealized appreciation
and $936,656 gross unrealized depreciation.
At December 31, 1994, 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).
DREYFUS INVESTORS GNMA FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
DREYFUS INVESTORS GNMA FUND
We have audited the accompanying statement of assets and liabilities
of Dreyfus Investors GNMA Fund, including the statement of investments, as of
December 31, 1994, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in
the period then ended, and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1994 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Dreyfus Investors GNMA Fund at December 31, 1994, the results of
its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.
(logo signature)
New York, New York
February 10, 1995
(Dreyfus Logo)
<TABLE>
<CAPTION>
DREYFUS INVESTORS GNMA FUND
STATEMENT OF INVESTMENTS JUNE 30, 1995 (UNAUDITED)
PRINCIPAL
BONDS AND NOTES-92.8% AMOUNT VALUE
---------------- ---------------
<S> <C> <C>
MORTGAGE-BACKED CERTIFICATES-76.1%
Government National Mortgage Association I:
7%, 11/15/2022-7/15/2024................................................ $ 5,944,963 $ 5,859,475
7 1/2%, 9/15/2021-6/15/2025............................................. 8,864,243 8,927,889
8%, 6/15/2017-11/15/2024................................................ 3,597,712 3,688,770
8 1/2%, 8/15/2018-2/15/2025............................................. 3,470,732 3,608,451
9%, 12/15/2009-11/15/2022............................................... 4,674,684 4,914,539
9 1/4%, 10/15/2023...................................................... 966,745 998,463
9 1/2%, 1/15/2017-12/15/2021............................................ 1,382,180 1,467,266
---------------
29,464,853
---------------
Government National Mortgage Association II:
9%, 3/20/2016-9/20/2021................................................. 287,976 299,944
9 1/2%, 9/20/2021-12/20/2021............................................ 490,024 515,290
---------------
815,234
---------------
Federal Home Loan Mortgage Corp.,
Real Estate Mortgage Investment Conduit:
Ser.77, Cl. F,
8 1/2%, 6/15/2017..................................................... 200,000 202,974
Ser.86, Cl. F,
9%, 10/15/2020........................................................ 300,000 331,170
Ser.128, Cl. H,
8 3/4%, 9/15/2019..................................................... 1,000,000 1,028,560
Ser.1030, Cl. E,
9%, 3/15/2019......................................................... 1,000,000 1,040,010
Ser.1092, Cl. J,
8 1/2%, 5/15/2020..................................................... 1,000,000 1,053,390
Ser.1395, Cl. C,
6%, 11/15/2018........................................................ 1,948,083 1,914,264
Ser.1455, Cl. K,
7%, 6/15/2020......................................................... 1,500,000 1,477,875
---------------
7,048,243
---------------
Federal National Mortgage Association,
Real Estate Mortgage Investment Conduit;
Cl. G27-E,
8 1/2%, 2/25/2018....................................................... 767,749 773,185
---------------
TOTAL MORTGAGE-BACKED CERTIFICATES.......................................... 38,101,515
===============
U.S. TREASURY BONDS-11.2%
8 3/4%, 5/15/2020....................................................... 4,500,000 5,585,625
===============
DREYFUS INVESTORS GNMA FUND
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1995 (UNAUDITED)
PRINCIPAL
BONDS AND NOTES (CONTINUED) AMOUNT VALUE
------------------------------
U.S. TREASURY NOTES-5.5%
4 5/8%, 2/15/1996....................................................... $ 600,000 $ 595,969
7 1/2%, 2/15/2005....................................................... 2,000,000 2,178,438
---------------
TOTAL U.S. TREASURY NOTES................................................... 2,774,407
===============
TOTAL BONDS AND NOTES
(cost $45,635,826)...................................................... $46,461,547
===============
SHORT-TERM INVESTMENTS-8.6%
Repurchase Agreement;
Lanston (Aubrey G.) & Co., Inc., 6.10%
Dated 6/30/1995, Due 7/3/1995 in the amount of $4,302,186 (fully
collateralized
by $4,470,000 U.S. Treasury Bills, due 12/14/1995, value $4,358,079)
(cost $4,300,000)....................................................... $ 4,300,000 $ 4,300,000
===============
TOTAL INVESTMENTS
(cost $49,935,826)...................................................... 101.4% $50,761,547
============== ===============
LIABILITIES, LESS CASH AND RECEIVABLES...................................... (1.4%) $ (682,582)
============== ===============
NET ASSETS.................................................................. 100.0% $50,078,965
============== ===============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS INVESTORS GNMA FUND
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1995 (UNAUDITED)
<S> <C> <C>
ASSETS:
Investments in securities, at value-Note 1(b)
(cost $49,935,826)-see statement...................................... $50,761,547
Interest receivable..................................................... 371,044
Receivable for shares of Beneficial Interest subscribed................. 71,140
Prepaid expenses........................................................ 22,212
---------------
51,225,943
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 56,253
Due to Custodian........................................................ 57,951
Payable for investment securities purchased............................. 948,670
