DREYFUS BASIC GNMA FUND
- -----------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to report the performance for Dreyfus BASIC GNMA Fund for the
six-month period ended June 30, 1998. Your Fund produced a total return,
including share price changes and dividend income generated, of 4.35%,* compared
to 3.34% for the Lehman Brothers GNMA Index.** Income dividends paid from net
investment income during the six-month period amounted to approximately $0.487%
per share, representing an annualized distribution rate per share of 6.34%.***
The Economy
In recent testimony to Congress, Federal Reserve Board Chairman Alan Greenspan
proclaimed the economy to be "as impressive as any I have witnessed." Indeed,
the performance of the economy has been tremendous, with solid, noninflationary
economic growth and a robust rate of new job creation. Accordingly, the
unemployment rate hovers near its 28-year low. Not surprisingly, consumers brim
with confidence: new home sales were recently at record levels, and retail sales
have surged since January. The enthusiastic spending of consumers has, so far,
offset the adverse effects of the economic problems in Asia. In fact, the
financial crisis in the Far East has proved a boon to consumers, since lower
import prices have further subdued domestic price pressures and helped keep
interest rates low. Remarkably, despite the strengthening economy since the
beginning of this year, inflation has waned further. With inflation under
control and the economy just beginning to experience a reduction in foreign
demand, the Federal Reserve Board has been reluctant to raise interest rates for
fear of further roiling Asian financial markets. The last increase in short-term
rates came in March 1997 when the Federal Reserve Board Open Market Committee
(the policy-making arm of The Federal Reserve) hiked the target rate for Federal
Funds by one quarter of a percent to 5.5%.
Even with the booming job market, wage gains have had little inflationary
effect, since business spending in productivity-enhancing capital equipment has
been strong throughout the economic expansion. The one soft spot in the job
market has been in manufacturing: industrial production has slowed -- a clear
sign that Asian economic woes are being felt here -- and inventories of domestic
manufacturers have risen due to the reduction in foreign demand. It is widely
expected that the growing trade deficit will retard second-quarter economic
growth and possibly serve as a drag over the foreseeable future. This reduction
in foreign demand could further moderate the rate of domestic production and
consequently ease the demand for labor, thus lessening inflationary pressure
resulting from wage increases. Cheaper imports have also weakened the pricing
environment for U.S. manufacturers and, in consequence, acted as an additional
curb to inflation. All this has been part of what Chairman Greenspan called our
economy' s "virtuous cycle" where even so-called crises have proven economically
beneficial. As a further example, the economic upheavals in Asia and Russia have
caused nervous foreign investors to seek refuge in the U.S. bond market, causing
a demand surge that has helped maintain our low interest rate environment. Yet
we, along with Chairman Greenspan, are skeptical that our economy has somehow
moved "beyond history," and we share his vigilance regarding signs of
inflationary imbalances.
Market Environment
The first half of 1998 was a period of interest rate declines. Long-term
interest rates (30-year Treasury) reached one of their lowest levels in history.
By late June, 30-year U.S. Treasury rates fell to 5.57%. This was lower than
during the bond rally in 1993 when rates decreased to 5.78%
During the reporting period, the U.S. fixed-income markets continued to see
strong demand for U.S. Treasuries from overseas. Given the continued problems
in the Asian economies, worried international investors sought securities with
stability and liquidity, and their main destination was the U.S. securities
market. This additional demand for U.S. Treasuries was a major factor
contributing to the new lower interest rates.
What has this meant for GNMA securities? As U.S. Treasury rates fell, so did
the rate on new mortgage loans. Hence the typical U.S. homeowner had a big
opportunity to refinance their home mortgage into a much lower interest rate
loan. This led to a very large number of prepayments in mortgage-backed
securities, causing mortgage-backed securities to underperform other
fixed-income investments during the first half of 1998.
Portfolio Overview
In this environment of falling interest rates and increasing prepayments, we
positioned the fund to take advantage of this situation. We adjusted the
duration of the Fund to be 6% longer than the duration of the Lehman Brothers
GNMA Index. The duration of the Fund was 2.35 years at the end of the second
quarter of 1998.
We have also made adjustments to our asset allocation. We continued to add
call-protected commercial mortgage-backed securities and GNMA project loans.
