Dreyfus BASIC GNMA Fund
SEMIANNUAL REPORT June 30, 1999
(reg.tm)
<PAGE>
The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured
* Not Bank-Guaranteed
* May Lose Value
Year 2000 Issues (Unaudited)
The fund could be adversely affected if the computer systems used by The Dreyfus
Corporation and the fund's other service providers do not properly process and
calculate date-related information from and after January 1, 2000. The Dreyfus
Corporation is working to avoid Year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by Year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
<PAGE>
Contents
THE FUND
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2 Letter from the President
3 Discussion of Fund Performance
6 Statement of Investments
10 Statement of Financial Futures
11 Statement of Assets and Liabilities
12 Statement of Operations
13 Statement of Changes in Net Assets
14 Financial Highlights
15 Notes to Financial Statements
FOR MORE INFORMATION
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Back Cover
<PAGE>
The Fund
Dreyfus BASIC GNMA Fund
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus BASIC GNMA Fund,
covering the six-month period from January 1, 1999 through June 30, 1999.
Inside, you' ll find valuable information about how the fund was managed during
the reporting period, including a discussion with Michael Hoeh, portfolio
manager and a member of the Dreyfus Taxable Fixed Income Team.
The past six months have produced mixed results for fixed-income investors.
That' s because economic growth has been stronger than many analysts expected,
fueling fears that inflation pressures may re-emerge. Overseas economies that
had been in recession -- including Japan and the rest of Asia -- appear to have
begun to gain strength. The U.S. economy, which is now in its eighth year of
expansion, has also grown more robustly than expected. In response, the Federal
Reserve raised short-term interest rates modestly on June 30.
In this economic climate, U.S. Treasury securities declined, giving back all of
the gains they achieved during their remarkable rally last summer and fall.
Prices of other types of bonds fell less sharply or remained relatively
unchanged when investors shifted assets back into market sectors they had
previously avoided. Accordingly, many corporate bonds, mortgage-backed
securities, asset-backed securities and U.S. dollar-denominated foreign bonds
provided higher returns than U.S. Treasuries over the first half of 1999.
We appreciate your confidence over the past six months, and we look forward to
your continued participation in Dreyfus BASIC GNMA Fund.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
July 15, 1999
<PAGE>
DISCUSSION OF FUND PERFORMANCE
Michael Hoeh, Portfolio Manager Dreyfus Taxable Fixed Income Team
How did Dreyfus BASIC GNMA Fund perform relative to its benchmark?
For the six-month period ended June 30, 1999, Dreyfus BASIC GNMA Fund achieved a
total return of 1.14%, including share price changes and dividend income.(1) In
comparison, the Lehman Brothers GNMA Index, the fund's benchmark, returned 0.57%
. (2) The fund paid a dividend of $0.48 during the period, representing an
annualized distribution rate per share of 6.59%.(3)
The fund' s good relative performance was largely due to its exposure to
credit-sensitive sectors of the mortgage market. In addition, the fund benefited
from higher mortgage rates, which caused a drop in homeowner refinancings and
reduced prepayments.
What is the fund's investment approach?
The fund invests primarily in GNMA (Government National Mortgage Association)
and GNMA-related securities. The remainder is allocated to other
mortgage-related debt. The fund' s goal is to provide a high level of current
income consistent with capital preservation.
We use a four-step investment approach:
* Prepayment trend analysis. We carefully review prepayment indicators, as an
increase in this trend could cause a decline in the fund's dividend.
* Option-adjusted spread analysis. This tool compares the "optionality" of
different mortgage-backed securities with "now optionable" securities (such as
U.S. Treasuries) . Homeowners have the right to prepay their mortgage at any
time. This essentially gives a call option to the homeowner, exercisable against
the mortgage-backed securities investor. Using this tool helps us determine
whether it is advisable to purchase optionable securities.
The Fund
<PAGE>
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
* Cash flow structure analysis. We review cash flows of different types of
securities. Our analysis indicates that GNMA project loans have a strong cash
flow, which is a favorable sign. The loans, issued for multifamily,
government-sponsored housing, do not allow prepayments. This feature provided
protection against prepayment risk and helped improve the fund's overall return
* Total-rate-of-return scenarios. We calculate expected rates of return for each
security over a six-month time horizon. This helps us estimate whether a
security is or is not likely to be able to surpass the return generated by its
benchmark.
What other factors influenced the fund's performance?