Payable for shares of Beneficial Interest redeemed...................... 16,471
Accrued expenses........................................................ 67,633 1,146,978
-------------- ---------------
NET ASSETS.................................................................. $50,078,965
===============
REPRESENTED BY:
Paid-in capital......................................................... $50,141,979
Accumulated net realized (loss) on investments.......................... (888,735)
Accumulated net unrealized appreciation on investments-Note 4........... 825,721
---------------
NET ASSETS at value applicable to 3,330,690 outstanding shares of
Beneficial Interest, equivalent to $15.04 per share
(unlimited number of $.001 par value shares authorized)................. $50,078,965
===============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS INVESTORS GNMA FUND
STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $1,785,371
EXPENSES:
Management fee-Note 3(a).............................................. $ 138,833
Shareholder servicing costs-Note 3(b)................................. 87,274
Registration fees..................................................... 20,108
Trustees' fees and expenses-Note 3(c)................................. 16,664
Auditing fees......................................................... 15,675
Custodian fees........................................................ 13,012
Legal fees............................................................ 6,055
Prospectus and shareholders' reports.................................. 5,263
Miscellaneous......................................................... 4,055
----------------
306,939
Less-expense reimbursement from Manager due to
undertakings-Note 3(a)............................................ 229,087
----------------
TOTAL EXPENSES.................................................. 77,852
---------------
INVESTMENT INCOME-NET........................................... 1,707,519
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 4................................. $1,078,524
Net unrealized appreciation on investments.............................. 1,744,508
----------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 2,823,032
---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $4,530,551
===============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS INVESTORS GNMA FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1995
1994 (UNAUDITED)
--------------- -------------------
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OPERATIONS:
Investment income-net.................................................. $ 3,499,509 $ 1,707,519
Net realized gain (loss) on investments................................ (1,967,259) 1,078,524
Net unrealized appreciation (depreciation) on investments for the period (2,115,432) 1,744,508
--------------- -------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...... (583,182) 4,530,551
--------------- -------------------
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net.................................................. (3,490,557) (1,716,471)
--------------- -------------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold.......................................... 18,193,639 9,969,567
Dividends reinvested................................................... 2,338,409 1,131,092
Cost of shares redeemed................................................ (25,744,866) (8,772,973)
--------------- -------------------
INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS (5,212,818) 2,327,686
--------------- -------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.......................... (9,286,557) 5,141,766
NET ASSETS:
Beginning of period.................................................... 54,223,756 44,937,199
--------------- -------------------
End of period (including undistributed investment income-net;
$8,952 in 1994)...................................................... $ 44,937,199 $ 50,078,965
=============== ===================
SHARES SHARES
----------------- -------------------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................ 1,237,307 678,930
Shares issued for dividends reinvested................................. 159,653 77,060
Shares redeemed........................................................ (1,744,696) (599,855)
----------------- -------------------
NET INCREASE (DECREASE) IN SHARES OUTSTANDING........................ (347,736) 156,135
================= ===================
See independent accountants' review report and notes to financial statements.
</TABLE>
DREYFUS INVESTORS GNMA FUND
FINANCIAL HIGHLIGHTS
Reference is made to page 4 of the Fund's Prospectus dated November 1, 1995.
See notes to financial statements.
DREYFUS INVESTORS GNMA FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940 ("Act")
as a diversified open-end management investment company. Premier Mutual Fund
Services, Inc. (the "Distributor") acts as the distributor of the Fund's
shares, which are sold to the public without a sales charge. The Distributor,
located at One Exchange Place, Boston, Massachusetts 02109, is a wholly-owned
subsidiary of FDI Distribution Services, Inc., a provider of mutual fund
administration services, which in turn is a wholly-owned subsidiary of FDI
Holdings, Inc., the parent company of which is Boston Institutional Group,
Inc. The Dreyfus Corporation ("Manager") serves as the Fund's investment
adviser. The Manager is a direct subsidiary of Mellon Bank, N.A.