These bonds typically have 10 years of protection from any type of mortgage loan
refinancing. During the first half of 1998, we increased our holdings in GNMA
project loans to over 10% of the Fund. We also increased our position in
commercial mortgage-backed securities to over 20% of the Fund's assets. These
securities have outperformed fixed-rate pass-through securities because their
coupon payments are not cut short by loan prepayments.
We also focused on discount dollar priced securities. These securities
directly benefit from increases in homeowner refinancing. During the first half
of the year, we increased our holdings in 15-year and 30-year GNMA 6.50% and
7.00% coupon pass-through securities to 23% of the Fund's assets. To do this, we
sold our prepay-sensitive premium 30-year GNMA 8.00% and 7.50% seasoned GNMA
pass-through securities.
Last, we decreased our exposure to adjustable-rate GNMA securities (GNMA ARMS)
. During the first quarter of 1998, the Department of Housing and Urban
Development (HUD) issued a large quantity of adjustable-rate securities. HUD
issued so many that the government agency reached the limit of its government
mandate. As a result, in May of this year they announced that they would be
forced to discontinue the GNMA adjustable rate program for the remainder of
their financial reporting year, causing a demand surge in GNMA ARMS. This extra
demand, with falling future supply, pushed the price of GNMA ARMS up beyond what
we believed to be their fair market value. At that point in time, we decided it
was a good opportunity to decrease our position and take profits.
Included in this report is a series of detailed statements about your Fund's
holdings and its financial condition. We appreciate your continued confidence in
the Fund and in The Dreyfus Corporation.
Sincerely,
[Michael Hoeh signature logo]
Michael Hoeh
Portfolio Manager
August 10, 1998
New York, N.Y.
*Total return includes reinvestment of dividends and any capital gains paid.
**SOURCE: LEHMAN BROTHERS -- The Lehman Brothers GNMA Index is an unmanaged
total return performance benchmark for the GNMA market, consisting of 15- and
30-year fixed-rate GNMA securities.
*** Distribution rate per share is based upon dividends per share paid from net
investment income doing the period (annualized), divided by the net asset value
per share at the end of the period.
<TABLE>
DREYFUS BASIC GNMA FUND
- ------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
Principal
Bonds and Notes--133.1% Amount Value
- ------------------------------------------------------
_____________ ____________
U.S. Government Agencies/
Mortgage-Backed Securities--89.2%
Government National Mortgage Association I:
<S> <C> <C>
61_2%, 10/15/2010-6/15/2011 $ 3,292,013 $ 3,343,435
61_2% 5,000,000 (a) 4,984,350
7%, 6/15/2009 809,066 (b) 834,091
7% 16,600,000 (a) 16,845,850
71_2%, 9/15/2021-12/15/2027 6,693,089 6,905,071
71_2%, 12/15/2023 413,724 (b) 427,038
8%, 4/15/2008-9/15/2008 2,971,522 (b) 3,119,204
8%, 1/15/2022-4/15/2022 464,261 486,058
81_2%, 2/15/2005-3/15/2022 1,529,375 1,635,887
9%, 5/15/2016-11/15/2022 1,375,075 1,494,559
91_2%, 1/15/2017-12/15/2021 720,711 784,345
_____________
40,859,888
_____________
Government National Mortgage Association I,
Project Loans:
65_8% 3,827,200 (a) 3,871,442
6.70%, 3/15/2028 645,991 653,458
7%, 5/15/2023-5/15/2030 3,133,030 3,251,420
91_4%, 10/15/2023 943,411 (b) 1,018,884
_____________
8,795,204
_____________
Government National Mortgage Association II:
41_2%, 4/20/2028-5/20/2028 5,049,998 (c) 4,974,248
5%, 4/20/2028 502,982 (c) 500,779
9%, 3/20/2016-7/20/2025 1,145,242 1,226,351
91_2%, 9/20/2021-12/20/2021 221,509 239,314
_____________
6,940,692
_____________
Government National Mortgage Association I,
Real Estate Mortgage Investment Conduit,
Collateralized Mortgage Obligations,
Ser. 1997-4, Cl. G, 71_2%, 11/16/2024 1,000,000 (b) 1,029,340
_____________
Government National Mortgage Association II,
Real Estate Mortgage Investment Conduit,
Collateralized Mortgage Obligations,
Ser. 1997-2, Cl. K, 71_2%, 1/20/2024 2,780,000 (b) 2,871,907
_____________
Federal Home Loan Mortgage Corp.:
Real Estate Mortgage Investment Conduit,
Collateralized Mortgage Obligations:
Ser. 128, Cl. H, 83_4%, 9/15/2019 26,679 (b) 26,679
Ser. 1092, Cl. J, 81_2%, 5/15/2020 797,537 (b) 805,529
</TABLE>
<TABLE>
DREYFUS BASIC GNMA FUND
- ------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1998 (UNAUDITED)
Principal
Bonds and Notes (continued) Amount Value
- ------------------------------------------------------
_____________ ____________
U.S. Government Agencies/
Mortgage-Backed Securities (continued)
Federal Home Loan Mortgage Corp. (continued):
Stripped Securities, Interest Only Class:
<S> <C> <C>
Ser. 1499, Cl. E, 7%, 4/15/2023 $ 864,285 (b,d) $ 498,597
Ser. 1541, Cl. FA, 7%, 5/15/2019 4,904,658 (b,d) 883,035
Ser. 1547, Cl. B, 7%, 2/15/2022 1,750,000 (b,d) 406,998
Ser. 1583, Cl. ID, 7%, 2/15/2023 5,059,464 (b,d) 1,727,858
Ser. 1590, Cl. JA, 61_2%, 10/15/2021 6,000,000 (b,d) 1,400,520
Ser. 1596, Cl. L, 61_2%, 12/15/2012 1,800,000 (b,d) 344,718
Ser. 1916, Cl. PI, 7%, 12/15/2011 1,338,799 (b,d) 294,603
Ser. 1999, Cl. PW, 7%, 8/15/2026 1,434,384 (b,d) 328,115
Ser. 2066, Cl. PM, 61_2%, 12/15/2026 3,843,569 (a) 1,085,808
_____________
7,802,460
_____________
Federal Housing Administration,
Project Loans:
7.20%, 2/1/2033 1,124,506 1,162,106
75_8%, 4/1/2031 1,245,111 1,310,479
_____________
2,472,585
_____________
Federal National Mortgage Association:
6.94% 4,286,449 4,500,544
Real Estate Mortgage Investment Conduit,
Stripped Securities, Interest Only Class:
Ser. 1993-61, Cl. N, 7%, 3/25/2022 7,218,166 (d) 1,760,078
Ser. 1993-137, Cl. PT, 7%, 6/25/2022 4,000,000 (d) 930,240
_____________
7,190,862
_____________
Total U.S. Government Agencies/
Mortgage-Backed Securities 77,962,938
=============
Asset-Backed Securities--3.4%
Nomura Depositor Trust,
Ser. 1998-ST1, Cl. A-5, 6.906%, 2003 3,000,000 (e,f) 2,995,312
=============
Commercial Mortgage-Backed Securities--20.5%
Asset Securitization,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1997-D5, Cl. A1-D, 6.85%, 2041 2,250,000 2,356,875
Chase Commercial Mortgage Securities,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1998-SN1, Cl. D, 6.486%, 2035 750,000 (e,f) 750,000
CS First Boston Mortgage Securities,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1998-C1, Cl. C, 6.78%, 2009 2,000,000 2,030,937
</TABLE>
<TABLE>
DREYFUS BASIC GNMA FUND
- ------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1998 (UNAUDITED)
Principal
Bonds and Notes (continued) Amount Value
- ------------------------------------------------------
_____________ ____________
Commercial Mortgage-Backed Securities (continued)
DLJ Commercial Mortgage,
Commercial Mortgage Pass-Through Ctfs.,
<S> <C> <C>
Ser. 1998-STFA, Cl. B-1, 6.63%, 2000 $ 1,400,000 (e,f) $ 1,401,313
GS Mortgage Securities II,
Commercial Mortgage Pass-Through Ctfs:
Ser. 1997-GL, Cl. G, 7.822%, 2030 2,000,000 (f) 2,061,250
Ser. 1998-GS1:
Cl. C, 6.148%, 2000 3,000,000 (e,f) 3,000,000
Cl. D, 6.448%, 2000 1,750,000 (a,e,f) 1,746,992
Merrill Lynch Mortgage Investors,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1997-SD1, Cl. E, 6.687%, 2010 3,500,000 3,504,375
Mortgage Capital Funding,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1997-MC2, Cl. C, 6.881%, 2007 1,000,000 1,019,375
_____________
Total Commercial Mortgage-Backed Securities 17,871,117
=============
Residential Mortgage-Backed Securities--20.0%
Chase Mortgage Finance,
Mortgage Pass-Through Ctfs.,
Ser. 1998-S3:
Cl. B-1, 61_2%, 2013 787,683 (a) 778,822
Cl. B-2, 61_2%, 2013 675,156 (a) 664,185
Norwest Asset Securities,
Mortgage Pass-Through Ctfs.:
Ser. 1997-3:
Cl. B-1, 71_4%, 2027 2,468,937 2,527,574
Cl. B-2, 71_4%, 2027 987,575 998,685
Ser. 1997-7, Cl. B-2, 7%, 2027 791,012 782,382
Ser. 1997-9, Cl. B-2, 7%, 2012 456,579 450,566
Ser. 1997-15, Cl. B-2, 63_4%, 2012 661,732 658,010
Ser. 1997-20, Cl. B-2, 63_4%, 2012 416,553 414,670
Ser. 1998-14, Cl. B-3, 61_2%, 2013 623,987 607,807
Ser. 1998-18, Cl. B-3, 61_4%, 2028 1,050,000 (a) 999,961
PNC Mortgage Securities,
Mortgage Pass-Through Ctfs.:
Ser. 1997-8, Cl. 3B-3, 63_4%, 2012 306,264 304,637
Ser. 1998-2:
Cl. 3B-3, 63_4%, 2013 575,491 576,391
Cl. 4B-3, 63_4%, 2027 401,717 386,904
</TABLE>
<TABLE>
DREYFUS BASIC GNMA FUND
- ------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1998 (UNAUDITED)
Principal
Bonds and Notes (continued) Amount Value
- ------------------------------------------------------
_____________ ____________
Residential Mortgage-Backed Securities (continued)
Prudential Home Mortgage Securities,
Mortgage Pass-Through Ctfs.,
<S> <C> <C>
Ser. 1995-6, Cl. B-2, 71_2%, 2025 $ 2,120,835 $ 2,124,811
Residential Accredit Loans,
Mortgage Asset-Backed Pass-Through Ctfs.,
Ser. 1997-QS6:
Cl. M-2, 71_2%, 2012 1,022,841 1,059,100
Cl. M-3, 71_2%, 2012 664,842 688,410
Residential Funding Mortgage Securities I,
Mortgage Pass-Through Ctfs.:
Ser. 1997-S10, Cl. M-3, 7%, 2012 515,130 519,601
Ser. 1997-S11, Cl. M-3, 7%, 2012 748,584 767,311
Ser. 1997-S14, Cl. M-3, 61_2%, 2013 860,400 (a) 840,234
Ser. 1997-S19, Cl. M-3, 61_2%, 2012 677,889 667,138
Ser. 1997-S21, Cl. M-3, 61_2%, 2012 391,783 384,560
Ser. 1998-NS1:
Cl. M-2, 63_8%, 2009 159,303 156,216
Cl. M-3, 63_8%, 2009 79,648 77,548
_____________
Total Residential Mortgage-Backed Securities 17,435,523
=============
TOTAL BONDS AND NOTES
(cost $115,278,965) $116,264,890
=============
Short-Term Investments--.9%
- ------------------------------------------------------
Repurchase Agreements--.7%
Barclays De Zoete Wedd, 5.35%
Dated 6/30/1998, Due 7/1/1998 in the amount of $600,089 (fully collateralized
by $595,000 U.S. Treasury Notes, 7%, 4/15/1999, value $611,200) $ 600,000 $ 600,000
_____________
U.S. Treasury Bills--.2%
5.02%, 8/27/1998 100,000 (g) 99,231
5.18%, 9/17/1998 25,000 24,735
4.99%, 9/24/1998 50,000 49,428
_____________
Total U.S. Treasury Bills 173,394
_____________
TOTAL SHORT-TERM INVESTMENTS
(cost $773,376) $ 773,394
=============
TOTAL INVESTMENTS
(cost $116,052,341) 134.0% $117,038,284
======= =============
LIABILITIES, LESS CASH AND RECEIVABLES (34.0%) $ (29,673,727)
======= =============
NET ASSETS 100.0% $ 87,364,557
======= =============
</TABLE>
DREYFUS BASIC GNMA FUND
- ------------------------------------------------------------------------------
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.