The fund' s emphasis on credit-sensitive sectors -- commercial and residential
mortgage-backed securities and asset-backed securities -- served to boost
performance. Liquidity returned to the market early in 1999 following the global
financial crisis that took place just prior to the start of the six-month
reporting period. As a result, demand for credit-sensitive securities outpaced
supply, and valuations recovered dramatically. Within this environment, the
strongest performers were commercial mortgage-backed securities, which rebounded
from previously depressed levels. The fund, which had a significant allocation
to this sector, benefited from its price appreciation and high yield.
Our position in GNMA project loans and adjustable-rate GNMA adjustable-rate
mortgages (" ARMs" ) also contributed positively to performance, particularly
during the second quarter of 1999. In contrast to a fixed-rate mortgage, in
which the interest rate remains the same for the life of the loan, the rate on
an ARM changes periodically. We added ARMs because, in a rising interest rate
environment, their yields tend to increase to a greater extent than those on
U.S. Treasuries. When interest rates rose during the period, prices of ARMs
remained approximately the same, while those of U.S. Treasury bonds declined
significantly. ARMs thus added price stability to the fund, as well as high
yield, which helped raise the fund's total return.
<PAGE>
On the other hand, our move to increase our allocation to higher-coupon
securities other than ARMs was not as favorable. We purchased these securities
because the mortgages underlying them carry high interest rates. As a result,
holders of these types of bonds tend to prepay at a much slower rate when
interest rates rise. Generally, the more slowly a pool of mortgages is prepaid,
the greater the potential income for mortgage investors. However, in the last
six months, the performance of higher-coupon securities fell short of our
expectations, mainly due to a large supply of them on the market.
What is the fund's current strategy?
We have kept the fund' s duration short -- 4.18 years as of June 30 -- in
anticipation of higher interest rates ahead. We have also maintained our
positions in GNMA ARMs, higher-coupon securities, and other mortgage debt, and
we have de-emphasized U.S. Treasuries. In addition, we have continued to focus
on commercial mortgage-backed issues and asset-backed securities, particularly
credit card and home equity loan issues. As the "wealth effects" of a strong
economy and stock market have improved the quality of consumer credit, these
bonds have provided solid returns for the fund.
July 15, 1999
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE AND INVESTMENT
RETURN FLUCTUATE SO MUCH THAT UPON REDEMPTION, FUND SHARES MAY BE WORTH MORE OR
LESS THAN THEIR ORIGINAL COST.
(2) DISTRIBUTION RATE PER SHARE IS BASED UPON DIVIDENDS PER SHARE PAID FROM NET
INVESTMENT INCOME DURING THE PERIOD (ANNUALIZED), DIVIDED BY THE NET ASSET VALUE
PER SHARE AT THE END OF THE PERIOD.
(3) SOURCE: LEHMAN BROTHERS -- THE LEHMAN BROTHERS GNMA INDEX IS AN UNMANAGED,
TOTAL RETURN PERFORMANCE BENCHMARK FOR THE GNMA MARKET, CONSISTING OF 15- AND
30-YEAR FIXED-RATE SECURITIES BACKED BY MORTGAGE POOLS OF THE GOVERNMENT
NATIONAL MORTGAGE ASSOCIATION.
