File No. 33-12660
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 21 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 21 [ X ]
(Check appropriate box or boxes.)
DREYFUS BASIC GNMA FUND
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
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X on May 1, 1996 pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(i)
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on (date) pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
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on (date) pursuant to paragraph (a)(ii) of Rule 485
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If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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Registrant has registered an indefinite number of shares of its
beneficial interest under the Securities Act of 1933 pursuant to
Section 24(f) of the Investment Company Act of 1940. Registrant's Rule 24f-2
Notice for the fiscal year ended December 31, 1995 was filed on February 28,
1996.
DREYFUS BASIC GNMA FUND
(FORMERLY, DREYFUS INVESTORS GNMA FUND)
Cross-Reference Sheet Pursuant to Rule 495(a)
Items in
Part A of
Form N-1A Caption Page
_________ _______ ____
1 Cover Page Cover
2 Synopsis 3
3 Condensed Financial Information 4
4 General Description of Registrant 4
5 Management of the Fund 6
5(a) Management's Discussion of Fund's Performance *
6 Capital Stock and Other Securities 15
7 Purchase of Securities Being Offered 7
8 Redemption or Repurchase 10
9 Pending Legal Proceedings *
Items in
Part B of
Form N-1A
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10 Cover Page Cover
11 Table of Contents Cover
12 General Information and History B-24
13 Investment Objectives and Policies B-2
14 Management of the Fund B-9
15 Control Persons and Principal B-13
Holders of Securities
16 Investment Advisory and Other B-14
Services
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
DREYFUS BASIC GNMA FUND
(FORMERLY, DREYFUS INVESTORS GNMA FUND)
Cross-Reference Sheet Pursuant to Rule 495(a) (continued)
Items in
Part B of
Form N-1A Caption Page
_________ _______ _____
17 Brokerage Allocation B-22
18 Capital Stock and Other Securities *
19 Purchase, Redemption and Pricing B-16, B-17 &
of Securities Being Offered B-20
20 Tax Status *
21 Underwriters B-16
22 Calculations of Performance Data B-23
23 Financial Statements B-26
Items in
Part C of
Form N-1A
_________
24 Financial Statements and Exhibits C-1
25 Persons Controlled by or Under C-3
Common Control with Registrant
26 Number of Holders of Securities C-3
27 Indemnification C-3
28 Business and Other Connections of C-4
Investment Adviser
29 Principal Underwriters C-11
30 Location of Accounts and Records C-14
31 Management Services C-14
32 Undertakings C-14
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
FOR USE BY BANKS ONLY
May 1, 1996
DREYFUS BASIC GNMA FUND
SUPPLEMENT TO PROSPECTUS
DATED MAY 1, 1996
All mutual fund shares involve certain investment risks, including
the possible loss of principal.
080s050196BNK
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PROSPECTUS MAY 1, 1996
DREYFUS BASIC GNMA FUND
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DREYFUS BASIC GNMA FUND (THE "FUND") IS AN OPEN-END, DIVERSIFIED,
MANAGEMENT INVESTMENT COMPANY, KNOWN AS A NO-LOAD MUTUAL FUND. THE FUND'S
INVESTMENT OBJECTIVE IS TO PROVIDE YOU WITH AS HIGH A LEVEL OF CURRENT INCOME
AS IS CONSISTENT WITH THE PRESERVATION OF CAPITAL. THE FUND INVESTS
PRINCIPALLY IN INSTRUMENTS ISSUED BY THE GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION.
THE FUND IS DESIGNED TO BENEFIT INVESTORS WHO DO NOT ENGAGE IN
FREQUENT TRANSACTIONS IN FUND SHARES.
YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING DREYFUS
TELETRANSFER.
THE DREYFUS CORPORATION PROFESSIONALLY MANAGES THE FUND'S PORTFOLIO.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 1996, WHICH MAY
BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF CERTAIN AREAS
IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST TO SOME
INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
IS INCORPORATED HEREIN BY REFERENCE. FOR A FREE COPY, WRITE TO THE FUND AT
144 GLENN CURTISS BOULEVARD, UNIONDALE, NEW YORK 11556-0144, OR CALL
1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO
TIME.
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TABLE OF CONTENTS
Page
Fee Table......................................... 3
Condensed Financial Information................... 4
Description of the Fund........................... 4
Management of the Fund............................ 6
How to Buy Shares................................. 7
Fund Exchanges.................................... 9
How to Redeem Shares.............................. 10
Shareholder Services Plan......................... 12
Dividends, Distributions and Taxes................ 12
Performance Information........................... 14
General Information............................... 15
Appendix.......................................... 16
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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This Page Intentionally Left Blank
Page 2
<TABLE>
<CAPTION>
FEE TABLE
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Exchange Fee.............................................................................. $5.00
Account Closeout Fee...................................................................... $5.00
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees (after expense reimbursement)............................................. .00%
Other Expenses (after expense reimbursement).............................................. .65%
Total Fund Operating Expenses (after expense reimbursement)............................... .65%
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption
at the end of each time period: $12 $26 $41 $86
</TABLE>
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THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL
RETURN GREATER OR LESS THAN 5%.
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The purpose of the foregoing table is to assist you in understanding
the costs and expenses borne by the Fund and investors, the payment of which
will reduce investors' annual return. Total Fund Operating Expenses noted
above have been restated to reflect an undertaking by The Dreyfus Corporation
that if, in any fiscal year until June 30, 1998, certain expenses of the
Fund, including the management fee, exceed .65% of the value of the Fund's
average net assets for the fiscal year, The Dreyfus Corporation may waive a
portion of its management fee or bear certain other expenses to the extent of
such excess expense. The information in the foregoing table does not
reflect any other fee waivers or expense reimbursement arrangements that may
be in effect. In addition, unlike certain other funds in the Dreyfus Family
of Funds, the Fund will charge your account $2.00 for each redemption check
you write; you also will be charged $5.00 for each exchange made and for each
redemption you make by wire or pursuant to the Dreyfus TELETRANSFER
Privilege, or if you otherwise closeout your account. These charges will be
paid to the Fund's transfer agent and will reduce the transfer agency charges
otherwise payable by the Fund. See "Fund Exchanges" and "How to Redeem
Shares." In addition, certain securities dealers, banks or other financial
institutions may charge their clients direct fees for effecting transactions
in Fund shares; such fees are not reflected in the foregoing table. See
"Management of the Fund" and "Shareholder Services Plan."
Page 3
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited by Ernst &
Young LLP, the Fund's independent auditors, whose report thereon appears in
the Statement of Additional Information. Further financial data and related
notes are included in the Statement of Additional Information, available upon
request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share
of beneficial interest outstanding, total investment return, ratios to
average net assets and other supplemental data for each year indicated. This
information has been derived from the Fund's financial statements.*
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------
1987(1) 1988 1989 1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ----- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year.. $14.50 $14.44 $14.59 $14.55 $14.55 $15.34 $15.20 $15.39 $14.16
------ ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income--net.... .59 1.34 1.22 1.20 1.06 1.16 1.11 1.08 1.03
Net realized and unrealized gain
(loss) on investments... (.06) .15 (.04) -_ .79 (.14) .19 (1.23) 1.25
------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS .53 1.49 1.18 1.20 1.85 1.02 1.30 (.15) 2.28
------ ------ ------ ------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Distributions from investment
income-net....... (.59) (1.34) (1.22) (1.20) (1.06) (1.16) (1.11) (1.08) (1.02)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year... $14.44 $14.59 $14.55 $14.55 $15.34 $15.20 $15.39 $14.16 $15.42
====== ====== ======= ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN..... 9.16%(2) 10.56% 8.42% 8.58% 13.28% 7.02% 8.75% (.99%) 16.62%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets...... -_ -_ -_ -_ -_ -_ -_ .06% .50%
Ratio of net investment income
to average net assets.... 10.23%(2) 8.97% 8.64% 8.29% 7.78% 7.70% 7.15% 7.34% 6.86%
Decrease reflected in above expense
ratios due to undertakings by
The Dreyfus Corporation (limited to
the expense limitation provision
of the Management Agreement)... 1.50%(2) 1.50% 1.50% 1.50% 1.50% 1.42% 1.28% 1.43% .78%
Portfolio Turnover Rate... 110.33%(3) 1,025.99%(4) 287.61% -_ 40.28% 30.99% 34.02% 290.20% 254.36%
Net Assets, end of year
(000's omitted).... $1,820 $2,211 $278 $293 $25,036 $45,280 $54,224 $44,937 $55,615
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* On August 23, 1991, the Fund's investment objective and certain of its
fundamental policies and restrictions were changed. See "Information about
the Fund" in the Statement of Additional Information.
(1) From August 5, 1987 (commencement of operations) to December 31, 1987.
(2) Annualized.
(3) Not annualized.
(4) The high portfolio turnover rate resulted from selling off large amounts
of unsettled securities bought to take advantage of favorable short-term
market fluctuations.
</TABLE>
Further information about the Fund's performance is contained in the
Fund's annual report, which may be obtained without charge by writing to the
address or calling the number set forth on the cover of this Prospectus.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund's investment objective is to provide you with as high a
level of current income as is consistent with the preservation of capital. It
cannot be changed without approval by the holders of a majority (as defined
in the Investment Company Act of 1940, as amended (the "1940 Act")) of the
Fund's outstanding voting shares. There can be no assurance that the Fund's
investment objective will be achieved.
MANAGEMENT POLICIES
It is a fundamental policy of the Fund that it will invest at least
65% of the value of its net assets (except when maintaining a temporary
defensive position) in "GNMA Certificates" (popularly called "Ginnie Maes").
Page 4
GNMA Certificates also may include other securities that in the future are
guaranteed by the Government National Mortgage Association ("GNMA"). The Fund
also may invest in other mortgage-related securities, including those issued
by government-related organizations such as the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC"), private mortgage pass-through securities and collateralized
mortgage obligations, including real estate mortgage investment conduits or
REMICs. The mortgage-related securities in which the Fund may invest include
those with fixed, floating and variable interest rates, those with interest
rates that change based on multiples of changes in interest rates and those
with interest rates that change inversely to changes in interest rates, as
well as stripped mortgage-backed securities. Mortgage-related securities are
a form of derivative collateralized by pools of mortgages. See "Appendix --
Investment Techniques -- Use of Derivatives" and "-- Certain Portfolio
Securities -- Mortgage-Related Securities."
Ginnie Maes are backed by the full faith and credit of the United
States. Ginnie Maes are mortgage-backed securities representing part
ownership of a pool of mortgage loans which are insured by the Federal
Housing Administration or Farmers' Home Administration or guaranteed by the
Veterans' Administration. The Fund will invest in Ginnie Maes only of the
"fully modified pass-through" type which are guaranteed as to timely payment
of principal and interest by GNMA, a U.S. Government corporation. The Fund
will purchase Ginnie Maes and certain other mortgage-related securities on a
forward commitment basis.
The Fund may purchase other securities issued or guaranteed by, or
exchangeable for securities issued or guaranteed by, the U.S. Government or
issued by its agencies or instrumentalities that are backed by the full faith
and credit of the U.S. Government, and may enter into repurchase agreements
with respect to securities of the type in which the Fund may invest. For
temporary defensive purposes, the entire portfolio may be so invested. A
security guaranteed by the U.S. Government is guaranteed only as to principal
and interest, and there is no guarantee of the security's market value. The
value of Fund shares is not guaranteed.
The Fund's annual portfolio turnover rate is not expected to exceed
500%. Higher portfolio turnover rates usually generate additional brokerage
commissions and expenses and the short-term gains realized from these
transactions are taxable to shareholders as ordinary income. In addition, the
Fund may engage in various investment techniques, such as leveraging,
short-selling, options and futures transactions, forward roll transactions
and lending portfolio securities. See "Investment Considerations and Risks"
and "Appendix -- Investment Techniques" below and "Investment Objective and
Management Policies -- Management Policies" in the Statement of Additional
Information.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL -- The Fund's net asset value per share should be expected to
fluctuate. Investors should consider the Fund as a supplement to an overall
investment program and should invest only if they are willing to undertake
the risks involved. See "Investment Objective and Management Policies --
Management Policies" in the Statement of Additional Information for further
discussion of certain risks. The Fund is designed to benefit investors who do
not engage in frequent redemptions or exchanges of Fund shares. Because
charges may apply to redemptions and exchanges of Fund shares, the Fund may
not be an appropriate investment for an investor who intends to engage
frequently in such transactions.
MORTGAGE-RELATED SECURITIES -- Although certain mortgage-related securities
are guaranteed by a third party or otherwise similarly secured, the market
value of the security, which may fluctuate, is not secured. If a
mortgage-related security is purchased at a premium, all or part of the
premium may be lost if there is a decline in the market value of the
security, whether resulting from changes in interest rates or prepayments on
the underlying mortgage collateral. As with other interest-bearing
securities, the prices of certain of these securities are inversely affected
by changes in interest rates. However, although the value of a
mortgage-related security may decline when interest rates rise, the converse
is not necessarily true, since in periods of declining interest rates the mort
gages underlying the security are more likely to be prepaid. For this and
other reasons, a mortgage-related security's stated maturity may be shortened
by unsched-
Page 5
uled prepayments on the underlying mortgages, and, therefore, it is
not possible to predict accurately the security's return to the Fund.
Moreover, with respect to stripped mortgage-backed securities, if the
underlying mortgage securities experience greater than anticipated
prepayments of principal, the Fund may fail to fully recoup its initial
investment even if the securities are rated in the highest rating category by
a nationally recognized statistical rating organization.
USE OF DERIVATIVES -- The Fund may invest in derivatives ("Derivatives").
These are financial instruments which derive their value, at least in part,
from the performance of an underlying asset, index or interest rate. The
Derivatives the Fund may use include mortgage-related securities, options and
futures. While Derivatives can be used effectively in furtherance of the
Fund's investment objective, under certain market conditions, they can
increase the volatility of the Fund's net asset value, can decrease the
liquidity of the Fund's portfolio and make more difficult the accurate
pricing of the Fund's portfolio. See "Appendix -- Investment Techniques --
Use of Derivatives" below and "Investment Objective and Management Policies
- -- Management Policies -- Derivatives" in the Statement of Additional
Information.
SIMULTANEOUS INVESTMENTS -- Investment decisions for the Fund are made
independently from those of other investment companies advised by The Dreyfus
Corporation. However, if such other investment companies desire to invest in,
or dispose of, the same securities as the Fund, available investments or
opportunities for sales will be allocated equitably to each investment
company. In some cases, this procedure may adversely affect the size of the
position obtained for or disposed of by the Fund or the price paid or
received by the Fund.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- The Dreyfus Corporation, located at 200 Park Avenue,
New York, New York 10166, was formed in 1947 and serves as the Fund's
investment adviser. The Dreyfus Corporation is a wholly-owned subsidiary of
Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank
Corporation ("Mellon"). As of March 29, 1996, The Dreyfus Corporation managed
or administered approximately $82 billion in assets for more than 1.7 million
investor accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the Fund,
subject to the authority of the Fund's Board in accordance with Massachusetts
law. The Fund's primary portfolio manager is Garitt A. Kono. He has held that
position since December 1992 and has been employed by The Dreyfus Corporation
since September 1992. For more than five years prior to joining The Dreyfus
Corporation, Mr. Kono was Vice-President - Fixed Income at The First Boston
Corporation. The Fund's other portfolio manager is identified in the
Statement of Additional Information. The Dreyfus Corporation also provides
research services for the Fund and for other funds advised by The Dreyfus
Corporation through a professional staff of portfolio managers and securities
analysts.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding companies in
the United States based on total assets. Mellon's principal wholly-owned
subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc., AFCO Credit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, including The Dreyfus Corporation, Mellon managed more than
$233 billion in assets as of December 31, 1995, including approximately $81
billion in proprietary mutual fund assets. As of December 31, 1995, Mellon,
through various subsidiaries, provided non-investment services, such as
custodial or administration services, for more than $786 billion in assets,
including approximately $60 billion in mutual fund assets.
Page 6
Under the terms of the Management Agreement, the Fund has agreed to
pay The Dreyfus Corporation a monthly fee at the annual rate of .60 of 1% of
the value of the Fund's average daily net assets. For the fiscal year ended
December 31, 1995, no management fee was paid by the Fund pursuant to
undertakings by The Dreyfus Corporation. From time to time, The Dreyfus
Corporation may waive receipt of its fees and/or voluntarily assume certain
expenses of the Fund, which would have the effect of lowering the overall
expense ratio of the Fund and increasing yield to investors. The Fund will
not pay The Dreyfus Corporation at a later time for any amounts it may waive,
nor will the Fund reimburse The Dreyfus Corporation for any amounts it may
assume.