(c) Adjustable rate mortgage-interest rate subject to change periodically.
(d) Reflects notional face.
(e) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At
June 30, 1998 these securities amounted to $9,893,617 or 11.3% of net
assets.
(f) Variable rate security-interest rate subject to change periodically.
(g) Held by the custodian in a segregated account as collateral for open
financial futures positions.
<TABLE>
STATEMENT OF FINANCIAL FUTURES JUNE 30, 1998 (UNAUDITED)
Market Value Unrealized
Covered (Depreciation)
Financial Futures Short Contracts by Contracts Expiration at 6/30/98
__________________________________________________________________ ____________ _______________ _________________ _______________
<S> <C> <C> <C> <C>
U.S. Treasury 10 year notes 125 $14,230,469 September '98 ($63,816)
============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS BASIC GNMA FUND
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1998 (UNAUDITED)
Cost Value
____________ ____________
ASSETS: Investments in securities--
<S> <C> <C>
See Statement of Investments--Note 1(b) $116,052,341 $117,038,284
Cash 748,190
Receivable for investment securities sold 15,260,800
Interest receivable 776,487
Receivable for shares of Beneficial Interest subscribed 57,208
Paydowns receivable 18,802
Prepaid expenses 13,068
_____________
133,912,839
_____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates 44,980
Payable for investment securities purchased 46,119,090
Payable for shares of Beneficial Interest redeemed 294,251
Payable for futures variation margin--Note 4(a) 27,488
Accrued expenses 62,473
_____________
46,548,282
_____________
NET ASSETS $ 87,364,557
=============
REPRESENTED BY: Paid-in capital $ 85,374,739
Accumulated undistributed investment income--net 1,544
Accumulated net realized gain (loss) on investments 1,066,147
Accumulated net unrealized appreciation (depreciation)
on investments [including ($63,816) net unrealized
(depreciation) on financial futures]--Note 4(b) 922,127
_____________
NET ASSETS $ 87,364,557
=============
SHARES OUTSTANDING
(UNLIMITED NUMBER OF $.001 PAR VALUE SHARES OF BENEFICIAL INTEREST AUTHORIZED) 5,641,743
NET ASSET VALUE, offering and redemption price per share $15.49
=======
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS BASIC GNMA FUND
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
INVESTMENT INCOME
<S> <C> <C>
INCOME Interest Income $2,873,231
EXPENSES: Management fee--Note 3(a) $ 244,952
Shareholder servicing costs--Note 3(b) 110,102
Trustees' fees and expenses--Note 3(c) 17,762
Registration fees 17,706
Auditing fees 14,604
Custodian fees--Note 3(b) 10,450
Interest expense--Note 2 10,359
Legal fees 8,121
Prospectus and shareholders' reports 7,699
Miscellaneous 5,581
___________
Total Expenses 447,336
Less--reduction in management fee due to
undertaking--Note 3(a) (171,613)
___________
Net Expenses 275,723
___________
INVESTMENT INCOME--NET 2,597,508
___________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments $ 883,869
Net realized gain (loss) on financial futures (112,915)
___________
Net Realized Gain (Loss) 770,954
Net unrealized appreciation (depreciation) on
investments [including ($63,816) net unrealized
(depreciation) on financial futures] 68,150
___________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 839,104
___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,436,612
===========
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS BASIC GNMA FUND
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 1998 Year Ended
(Unaudited) December 31, 1997
________________ _______________
OPERATIONS:
<S> <C> <C>
Investment income--net $ 2,597,508 $ 4,055,809
Net realized gain (loss) on investments 770,954 954,499
Net unrealized appreciation (depreciation) on investments 68,150 776,447
____________ ____________
Net Increase (Decrease) in Net Assets Resulting from Operations 3,436,612 5,786,755
____________ ____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net (2,597,864) (4,053,909)
Net realized gain on investments -- (1,027,054)
____________ ____________
Total Dividends (2,597,864) (5,080,963)
____________ ____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold 20,179,140 31,673,859
Dividends reinvested 1,910,684 3,692,556
Cost of shares redeemed (11,493,830) (17,807,854)
____________ ____________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions 10,595,994 17,558,561
____________ ____________
Total Increase (Decrease) in Net Assets 11,434,742 18,264,353
NET ASSETS:
Beginning of Period 75,929,815 57,665,462
____________ ____________
End of Period $87,364,557 $75,929,815
============ ============
UNDISTRIBUTED INVESTMENT INCOME--NET $ 1,544 $ 1,900
____________ ____________
Shares Shares
____________ ____________
CAPITAL SHARE TRANSACTIONS:
Shares sold 1,308,005 2,070,281
Shares issued for dividends reinvested 123,863 241,976
Shares redeemed (744,780) (1,167,399)
____________ ____________
Net Increase (Decrease) in Shares Outstanding 687,088 1,144,858
============ ============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS BASIC GNMA FUND
- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average net
assets and other supplemental data for each period indicated. This information
has been derived from the Fund's financial statements.