The Fund
<PAGE>
STATEMENT OF INVESTMENTS
<TABLE>
<CAPTION>
June 30, 1999 (Unaudited)
Principal
BONDS AND NOTES--152.2% Amount ($) Value ($)
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<S> <S> <S>
U.S. GOVERNMENT AGENCIES/ MORTGAGE-BACKED SECURITIES--105.2%
Government National Mortgage Association I:
6.5% 3,250,000 (a) 3,140,313
6.5%, 10/15/2010-3/15/2029 14,283,287 13,848,081
7% 9,000,000 (a) 8,900,134
7%, 1/15/2023-2/15/2024 4,126,240 4,109,817
7.5% 3,000,000 (a) 3,031,860
7.5%, 12/15/2023 289,259 293,237
8%, 4/15/2008-4/15/2022 7,796,874 8,042,355
8.5%, 2/15/2005-11/15/2021 984,031 1,039,051
9%, 5/15/2016-11/15/2022 947,608 1,016,980
9.5%, 1/15/2017-10/15/2020 400,314 435,778
43,857,606
Government National Mortgage Association I,
Construction Loans:
6.75% 2,827,663 (a) 2,676,563
6.75%, 10/15/2036 3,677,837 3,481,303
6,157,866
Government National Mortgage Association I:
Project Loans:
6.32%, 10/15/2033 2,577,390 2,481,536
6.375%, 10/15/2033-1/15/2034 4,368,140 4,244,602
6.4%, 10/15/2033 1,839,603 1,801,082
6.41%, 8/15/2028 993,331 974,080
6.43%, 9/15/2033 1,491,731 1,446,979
6.45%, 11/15/2033-3/15/2034 5,517,710 5,375,273
6.55%, 12/15/2033 701,007 685,887
6.6%, 5/15/2028 1,924,290 1,880,378
6.625%, 8/15/2028-1/15/2034 15,375,531 15,170,205
6.7%, 3/15/2028 639,670 639,868
6.75%, 12/15/2023 6,820,551 6,771,511
7.125%, 1/15/2029 1,302,687 1,331,580
7.25%, 4/15/2029 1,254,266 1,250,340
7.325%, 3/1/2034 3,480,024 3,587,661
47,640,982
Government National Mortgage Association II:
5% 7,000,000 (a,b) 6,864,340
9%, 5/20/2016-7/20/2025 672,693 708,915
9.5%, 9/20/2021-12/20/2021 127,594 137,173
7,710,428
Federal Home Loan Mortgage Corp.,
Stripped Securities, Interest Only Class:
Ser. 1541, Cl. FA, 7%, 5/15/2019 4,904,658 (c,d) 636,134
Ser. 1547, Cl. B, 7%, 2/15/2022 1,750,000 (d) 317,275
Ser. 1590, Cl. JA, 6.5%, 10/15/2021 6,000,000 (d) 1,100,625
<PAGE>
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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U.S. GOVERNMENT AGENCIES/ MORTGAGE-BACKED SECURITIES (CONTINUED)
Federal Home Loan Mortgage Corp.,
Stripped Securities, Interest Only Class (continued):
Ser. 1596, Cl. L, 6.5%, 12/15/2012 1,800,000 (c,d) 259,920
Ser. 1916, Cl. PI, 7%, 12/15/2011 1,161,802 (c,d) 243,502
Ser. 1987, Cl. PI, 7%, 9/15/2012 1,218,605 (d) 244,440
Ser. 1999, Cl. PW, 7%, 8/15/2026 3,637,886 (c,d) 704,840
Ser. 2047, Cl. PJ, 7%, 2/15/2028 3,000,000 (d) 1,121,250
4,627,986
Federal Housing Administration,
Project Loans:
7.2%, 2/1/2033 1,117,404 1,087,898
7.625%, 4/1/2031 1,236,334 1,230,925
2,318,823
Federal National Mortgage Association,
7% 3,600,000 (a) 3,612,348
TOTAL U.S. GOVERNMENT AGENCIES/
MORTGAGE-BACKED SECURITIES 115,926,039
ASSET-BACKED SECURITIES--7.9%
Green Tree Financial Corporation,
Ser. 1999-3, Cl. A-5, 6.16%, 2031 1,000,000 982,500
Nomura Depositor Trust,
Ser. 1998-ST1, Cl. A-3, 5.568%, 2003 1,000,000 (e,f) 973,906
Ser. 1998-ST1, Cl. A-5, 6.238%, 2003 3,500,000 (e,f) 3,232,578
Premier Auto Trust,
Ser. 1999-3, Cl. A-4, 6.43%, 2004 3,500,000 3,519,985
TOTAL ASSET-BACKED SECURITIES 8,708,969
COMMERCIAL MORTGAGE PASS-THROUGH CTFS.--23.4%
Asset Securitization,
Ser. 1997-D5, Cl. A1-D, 6.85%, 2041 2,250,000 (c) 2,207,461
Chase Commercial Mortgage Securities,
Ser. 1998-SN1A, Cl. D, 5.858%, 2001 750,000 (c,e,f) 738,750
CS First Boston Mortgage Securities,