The Dreyfus Corporation has undertaken until June 30, 1998 that if in
any fiscal year 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 .65 of 1% of the value of the Fund's average daily
net assets for the fiscal year, the Fund may deduct from the payment to be
made to The Dreyfus Corporation under the Management Agreement, or The
Dreyfus Corporation will bear, such excess expense.
In allocating brokerage transactions for the Fund, The Dreyfus
Corporation seeks to obtain the best execution of orders at the most
favorable net price. Subject to this determination, The Dreyfus Corporation
may consider, among other things, the receipt of research services and/or the
sale of shares of the Fund or other funds managed, advised or administered by
The Dreyfus Corporation as factors in the selection of broker-dealers to
execute portfolio transactions for the Fund. See "Portfolio Transactions"in
the Statement of Additional Information.
The Dreyfus Corporation may pay the Fund's distributor for
shareholder services from The Dreyfus Corporation's own assets, including
past profits but not including the management fee paid by the Fund. The
Fund's distributor may use part or all of such payments to pay securities
dealers, banks or other financial institutions in respect of these services.
DISTRIBUTOR -- The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at One Exchange Place, Boston, Massachusetts
02109. The Distributor's ultimate parent is Boston Institutional Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN -- Dreyfus Transfer,
Inc., a wholly-owned subsidiary of The Dreyfus Corporation, P.O. Box 9671,
Providence, Rhode Island 02940-9671, is the Fund's Transfer and Dividend
Disbursing Agent (the "Transfer Agent"). The Transfer Agent will receive the
$5.00 exchange fee, the $5.00 account closeout fee, the $5.00 wire and
Dreyfus TELETRANSFER redemption fee and the $2.00 checkwriting charge,
described below. A sufficient number of your shares will be redeemed
automatically to pay these amounts. These payments will reduce the transfer
agency fee otherwise payable by the Fund. By purchasing Fund shares, you are
deemed to have consented to this procedure. Mellon Bank, N.A., One Mellon
Bank Center, Pittsburgh, Pennsylvania 15258, is the Fund's Custodian.
HOW TO BUY SHARES
Fund shares are sold without a sales charge. You may be charged a
nominal fee if you effect transactions in Fund shares through a securities
dealer, bank or other financial institution. Share certificates are issued
only upon your written request. No certificates are issued for fractional
shares. The Fund reserves the right to reject any purchase order.
The minimum initial investment is $10,000. Subsequent investments
must be at least $1,000. However, the minimum initial investment for
Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7) Plans with only
one participant is $5,000. Subsequent investments through such retirement
plan accounts must be at least $1,000. The initial investment must be
accompanied by the Account Application.
You may purchase Fund shares by check or wire, or through the Dreyfus
TELETRANSFER Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds," or, if for Dreyfus retirement plan
Page 7
accounts, to"The Dreyfus Trust Company, Custodian." Payments to open new
accounts which are mailed should be sent to The Dreyfus Family of Funds, P.O.
Box 9387, Providence, Rhode Island 02940-9387, together with your Account
Application. For subsequent investments, your Fund account number should
appear on the check and an investment slip should be enclosed and sent to The
Dreyfus Family of Funds, P.O. Box 105, Newark, New Jersey 07101-0105. For
Dreyfus retirement plan accounts, both initial and subsequent investments
should be sent to The Dreyfus Trust Company, Custodian, P.O. Box 6427,
Providence, Rhode Island 02940-6427. Neither initial nor subsequent
investments should be made by third party check. Purchase orders may be
delivered in person only to a Dreyfus Financial Center. THESE ORDERS WILL BE
FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For
the location of the nearest Dreyfus Financial Center, please call one of the
telephone numbers listed under "General Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, DDA# 8900119535/Dreyfus BASIC
GNMA Fund, for purchase of Fund shares in your name. The wire must include
your Fund account number (for new accounts, your Taxpayer Identification
Number ("TIN") should be included instead), account registration and dealer
number, if applicable. If your initial purchase of Fund shares is by wire,
please call 1-800-645-6561 after completing your wire payment to obtain your
Fund account number. Please include your Fund account number on the Account
Application and promptly mail the Account Application to the Fund, as no
redemptions will be permitted until the Account Application is received. You
may obtain further information about remitting funds in this manner from your
bank. All payments should be made in U.S. dollars and, to avoid fees and
delays, should be drawn only on U.S. banks. A charge will be imposed if any
check used for investment in your account does not clear. The Fund makes
available to certain large institutions the ability to issue purchase
instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct the
institution to transmit immediately available funds through the Automated
Clearing House to The Bank of New York with instructions to credit your Fund
account. The instructions must specify your Fund account registration and
your Fund account number PRECEDED BY THE DIGITS "1111."
Fund shares are sold on a continuous basis at the net asset value per
share next determined after an order in proper form is received by the
Transfer Agent or other agent. Net asset value per share is determined as of
the close of trading on the floor of the New York Stock Exchange (currently
4:00 p.m., New York time), on each day the New York Stock Exchange is open
for business. For purposes of determining net asset value, options and
futures contracts will be valued 15 minutes after the close of trading on the
floor of the New York Stock Exchange. Net asset value per share is computed
by dividing the value of the Fund's net assets (i.e., the value of its assets
less liabilities) by the total number of shares outstanding. 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
approved by the Fund's Board. Each pricing service's procedures are reviewed
under the general supervision of the Board. For further information regarding
the methods employed in valuing Fund investments, see "Determination of Net
Asset Value" in the Statement of Additional Information.
For certain institutions that have entered into agreements with the
Distributor, payment for the purchase of shares may be transmitted, and must
be received by the Transfer Agent, within three business days after the order
is placed. If such payment is not received within three business days after
the order is placed, the order may be canceled and the institution could be
held liable for resulting fees and/or losses.
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other pro-
Page 8
grams where (i) the employers or affiliated employers maintaining such plans
or programs have a minimum of 250 employees eligible for participation in
such plans or programs, or (ii) such plan's or program's aggregate investment
in the Dreyfus Family of Funds or certain other products made available by the
Distributor to such plans or programs exceeds $1,000,000 ("Eligible Benefit
Plans"). Shares of funds in the Dreyfus Family of Funds then held by Eligible
Benefit Plans will be aggregated to determine the fee payable. The
Distributor reserves the right to cease paying these fees at any time. The
Distributor will pay such fees from its own funds, other than amounts
received from the Fund, including past profits or any other source available
to it.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service (the "IRS").
DREYFUS TELETRANSFER PRIVILEGE -- You may purchase shares (minimum $1,000,
maximum $150,000 per day) by telephone if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds will
be transferred between the bank account designated in one of these documents
and your Fund account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
The Fund may modify or terminate this Privilege at any time. No fee currently
is contemplated for purchases of Fund shares pursuant to this Privilege.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of shares by telephoning
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
FUND EXCHANGES
You may purchase up to four times per calendar year, in exchange for
shares of the Fund, shares of certain other funds managed or administered by
The Dreyfus Corporation, to the extent such shares are offered for sale in
your state of residence. These funds have different investment objectives
which may be of interest to you. If you desire to use this service, please
call 1-800-645-6561 to determine if it is available and whether any
conditions are imposed on its use. You will be charged a $5.00 fee for each
exchange you make out of the Fund. This fee will be deducted from your
account and paid to the Transfer Agent.
To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. Before any exchange, you must
obtain and should review a copy of the current prospectus of the fund into
which the exchange is being made. Prospectuses may be obtained by calling
1-800-645-6561. Except in the case of personal retirement plans, the shares
being exchanged must have a current value of at least $1,000; furthermore,
when establishing a new account by exchange, the shares being exchanged must
have a value of at least the minimum initial investment required for the fund
into which the exchange is being made. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless you check the applicable "No"box on the Account Application,
indicating that you specifically refuse this Privilege. The Telephone
Exchange Privilege may be established for an existing account by written
request, signed by all shareholders on the account, or by a separate signed
Shareholder Services Form, also available by calling 1-800-645-6561. If you
have established the Telephone Exchange Privilege, you may telephone exchange
instructions by calling 1-800-645-6561 or, if you are calling from overseas,
call 516-794-5452. See "How to Redeem Shares -- Procedures." Upon an exchange
into a new account, the following shareholder services and privileges, as
applicable and where available, will be automatically carried over to the
fund into which the exchange is made: Telephone Exchange Privilege, Check
Redemption Privilege, Wire Redemption Privilege, Telephone Redemption
Privilege, Dreyfus TELETRANSFER Privilege and the dividend/capital gain
distribution option selected by the investor.
Page 9
Shares will be exchanged at the next determined net asset value;
however, a sales load may be charged with respect to exchanges into funds
sold with a sales load. If you are exchanging into a fund that charges a
sales load, you may qualify for share prices which do not include the sales
load or which reflect a reduced sales load, if the shares you are exchanging
were: (a) purchased with a sales load, (b) acquired by a previous exchange
from shares purchased with a sales load, or (c) acquired through reinvestment
of dividends or distributions paid with respect to the foregoing categories
of shares. To qualify, at the time of the exchange you must notify the
Transfer Agent. Any such qualification is subject to confirmation of your
holdings through a check of appropriate records. See "Fund Exchanges" in the
Statement of Additional Information. The Fund reserves the right to reject
any exchange request in whole or in part. The availability of Fund Exchanges
may be modified or terminated at any time upon notice to shareholders. See
"Dividends, Distributions and Taxes."
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value.
YOU WILL BE CHARGED $5.00 WHEN YOU REDEEM ALL SHARES IN YOUR ACCOUNT
OR YOUR ACCOUNT IS OTHERWISE CLOSED OUT. The fee will be deducted from your
redemption proceeds and paid to the Transfer Agent. The account closeout fee
does not apply to exchanges out of the Fund or to wire or Dreyfus TELETRANSFER
redemptions, for each of which a $5.00 fee applies. Securities dealers,
banks and other financial institutions may charge their clients a nominal fee
for effecting redemptions of Fund shares. Any certificates representing Fund
shares being redeemed must be submitted with the redemption request. The
value of the shares redeemed may be more or less than their original cost,
depending on the Fund's then-current net asset value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK OR BY THE
DREYFUS TELETRANSFER PRIVILEGE AND SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION
REQUEST TO THE TRANSFER AGENT, THE REDEMPTION PROCEEDS WILL BE TRANSMITTED TO
YOU PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE CHECK OR DREYFUS
TELETRANSFER PURCHASE, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN
ADDITION, THE FUND WILL NOT HONOR REDEMPTION CHECKS UNDER THE CHECK
REDEMPTION PRIVILEGE, AND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR
TELEPHONE OR PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE, FOR A PERIOD OF
EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK
OR DREYFUS TELETRANSFER PURCHASE ORDER AGAINST WHICH SUCH REDEMPTION IS
REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY
WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR
ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS
EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL
BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares
will not be redeemed until the Transfer Agent has received your Account
Application.
The Fund reserves the right to redeem your account at its option upon
not less than 30 days' written notice if your account's net asset value is
$5,000 or less ($500 or less if you were a Fund shareholder on October 31,
1995) and remains so during the notice period. The $5.00 account closeout fee
would be charged in such case.
PROCEDURES
You may redeem Fund shares by using the regular redemption procedure
through the Transfer Agent, or, if you have checked the appropriate box and
supplied the necessary information on the Account
Page 10
Application or have filed a Shareholder Services Form with the Transfer Agent,
through the Check Redemption Privilege, the Wire Redemption Privilege, the
Telephone Redemption Privilege or the Dreyfus TELETRANSFER Privilege. The
Fund makes available to certain large institutions the ability to issue
redemption instructions through compatible computer facilities. The Fund
reserves the right to refuse any request made by wire or telephone, including
requests made shortly after a change of address, and may limit the amount
involved or the number of such requests. The Fund may modify or terminate any
redemption Privilege at any time. Shares held under Keogh Plans, IRAs or other
retirement plans, and shares for which the certificates have been issued, are
not eligible for the Check Redemption,Wire Redemption, Telephone Redemption or
Dreyfus TELETRANSFER Privilege.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption
privilege or telephone exchange privilege (which is granted automatically
unless you refuse it), you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you and
reasonably believed by the Transfer Agent to be genuine. The Fund will
require the Transfer Agent to employ reasonable procedures, such as requiring
a form of personal identification, to confirm that instructions are genuine
and, if it does not follow such procedures, the Fund or the Transfer Agent
may be liable for any loss due to unauthorized or fraudulent instructions.
Neither the Fund nor the Transfer Agent will be liable for following
telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used. During the delay, the Fund's net asset value may fluctuate.
REGULAR REDEMPTION -- Under the regular redemption procedure, you may redeem
your shares by written request mailed to The Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus retirement
plan accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427,
Providence, Rhode Island 02940-6427. Redemption requests may be delivered in
person only to a Dreyfus Financial Center. THESE REQUESTS WILL BE FORWARDED
TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For the location
of the nearest Dreyfus Financial Center, please call one of the telephone
numbers listed under "General Information." Redemption requests must be
signed by each shareholder, including each owner of a joint account, and each
signature must be guaranteed. The Transfer Agent has adopted standards and
procedures pursuant to which signature-guarantees in proper form generally
will be accepted from 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.
If you have any questions with respect to signature-guarantees, please call
one of the telephone numbers listed under "General Information."
Redemption proceeds of at least $5,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
CHECK REDEMPTION PRIVILEGE _ You may write Redemption Checks drawn on your
Fund account. Redemption Checks may be made payable to the order of any
person in the amount of $1,000 or more. Potential fluctuations in the net
asset value of Fund shares should be considered in determining the amount of
the check. Redemption Checks should not be used to close an account. Your
account will be charged $2.00 for each Redemption Check you write. The
Transfer Agent also will impose a fee for stopping payment of a Redemption
Check upon your request or if the Transfer Agent cannot honor the Redemption
Check because of insufficient funds or other valid reason. You should date
your Redemption
Page 11
Checks with the current date when you write them. Please do
not postdate your Redemption Checks. If you do, the Transfer Agent will
honor, upon presentment, even if presented before the date of the check, all
postdated Redemption Checks which are dated within six months of presentment
for payment, if they are otherwise in good order. The Fund may return an
unpaid Redemption Check that would draw your account balance below $5.00 and
you may be subject to extra charges. This Privilege will be terminated
immediately, without notice, with respect to any account which is, or becomes,
subject to backup withholding on redemptions (see "Dividends, Distributions
and Taxes"). Any Redemption Check written on an account which has become
subject to backup withholding on redemptions will not be honored by the
Transfer Agent.
WIRE REDEMPTION PRIVILEGE -- You may request by wire or telephone that
redemption proceeds (minimum $5,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. You will be charged a $5.00 wire redemption fee for
each wire redemption, which will be deducted from your account and paid to
the Transfer Agent. You also may direct that redemption proceeds be paid by
check (maximum $150,000 per day)made out to the owners of record and mailed
to your address. Redemption proceeds of less than $5,000 will be paid
automatically by check. Holders of jointly registered Fund or bank accounts
may have redemption proceeds of not more than $250,000 wired within any
30-day period. You may telephone redemption requests by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. The
Statement of Additional Information sets forth instructions for transmitting
redemption requests by wire.