Six Months Ended
June 30, 1998 Year Ended December 31,
_________________________________________________________
PER SHARE DATA: (Unaudited) 1997 1996 1995 1994 1993
_________ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.32 $15.14 $15.42 $14.16 $15.39 $15.20
_______ ______ ______ ______ ______ ______
Investment Operations:
Investment income--net .49 .99 .98 1.03 1.08 1.11
Net realized and unrealized gain (loss)
on investments .17 .41 (.27) 1.25 (1.23) .19
_______ ______ ______ ______ ______ ______
Total from Investment Operations .66 1.40 .71 2.28 (.15) 1.30
_______ ______ ______ ______ ______ ______
Distributions:
Dividends from investment income--net (.49) (.99) (.99) (1.02) (1.08) (1.11)
Dividends from net realized gain on investments -- (.23) -- -- -- --
_______ ______ ______ ______ ______ ______
Total Distributions (.49) (1.22) (.99) (1.02) (1.08) (1.11)
_______ ______ ______ ______ ______ ______
Net asset value, end of period $15.49 $15.32 $15.14 $15.42 $14.16 $15.39
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN 8.77%(1) 9.55% 4.81% 16.62% (.99%) 8.75%
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses to average net assets .65%(1) .65% .65% .50% .06% --
Ratio of interest expense to average net assets .03%(1) -- -- -- -- --
Ratio of net investment income to
average net assets 6.36%(1) 6.46% 6.50% 6.86% 7.34% 7.15%
Decrease reflected in above expense ratios
due to undertakings by the Manager .42%(1) .42% .52% .78% 1.43% 1.28%
Portfolio Turnover Rate 221.98%(2) 534.25% 332.96% 254.36% 290.20% 34.02%
Net Assets, end of period (000's Omitted) $87,365 $75,930 $57,665 $55,615 $44,937 $54,224
- ------------
(1) Annualized.
(2) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS BASIC GNMA FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus BASIC GNMA Fund (the "Fund" ) is registered under the Investment
Company Act of 1940 (" Act") as a diversified open-end management investment
company. The Fund's investment objective is to provide investors with as high a
level of current income as is consistent with the preservation of capital by
investing principally in instruments issued by the Government National Mortgage
Association. The Dreyfus Corporation ("Manager") serves as the Fund's investment
adviser. The Manager is a direct subsidiary of Mellon Bank, N.A. ("Mellon").
Premier Mutual Fund Services, Inc. is the distributor of the Fund's shares,
which are sold to the public without a sales charge.
The Fund' s financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: Investments in securities (excluding short-term
investments other than U.S. Treasury Bills and financial futures) are valued
each business day by an independent pricing service ("Service") approved by the
Board of Trustees. Investments for which quoted bid prices are readily available
and are representative of the bid side of the market in the judgment of the
Service are valued at the mean between the quoted bid prices (as obtained by the
Service from dealers in such securities) and asked prices (as calculated by the
Service based upon its evaluation of the market for such securities). Other
investments (which constitute a majority of the portfolio securities) are
carried at fair value as determined by the Service, based on methods which
include consideration of: yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to values from dealers; and general
market conditions. Short-term investments, excluding U.S. Treasury Bills, are
carried at amortized cost, which approximates value. Financial futures are
valued at the last sales price on the securities exchange on which such
securities are primarily traded or at the last sales price on the national
securities market on each business day.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income
(including, where applicable, amortization of discount on short-term
investments) is recognized on the accrual basis. Under the terms of the
custodian agreement the Fund receives net earnings credits based on available
cash balances left on deposit.