Ser. 1998-C1, Cl. C, 6.78%, 2009 2,000,000 (c) 1,941,910
DLJ Commercial Mortgage:
Ser. 1998-ST1A, Cl. B-1, 5.818%, 2000 2,400,000 (c,e,f) 2,394,000
Ser. 1999-CG1, Cl. B-2, 7.487%, 2009 5,497,000 4,978,221
Ser. 1999-CG2, Cl. B-2, 7.607%, 2009 6,000,000 5,607,188
The Fund
<PAGE>
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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COMMERCIAL MORTGAGE PASS-THROUGH CTFS. (CONTINUED)
GS Mortgage Securities Corp. II,
Ser. 1998-FL1, Cl. C, 5.488%, 2000 3,000,000 (c,e,f) 2,992,500
Ser. 1998-FL1, Cl. D, 5.788%, 2000 1,750,000 (c,e,f) 1,741,250
Merrill Lynch Mortgage Investors,
Ser. 1997-SD1, Cl. E, 5.937%, 2010 3,500,000 (c,e,f) 3,233,125
TOTAL COMMERCIAL MORTGAGE PASS-THROUGH CTFS. 25,834,405
RESIDENTIAL MORTGAGE PASS-THROUGH CTFS.--14.9%
BA Mortgage Securities,
Ser. 1998-2, Cl. 2B-2, 6.5%, 2013 295,435 (c) 271,062
Chase Mortgage Finance:
Ser. 1998-S3, Cl. B-1, 6.5%, 2013 755,592 (c) 726,301
Ser. 1998-S3, Cl. B-2, 6.5%, 2013 647,649 (c) 622,543
GE Capital Mortgage Services,
Ser. 1998-16, Cl. B-2, 6.5%, 2013 604,981 (c) 535,638
Norwest Asset Securities:
Ser. 1997-3, Cl. B-1, 7.25%, 2027 2,443,300 (c) 2,381,729
Ser. 1997-3, Cl. B-2, 7.25%, 2027 977,320 (c) 945,538
Ser. 1997-7, Cl. B-2, 7%, 2027 782,389 (c) 735,719
Ser. 1997-9, Cl. B-2, 7%, 2012 436,367 (c) 400,685
Ser. 1997-11, Cl. B-2, 7%, 2027 517,332 477,394
Ser. 1997-15, Cl. B-2, 6.75%, 2012 633,408 (c) 588,931
Ser. 1997-20, Cl. B-2, 6.75%, 2012 399,090 (c) 367,402
Ser. 1998-14, Cl. B-3, 6.5%, 2013 598,663 (c) 527,104
Ser. 1998-18, Cl. B-3, 6.25%, 2028 867,568 (c) 687,860
PNC Mortgage Securities:
Ser. 1997-8, Cl. 3B-3, 6.75%, 2012 293,350 (c) 284,543
Ser. 1998-2, Cl. 3B-3, 6.75%, 2013 553,125 (c) 533,755
Ser. 1998-2, Cl. 4B-3, 6.75%, 2027 394,862 (c) 374,823
Ser. 1998-11, Cl. 2B-3, 6.25%, 2013 511,189 (c) 462,067
Residential Accredit Loans:
Ser. 1997-QS6, Cl. M-2, 7.5%, 2012 979,498 (c) 997,274
Ser. 1997-QS6, Cl. M-3, 7.5%, 2012 636,669 (c) 648,223
Residential Funding Mortgage Securities I:
Ser. 1997-S10, Cl. M-3, 7%, 2012 493,861 (c) 471,485
Ser. 1997-S11, Cl. M-3, 7%, 2012 716,601 (c) 716,002
Ser. 1997-S19, Cl. M-3, 6.5%, 2012 649,703 (c) 599,786
Ser. 1997-S21, Cl. M-3, 6.5%, 2012 375,234 (c) 343,688
Ser. 1998-NS1, Cl. M-2, 6.375%, 2009 147,371 (c) 144,078
Ser. 1998-NS1, Cl. M-3, 6.375%, 2009 73,685 (c) 70,603
Ser. 1998-S14, Cl. M-3, 6.5%, 2013 823,231 (c) 799,435
Ser. 1998-S16, Cl. M-3, 6.5%, 2013 740,221 (c) 676,030
TOTAL RESIDENTIAL MORTGAGE PASS-THROUGH CTFS. 16,389,698
<PAGE>
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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U.S. GOVERNMENTS--.8%
U.S. Treasury Bonds,
5.25%, 2/15/2029 1,000,000 897,883
TOTAL BONDS AND NOTES
(cost $171,126,374) 167,756,994
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SHORT-TERM INVESTMENTS--.7%
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U.S.Treasury Bills:
4.17%, 7/8/1999 70,000 (g) 69,954
5.08%, 7/22/1999 205,000 (g) 204,510
4.93%, 8/19/1999 275,000 (g) 273,360
4.4%, 9/16/1999 150,000 (g) 148,530
TOTAL SHORT-TERM INVESTMENTS
(cost $696,387) 696,354
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TOTAL INVESTMENTS
(cost $171,822,761) 152.9% 168,453,348
LIABILITIES, LESS CASH AND RECEIVABLES (52.9%) (58,254,125)
NET ASSETS 100.0% 110,199,223
(A) PURCHASED ON A FORWARD COMMITMENT BASIS.