TELEPHONE REDEMPTION PRIVILEGE -- You may request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
DREYFUS TELETRANSFER PRIVILEGE -- You may request by telephone that
redemption proceeds (minimum $1,000 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an Automated Clearing House member may be
designated. Redemption proceeds will be on deposit in your account at an
Automated Clearing House member bank ordinarily two days after receipt of the
redemption request or, at your request, paid by check (maximum $150,000 per
day) and mailed to your address. Holders of jointly registered Fund or bank
accounts may redeem through the Dreyfus TELETRANSFER Privilege for transfer
to their bank account not more than $250,000 within any 30-day period. You
will be charged a $5.00 TELETRANSFER redemption fee for each Dreyfus
TELETRANSFER redemption, which will be deducted from your account and paid to
the Transfer Agent.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of shares by telephoning
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan pursuant to which
the Fund reimburses Dreyfus Service Corporation, a wholly-owned subsidiary of
The Dreyfus Corporation, an amount not to exceed an annual rate of .25 of 1%
of the value of the Fund's average daily net assets 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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily declares dividends from its net investment income
daily on each day the New York Stock Exchange is open for business. Dividends
usually are paid on the last business day of each month, and are automatically
reinvested in additional shares, or, at your option, paid in cash. The Fund's
earnings for Saturdays, Sundays and holidays are declared as dividends on the
next business day. If you redeem all shares in your account at any time during
the month, all dividends to which you are entitled will be paid to
Page 12
you along with the proceeds of the redemption. If you are an
omnibus accountholder and indicate in a partial redemption request that a
portion of any accrued dividends to which such account is entitled belongs to
an underlying accountholder who has redeemed all shares in his or her
account, such portion of the accrued dividends will be paid to you along with
the proceeds of the redemption. Distributions from net realized securities
gains, if any, generally are declared and paid once a year, but the Fund may
make distributions on a more frequent basis to comply with distribution
requirements of the Internal Revenue Code of 1986, as amended (the "Code"),
in all events in a manner consistent with the provisions of the 1940 Act. The
Fund will not make distributions from net realized securities gains unless
capital loss carryovers, if any, have been utilized or have expired. You may
choose whether to receive distributions in cash or to reinvest in additional
shares at net asset value. All expenses are accrued daily and deducted before
declaration of dividends to investors.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Fund will be taxable to U.S. shareholders
as ordinary income whether received in cash or reinvested in Fund shares. No
dividend paid by the Fund will qualify for the dividends received deduction
allowable to certain U.S. corporations. Distributions from net realized
long-term securities gains of the Fund generally will be taxable to U.S.
shareholders as long-term capital gains for Federal income tax purposes,
regardless of how long shareholders have held their Fund shares and whether
such distributions are received in cash or reinvested in Fund shares. The
Code provides that the net capital gain of an individual generally will not
be taxed at a rate in excess of 28%. Dividends and distributions may be
subject to state and local taxes.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Fund to a foreign investor generally are
subject to U.S. nonresident withholding taxes at the rate of 30%, unless the
foreign investor claims the benefit of a lower rate specified in a tax
treaty. Distributions from net realized long-term securities gains paid by
the Fund to a foreign investor as well as the proceeds of any redemptions
from a foreign investor's account, regardless of the extent to which gain or
loss may be realized, generally will not be subject to U.S. nonresident
withholding tax. However, such distributions may be subject to backup
withholding, as described below, unless the foreign investor certifies his
non-U.S. residency status.
Notice as to the tax status of your dividends and distributions will
be mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends, distributions
from net realized securities gains and the proceeds of any redemption,
regardless of the extent to which gain or loss may be realized, paid to a
shareholder if such shareholder fails to certify either that the TIN
furnished in connection with opening an account is correct, or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the IRS may
notify the Fund to institute backup withholding if the IRS determines a
shareholder's TIN is incorrect or if a shareholder has failed to properly
report taxable dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax
Page 13
imposed on the record owner of the account, and may be claimed as a credit on
the record owner's Federal income tax return.
Management of the Fund believes that the Fund has qualified for the
fiscal year ended December 31, 1995 as a "regulated investment company" under
the Code. The Fund intends to continue to so qualify if such qualification is
in the best interests of its shareholders. Such qualification relieves the
Fund of any liability for Federal income taxes to the extent its earnings are
distributed in accordance with applicable provisions of the Code. The Fund is
subject to a non-deductible 4% excise tax, measured with respect to certain
undistributed amounts of taxable investment income and capital gains.
You should consult your tax adviser regarding specific questions as
to Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance may be calculated on several
bases, including current yield, average annual total return and/or total
return.
Current yield refers to the Fund's annualized net investment income
per share over a 30-day period, expressed as a percentage of the net asset
value per share at the end of the period. For purposes of calculating current
yield, the amount of net investment income per share during that 30-day
period, computed in accordance with regulatory requirements, is compounded by
assuming that it is reinvested at a constant rate over a six-month period. An
identical result is then assumed to have occurred during a second six-month
period which, when added to the result for the first six months, provides an
"annualized" yield for an entire one-year period. Calculations of the Fund's
current yield may reflect absorbed expenses pursuant to any undertaking that
may be in effect. See "Management of the Fund."
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment in the Fund was purchased with an
initial payment of $1,000 and that the investment was redeemed at the end of
a stated period of time, after giving effect to the reinvestment of dividends
and distributions during the period. The return is expressed as a percentage
rate which, if applied on a compounded annual basis, would result in the
redeemable value of the investment at the end of the period. Advertisements
of the Fund's performance will include the Fund's average annual total return
for one, five and ten year periods, or for shorter time periods depending
upon the length of time during which the Fund has operated.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the net asset
value per share at the beginning of the period. Advertisements may include
the percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes the
application of the percentage rate of total return.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance. For purposes of
advertising, calculations of average annual total return and certain
calculations of total return will take into account the performance of
Dreyfus Investors GNMA Fund, L.P. the assets and liabilities of which were
transferred to the Fund in exchange for shares of the Fund on December 31,
1993. See "General Information."
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Bank Rate Monitortrademark, N. Palm Beach, Fla.
33408, Merrill Lynch Mortgage Master Index, Moody's Bond Survey Bond Index,
Lehman Brothers Bond Indices, Salomon Brothers Bond Indices, Morningstar,
Inc. and other industry publica-
Page 14
tions. In addition, data may be used comparing the difference in yields
between Ginnie Maes and comparable term Treasury Notes (which are direct
obligations of the U.S. Government).
GENERAL INFORMATION
The Fund was organized as an unincorporated business trust under the
laws of the Commonwealth of Massachusetts pursuant to an Agreement and
Declaration of Trust (the "Trust Agreement") dated May 14, 1993, and
commenced operations on January 1, 1994. Before November 1, 1995, the Fund's
name was Dreyfus Investors GNMA Fund. The Fund is authorized to issue an
unlimited number of shares of beneficial interest, par value $.001 per share.
Each share has one vote.
On December 31, 1993, all of the assets and liabilities of Dreyfus
Investors GNMA Fund, L.P.(the "Partnership") were transferred to the Fund in
exchange for shares of beneficial interest of the Fund pursuant to a proposal
approved at a Meeting of Partners of the Partnership held on November 24,
1993.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Trust Agreement disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be given
in each agreement, obligation or instrument entered into or executed by the
Fund or a Board member. The Trust Agreement provides for indemnification from
the Fund's property for all losses and expenses of any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations, a possibility which management believes is remote. Upon payment
of any liability incurred by the Fund, the shareholder paying such liability
will be entitled to reimbursement from the general assets of the Fund. The
Fund intends to conduct its operations in such a way so as to avoid, as far
as possible, ultimate liability of the shareholders for liabilities of the
Fund. As discussed under "Management of the Fund" in the Statement of
Additional Information, the Fund ordinarily will not hold shareholder
meetings; however, shareholders under certain circumstances may have the
right to call a meeting of shareholders for the purpose of voting to remove
Board members.
The Transfer Agent maintains a record of your ownership and sends you
confirmations and statements of account. The Fund sends annual and
semi-annual financial statements to all its shareholders.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling 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.
Page 15
APPENDIX
INVESTMENT TECHNIQUES
FORWARD ROLL TRANSACTIONS -- To enhance current income, the Fund may enter
into forward roll transactions with respect to mortgage-related securities.
In a forward roll transaction, the Fund sells a mortgage-related security to
a financial institution, such as a bank or broker-dealer, and simultaneously
agrees to purchase a similar security from the institution at a later date at
an agreed upon price. The securities that are purchased will bear the same
interest rate as those sold, but generally will be collateralized by different
pools of mortgages with different prepayment histories than those sold.
During the period between the sale and purchase, the Fund will not be
entitled to receive interest and principal payments on the securities sold.
Proceeds of the sale typically will be invested in short-term instruments,
particularly repurchase agreements, and the income from these investments,
together with any additional fee income received on the sale will generate
income for the Fund exceeding the yield on the securities sold. Forward roll
transactions involve the risk that the market value of the securities sold by
the Fund may decline below the purchase price of those securities. A
segregated account of the Fund consisting of cash, U.S. Government securities
or other high quality liquid debt securities at least equal to the amount of
the repurchase price (including accrued interest) will be established and
maintained at the Fund's custodian bank.
USE OF DERIVATIVES -- TheFund may invest in the types of Derivatives
enumerated under "Description of the Fund -- Investment Considerations and
Risks -- Use of Derivatives." These instruments and certain related risks are
described more specifically under "Investment Objective and Management
Policies -- Management Policies -- Derivatives" in the Statement of
Additional Information.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and the
Fund's portfolio as a whole. Derivatives permit the Fund to increase or
decrease the level of risk, or change the character of the risk, to which its
portfolio is exposed in much the same way as the Fund can increase or
decrease the level of risk, or change the character of the risk, of its
portfolio by making investments in specific securities.
Derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in Derivatives
could have a large potential impact on the Fund's performance.
If the Fund invests in Derivatives at inappropriate times or judges
market conditions incorrectly, such investments may lower the Fund's return
or result in a loss. The Fund also could experience losses if it were unable
to liquidate its position because of an illiquid secondary market. The market
for many Derivatives is, or suddenly can become, illiquid. Changes in
liquidity may result in significant, rapid and unpredictable changes in the
prices for Derivatives.
Although the Fund will not be a commodity pool, Derivatives subject
the Fund to the rules of the Commodity Futures Trading Commission which limit
the extent to which the Fund can invest in certain Derivatives. The Fund may
invest in stock index futures contracts, interest rate futures contracts and
currency futures contracts, and options with respect thereto for hedging
purposes without limit. However, the Fund may not invest in such contracts
and options if the sum of the amount of initial margin deposits and premiums
paid for unexpired options with respect to such contracts, other than for
bona fide hedging purposes, exceed 5% of the liquidation value of the Fund's
assets, after taking into account unrealized profits and unrealized losses on
such contracts and options; provided however, that in the case of an option
that is in-the-money at the time of purchase, the in-the-money amount may be
excluded in calculating the 5% limitation.
The Fund may invest up to 5% of its assets, represented by the
premium paid, in the purchase of call and put options. TheFund may write
(i.e., sell) covered call and put option contracts to the extent
Page 16
of 20% of the value of its net assets at the time of such option contracts
are written. When required by the Securities and Exchange Commission, the
Fund will set aside permissable liquid assets in a segregated account to cover
its obligations relating to its transactions in Derivatives. To maintain this
required cover, the Fund may have to sell portfolio securities at
disadvantageous prices or times since it may not be possible to liquidate a
Derivative position at a reasonable price.
FORWARD COMMITMENTS -- The Fund may purchase Ginnie Maes and other
mortgage-related securities on a forward commitment or when-issued basis,
which means that delivery and payment take place a number of days after the
date of the commitment to purchase. The payment obligation and the interest
rate that will be received on a forward commitment or when-issued security
are fixed when the Fund enters into the commitment, but the Fund does not
make a payment until it receives delivery from the counterparty. The Fund
will commit to purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable. A segregated account of the Fund
consisting of cash, cash equivalents or U.S. Government securities or other
high quality liquid debt securities at least equal at all times to the amount
of the commitments will be established and maintained at the Fund's custodian
bank.
LEVERAGE -- Leveraging exaggerates the effect on net asset value of any
increase or decrease in the market value of the Fund's portfolio. Money
borrowed for leveraging will be limited to 331/3% of the value of the Fund's
total assets. These borrowings will be subject to interest costs which may or
may not be recovered by appreciation of the securities purchased; in certain
cases, interest costs may exceed the return received on the securities
purchased.
The Fund may enter into reverse repurchase agreements with banks,
brokers or dealers. This form of borrowing involves the transfer by the Fund
of an underlying debt instrument in return for cash proceeds based on a
percentage of the value of the security. The Fund retains the right to
receive interest and principal payments on the security. At an agreed upon
future date, the Fund repurchases the security at principal plus accrued
interest. Except for these transactions, the Fund's borrowings generally will
be unsecured.
SHORT SELLING -- In these transactions, the Fund sells a security it does not
own in anticipation of a decline in the market value of the security. To
complete the transaction, the Fund must borrow the security to make delivery
to the buyer. The Fund is obligated to replace the security borrowed by
purchasing it subsequently at the market price at the time of replacement.
The price at such time may be more or less than the price at which the
security was sold by the Fund, which would result in a loss or gain,
respectively.
Securities will not be sold short if, after effect is given to any
such short sale, the total market value of all securities sold short would
exceed 25% of the value of the Fund's net assets. The Fund may not sell short
the securities of any single issuer listed on a national securities exchange
to the extent of more than 5% of the value of the Fund's net assets. The Fund
may not make a sale which results in the Fund having sold short in the
aggregate more than 5% of the outstanding securities of any class of an
issuer.
The Fund also may make short sales "against the box," in which the
Fund enters into a short sale of a security it owns in order to hedge an
unrealized gain on the security. At no time will more than 15% of the value
of the Fund's net assets be in deposits on short sales against the box.
LENDING PORTFOLIO SECURITIES -- The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to be
entitled to payments in amounts equal to the interest, dividends or other
distributions payable on the loaned securities which affords the Fund an
opportunity to earn interest on the amount of the loan and income on the
loaned securities' collateral. Loans of portfolio securities may not exceed
331/3% of the value of the Fund's total assets, and the Fund will receive
collateral consisting of cash, U.S. Government securities or irrevocable
letters of credit which will be maintained at all times in an amount equal to
at least
Page 17
100% of the current market value of the loaned securities. Such
loans are terminable by the Fund at any time upon specified notice. TheFund
might experience risk of loss if the institution with which it has engaged in
a portfolio loan transaction breaches its agreement with the Fund.
CERTAIN PORTFOLIO SECURITIES
MORTGAGE-RELATED SECURITIES -- Mortgage-related securities issued by FNMA
include FNMA Guaranteed Mortgage Pass-Through Certificates (also known as
"Fannie Maes") which are solely the obligations of FNMA and are not backed by
or entitled to the full faith and credit of the United States, but are
guaranteed as to timely payment of principal and interest by FNMA.
Mortgage-related securities issued by FHLMC include FHLMC Mortgage
Participation Certificates (also known as "Freddie Macs" or "PCs"). Freddie
Macs are not guaranteed by the United States and do not constitute a debt or
obligation of the United States. Freddie Macs entitle the holder to timely
payment of interest, which is guaranteed by FHLMC. The FHLMC guarantees
either ultimate collection or timely payment of all principal payments on the
underlying mortgage loans. When FHLMC does not guarantee timely payment of
principal, FHLMC may remit the amount due on account of its guarantee of
ultimate payment of principal at any time after default on an underlying
mortgage, but in no event later than one year after it becomes payable.
Collateralized mortgage obligations, which include those issued
through real estate mortgage investment conduits or REMICs, are debt
securities that are structured to pay principal and interest based on
payments received on a pool of mortgage-related securities pledged to secure
the obligations. The issuers of collateralized mortgage obligations typically
do not have assets other than those pledged to secure separately the
obligations. Holders of these obligations must rely principally on
distributions on the underlying mortgage-related securities and other
collateral securing the obligations for payments of principal and interest on
the obligations. Typically, collateralized mortgage obligations are
collateralized by Ginnie Mae, Fannie Mae or Freddie Mac Certificates, but
also may be collateralized by whole loans or private mortgage pass-through
securities. Although the mortgage-related securities securing these
obligations may be subject to a government guarantee or third-party support,
the obligations are not so guaranteed. Consequently, if the collateral
securing the obligations is insufficient to make payments on the obligations,
a holder could sustain a loss.
The Fund may invest in private mortgage pass-through securities that
are structured similarly to the Ginnie Mae, Fannie Mae and Freddie Mac
mortgage pass-through securities and are issued by originators of, or
investors in, mortgage loans. Private mortgage pass-through securities
usually are backed by a pool of conventional fixed rate or adjustable rate
mortgage loans. Since these securities typically are not guaranteed by an
entity having the credit status of Ginnie Mae, Fannie Mae or Freddie Mac, such
securities generally are structured with one or more types of credit
enhancement.
The Fund also may invest in stripped mortgage-backed securities
issued by agencies or instrumentalities of the United States government, or
by private originators of, or investors in, mortgage loans, including savings
and loan associations, mortgage banks, commercial banks, investment banks and
special purpose subsidiaries of the foregoing. Stripped mortgage-backed
securities usually are structured with two classes that receive different
proportions of interest and principal distributions on a pool of mortgage-back
ed securities or whole loans. A common type of stripped mortgage-backed
security will have one class of receiving some of the interest and most of
the principal from the mortgage collateral, while the other class will
receive most of the interest and the remainder of the principal.