(A) PORTFOLIO VALUATION: The Fund's investments (excluding short-term
investments) are valued each business day by an independent pricing service
("Service") approved by the Fund's Board of Trustees. Investments for which
quoted bid prices are readily available and are representative of the bid
side of the market in the judgment of the Service are valued at the mean
between the quoted bid prices (as obtained by the Service from dealers in
such securities) and asked prices (as calculated by the Service based upon
its evaluation of the market for such securities). Other investments, which
constitute a majority of the portfolio securities, are carried at fair value
as determined by the Service, based on methods which include consideration
of: yields or prices of securities of comparable quality, coupon, maturity
and type; indications as to values from dealers; and general market
conditions. Short-term investments are carried at amortized cost, which
approximates value.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income (including, where applicable, amortization of discount on short-term
investments) is recognized on the accrual basis.
The Fund may enter into repurchase agreements with financial
institutions, deemed to be creditworthy by the Fund's Manager, subject to the
seller's agreement to repurchase and the Fund's agreement to resell such
securities at a mutually agreed upon price. Securities purchased subject to
repurchase agreements are deposited with the Fund's custodian and, pursuant
to the terms of the repurchase agreement, must have an aggregate market value
greater than or equal to the repurchase price plus accrued interest at all
times. If the value of the underlying securities falls below the value of the
repurchase price plus accrued interest, the Fund will require the seller to
deposit additional collateral by the next business day. If the request for
additional collateral is not met, or the seller defaults on its repurchase
obligation, the Fund maintains the right to sell the underlying securities at
market value and may claim any resulting loss against the seller.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the Fund not to distribute such gain.
DREYFUS INVESTORS GNMA FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(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 interest of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
The Fund has an unused capital loss carryover of approximately $1,040,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to December 31, 1994. The
carryover does not include net realized securities losses from November 1,
1994 through December 31, 1994 which are treated, for Federal income tax
purposes, as arising in fiscal 1995. If not applied, the carryover expires in
fiscal 2002.
NOTE 2-BANK LINE OF CREDIT:
In accordance with an agreement with a bank, the Fund may borrow up to
the lesser of 25 percent of its net assets or $5,000,000 under a short-term
unsecured line of credit. Interest on borrowings is charged at rates which
are related to Federal Funds rates in effect from time to time.
There were no borrowings during the six months ended June 30, 1995.
NOTE 3-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .60 of 1% of the average
daily value of the Fund's net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Fund's
aggregate expenses, exclusive of taxes, interest on borrowings, brokerage and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Fund. The most stringent state expense limitation
applicable to the Fund presently requires reimbursement of expenses in any
full fiscal year that such expenses (exclusive of certain expenses as
described above) exceed 2 1/2% of the first $30 million, 2% of the next $70
million and 1 1/2% of the excess over $100 million of the average value of
the Fund's net assets in accordance with California "blue sky" regulations.
However, the Manager had undertaken from January 1, 1995 through March 31,
1995, to waive receipt of the management fee payable to it by the Fund, and
thereafter through July 31, 1995 to reduce the management fee paid by, or
reimburse such excess expense of the Fund, to the extent that the Fund's
aggregate expenses (excluding certain expenses as described above) exceeded
specified annual percentages of the Funds' average daily net assets. The
Manager has currently undertaken through December 31, 1995, or until such
time as the net assets of the Fund exceed $100 million, regardless of whether
they remain at that level, to reduce the management fee paid by, or reimburse
such excess expenses of the Fund, to the extent that the Fund's aggregate
annual expenses (excluding certain expenses as described above) exceed an
annual rate of .65 of 1% of the average daily value of the Fund's net assets.
In addition, during the six months ended June 30, 1995, the Manager
voluntarily assumed all or part of the remaining expenses of the Fund. The
expense reimbursement, pursuant to the undertakings, amounted to $229,087 for
the six months ended June 30, 1995.
The undertaking may be modified by the Manager from time to time,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
(B) Pursuant to the Fund's Shareholder Services Plan, the Fund reimburses
the Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager, an
amount not to exceed an annual rate of .25
DREYFUS INVESTORS GNMA FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
of 1% of the value of the Fund's average daily net assets for servicing
shareholder accounts. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder inquiries
regarding the Fund and providing reports and other information, and services
related to the maintenance of shareholder accounts. During the six months
ended June 30, 1995, the Fund was charged an aggregate of $64,000 pursuant to
the Shareholder Services Plan.
(C) 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 $250
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 six months
ended June 30, 1995, amounted to $79,944,508 and $77,867,307, respectively.
At June 30, 1995, accumulated net unrealized appreciation on investments
was $825,721, consisting of $904,678 gross unrealized appreciation and
$78,957 gross unrealized depreciation.
At June 30, 1995, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see
the Statement of Investments).