(B) ADJUSTABLE RATE MORTGAGE-INTEREST RATE SUBJECT TO CHANGE PERIODICALLY.
(C) SECURITIES HELD IN WHOLE OR IN PART BY THE CUSTODIAN IN A SEGREGATED
ACCOUNT AS COLLATERAL FOR SECURITIES PURCHASED ON A FORWARD COMMITMENT
BASIS.
(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, 1999
THESE SECURITIES AMOUNTED TO $15,306,109, OR 13.9% OF NET ASSETS.
(F) VARIABLE RATE SECURITY-INTEREST RATE SUBJECT TO CHANGE PERIODICALLY.
(G) HELD BY THE CUSTODIAN IN A SEGREGATED ACCOUNT AS COLLATERAL FOR OPEN
FINANCIAL FUTURES POSITIONS.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Fund
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STATEMENT OF FINANCIAL FUTURES
<TABLE>
<CAPTION>
June 30, 1999 (Unaudited)
Unrealized
Market Value Appreciation
Covered (Depreciation)
Contracts by Contracts ($) Expiration at 6/30/99 ($)
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<S> <C> <C>
FINANCIAL FUTURES SHORT
U.S. Treasury 5 year Notes 168 18,312,000 September '99 (19,405)
U.S. Treasury 10 year Notes 356 39,582,750 September '99 385,296
365,891
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999 (Unaudited)
Cost Value
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ASSETS ($):
Investments in securities--See Statement of
Investments 171,822,761 168,453,348
Receivable for investment securities sold 4,630,019
Interest receivable 1,069,096
Paydowns receivables 27,498
Receivable for shares of Beneficial Interest subscribed 20,677
Prepaid expenses 12,400
174,213,038
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LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 45,328
Cash overdraft due to Custodian 253,726
Payable for investment securities purchased 35,550,232
Payable for Reverse Repurchase Agreements--Note 5 27,516,000
Payable for futures variation margin--Note 4(a) 448,925
Payable for shares of Beneficial Interest redeemed 115,693
Interest payable--Note 5 18,101
Accrued expenses 65,810
64,013,815
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NET ASSETS ($) 110,199,223
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COMPOSITION OF NET ASSETS ($):
Paid-in capital 113,203,069
Accumulated distributions in excess of investment income--net (6,550)
Accumulated net realized gain (loss) on investments and
financial futures 6,226
Accumulated net unrealized appreciation (depreciation)
on investments (including $365,891 net unrealized
appreciation on financial futures)--Note 4(b) (3,003,522)
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NET ASSETS ($) 110,199,223
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SHARES OUTSTANDING
(unlimited number of $.001 par value shares of
Beneficial Interest authorized) 7,494,822
NET ASSET VALUE, offering and redemption price per share ($) 14.70
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1999 (Unaudited)
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INVESTMENT INCOME ($):
INTEREST INCOME 4,100,072
EXPENSES:
Management fee--Note 3(a) 298,892
Interest expense--Note 5 540,373
Shareholder servicing costs--Note 3(b) 107,665
Professional fees 34,256
Registration fees 20,894
Trustees' fees and expenses--Note 3(c) 18,059
Custodian fees--Note 3(b) 13,866
Prospectus and shareholders' reports 13,669
Loan commitment fees--Note 2 104
Miscellaneous 3,839
TOTAL EXPENSES 1,051,617
Less--reduction in management fee due to undertaking--Note 3(a) (187,341)
NET EXPENSES 864,276
INVESTMENT INCOME--NET 3,235,796
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (836,458)
Net realized gain (loss) on financial futures 1,346,195
NET REALIZED GAIN (LOSS) 509,737
Net unrealized appreciation (depreciation) on investments (including
$213,660 net unrealized appreciation on financial futures) (2,529,010)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (2,019,273)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 1,216,523
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 1999 Year Ended
(Unaudited) December 31, 1999
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OPERATIONS ($):
Investment income--net 3,235,796 5,555,447
Net realized gain (loss) on investments 509,737 (507,112)
Net realized appreciation (depreciation)
on investments (2,529,010) (1,328,489)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 1,216,523 3,719,846
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DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net (3,253,773) (5,545,920)
Net realized gain on investments -- (291,592)
TOTAL DIVIDENDS (3,253,773) (5,837,512)
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BENEFICIAL INTEREST TRANSACTIONS ($):
Net proceeds from shares sold 29,412,060 43,371,763
Dividends reinvested 2,364,972 4,345,234
Cost of shares redeemed (16,386,843) (24,682,862)
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS 15,390,189 23,034,135
TOTAL INCREASE (DECREASE) IN NET ASSETS 13,352,939 20,916,469
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NET ASSETS ($):
Beginning of Period 96,846,284 75,929,815
END OF PERIOD 110,199,223 96,846,284
Undistributed investment income (distributions in
excess of investment income)-ne (6,550) 11,427
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CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold 1,982,773 2,827,468
Shares issued for dividends reinvested 159,218 283,676
Shares redeemed (1,101,108) (1,611,860)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 1,040,883 1,499,284
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
<PAGE>
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the fund would have increased
(or decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements.