REPURCHASE AGREEMENTS -- In a repurchase agreement, the Fund buys a security,
and at the time of sale, the seller agrees to repurchase the obligation at a
mutually agreed upon time and price (usually within seven days). The
repurchase agreement thereby determines the yield during the purchaser's
holding period, while the seller's obligation to repurchase is secured by the
value of the underlying security. Repurchase agreements could involve risks
in the event of a default or insolvency of the other party to the agreement,
including possi-
Page 18
ble delays or restrictions upon the Fund's ability to dispose
of the underlying securities. The Fund may enter into repurchase agreements
with certain banks or non-bank dealers.
ILLIQUID SECURITIES -- TheFund may invest up to 15% of the value of its net
assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment
objective. Such securities may include securities that are not readily
marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, repurchase agreements providing for
settlement in more than seven days after notice, and certain privately
negotiated, non-exchange traded options and securities used to cover such
options. As to these securities, the Fund is subject to a risk that should
the Fund desire to sell them when a ready buyer is not available at a price
the Fund deems representative of their value, the value of the Fund's net
assets could be adversely affected.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 19
DREYFUS
BASIC
GNMA
Fund
Prospectus
(LION LOGO)
Copy Rights 1996, Dreyfus Service Corporation
080p050196
Registration Mark
DREYFUS BASIC GNMA FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MAY 1, 1996
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 May 1, 1996, 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-14
Shareholder Services Plan. . . . . . . . . . . . . . . . . . . . . .B-15
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . .B-16
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . .B-17
Fund Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . .B-19
Determination of Net Asset Value . . . . . . . . . . . . . . . . . .B-20
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . .B-21
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . .B-22
Performance Information. . . . . . . . . . . . . . . . . . . . . . .B-23
Information about the Fund . . . . . . . . . . . . . . . . . . . . .B-24
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors. . . . . . . . . . . . . . . .B-24
Financial Statements . . . . . . . . . . . . . . . . . . .B-26
Report of Independent Auditors . . . . . . . . . . . . . .B-35
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the sections in the Fund's Prospectus entitled
"Description of the Fund" and "Appendix."
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.
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 $1 billion, 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.
Illiquid Securities. Where a substantial market of qualified
institutional buyers has developed for certain restricted securities
purchased by the Fund pursuant to Rule 144A under the Securities Act of
1933, as amended, the Fund intends to treat such securities as liquid
securities in accordance with procedures approved by the Fund's Board.
Because it is not possible to predict with assurance how the market for
specific restricted securities sold pursuant to Rule 144A will develop, the
Fund's Board has directed the Manager to monitor carefully the Fund's
investments in such securities with particular regard to trading activity,
availability of reliable price information and other relevant information.
To the extent that, for a period of time, qualified institutional buyers
cease purchasing restricted securities pursuant to Rule 144A, the Fund's
investing in such securities may have the effect of increasing the level of
illiquidity in its investment portfolio during such period.
Management Policies
Leverage Through Borrowing. For borrowings for investment purposes,
the Investment Company Act of 1940, as amended (the "1940 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 the amount deposited in the account plus
the amount deposited with the broker as collateral always equals the
current value of the security sold short, or (b) otherwise cover its short
position.
Derivatives. The Fund may invest in Derivatives (as defined in the
Prospectus) for a variety of reasons, including to hedge certain market
risks, to manage the interest rate sensitivity (sometimes called duration)
of fixed-income securities, to provide a substitute for purchasing or
selling particular securities or to increase potential income gain.
Derivatives may provide a cheaper, quicker or more specifically focused way
for the Fund to invest than "traditional" securities would.
Derivatives 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.,
variation 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 futures
contracts in 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. Furthermore, if in such
circumstances the Fund has insufficient cash, it may have to sell
securities to meet daily variation margin requirements. The Fund may have
to sell such 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.
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.
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.
Lending Portfolio Securities. 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 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 1940 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 Board 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 1940 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 1940 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 1940 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
Board members 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 Board member who is deemed to be an
"interested person" of the Fund, as defined in the 1940 Act, is indicated
by an asterisk.
Board Members of the Fund
GORDON J. DAVIS, Board Member. 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 trustee
of Bucknell University, and a director of the Muscular Dystrophy
Association, HealthPlan Services Corporation, Belding Heminway
Company, Inc., Curtis Industries Inc., and Staffing Resources, Inc.
He is 52 years old and his address is 200 Park Avenue, New York, New
York 10166.
*DAVID P. FELDMAN, Board Member. 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
56 years old and his address is One Oak Way, Berkeley Heights, New
Jersey 07922.
LYNN MARTIN, Board Member. Professor, J.L. Kellogg Graduate School of
Management, Northwestern University. During the Spring Semester of
1993, she was a Visiting Fellow at the Institute of Politics, Kennedy
School of Government, Harvard University. She also is an advisor to
the international accounting firm of Deloitte & Touche, LLP and chair
of its Council for 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 served in the
United States House of Representatives as a congresswoman from the
state of Illinois. She also is a director of Harcourt General, Inc.;
Ameritech; Ryder System, Inc.; The Proctor & Gamble Co.; and TRW, Inc.
She is 56 years old and her address is c/o Deloitte & Touche, LLP, Two
Prudential Plaza, 180 N. Stetson Avenue, Chicago, IL 60601.
EUGENE McCARTHY, Director Emeritus. Writer and columnist; former Senator
from Minnesota from 1958 to 1970. He also is a director of Harcourt
Brace Jovanovich, Inc., publishers. He is 80 years old and his
address is 271 Hawlin Road, Woodville, Virginia 22749.
DANIEL ROSE, Board Member. 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, Board Member. Since May 1995, Mr. Vanocur has been a
Professional in Residence at the Freedom Forum in Arlington, VA. From
January 1994 to May 1995, he 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 68 years old and his address is 2928 P
Street, N.W., Washington, D.C. 20007.
ANNE WEXLER, Board Member. Chairman of the Wexler Group, consultants
specializing in government relations and public affairs. She is also
a director of Alumax, Comcast Corporation, The New England Electric
System, NOVA Corporation 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 66
years old and her address is c/o The Wexler Group, 1317 F Street,
Suite 600, N.W., Washington, DC 20004.
REX WILDER, Board Member. 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 Board members of the
Fund who are not "interested persons" of the Fund, as defined in the 1940
Act, will be selected and nominated by the Board members who are not
"interested persons" of the Fund.
Meetings of shareholders will not be held for the purpose of electing
Board members unless and until such time as less than a majority of the
Board members holding office have been elected by shareholders, at which
time the Board members then in office will call a shareholders' meeting for
the election of Board members. Under the 1940 Act, shareholders of record
of not less than two-thirds of the outstanding shares of the Fund may
remove a Board member through a declaration in writing or by vote cast in
person or by proxy at a meeting called for that purpose. The Board members
are required to call a meeting of shareholders for the purpose of voting
upon the question of removal of any such Board member 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 Board members 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, 1995, the aggregate amount of compensation paid to each
Board member 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:
Total
Compensation from
Aggregate Fund and Fund
Name of Board Compensation from Complex Paid to
Member Fund* Board Member
- -------------- ------------------- -----------------
Gordon J. Davis $4,000 $ 76,575 (26)
Joseph S. DiMartino $4,499 $448,618 (93)
David P. Feldman $4,000 $111,783 (28)
Lynn Martin $3,750 $ 38,500 (12)
Eugene McCarthy+ $4,000 $ 41,250 (12)
Daniel Rose $4,000 $ 80,250 (22)
Sander Vanocur $4,000 $ 79,750 (22)
Anne Wexler $3,750 $ 62,201 (17)
Rex Wilder $4,000 $ 41,250 (12)
- -------------------------------
* Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $530 for all Board members as a group.
+ Director Emeritus as of March 29, 1996.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President and Chief
Executive 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 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 31 years old.
ELIZABETH BACHMAN, Vice President and Assistant Secretary. Assistant Vice
President of the Distributor and an officer of other investment
companies advised or administered by the Manager. She is 26 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 34 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.
MARGARET M. PARDO, Assistant Secretary. Legal Assistant with the
Distributor and an officer of other investment companies advised or
administered by the Manager. From June 1992 to April 1995, she was a
Medical Coordination Officer at ORBIS International. Prior to June
1992, she worked as Program Coordinator at Physicians World
Communications Group. She is 27 years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
The Fund's Board members and officers of the Fund, as a group, owned
less than 1% of the Fund's voting securities outstanding on April 1, 1996.
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 Board or (ii) vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities
of the Fund, provided that in either event the continuance also is approved
by a majority of the Board members who are not "interested persons" (as
defined in the 1940 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, including a majority of the Board members who are not
"interested persons" of any party to this Agreement, at a meeting held on
November 6, 1995. The Agreement is terminable without penalty, on 60 days'
notice, by the Fund's Board 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 1940 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; Christopher M. Condron, 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; William T. Sandalls, Jr., Senior Vice
President and Chief Financial Officer; 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; Mark N.
Jacobs, Vice President, General Counsel and Secretary; Mary Beth Leibig,
Vice President-Human Resources; Jeffrey N. Nachman, Vice President-Mutual
Fund Accounting; Andrew S. Wasser, Vice President-Information Systems;
Maurice Bendrihem, Controller; Elvira Oslapas, Assistant Secretary; and
Mandell L. Berman, Frank V. Cahouet, Alvin E. Friedman, Lawrence M. Greene
and Julian M. Smerling, 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
Board. The Manager is responsible for investment decisions, and provides
the Fund with portfolio managers who are authorized by the Board 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's review at
the meeting subsequent to such transactions.
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.
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 Board members 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.
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, 1993, 1994 and 1995, the management
fees payable to the Manager amounted to $317,545, $285,899 and $299,419,
respectively, which amounts were reduced by $317,545, $285,899 and
$299,419, respectively, pursuant to undertakings by the Manager, resulting
in no management fees being paid by the Fund for the fiscal years 1993,
1994 and 1995.
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
Board for its review. In addition, the Plan provides that material
amendments of the Plan must be approved by the Fund's Board, and by the
Board members who are not "interested persons" (as defined in the 1940 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 Board members cast in person at a meeting
called for the purpose of voting on the Plan.
The Plan was last so approved on November 6, 1995. The Plan is
terminable at any time by vote of a majority of the Board members 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, 1995, the fee payable by the
Fund to Dreyfus Service Corporation, pursuant to the Plan, amounted to
$124,129.
PURCHASE OF SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Shares."
The Distributor. The Distributor serves as the Fund's distributor on
a best efforts basis 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.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 P.M., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York
Stock Exchange are open for business will be credited to the shareholder's
Fund account on the next bank business day following such purchase order.
Purchase orders made after 4:00 P.M., New York time, on any business day
the Transfer Agent and the New York Stock Exchange are open for business,
or orders made on Saturday, Sunday or any Fund holiday (e.g., when the New
York Stock Exchange is not open for business), will be credited to the
shareholder's Fund account on the second bank business day following such
purchase order. To qualify to use Dreyfus TeleTransfer Privilege, the
initial payment for purchase of Fund shares must be drawn on, and
redemption proceeds paid to, the same bank and account as are designated on
the Account Application or Shareholder Services Form on file. If the
proceeds of a particular redemption are to be wired to an account at any
other bank, the request must be in writing and signature-guaranteed. See
"Redemption of Shares--Dreyfus TeleTransfer Privilege."
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 SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Redeem Shares."
Check Redemption Privilege. An investor may indicate on the Account
Application, Shareholder Services Form or by later written request that the
Fund provide Redemption Checks ("Checks") drawn on the investor's Fund
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 to the Transfer Agent for
payment, 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."
Dreyfus TeleTransfer Privilege. Investors should be aware that if
they have also selected the Dreyfus TeleTranfer Privilege, any request for
a wire redemption will be effected as a Dreyfus TeleTransfer transaction
through the Automated Clearing House ("ACH") system unless more prompt
transmittal specifically is requested. Redemption proceeds will be on
deposit in the investor's account at an ACH member bank ordinarily two
business days after receipt of the redemption request. Investors will be
charged a $5.00 fee for each redemption made pursuant to this Privilege,
which will be deducted from the investor's account and paid to the Transfer
Agent. See "Purchase of Shares--Dreyfus TeleTransfer Privilege."
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 Fund's Board reserve the right to make payments in whole or
part in securities (which may include non-marketable 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
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 Fund's Board. 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
Fund's Board. 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.
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, 1995 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 in
the Prospectus. 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.
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 December 31, 1995
was 6.37%, which reflects the absorption of certain expenses pursuant to an
undertaking 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 5.82%. 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 8.408 year
periods ended December 31, 1995 was 16.62%, 8.75% and 8.95%, respectively.
The Fund's average annual total return for the 4.359 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 December 31, 1995 was 8.96%. 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
December 31, 1995, and the period August 23, 1991 to December 31, 1995, was
105.56% and 45.37%, 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.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer
to, or include commentary by, the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
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.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN,
COUNSEL AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, P.O.
Box 9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and
dividend disbursing agent. Under a transfer agency agreement with the
Fund, the Transfer Agent arranges for the maintenance of shareholder
account records for the Fund, the handling of certain communications
between shareholders and the Fund and the payment of dividends and
distributions payable by the Fund. For these services, the Transfer Agent
receives a monthly fee computed on the basis of the number of shareholder
accounts it maintains for the Fund during the month, and is reimbursed for
certain out-of-pocket expenses. Mellon Bank, N.A., the Manager's parent,
One Mellon Bank Center, Pittsburgh, Pennsylvania 15258, acts as custodian
of the Fund's investments. Under a custody agreement with the Fund, Mellon
Bank, N.A. holds the Fund's securities and keeps all necessary accounts and
records. For its custody services, Mellon Bank, N.A. receives a monthly
fee based on the market value of the Fund's assets held in custody and
receives certain securities transactions charges. Neither Dreyfus
Transfer, Inc. nor Mellon Bank, N.A. 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 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.
<TABLE>
<CAPTION>
DREYFUS BASIC GNMA FUND
(FORMERLY DREYFUS INVESTORS GNMA FUND)
STATEMENT OF INVESTMENTS DECEMBER 31, 1995
PRINCIPAL
BONDS AND NOTES-98.6% AMOUNT VALUE
_______ _______
<S> <C> <C>
MORTGAGE-BACKED SECURITIES-86.0%
Government National Mortgage Association I:
7%, 6/15/2008-12/15/2023................................................ $ 14,588,827 $ 14,802,140
7 1/2% (a).............................................................. 4,000,000 4,132,480
7 1/2%, 9/15/2021-6/15/2025............................................. 8,556,221 8,814,340
8%, 6/15/2016-11/15/2024................................................ 3,454,205 3,604,466
8 1/2%, 8/15/2018-2/15/2025............................................. 3,199,518 3,370,773
9%, 5/15/2016-11/15/2022................................................ 2,617,465 2,792,154
9 1/2%, 1/15/2017-12/15/2021............................................ 1,280,279 1,381,678
______
38,898,031
______
Government National Mortgage Association II:
9%, 3/20/2016-9/20/2021................................................. 243,425 257,722
9 1/2%, 9/20/2021-12/20/2021............................................ 434,743 464,934
______
722,656
______
Government National Mortgage Association I:
Project Loan;
9 1/4%, 10/15/2023...................................................... 963,301 1,023,199
______
Federal Home Loan Mortgage Corp.,
Real Estate Mortgage Investment Conduit:
Ser.77, Cl. F,
8 1/2%, 6/15/2017..................................................... 200,000 202,068
Ser.86, Cl. F,
9%, 10/15/2020........................................................ 300,000 340,656
Ser.128, Cl. H,
8 3/4%, 9/15/2019..................................................... 805,806 832,542
Ser.1030, Cl. E,
9%, 3/15/2019......................................................... 979,685 1,018,804
Ser.1092, Cl. J,
8 1/2%, 5/15/2020..................................................... 1,000,000 1,070,900
Ser.1395, Cl. C,
6%, 11/15/2018........................................................ 1,658,080 1,649,740
Ser.1455, Cl. K,
7%, 6/15/2020......................................................... 1,500,000 1,498,905
______
6,613,615
______
Federal National Mortgage Association,
Real Estate Mortgage Investment Conduit;
Cl. G27-E,
8 1/2%, 2/25/2018....................................................... 562,165 568,653
______
TOTAL MORTGAGE-BACKED SECURITIES............................................ 47,826,154
======
DREYFUS BASIC GNMA FUND
(FORMERLY DREYFUS INVESTORS GNMA FUND)
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1995
PRINCIPAL
BONDS AND NOTES (CONTINUED) AMOUNT VALUE
_______ _______
U.S. TREASURY NOTES-12.6%
4 5/8%, 2/15/1996....................................................... $ 600,000 $ 599,672
6 1/2%, 8/15/2005....................................................... 6,000,000 6,398,436
______
TOTAL U.S. TREASURY NOTES................................................... 6,998,108
======
TOTAL BONDS AND NOTES
(cost $53,180,388)...................................................... $ 54,824,262
======
SHORT-TERM INVESTMENT-8.4%
REPURCHASE AGREEMENT;
Lehman Government Securities Inc., 5.70%
Dated 12/29/1995, Due 1/2/1996 in the amount of $4,702,977 (fully
collateralized
by $4,700,000 U.S. Treasury Notes, 7 5/8%, due 4/30/1996, value
$4,800,698) (b)
(cost $4,700,000)....................................................... $ 4,700,000 $ 4,700,000
======
TOTAL INVESTMENTS
(cost $57,880,388)...................................................... 107.0% $ 59,524,262
==== ======
LIABILITIES, LESS CASH AND RECEIVABLES...................................... (7.0%) $ (3,909,687)
==== ======
NET ASSETS ................................................................ 100.0% $ 55,614,575
==== ======
NOTES TO STATEMENT OF INVESTMENTS:
(a) Purchased on a forward commitment basis.