The Fund may enter into repurchase agreements with financial institutions,
deemed to be creditworthy by the Fund' s Manager, subject to the seller's
agreement to repurchase and the Fund's agreement to resell such securities at a
mutually agreed upon price. Securities purchased subject to repurchase
agreements are deposited with the Fund's custodian and, pursuant to the terms of
the repurchase agreement, must have an aggregate market value greater than or
equal to the repurchase price plus accrued interest at all times. If the value
of the underlying securities falls below the value of the repurchase price plus
accrued interest, the Fund will require the seller to deposit additional
collateral by the next business day. If the request for additional collateral is
not met, or the seller defaults on its repurchase obligation, the Fund maintains
the right to sell the underlying securities at market value and may claim any
resulting loss against the seller.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to comply
with the distribution requirements of the Internal Revenue Code. To the extent
that net realized capital gain can be offset by capital loss carryovers, if any,
it is the policy of the Fund not to distribute such gain.
DREYFUS BASIC GNMA FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to qualify
as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Internal Revenue Code, and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and excise taxes
NOTE 2--BANK LINE OF CREDIT:
The Fund participates with other Dreyfus-managed funds in a $600 million
redemption credit facility (" Facility" ) to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the Fund has agreed to pay commitment fees on its pro rata portion of
the Facility. Interest is charged to the Fund at rates based on prevailing
market rates in effect at the time of borrowings.
The average daily amount of borrowings outstanding during the period ended
June 30, 1998 was approximately $185,600 with a related weighted average
annualized interest rate of 6.62%.
NOTE 3--MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .60 of 1% of the value of the
Fund' s average daily net assets and is payable monthly. The Manager had
undertaken through June 30, 1998 to reduce the management fee paid by, or
reimburse such excess expenses of the Fund, to the extent that the Fund's
aggregate annual expenses (exclusive of taxes, brokerage, interest on
borrowings, commitment fees and extraordinary expenses) exceeded an annual rate
of .65 of 1% of the value of the Fund's average daily net assets. The reduction
in management fee, pursuant to the undertaking, amounted to $171,613 during the
period ended June 30, 1998.
The undertaking may be extended, modified or terminated by the Manager,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
(B) Under the Shareholder Services Plan, the Fund reimburses 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 period ended June
30, 1998, the Fund was charged $67,260 pursuant to the Shareholder Services
Plan.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the
Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. During the period
ended June 30, 1998, the Fund was charged $30,649 pursuant to the transfer
agency agreement.
The Fund compensates Mellon under a custody agreement for providing custodial
services for the Fund. During the period ended June 30, 1998, the Fund was
charged $10,450 pursuant to the custody agreement.
(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 and the Trustee Emeritus receives 50% of such compensation.
NOTE 4--SECURITIES TRANSACTIONS:
(A) The aggregate amount of purchases and sales (including paydowns) of
investment securities excluding short-term securities and financial futures,
during the period ended June 30, 1998 amounted to $252,091,300 and 222,640,556,
respectively.
The Fund may invest in financial futures contracts in order to gain exposure
to or protect against changes in the market. The Fund is exposed to market risk
as a result of changes in the value of the underlying financial instruments.
Investments in financial futures require the Fund to "mark to market" on a daily
basis, which reflects the change in the market value of the contracts at the
close of each day's trading. Accordingly, variation margin payments are received
or made to reflect daily unrealized gains or losses. When the contracts are
closed, the Fund recognizes a realized gain or loss. These investments require
initial margin deposits with a custodian, which consist of cash or cash
equivalents, up to approximately 10% of the contract amount. The amount of these
deposits is determined by the exchange or Board of Trade on which the contract
is traded and is subject to change. Contracts open at June 30, 1998, are set
forth in the Statement of Financial Futures.
(B) At June 30, 1998, accumulated net unrealized appreciation on investments
and financial futures was $922,127, consisting of $1,484,163 gross unrealized
appreciation and $562,036 gross unrealized depreciation.
At June 30, 1998, 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
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
[dreyfus lion 'd' logo] (reg.tm)
[dreyfus logo] (reg.tm)
DREYFUS BASIC
GNMA FUND
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 080SA986
BASIC
GNMA
Fund
Semi-Annual
Report
June 30, 1998