(b) Held by the custodian in a segregated account as collateral for
securities purchased on a forward commitment basis.
See notes to financial statements.
DREYFUS BASIC GNMA FUND
(FORMERLY DREYFUS INVESTORS GNMA FUND)
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1995
ASSETS:
Investments in securities, at value-Note 1(a)
(cost $57,880,388)-see statement...................................... $59,524,262
Cash.................................................................... 65,573
Interest receivable..................................................... 453,632
Paydowns receivable..................................................... 35,110
Receivable for shares of Beneficial Interest subscribed................. 7,124
Prepaid expenses........................................................ 9,257
______
60,094,958
LIABILITIES:
Due to The Dreyfus Corporation and subsidiaries......................... $ 39,173
Payable for investment securities purchased............................. 4,129,271
Payable for shares of Beneficial Interest redeemed...................... 235,756
Accrued expenses........................................................ 76,183 4,480,383
_____ ______
NET ASSETS ................................................................ $55,614,575
======
REPRESENTED BY:
Paid-in capital......................................................... $54,143,816
Accumulated undistributed investment income-net......................... 19,379
Accumulated net realized (loss) on investments.......................... (192,494)
Accumulated net unrealized appreciation on investments-Note 3........... 1,643,874
______
NET ASSETS at value applicable to 3,606,225 shares outstanding
(unlimited number of $.001 par value shares of
Beneficial Interest authorized)......................................... $55,614,575
======
NET ASSET VALUE, offering and redemption price per share
($55,614,575 / 3,606,225 shares)........................................ $15.42
======
See notes to financial statements.
DREYFUS BASIC GNMA FUND
(FORMERLY DREYFUS INVESTORS GNMA FUND)
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1995
INVESTMENT INCOME:
INTEREST INCOME......................................................... $3,672,726
EXPENSES:
Management fee-Note 2(a).............................................. $ 299,419
Shareholder servicing costs-Note 2(b)................................. 178,512
Registration fees..................................................... 37,216
Trustees' fees and expenses-Note 2(c)................................. 37,079
Auditing fees......................................................... 25,439
Custodian fees........................................................ 23,686
Legal fees............................................................ 20,762
Prospectus and shareholders' reports.................................. 8,261
Miscellaneous......................................................... 7,670
_____
TOTAL EXPENSES.................................................... 638,044
Less-expense reimbursement from Manager due to
undertakings-Note 2(a)............................................ 390,999
_____
NET EXPENSES...................................................... 247,045
_____
INVESTMENT INCOME-NET............................................. 3,425,681
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $1,605,147
Net unrealized appreciation on investments.............................. 2,562,661
_____
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 4,167,808
_____
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $7,593,489
======
See notes to financial statements.
DREYFUS BASIC GNMA FUND
(FORMERLY DREYFUS INVESTORS GNMA FUND)
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
________________________________
1994 1995
______ ______
OPERATIONS:
Investment income-net................................................... $ 3,499,509 $ 3,425,681
Net realized gain (loss) on investments................................. (1,967,259) 1,605,147
Net unrealized appreciation (depreciation) on investments for the year.. (2,115,432) 2,562,661
______ ______
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS....... (583,182) 7,593,489
______ ______
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net................................................... (3,490,557) (3,415,254)
______ ______
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold........................................... 18,193,639 22,533,965
Dividends reinvested.................................................... 2,338,409 2,239,783
Cost of shares redeemed................................................. (25,744,866) (18,274,607)
______ ______
INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL
INTEREST TRANSACTIONS............................................. (5,212,818) 6,499,141
______ ______
TOTAL INCREASE (DECREASE) IN NET ASSETS........................... (9,286,557) 10,677,376
NET ASSETS:
Beginning of year....................................................... 54,223,756 44,937,199
______ ______
End of year (including undistributed investment income-net:
$8,952 in 1994 and $19,379 in 1995)................................... $ 44,937,199 $ 55,614,575
====== ======
SHARES SHARES
______ ______
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 1,237,307 1,509,390
Shares issued for dividends reinvested.................................. 159,653 150,171
Shares redeemed......................................................... (1,744,696) (1,227,891)
______ ______
NET INCREASE (DECREASE) IN SHARES OUTSTANDING......................... (347,736) 431,670
====== ======
See notes to financial statements.
</TABLE>
DREYFUS BASIC GNMA FUND
(FORMERLY DREYFUS INVESTORS GNMA FUND)
FINANCIAL HIGHLIGHTS
Reference is made to page 4 of the Prospectus dated May 1, 1996.
DREYFUS BASIC GNMA FUND
(FORMERLY 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. 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.
On July 17, 1995, the Fund's Trustees approved a change to the Fund's
name, effective November 1, 1995, from "Dreyfus Investors GNMA Fund" to
"Dreyfus BASIC 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 are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to
DREYFUS BASIC GNMA FUND
(FORMERLY DREYFUS INVESTORS GNMA FUND)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the Fund not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best 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 $192,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to December 31, 1995. If not
applied, the carryover expires in fiscal 2002.
In connection with the adoption of Statement of Position 93-2
("Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies"),
the Fund has reclassified $169,618 from accumulated net realized loss on
investments to paid-in capital. Results of operations and net assets were not
effected by this reclassification.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .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 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, 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 (exclusive of certain expenses as described above) exceeded
specified annual percentages of the Funds' average daily net assets. The
Manager has currently undertaken through June 30, 1998 to reduce the
management fee paid by the Fund, to the extent that the Fund's aggregate
annual expenses (exclusive of 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 year ended December 31, 1995, the Manager voluntarily
assumed all or part of the remaining expenses of the Fund. The expense
reimbursement, pursuant to the undertakings, amounted to $390,999 for the
year ended December 31, 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.
DREYFUS BASIC GNMA FUND
(FORMERLY DREYFUS INVESTORS GNMA FUND)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Effective December 1, 1995, the Fund compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a
transfer agency agreement for providing personnel and facilities to perform
transfer agency services for the Fund. Such compensation amounted to $3,869
for the period from December 1, 1995 through December 31, 1995.
(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 of 1% of the value of the Fund's
average daily net assets 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.
During the year ended December 31, 1995, the Fund was charged an aggregate of
$124,129 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 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales (including paydowns) of
investment securities, excluding short-term securities, during the year ended
December 31, 1995, amounted to $126,948,692 and $117,836,425, respectively.
At December 31, 1995, accumulated net unrealized appreciation on
investments was $1,643,874, consisting of $1,662,236 gross unrealized
appreciation and $18,362 gross unrealized depreciation.
At December 31, 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).
DREYFUS BASIC GNMA FUND
(FORMERLY DREYFUS INVESTORS GNMA FUND)
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
DREYFUS BASIC GNMA FUND
We have audited the accompanying statement of assets and liabilities of
Dreyfus BASIC GNMA Fund, including the statement of investments, as of
December 31, 1995, 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, 1995 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 BASIC GNMA Fund at December 31, 1995, 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.
[Ernst and Young LLP signature logo]
New York, New York
February 6, 1996
DREYFUS BASIC GNMA FUND
(FORMERLY, DREYFUS INVESTORS GNMA FUND)
PART C. OTHER INFORMATION
_________________________
Item 24. Financial Statements and Exhibits. - List
_______ _________________________________________
(a) Financial Statements:
Included in Part A of the Registration Statement
Condensed Financial Information for the period from August
5, 1987 (commencement of operations) to December 31, 1987
and for each of the eight years in the period ended December
31, 1995.
Included in Part B of the Registration Statement:
Statement of Investments--December 31, 1995
Statement of Assets and Liabilities--December 31, 1995
Statement of Operations--year ended December 31, 1995
Statement of Changes in Net Assets--for each of the
years ended December 31, 1994 and 1995
Notes to Financial Statements
Report of Ernst & Young LLP, Independent Auditors,
dated February 6, 1996
All schedules and other financial statement information, for which
provision is made in the applicable accounting regulations of the
Securities and Exchange Commission, are either omitted because they are not
required under the related instructions, they are inapplicable, or the
required information is presented in the financial statements or notes
thereto which are included in Part B of the Registration Statement.
Item 24. Financial Statements and Exhibits. - List (continued)
_______ _____________________________________________________
(b) Exhibits:
(1)(a) Registrant's Agreement and Declaration of Trust is
incorporated by reference to Exhibit (1) of Post-Effective
Amendment No. 14 to the Registration Statement on Form N-1A,
filed on November 1, 1993.
(1)(b) Articles of Amendment are incorporated by reference to
Exhibit (1)(b) of Post-Effective Amendment No. 19 to the
Registration Statement on Form N-1A, filed on August 24,
1995.
(2) Registrant's By-Laws, as amended, are incorporated by
reference to Exhibit (2) of Post-Effective Amendment No. 14
to the Registration Statement on Form N-1A, filed on
November 1, 1993.
(5) Management Agreement is incorporated by reference to Exhibit
(5) of Post-Effective Amendment No. 20 to the Registration
Statement on Form N-1A, filed on October 25, 1995.
(6) Distribution Agreement is incorporated by reference to
Exhibit (6) of Post-Effective Amendment No. 20 to the
Registration Statement on Form N-1A, filed on October 25,
1995.
(8) Custody Agreement.
(9) Shareholder Services Plan is incorporated by reference to
Exhibit (9) of Post-Effective Amendment No. 20 to the
Registration Statement on Form N-1A, filed on October 25,
1995.
(10) Opinion and consent of Registrant's counsel is incorporated
by reference to Exhibit (10) of Post-Effective Amendment No.
15 to the Registration Statement on Form N-1A, filed on
December 30, 1993.
(11) Consent of Independent Auditors.
(16) Schedules of Computation of Performance Data are
incorporated by reference to Exhibit (10) of Post-Effective
Amendment No. 15 to the Registration Statement on Form N-1A,
filed on December 30, 1993.
(17) Financial Data Schedule.
Item 24. Financial Statements and Exhibits. - List (continued)
_______ _____________________________________________________
Other Exhibits
______________
(a) Powers of Attorney of the Trustees and Officers are
incorporated by reference to Other Exhibits (a) of
Post-Effective Amendment No. 17 to the Registration
Statement on Form N-1A, filed on February 24, 1995.
(b) Certificate of Secretary is incorporated by reference
to Other Exhibits (b) of Post-Effective Amendment No.
17 to the Registration Statement on Form N-1A, filed on
February 24, 1995.
Item 25. Persons Controlled by or under Common Control with Registrant.
_______ ______________________________________________________________
Not Applicable
Item 26. Number of Holders of Securities.
_______ ________________________________
(1) (2)
Number of Record
Title of Class Holders as of April 1, 1996
______________ ______________________________
Beneficial Interest 2,657
(Par value $.001)
Item 27. Indemnification
_______ _______________
Reference is made to Article EIGHT of the Registrant's Agreement
and Declaration of Trust previously filed as Exhibit 1 to Post-
Effective Amendment No. 14 to the Registration Statement on Form
N-1A on November 1, 1993. The application of these provisions is
limited by Article 10 of the Registrant's By-Laws previously
filed as Exhibit 2 to Post-Effective Amendment No. 14 to the
Registration Statement on Form N-1A on November 1, 1993 and by
the following undertaking set forth in the rules promulgated by
the Securities and Exchange Commission: Insofar as
indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers and controlling
persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is
against public policy as expressed in such Act and is, therefore,
unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses
incurred or paid by a trustee, officer or controlling person of
the registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
such Act and will be governed by the final adjudication of such
issue.
The Distribution Agreement is incorporated by Reference to
Exhibit (6) of Post-Effective Amendment No. 20 to the
Registration Statement on Form N-1A, filed on October 25, 1995.
Item 28. Business and Other Connections of Investment Adviser.
_______ ____________________________________________________
The Dreyfus Corporation ("Dreyfus") and subsidiary companies
comprise a financial service organization whose business consists
primarily of providing investment management services as the
investment adviser and manager for sponsored investment companies
registered under the Investment Company Act of 1940 and as an
investment adviser to institutional and individual accounts.
Dreyfus also serves as sub-investment adviser to and/or
administrator of other investment companies. Dreyfus Service
Corporation, a wholly-owned subsidiary of Dreyfus, is a
registered broker-dealer. Dreyfus Management, Inc., another
wholly-owned subsidiary, provides investment management services
to various pension plans, institutions and individuals.
Item 28. Business and Other Connections of Investment Adviser (continued)
________ ________________________________________________________________
Officers and Directors of Investment Adviser
____________________________________________
Name and Position
with Dreyfus Other Businesses
_________________ ________________
MANDELL L. BERMAN Real estate consultant and private investor
Director 29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034;
Past Chairman of the Board of Trustees:
Skillman Foundation;
Member of The Board of Vintners Intl.
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation****;
Mellon Bank, N.A.****
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
ALVIN E. FRIEDMAN Senior Adviser to Dillon, Read & Co. Inc.
Director 535 Madison Avenue
New York, New York 10022;
Director and Member of the Executive
Committee of Avnet, Inc.**
LAWRENCE M. GREENE Director:
Director Dreyfus America Fund
JULIAN M. SMERLING None
Director
HOWARD STEIN Chairman of the Board:
Chairman of the Board and Dreyfus Acquisition Corporation*;
Chief Executive Officer The Dreyfus Consumer Credit Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Service Corporation*;
Chairman of the Board and Chief Executive
Officer:
Major Trading Corporation*;
Director:
Avnet, Inc.**;
Dreyfus America Fund++++;
The Dreyfus Fund International
Limited+++++;
World Balanced Fund+++;
Dreyfus Partnership Management,
Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Organization, Inc.***;
Seven Six Seven Agency, Inc.*;
Trustee:
Corporate Property Investors
New York, New York
W. KEITH SMITH Chairman and Chief Executive Officer:
Vice Chairman of the Board The Boston Company*****;
Vice Chairman of the Board:
Mellon Bank Corporation****;
Mellon Bank, N.A.****;
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
CHRISTOPHER M. CONDRON Vice Chairman:
President, Chief Mellon Bank Corporation****;
Operating Officer The Boston Company*****;
and a Director Deputy Director:
Mellon Trust****;
Chief Executive Officer:
The Boston Company Asset Management,
Inc.*****;
President:
Boston Safe Deposit and Trust
Company*****
STEPHEN E. CANTER Director:
Vice Chairman and The Dreyfus Trust Company++;
Chief Investment Officer, Formerly, Chairman and Chief Executive
Officer:
and a Director Kleinwort Benson Investment Management
Americas Inc.*
LAWRENCE S. KASH Chairman, President and Chief
Vice Chairman-Distribution Executive Officer:
and a Director The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
Executive Vice President and Director:
Dreyfus Service Organization, Inc.***;
Director:
The Dreyfus Consumer Credit Corporation*;
The Dreyfus Trust Company++;
Dreyfus Service Corporation*;
President:
The Boston Company*****;
Laurel Capital Advisors****;
Boston Group Holdings, Inc.;
Executive Vice President:
Mellon Bank, N.A.****;
Boston Safe Deposit and Trust
Company*****;
PHILIP L. TOIA Chairman of the Board and Trust Investment
Vice Chairman-Operations Officer:
and Administration The Dreyfus Trust Company++;
and a Director Chairman of the Board and Chief Operating
Officer:
Major Trading Corporation*;
Chairman and Director:
Dreyfus Transfer, Inc.
One American Express Plaza
Providence, Rhode Island 02903
Director:
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Corporation*;
Seven Six Seven Agency, Inc.*;
President and Director:
Dreyfus Acquisition Corporation*;
The Dreyfus Consumer Credit Corporation*;
Dreyfus-Lincoln, Inc.*;
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Partnership Management, Inc.+;
Dreyfus Service Organization, Inc.***;
The Truepenny Corporation*;
Formerly, Senior Vice President:
The Chase Manhattan Bank, N.A. and
The Chase Manhattan Capital Markets
Corporation
One Chase Manhattan Plaza
New York, New York 10081
WILLIAM T. SANDALLS, JR. Director:
Senior Vice President and Dreyfus Partnership Management, Inc.*;
Chief Financial Officer Seven Six Seven Agency, Inc.*;
President and Director:
Lion Management, Inc.*;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.*;
Vice President, Chief Financial Officer and
Director:
Dreyfus Acquisition Corporation*;
Vice President and Director:
The Dreyfus Consumer Credit Corporation*;
The Truepenny Corporation*;
Treasurer, Financial Officer and Director:
The Dreyfus Trust Company++;
Treasurer and Director:
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Service Corporation*;
Major Trading Corporation*;
Formerly, President and Director:
Sandalls & Co., Inc.
BARBARA E. CASEY President:
Vice President- Dreyfus Retirement Services Division;
Dreyfus Retirement Executive Vice President:
Services Boston Safe Deposit & Trust Co.*****
Dreyfus Service Corporation*
DIANE M. COFFEY None
Vice President-
Corporate Communications
ELIE M. GENADRY President:
Vice President- Institutional Services Division of
Dreyfus
Institutional Sales Service Corporation*;
Broker-Dealer Division of Dreyfus Service
Corporation*;
Group Retirement Plans Division of
Dreyfus Service Corporation;
Executive Vice President:
Dreyfus Service Corporation*;
Dreyfus Service Organization, Inc.***;
Vice President:
The Dreyfus Trust Company++
MARY BETH LEIBIG None
Vice President-
Human Resources
JEFFREY N. NACHMAN President and Director:
Vice President-Mutual Fund Dreyfus Transfer, Inc.
Accounting One American Express Plaza
Providence, Rhode Island 02903
WILLIAM F. GLAVIN, JR. Executive Vice President:
Vice President-Corporate Dreyfus Service Corporation*;
Development Senior Vice President:
The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
MARK N. JACOBS Vice President, Secretary and Director:
Vice President- Lion Management, Inc.*;
General Counsel Secretary:
and Secretary The Dreyfus Consumer Credit Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.***;
Major Trading Corporation*;
The Truepenny Corporation*
ANDREW S. WASSER Vice President:
Vice President-Information Mellon Bank Corporation****
Services
MAURICE BENDRIHEM Treasurer:
Controller Dreyfus Partnership Management, Inc.*;
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Organization, Inc.***;
Seven Six Seven Agency, Inc.*;
The Truepenny Corporation*;
Controller:
Dreyfus Acquisition Corporation*;
Dreyfus Service Corporation*;
The Dreyfus Trust Company++;
The Dreyfus Consumer Credit Corporation*;
Formerly, Vice President-Financial Planning,
Administration and Tax:
Showtime/The Movie Channel, Inc.
1633 Broadway
New York, New York 10019
ELVIRA OSLAPAS Assistant Secretary:
Assistant Secretary Dreyfus Service Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Acquisition Corporation, Inc.*;
The Truepenny Corporation+
______________________________________
* The address of the business so indicated is 200 Park Avenue, New
York, New York 10166.
** The address of the business so indicated is 80 Cutter Mill Road,
Great Neck, New York 11021.
*** The address of the business so indicated is 131 Second Street,
Lewes, Delaware 19958.
**** The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
***** The address of the business so indicated is One Boston Place,
Boston, Massachusetts 02108.
+ The address of the business so indicated is Atrium Building, 80
Route 4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
+++ The address of the business so indicated is One Rockefeller Plaza,
New York, New York 10020.
++++ The address of the business so indicated is 2 Boulevard Royal,
Luxembourg.
+++++ The address of the business so indicated is Nassau, Bahama Islands.
Item 29. Principal Underwriters
________ ______________________
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or
exclusive distributor:
1) Comstock Partners Strategy Fund, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC GNMA Fund
7) Dreyfus BASIC Money Market Fund, Inc.
8) Dreyfus BASIC Municipal Fund, Inc.
9) Dreyfus BASIC U.S. Government Money Market Fund
10) Dreyfus California Intermediate Municipal Bond Fund
11) Dreyfus California Tax Exempt Bond Fund, Inc.
12) Dreyfus California Tax Exempt Money Market Fund
13) Dreyfus Capital Value Fund, Inc.
14) Dreyfus Cash Management
15) Dreyfus Cash Management Plus, Inc.
16) Dreyfus Connecticut Intermediate Municipal Bond Fund
17) Dreyfus Connecticut Municipal Money Market Fund, Inc.
18) Dreyfus Edison Electric Index Fund, Inc.
19) Dreyfus Florida Intermediate Municipal Bond Fund
20) Dreyfus Florida Municipal Money Market Fund
21) The Dreyfus Fund Incorporated
22) Dreyfus Global Bond Fund, Inc.
23) Dreyfus Global Growth Fund
24) Dreyfus GNMA Fund, Inc.
25) Dreyfus Government Cash Management
26) Dreyfus Growth and Income Fund, Inc.
27) Dreyfus Growth and Value Funds, Inc.
28) Dreyfus Growth Opportunity Fund, Inc.
29) Dreyfus Institutional Money Market Fund
30) Dreyfus Institutional Short Term Treasury Fund
31) Dreyfus Insured Municipal Bond Fund, Inc.
32) Dreyfus Intermediate Municipal Bond Fund, Inc.
33) Dreyfus International Equity Fund, Inc.
34) The Dreyfus/Laurel Funds, Inc.
35) The Dreyfus/Laurel Funds Trust
36) The Dreyfus/Laurel Tax-Free Municipal Funds
37) The Dreyfus/Laurel Investment Series
38) Dreyfus Life and Annuity Index Fund, Inc.
39) Dreyfus LifeTime Portfolios, Inc.
40) Dreyfus Liquid Assets, Inc.
41) Dreyfus Massachusetts Intermediate Municipal Bond Fund
42) Dreyfus Massachusetts Municipal Money Market Fund
43) Dreyfus Massachusetts Tax Exempt Bond Fund
44) Dreyfus Michigan Municipal Money Market Fund, Inc.
45) Dreyfus Money Market Instruments, Inc.
46) Dreyfus Municipal Bond Fund, Inc.
47) Dreyfus Municipal Cash Management Plus
48) Dreyfus Municipal Money Market Fund, Inc.
49) Dreyfus New Jersey Intermediate Municipal Bond Fund
50) Dreyfus New Jersey Municipal Bond Fund, Inc.
51) Dreyfus New Jersey Municipal Money Market Fund, Inc.
52) Dreyfus New Leaders Fund, Inc.
53) Dreyfus New York Insured Tax Exempt Bond Fund
54) Dreyfus New York Municipal Cash Management
55) Dreyfus New York Tax Exempt Bond Fund, Inc.
56) Dreyfus New York Tax Exempt Intermediate Bond Fund
57) Dreyfus New York Tax Exempt Money Market Fund
58) Dreyfus Ohio Municipal Money Market Fund, Inc.
59) Dreyfus 100% U.S. Treasury Intermediate Term Fund
60) Dreyfus 100% U.S. Treasury Long Term Fund
61) Dreyfus 100% U.S. Treasury Money Market Fund
62) Dreyfus 100% U.S. Treasury Short Term Fund
63) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
64) Dreyfus Pennsylvania Municipal Money Market Fund
65) Dreyfus Short-Intermediate Government Fund
66) Dreyfus Short-Intermediate Municipal Bond Fund
67) Dreyfus Investment Grade Bond Funds, Inc.
68) The Dreyfus Socially Responsible Growth Fund, Inc.
69) Dreyfus Strategic Income
70) Dreyfus Strategic Investing
71) Dreyfus Tax Exempt Cash Management
72) The Dreyfus Third Century Fund, Inc.
73) Dreyfus Treasury Cash Management
74) Dreyfus Treasury Prime Cash Management
75) Dreyfus Variable Investment Fund
76) Dreyfus-Wilshire Target Funds, Inc.
77) Dreyfus Worldwide Dollar Money Market Fund, Inc.
78) General California Municipal Bond Fund, Inc.
79) General California Municipal Money Market Fund
80) General Government Securities Money Market Fund, Inc.
81) General Money Market Fund, Inc.
82) General Municipal Bond Fund, Inc.
83) General Municipal Money Market Fund, Inc.
84) General New York Municipal Bond Fund, Inc.
85) General New York Municipal Money Market Fund
86) Pacifica Funds Trust -
Pacifica Prime Money Market Fund
Pacifica Treasury Money Market Fund
87) Peoples Index Fund, Inc.
88) Peoples S&P MidCap Index Fund, Inc.
89) Premier Insured Municipal Bond Fund
90) Premier California Municipal Bond Fund
91) Premier Equity Funds, Inc.
92) Premier Global Investing, Inc.
93) Premier GNMA Fund
94) Premier Growth Fund, Inc.
95) Premier Municipal Bond Fund
96) Premier New York Municipal Bond Fund
97) Premier State Municipal Bond Fund
98) Premier Strategic Growth Fund
(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
__________________ ___________________________ _____________
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Compliance Treasurer
Officer
Joseph F. Tower, III+ Senior Vice President, Treasurer Assistant
and Chief Financial Officer Treasurer
John E. Pelletier+ Senior Vice President, General Vice President
Counsel, Secretary and Clerk and Secretary
Frederick C. Dey++ Senior Vice President Vice President
and Assistant
Treasurer
Eric B. Fischman++ Vice President and Associate Vice President
General Counsel and Assistant
Secretary
Paul Prescott+ Vice President None
Elizabeth Bachman++ Assistant Vice President Vice President
and Assistant
Secretary
Mary Nelson+ Assistant Treasurer None
John J. Pyburn++ Assistant Treasurer Assistant
Treasurer
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
________________________________
+ Principal business address is One Exchange Place, Boston, Massachusetts
02109.
++ Principal business address is 200 Park Avenue, New York, New York 10166.
Item 30. Location of Accounts and Records
________________________________
1. First Data Investor Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
3. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 31. Management Services
_______ ___________________
Not Applicable
Item 32. Undertakings
________ ____________
(1) To call a meeting of shareholders for the purpose of voting upon
the question of removal of a trustee or trustees when requested
in writing to do so by the holders of at least 10% of the
Registrant's outstanding shares of beneficial interest and in
connection with such meeting to comply with the provisions of
Section 16(c) of the Investment Company Act of 1940 relating to
shareholder communications.
(2) To furnish each person to whom a prospectus is delivered with a
copy of the Fund's latest Annual Report to Shareholders, upon
request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New
York, and State of New York on the 11th day of April 1996.
DREYFUS BASIC GNMA FUND
BY: /s/ Marie E. Connolly*
_____________________________________
MARIE E. CONNOLLY, PRESIDENT AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
Signatures Title Date
___________________________ ______________________________ ___________
/s/ Marie E. Connolly* President and Treasurer (Principal 04/11/96
______________________________ Executive, Financial and Accounting
Marie E. Connolly Officer)
/s/ Joseph S. DiMartino* Chairman of the Board 04/11/96
______________________________
Joseph S. DiMartino
/s/ Gordon J. Davis* Trustee 04/11/96
______________________________
Gordon J. Davis
/s/ David P. Feldman* Trustee 04/11/96
______________________________
David P. Feldman
/s/ Lynn Martin* Trustee 04/11/96
______________________________
Lynn Martin
/s/ Eugene McCarthy* Trustee 04/11/96
______________________________
Eugene McCarthy
/s/ Daniel Rose* Trustee 04/11/96
______________________________
Daniel Rose
/s/ Sander Vanocur* Trustee 04/11/96
______________________________
Sander Vanocur
/s/ Anne Wexler* Trustee 04/11/96
______________________________
Anne Wexler
/s/ Rex Wilder* Trustee 04/11/96
______________________________
Rex Wilder
*BY: /s/ Eric B. Fischman
_____________________
Eric B. Fischman,
Attorney-in-Fact
DREYFUS BASIC GNMA FUND
Post-Effective Amendment No. 21 to the
Registration Statement on Form N-1A under
the Securities Act of 1933 and
the Investment Company Act of 1940
EXHIBITS
INDEX TO EXHIBITS
(8) Custody Agreement
(11) Consent of Independent Auditors.
(17) Financial Data Schedule.
CUSTODY AGREEMENT
AGREEMENT dated as of April 1996, between DREYFUS BASIC GNMA FUND, a
business trust organized under the laws of the State of Massachusetts (the
"Fund"), having its principal office and place of business at 200 Park
Avenue, New York, New York 10166, and MELLON BANK, N.A. (the "Custodian"),
a national banking organization with its principal place of business at One
Mellon Bank Center, Pittsburgh, PA 15258.
W I T N E S S E T H:
That for and in consideration of the mutual promises hereinafter set
forth, the Fund and the Custodian agree as follows:
1. Definitions.
Whenever used in this Agreement or in any Schedules to this Agreement,
the following words and phrases, unless the context otherwise requires, shall
have the following meanings:
(a) "Affiliated Person" shall have the meaning of the term within
Section 2(a)3 of the 1940 Act.
(b) "Authorized Person" shall mean those persons duly authorized by
the Board of Trustees of the Fund to give Oral Instructions and Written
Instructions on behalf of the Fund and listed in the certification annexed
hereto as Appendix A or such other certification as may be received by the
Custodian from time to time.
(c) "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency Securities, its
successor or successors and its nominee or nominees, in which the Custodian
is hereby specifically authorized and instructed on a continuous and on-going
basis to deposit all Securities eligible for deposit therein, and to utilize
the Book-Entry System to the extent possible in connection with its
performance hereunder.
(d) "Business Day" shall mean each day on which the Fund is required
to determine its net asset value, and any other day on which the Securities
and Exchange Commission may require the Fund to be open for business.
(e) "Certificate" shall mean any notice, instruction or other
instrument in writing, authorized or required by this Agreement to be given
to the Custodian, which is actually received by the Custodian and signed on
behalf of the Fund by any two Authorized Persons or any two officers thereof.
(f) "Master Trust Agreement" shall mean the Master Trust Agreement of
the Fund dated May 14, 1993 as the same may be amended from time to time.
(g) "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission under
Section 17(a) of the Securities Exchange Act of 1934, as amended, its
successor or successors and its nominee or nominees, in which the Custodian
is hereby specifically authorized and instructed on a continuous and on-going
basis to deposit all Securities eligible for deposit therein, and to utilize
the Book-Entry System to the extent possible in connection with its
performance hereunder. The term "Depository" shall further mean and include
any other person to be named in a Certificate authorized to act as a
depository under the 1940 Act, its successor or successors and its nominee
or nominees.
(h) "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to interest and
principal by the government of the United States or agencies or
instrumentalities thereof ("U.S. government securities"), commercial paper,
bank certificates of deposit, bankers' acceptances and short-term corporate
obligations, where the purchase or sale of such securities normally requires
settlement in federal funds on the same day as such purchase or sale, and
repurchase and reverse repurchase agreements with respect to any of the
foregoing types of securities and bank time deposits.
(i) "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from a person reasonably believed by the Custodian
to be an Authorized Person.
(j) "Prospectus" shall mean the Fund's current prospectus and
statement of additional information relating to the registration of the
Fund's Shares under the Securities Act of 1933, as amended.
(k) "Shares" shall mean all or any part of each class of Beneficial
Interest of the Fund listed in the Certificate annexed hereto as Appendix B,
as it may be amended from time to time, which from time to time are
authorized and/or issued by the Fund.
(l) "Security" or "Securities" shall be deemed to include bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and other
securities, commodities interests and investments from time to time owned
by the Fund.
(m) "Transfer Agent" shall mean the person which performs the
transfer agent, dividend disbursing agent and shareholder servicing agent
functions for the Fund.
(n) "Written Instructions" shall mean a written communication actually
received by the Custodian from a person reasonably believed by the Custodian
to be an Authorized Person by any system, including, without limitation,
electronic transmissions, facsimile and telex, whereby the receiver of such
communication is able to verify by codes or otherwise with a reasonable
degree of certainty the authenticity of the sender of such communication.
(o) The "1940 Act" refers to the Investment Company Act of 1940, and
the Rules and Regulations thereunder, all as amended from time to time.
2. Appointment of Custodian.
(a) The Fund hereby constitutes and appoints the Custodian as
custodian of all the Securities and monies at the time owned by or in the
possession of the Fund during the period of this Agreement.
(b) The Custodian hereby accepts appointment as such custodian and
agrees to perform the duties thereof as hereinafter set forth.
3. Compensation.
(a) The Fund will compensate the Custodian for its services rendered
under this Agreement in accordance with the fees set forth in the Fee
Schedule annexed hereto as Schedule A and incorporated herein. Such Fee
Schedule does not include out-of-pocket disbursements of the Custodian for
which the Custodian shall be entitled to bill separately. Out-of-pocket
disbursements shall consist of the items specified in the Schedule of Out-of-
pocket charges annexed hereto as Schedule B and incorporated herein, which
schedule may be modified by the Custodian upon not less than thirty days
prior written notice to the Fund.
(b) Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule A of this Agreement a revised Fee Schedule,
dated and signed by an Authorized Officer or authorized representative of
each party hereto.
(c) The Custodian will bill the Fund as soon as practicable after the
end of each calendar month, and said billings will be detailed in accordance
with Schedule A, as amended from time to time. The Fund will promptly pay
to the Custodian the amount of such billing. The Custodian may charge against
any monies held on behalf of the Fund pursuant to this Agreement such
compensation and disbursements incurred by the Custodian in the performance
of its duties pursuant to this Agreement. The Custodian shall also be
entitled to charge against any money held on behalf of the Fund pursuant to
this Agreement the amount of any loss, damage, liability or expense incurred
with respect to the Fund, including counsel fees, for which it shall be
entitled to reimbursement under the provisions of this Agreement.
4. Custody of Cash and Securities.
(a) Receipt and Holding of Assets.
The Fund will deliver or cause to be delivered to the Custodian or its
permitted Sub-Custodians all Securities and monies owned by it at any time
during the period of this Agreement. The Custodian will not be responsible
for such Securities and monies until actually received by it. The Fund shall
instruct the Custodian from time to time in its sole discretion, by means of
Written Instructions, or, in connection with the purchase or sale of Money
Market Securities, by means of Oral Instructions confirmed in writing in
accordance with Section 11(h) hereof or Written Instructions, as to the
manner in which and in what amounts Securities and monies are to be deposited
on behalf of the Fund in the Book-Entry System or the Depository. Securities
and monies of the Fund deposited in the Book-Entry System or the Depository
will be represented in accounts which include only assets held by the
Custodian for customers, including but not limited to accounts for which the
Custodian acts in a fiduciary or representative capacity.
(b) Accounts and Disbursements. The Custodian shall establish and
maintain a separate account for the Fund and shall credit to the separate
account all monies received by it for the account of such Fund and shall
disburse the same only:
1. In payment for Securities purchased for the Fund, as provided
in Section 5 hereof;
2. In payment of dividends or distributions with respect to the
Shares, as provided in Section 7 hereof;
3. In payment of original issue or other taxes with respect to
the Shares, as provided in Section 8 hereof;
4. In payment for Shares which have been redeemed by the Fund,
as provided in Section 8 hereof;
5. Pursuant to a Certificate setting forth the name and address
of the person to whom the payment is to be made, the amount to be paid and
the purpose for which payment is to be made, provided that in the event of
disbursements pursuant to this Sub-section 4(b)(5), the Fund shall indemnify
and hold the Custodian harmless from any claims or losses arising out of such
disbursements in reliance on such Certificate; or
6. In payment of fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to the Fund, as provided in
Sections 3 and 11(i).
(c) Confirmation and Statements. Promptly after the close of business
on each day, the Custodian shall furnish the Fund with confirmations and a
summary of all transfers to or from the account of the Fund during said day.
Where securities purchased by the Fund are in a fungible bulk of securities
registered in the name of the Custodian (or its nominee) or shown on the
Custodian's account on the books of the Depository or the Book-Entry System,
the Custodian shall by book entry or otherwise identify the quantity of those
securities belonging to the Fund. At least monthly, the Custodian shall
furnish the Fund with a detailed statement of the Securities and monies held
for the Fund under this Agreement.
(d) Registration of Securities and Physical Separation. All
Securities held for the Fund which are issued or issuable only in bearer
form, except such Securities as are held in the Book-Entry System, shall be
held by the Custodian in that form; all other Securities held for the Fund
may be registered in the name of the Fund, in the name of the Custodian, in
the name of any duly appointed registered nominee of the Custodian as the
Custodian may from time to time determine, or in the name of the Book-Entry
System or the Depository or their successor or successors, or their nominee
or nominees. The Fund reserves the right to instruct the Custodian as to the
method of registration and safekeeping of the Securities. The Fund agrees
to furnish to the Custodian appropriate instruments to enable the Custodian
to hold or deliver in proper form for transfer, or to register in the name
of its registered nominee or in the name of the Book-Entry System or the
Depository, any Securities which it may hold for the account of the Fund and
which may from time to time be registered in the name of the Fund. The
Custodian shall hold all such Securities specifically allocated to the Fund
which are not held in the Book-Entry System or the Depository in a separate
account for the Fund in the name of the Fund physically segregated at all
times from those of any other person or persons.
(e) Segregated Accounts. Upon receipt of a Certificate the Custodian
will establish segregated accounts on behalf of the Fund to hold liquid or
other assets as it shall be directed by a Certificate and shall increase or
decrease the assets in such segregated accounts only as it shall be directed
by subsequent Certificate.
(f) Collection of Income and Other Matters Affecting Securities.
Unless otherwise instructed to the contrary by a Certificate, the Custodian
by itself, or through the use of the Book-Entry System or the Depository with
respect to Securities therein deposited, shall with respect to all Securities
held for the Fund in accordance with this Agreement:
1. Collect all income due or payable;
2. Present for payment and collect the amount payable upon all
Securities which may mature or be called, redeemed, retired or otherwise
become payable. Notwithstanding the foregoing, the Custodian only shall have
such responsibility to the Fund for Securities which are called if either (i)
the Custodian received a written notice of such call; or (ii) notice of such
call appears in one or more of the publications listed in Appendix C annexed
hereto, which may be amended at any time by the Custodian upon five (5)
Business Days prior notification to the Fund;
3. Surrender Securities in temporary form for definitive
Securities;
4. Execute any necessary declarations or certificates of
ownership under the Federal income tax laws or the laws or regulations of any
other taxing authority now or hereafter in effect; and
5. Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the account of
the Fund all rights and similar Securities issued with respect to any
Securities held by the Custodian hereunder for the Fund.
(g) Delivery of Securities and Evidence of Authority. Upon receipt of
a Certificate, the Custodian, directly or through the use of the Book-Entry
System or the Depository, shall:
1. Execute and deliver or cause to be executed and delivered to
such persons as may be designated in such Certificate, proxies, consents,
authorizations, and any other instruments whereby the authority of the Fund
as owner of any Securities may be exercised;
2. Deliver or cause to be delivered any Securities held for the
Fund in exchange for other Securities or cash issued or paid in connection
with the liquidation, reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise of any conversion
privilege;
3. Deliver or cause to be delivered any Securities held for the
Fund to any protective committee, reorganization committee or other person
in connection with the reorganization, refinancing, merger, consolidation or
recapitalization or sale of assets of any corporation, and receive and hold
under the terms of this Agreement in the separate account for the Fund such
certificates of deposit, interim receipts or other instruments or documents
as may be issued to it to evidence such delivery;
4. Make or cause to be made such transfers or exchanges of the
assets specifically allocated to the separate account of the Fund and take
such other steps as shall be stated in a Certificate to be for the purpose
of effectuating any duly authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Fund;
5. Deliver Securities upon the receipt of payment in connection
with any repurchase agreement related to such Securities entered into by the
Fund;
6. Deliver Securities owned by the Fund to the issuer thereof or
its agent when such Securities are called or otherwise become payable.
Notwithstanding the foregoing, the Custodian shall have no responsibility for
monitoring or ascertaining any call, redemption or retirement dates with
respect to put bonds which are owned by the Fund and held by the Custodian
or its nominees. Nor shall the Custodian have any responsibility or
liability to the Fund for any loss by the Fund for any missed payments or
other defaults resulting therefrom; unless the Custodian received timely
notification from the Fund specifying the time, place and manner for the
presentment of any such put bond owned by the Fund and held by the Custodian
or its nominee. The Custodian shall not be responsible and assumes no
liability to the Fund for the accuracy or completeness of any notification
the Custodian may furnish to the Fund with respect to put bonds
7. Deliver Securities for delivery in connection with any loans
of Securities made by the Fund but only against receipt of adequate
collateral as agreed upon from time to time by the Custodian and the Fund
which may be in the form of cash or U.S. government securities or a letter
of credit;
8. Deliver Securities for delivery as security in connection
with any borrowings by the Fund requiring a pledge of Fund assets, but only
against receipt of amounts borrowed;
9. Deliver Securities upon receipt of a Certificate from the
Fund for delivery to the Transfer Agent or to the holders of Shares in
connection with distributions in kind, as may be described from time to time
in the Fund's Prospectus, in satisfaction of requests by holders of Shares
for repurchase or redemption;
10. Deliver Securities as collateral in connection with short
sales by the Fund of common stock for which the Fund owns the stock or owns
preferred stocks or debt securities convertible or exchangeable, without
payment or further consideration, into shares of the common stock sold short;
11. Deliver Securities for any purpose expressly permitted by and
in accordance with procedures described in the Fund's Prospectus; and
12. Deliver Securities for any other proper business purpose, but
only upon receipt of, in addition to Written Instructions, a certified copy
of a resolution of the Board of Trustees signed by an Authorized Person and
certified by the Secretary of the Fund, specifying the Securities to be
delivered, setting forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper business purpose, and naming the person
or persons to whom delivery of such Securities shall be made.
(h) Endorsement and Collection of Checks, Etc. The Custodian is
hereby authorized to endorse and collect all checks, drafts or other orders
for the payment of money received by the Custodian for the account of the
Fund.
5. Purchase and Sale of Investments of the Fund.
(a) Promptly after each purchase of Securities for the Fund, the Fund
shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate; and (ii)
with respect to each purchase of Money Market Securities, either a Written
Instruction or Oral Instruction, in either case specifying with respect to
each purchase: (1) the name of the issuer and the title of the Securities;
(2) the number of shares or the principal amount purchased and accrued
interest, if any; (3) the date of purchase and settlement; (4) the purchase
price per unit; (5) the total amount payable upon such purchase; (6) the name
of the person from whom or the broker through whom the purchase was made, if
any; and (7) whether or not such purchase is to be settled through the Book-
Entry System or the Depository. The Custodian shall receive the Securities
purchased by or for the Fund and upon receipt of Securities shall pay out of
the monies held for the account of the Fund the total amount payable upon
such purchase, provided that the same conforms to the total amount payable
as set forth in such Certificate, Written or Oral Instruction.
(b) Promptly after each sale of Securities of the Fund, the Fund shall
deliver to the Custodian (i) with respect to each sale of Securities which
are not Money Market Securities, a Certificate, and (ii) with respect to each
sale of Money Market Securities, either Written Instruction or Oral
Instructions, in either case specifying with respect to such sale: (1) the
name of the issuer and the title of the Securities; (2) the number of shares
or principal amount sold, and accrued interest, if any; (3) the date of sale;
(4) the sale price per unit; (5) the total amount payable to the Fund upon
such sale; (6) the name of the broker through whom or the person to whom the
sale was made; and (7) whether or not such sale is to be settled through the
Book-Entry System or the Depository. The Custodian shall deliver or cause
to be delivered the Securities to the broker or other person designated by
the Fund upon receipt of the total amount payable to the Fund upon such sale,
provided that the same conforms to the total amount payable to the Fund as
set forth in such Certificate, Written or Oral Instruction. Subject to the
foregoing, the Custodian may accept payment in such form as shall be
satisfactory to it, and may deliver Securities and arrange for payment in
accordance with the customs prevailing among dealers in Securities.
6. Lending of Securities.
If the Fund is permitted by the terms of the Master Trust
Agreement and as disclosed in its Prospectus to lend securities, within 24
hours after each loan of Securities, the Fund shall deliver to the Custodian
a Certificate specifying with respect to each such loan: (a) the name of the
issuer and the title of the Securities; (b) the number of shares or the
principal amount loaned; (c) the date of loan and delivery; (d) the total
amount to be delivered to the Custodian, and specifically allocated against
the loan of the Securities, including the amount of cash collateral and the
premium, if any, separately identified; and (e) the name of the broker,
dealer or financial institution to which the loan was made.
Promptly after each termination of a loan of Securities, the Fund
shall deliver to the Custodian a Certificate specifying with respect to each
such loan termination and return of Securities: (a) the name of the issuer
and the title of the Securities to be returned; (b) the number of shares or
the principal amount to be returned; (c) the date of termination; (d) the
total amount to be delivered by the Custodian (including the cash collateral
for such Securities minus any offsetting credits as described in said
Certificate); and (e) the name of the broker, dealer or financial institution
from which the Securities will be returned. The Custodian shall receive all
Securities returned from the broker, dealer or financial institution to which
such Securities were loaned and upon receipt thereof shall pay the total
amount payable upon such return of Securities as set forth in the
Certificate. Securities returned to the Custodian shall be held as they were
prior to such loan.
7. Payment of Dividends or Distributions.
(a) The Fund shall furnish to the Custodian a Certificate specifying
the date of payment of any dividend or distribution, and the total amount
payable to the Transfer Agent on the payment date.
(b) Upon the payment date specified in such Certificate, the Custodian
shall pay out the total amount payable to the Transfer Agent of the Fund.
8. Sale and Redemption of Shares of the Fund.
(a) Whenever the Fund shall sell any Shares, or whenever any shares
are redeemed, the Fund shall deliver or cause to be delivered to the
Custodian a Written Instruction from the Transfer Agent duly specifying:
1. The net amount of money to be received by the Custodian,
where the sale of such Shares exceeds redemption; and
2. The net amount of money to be paid for such Shares, where
redemptions exceed purchases.
The Custodian understands and agrees that Written Instructions may
be furnished subsequent to the purchase of Shares and that the information
contained therein will be derived from the sales of Shares as reported to the
Fund by the Transfer Agent.
(b) Upon receipt of money from the Transfer Agent, the Custodian shall
credit such money to the separate account of the Fund.
(c) Upon issuance of any Shares in accordance with the foregoing
provisions of this Section 8, the Custodian shall pay all original issue or
other taxes required to be paid in connection with such issuance upon the
receipt of a Written Instruction specifying the amount to be paid.
(d) Upon receipt from the Transfer Agent of Written Instructions
setting forth the net amount of money to be paid for Shares received by the
Transfer Agent for redemption, the Custodian shall make payment to the
Transfer Agent of such net amount.
9. Indebtedness.
(a) The Fund will cause to be delivered to the Custodian by any bank
(excluding the Custodian) from which the Fund borrows money for investment
or for temporary administrative or emergency purposes using Securities as
collateral for such borrowings, a notice or undertaking in the form currently
employed by any such bank setting forth the amount which such bank will loan
to the Fund against delivery of a stated amount of collateral. The Fund
shall promptly deliver to the Custodian a Certificate stating with respect
to each such borrowing: (1) the name of the bank; (2) the amount and terms
of the borrowing, which may be set forth by incorporating by reference an
attached promissory note, duly endorsed by the Fund, or other loan agreement;
(3) the time and date, if known, on which the loan is to be entered into (the
"borrowing date"); (4) the date on which the loan becomes due and payable;
(5) the total amount payable to the Fund on the borrowing date; (6) the
market value of Securities to be delivered as collateral for such loan,
including the name of the issuer, the title and the number of shares or the
principal amount of any particular Securities; and (7) a statement that such
loan is in conformance with the 1940 Act and the Fund's Prospectus.
(b) Upon receipt of the Certificate referred to in subparagraph (a)
above, the Custodian shall deliver on the borrowing date the specified
collateral and the executed promissory note, if any, against delivery by the
lending bank of the total amount of the loan payable, provided that the same
conforms to the total amount payable as set forth in the Certificate. The
Custodian may, at the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights therein given
the lending bank by virtue of any promissory note or loan agreement. The
Custodian shall deliver as additional collateral in the manner directed by
the Fund from time to time such Securities as may be specified in the
Certificate to collateralize further any transaction described in this
Section 9. The Fund shall cause all Securities released from collateral
status to be returned directly to the Custodian, and the Custodian shall
receive from time to time such return of collateral as may be tendered to it.
In the event that the Fund fails to specify in the Certificate all of the
information required by this Section 9, the Custodian shall not be under any
obligation to deliver any Securities. Collateral returned to the Custodian
shall be held hereunder as it was prior to being used as collateral.
10. Persons Having Access to Assets of the Fund.
(a) No trustee or agent of the Fund, and no officer, director,
employee or agent of the Fund's investment adviser, of any sub-investment
adviser of the Fund, or of the Fund's administrator, shall have physical
access to the assets of the Fund held by the Custodian or be authorized or
permitted to withdraw any investments of the Fund, nor shall the Custodian
deliver any assets of the Fund to any such person. No officer, director,
employee or agent of the Custodian who holds any similar position with the
Fund's investment adviser, with any sub-investment adviser of the Fund or
with the Fund's administrator shall have access to the assets of the Fund.
(b) Nothing in this Section 10 shall prohibit any duly authorized
officer, employee or agent of the Fund, or any duly authorized officer,
director, employee or agent of the investment adviser, of any sub-investment
adviser of the Fund or of the Fund's administrator, from giving Oral
Instructions or Written Instructions to the Custodian or executing a
Certificate so long as it does not result in delivery of or access to assets
of the Fund prohibited by paragraph (a) of this Section 10.
11. Concerning the Custodian.
(a) Standard of Conduct. Notwithstanding any other provision of this
Agreement, neither the Custodian nor its nominee shall be liable for any loss
or damage, including counsel fees, resulting from its action or omission to
act or otherwise, except for any such loss or damage arising out of the
negligence, misfeasance or willful misconduct of the Custodian or any of its
employees, Sub-Custodians or agents. The Custodian may, with respect to
questions of law, apply for and obtain the advice and opinion of counsel to
the Fund or of its own counsel, at the expense of the Fund, and shall be
fully protected with respect to anything done or omitted by it in good faith
in conformity with such advice or opinion. The Custodian shall not be liable
to the Fund for any loss or damage resulting from the use of the Book-Entry
System or the Depository, except to the extent such loss or damage arises by
reason of any negligence, misfeasance or willful misconduct on the part of
the Custodian or any of its employees or agents.
(b) Limit of Duties. Without limiting the generality of the
foregoing, the Custodian shall be under no duty or obligation to inquire
into, and shall not be liable for:
1. The validity of the issue of any Securities purchased by the
Fund, the legality of the purchase thereof, or the propriety of the amount
paid therefor;
2. The legality of the sale of any Securities by the Fund or the
propriety of the amount for which the same are sold;
3. The legality of the issue or sale of any Shares, or the
sufficiency of the amount to be received therefor;
4. The legality of the redemption of any Shares, or the
propriety of the amount to be paid therefor;
5. The legality of the declaration or payment of any
distribution of the Fund;
6. The legality of any borrowing for temporary or emergency
administrative purposes.
(c) No Liability Until Receipt. The Custodian shall not be liable
for, or considered to be the Custodian of, any money, whether or not
represented by any check, draft, or other instrument for the payment of
money, received by it on behalf of the Fund until the Custodian actually
receives and collects such money directly or by the final crediting of the
account representing the Fund's interest in the Book-Entry System or the
Depository.
(d) Amounts Due from Transfer Agent. The Custodian shall not be under
any duty or obligation to take action to effect collection of any amount due
to the Fund from the Transfer Agent nor to take any action to effect payment
or distribution by the Transfer Agent of any amount paid by the Custodian to
the Transfer Agent in accordance with this Agreement.
(e) Collection Where Payment Refused. The Custodian shall not be
under any duty or obligation to take action to effect collection of any
amount, if the Securities upon which such amount is payable are in default,
or if payment is refused after due demand or presentation, unless and until
(a) it shall be directed to take such action by a Certificate and (b) it
shall be assured to its satisfaction of reimbursement of its costs and
expenses in connection with any such action.
(f) Appointment of Agents and Sub-Custodians. The Custodian may
appoint one or more banking institutions, including but not limited to
banking institutions located in foreign countries, to act as Depository or
Depositories or as Sub-Custodian or as Sub-Custodians of Securities and
monies at any time owned by the Fund. The Custodian shall use reasonable
care in selecting a Depository and/or Sub-Custodian located in a country
other than the United States ("Foreign Sub-Custodian"), which selection shall
be in accordance with the requirements of Rule 17f-5 under the 1940 Act, and
shall oversee the maintenance of any Securities or monies of the Fund by any
Foreign Sub-Custodian. In addition, the Custodian shall hold the Fund
harmless from, and indemnify the Fund against, any loss, action, claim,
demand, expense and proceeding, including counsel fees, that occurs as a
result of the failure of any Foreign Sub-Custodian or Depository to exercise
reasonable care with respect to the safekeeping of Securities and monies of
the Fund. Notwithstanding the generality of the foregoing, however, the
Custodian shall not be liable for any losses resulting from the general risk
of investing or holding Securities and monies in a particular country,
including, but not limited to, losses resulting from nationalization,
expropriation, devaluation, revaluation, confiscation, seizure, cancellation,
destruction or similar action by any governmental authority, de facto or de
jure; or enactment, promulgation, imposition or enforcement by any such
governmental authority of currency restrictions, exchange controls, taxes,
levies or other charges affecting the Fund's property; or acts of war,
terrorism, insurrection or revolution; or any other similar act or event
beyond the Custodian's control.
(g) No Duty to Ascertain Authority. The Custodian shall not be under
any duty or obligation to ascertain whether any Securities at any time
delivered to or held by it for the Fund are such as may properly be held by
the Fund under the provisions of the Master Trust Agreement and the
Prospectus.
(h) Reliance on Certificates and Instructions. The Custodian shall be
entitled to rely upon any Certificate, notice or other instrument in writing
received by the Custodian and reasonably believed by the Custodian to be
genuine and to be signed by an officer or Authorized Person of the Fund. The
Custodian shall be entitled to rely upon any Written Instructions or Oral
Instructions actually received by the Custodian pursuant to the applicable
Sections of this Agreement and reasonably believed by the Custodian to be
genuine and to be given by an Authorized Person. The Fund agrees to forward
to the Custodian Written Instructions from an Authorized Person confirming
such Oral Instructions in such manner so that such Written Instructions are
received by the Custodian, whether by hand delivery, telex or otherwise, by
the close of business on the same day that such Oral Instructions are given
to the Custodian. The Fund agrees that the fact that such confirming
instructions are not received by the Custodian shall in no way affect the
validity of the transactions or enforceability of the transactions hereby
authorized by the Fund. The Fund agrees that the Custodian shall incur no
liability to the Fund in acting upon Oral Instructions given to the Custodian
hereunder concerning such transactions provided such instructions reasonably
appear to have been received from a duly Authorized Person.
(i) Overdraft Facility and Security for Payment. In the event that
the Custodian is directed by Written Instruction (or Oral Instructions
confirmed in writing in accordance with Section 11(h) hereof) to make any
payment or transfer of monies on behalf of the Fund for which there would be,
at the close of business on the date of such payment or transfer,
insufficient monies held by the Custodian on behalf of the Fund, the
Custodian may, in its sole discretion, provide an overdraft (an "Overdraft")
to the Fund in an amount sufficient to allow the completion of such payment
or transfer. Any Overdraft provided hereunder: (a) shall be payable on the
next Business Day, unless otherwise agreed by the Fund and the Custodian; and
(b) shall accrue interest from the date of the Overdraft to the date of
payment in full by the Fund at a rate agreed upon in writing, from time to
time, by the Custodian and the Fund. The Custodian and the Fund acknowledge
that the purpose of such Overdraft is to temporarily finance the purchase of
Securities for prompt delivery in accordance with the terms hereof, to meet
unanticipated or unusual redemption, to allow the settlement of foreign
exchange contracts or to meet other emergency expenses not reasonably
foreseeable by the Fund. The Custodian shall promptly notify the Fund in
writing (an "Overdraft Notice") of any Overdraft by facsimile transmission
or in such other manner as the Fund and the Custodian may agree in writing.
To secure payment of any Overdraft, the Fund hereby grants to the Custodian
a continuing security interest in and right of setoff against the Securities
and cash in the Fund's account from time to time in the full amount of such
Overdraft. Should the Fund fail to pay promptly any amounts owed hereunder,
the Custodian shall be entitled to use available cash in the Fund's account
and to liquidate Securities in the account as is necessary to meet the Fund's
obligations under the Overdraft. In any such case, and without limiting the
foregoing, the Custodian shall be entitled to take such other actions(s) or
exercise such other options, powers and rights as the Custodian now or
hereafter has as a secured creditor under the Massachusetts Uniform
Commercial Code or any other applicable law.
(j) Inspection of Books and Records. The books and records of the
Custodian shall be open to inspection and audit at reasonable times by
officers and auditors employed by the Fund and by the appropriate employees
of the Securities and Exchange Commission.
The Custodian shall provide the Fund with any report obtained by the
Custodian on the system of internal accounting control of the Book-Entry
System or the Depository and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to time.
12. Term and Termination.
(a) This Agreement shall become effective on the date first set
forth above (the "Effective Date") and shall continue in effect thereafter
until such time as this Agreement may be terminated in accordance with the
provisions hereof.
(b) Either of the parties hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than 60 days after the date of receipt
of such notice. In the event such notice is given by the Fund, it shall be
accompanied by a certified vote of the Board of Trustees of the Fund,
electing to terminate this Agreement and designating a successor custodian
or custodians, which shall be a person qualified to so act under the 1940
Act.
In the event such notice is given by the Custodian, the Fund shall,
on or before the termination date, deliver to the Custodian a certified vote
of the Board of Trustees of the Fund, designating a successor custodian or
custodians. In the absence of such designation by the Fund, the Custodian
may designate a successor custodian, which shall be a person qualified to so
act under the 1940 Act. If the Fund fails to designate a successor
custodian, the Fund shall upon the date specified in the notice of
termination of this Agreement and upon the delivery by the Custodian of all
Securities (other than Securities held in the Book-Entry System which cannot
be delivered to the Fund) and monies then owned by the Fund, be deemed to be
its own custodian and the Custodian shall thereby be relieved of all duties
and responsibilities pursuant to this Agreement, other than the duty with
respect to Securities held in the Book-Entry System which cannot be delivered
to the Fund.
(c) Upon the date set forth in such notice under paragraph (b) of
this Section 12, this Agreement shall terminate to the extent specified in
such notice, and the Custodian shall upon receipt of a notice of acceptance
by the successor custodian on that date deliver directly to the successor
custodian all Securities and monies then held by the Custodian on behalf of
the Fund, after deducting all fees, expenses and other amounts for the
payment or reimbursement of which it shall then be entitled.
13. Limitation of Liability.
The Fund and the Custodian agree that the obligations of the Fund
under this Agreement shall not be binding upon any of the Trustees,
shareholders, nominees, officers, employees or agents, whether past, present
or future, of the Fund, individually, but are binding only upon the assets
and property of the Fund, as provided in the Master Trust Agreement. The
execution and delivery of this Agreement have been authorized by the Trustees
of the Fund, and signed by an authorized officer of the Fund, acting as such,
and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them or
any shareholder of the Fund individually or to impose any liability on any
of them or any shareholder of the Fund personally, but shall bind only the
assets and property of the Fund as provided in the Master Trust Agreement.
14. Miscellaneous.
(a) Annexed hereto as Appendix A is a certification signed by the
Secretary of the Fund setting forth the names and the signatures of the
present Authorized Persons. The Fund agrees to furnish to the Custodian a
new certification in similar form in the event that any such present
Authorized Person ceases to be such an Authorized Person or in the event that
other or additional Authorized Persons are elected or appointed. Until such
new certification shall be received, the Custodian shall be fully protected
in acting under the provisions of this Agreement upon Oral Instructions or
signatures of the present Authorized Persons as set forth in the last
delivered certification.
(b) Annexed hereto as Appendix B is a certification signed by the
Secretary of the Fund setting forth the names and the signatures of the
present officers of the Fund. The Fund agrees to furnish to the Custodian
a new certification in similar form in the event any such present officer
ceases to be an officer of the Fund or in the event that other or additional
officers are elected or appointed. Until such new certification shall be
received, the Custodian shall be fully protected in acting under the
provisions of this Agreement upon the signature of an officer as set forth
in the last delivered certification.
(c) Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall be
sufficiently given if addressed to the Custodian and mailed or delivered to
it at its offices at One Mellon Bank Center, Pittsburgh, PA 15258 or at such
other place as the Custodian may from time to time designate in writing.
(d) Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Fund, shall be sufficiently
given if addressed to the Fund and mailed or delivered to it at its offices
at 200 Park Avenue, New York, New York 10166 or at such other place as the
Fund may from time to time designate in writing.
(e) This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the same
formality as this Agreement, (i) authorized, or ratified and approved by a
vote of the Board of Trustees of the Fund, including a majority of the
members of the Board of Trustees of the Fund who are not "interested persons"
of the Fund (as defined in the 1940 Act), or (ii) authorized, or ratified and
approved by such other procedures as may be permitted or required by the 1940
Act.
(f) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Fund without the
written consent of the Custodian, or by the Custodian without the written
consent of the Fund authorized or approved by a vote of the Board of Trustees
of the Fund. Nothing in this Agreement shall give or be construed to give
or confer upon any third party any rights hereunder.
(g) The Fund represents that a copy of the Master Trust Agreement
is on file with the Secretary of the State of Massachusetts.
(h) This Agreement shall be construed in accordance with the laws
of the Commonwealth of Massachusetts.
(i) The captions of the Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
(j) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective representatives duly authorized as of the
day and year first above written.
DREYFUS BASIC GNMA FUND
By:
Name: Eric B. Fischman
Title: Vice President
MELLON BANK, N.A.
By:
Name:
Title:
APPENDIX A
I, Eric B. Fischman, the Assistant Secretary, of Dreyfus BASIC GNMA
Fund, a business trust organized under the laws of the State of Massachusetts
(the "Fund"), do hereby certify that:
The following individuals have been duly authorized as Authorized
Persons to give Oral Instructions and Written Instructions on behalf of the
Fund and the specimen signatures set forth opposite their respective names
are their true and correct signatures:
Name Signature
Paul Casti ____________________________
William Maeder ____________________________
William McDowell ____________________________
Donna Forte ____________________________
Tom Brereton ____________________________
__________________________
Assistant Secretary
Dated:
APPENDIX B
DREYFUS BASIC GNMA FUND
I, Eric B. Fischman, Vice President and Assistant Secretary of
Dreyfus BASIC GNMA Fund, a business trust organized and existing under the
laws of the State of Massachusetts (the "Fund"), do hereby certify that
the only series of shares of the Fund issued and/or authorized by the Fund
as of the date of this Custody Agreement are shares of Beneficial
Interest, $.001 par value.
APPENDIX C
The following are designated publications for purposes of Section
4(f)2:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
SCHEDULE A
MELLON BANK, N.A.
CUSTODY FEE SCHEDULE
A. Domestic Safekeeping
B. PLUS $5/security holding charge per month
C. PLUS Transaction charges:
DTC eligible $
Non-DTC eligible $
Fed Book Entry $
Options $
Futures $
GNMA Paydowns $
Repo-depository $
-non-depository $
Physical - Gov't. $
Commercial Paper $
SCHEDULE B
The Fund will pay to the Custodian as soon as possible after the end
of each month all out-of-pocket expenses reasonably incurred in connection
with the assets of the Fund.
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed
Financial Information" and "Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors" and to the use of our report
dated February 6, 1996, in this Registration Statement (Form N-1A 33-12660)
of Dreyfus BASIC GNMA Fund (formerly, Dreyfus Investors GNMA Fund).
ERNST & YOUNG LLP
New York, New York
April 8, 1996
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