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999 Year Ended December 31,
--------------------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA ($):
Net asset value,
beginning of period 15.01 15.32 15.14 15.42 14.16 15.39
Investment Operations:
Investment income--net .48 .97 .99 .98 1.03 1.08
Net realized and unrealized
gain (loss) on investments (.31) (.26) .41 (.27) 1.25 (1.23)
Total from Investment Operations .17 .71 1.40 .71 2.28 (.15)
Distributions:
Dividends from investment
income--net (.48) (.97) (.99) (.99) (1.02) (1.08)
Dividends from net realized
gain on investments -- (.05) (.23) -- -- --
Total Distributions (.48) (1.02) (1.22) (.99) (1.02) (1.08)
Net asset value, end of period 14.70 15.01 15.32 15.14 15.42 14.16
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TOTAL RETURN (%) 2.30((+)) 4.71 9.55 4.81 16.62 (.99)
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RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses
to average net assets .65((+)) .65 .65 .65 .50 .06
Ratio of interest expense and
loan commitment fees
to average net assets 1.08((+)) .17 -- -- -- --
Ratio of net investment income
to average net assets 6.50((+)) 6.34 6.46 6.50 6.86 7.34
Decrease reflected in above
expense ratios due to
undertakings by the Manager .38((+)) .39 .42 .52 .78 1.43
Portfolio Turnover Rate 176.54 388.97 534.25 332.96 254.36 290.20
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Net Assets, end of period
($ x 1,000) 110,199 96,846 75,930 57,665 55,615 44,937
((+)) ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
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, as amended ( the "Act"), as a diversified open-end management
investment company. The fund's investment objective is to provide investors with
as high a level of current income as is consistent with the preservation of
capital by investing principally in instruments issued by the Government
National Mortgage Association. The Dreyfus Corporation (the "Manager") serves as
the fund' s investment adviser. The Manager is a direct subsidiary of Mellon
Bank, N.A. ("Mellon"). Premier Mutual Fund Services, Inc. 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 The Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
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 custody
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 of 1986, as amended (the
" Code" ). To the extent that net realized capital gain can be offset by capital
loss carryovers, it is the policy of the fund not to distribute such gain.
<PAGE>
(d) Federal income taxes: It is the policy of the fund to continue to qualify as
a regulated investment company, if such qualification is in the best interests
of its shareholders, by complying with the applicable provisions of the Code,
and to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes.
The fund has an unused capital loss carryover of approximately $197,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to December 31, 1998. The
carryover does not include net realized securities losses from November 1, 1998
through December 31, 1998 which are treated, for Federal income tax purposes, as
arising in fiscal 1999. If not applied, the carryover expires in fiscal 2006.
NOTE 2--Bank Line of Credit:
The fund participates with other Dreyfus-managed funds in a $600 million
redemption credit facility (" the Facility") to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the fund has agreed to pay commitment fees on its pro rata portion of
the Facility. Interest is charged to the fund at rates based on prevailing
market rates in effect at the time of borrowings. During the period ended June
30, 1999, the fund did not borrow under the Facility.
NOTE 3--Management Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement ("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 until such time as they give shareholders at least 90 days' notice to
the contrary, if the aggregate expenses of the fund, exclusive of taxes,
brokerage, interest on borrowings, commitment fees and extraordinary expenses,
but including the management fee, exceed an annual rate of .65 of 1% of the
value The Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
of the fund's average daily net assets, the fund may deduct from the payments to
be made to Dreyfus under the Management Agreement, or Dreyfus will bear, such
excess expense. The expense reduction in management fee, pursuant to the
undertaking, amounted to $187,341 during the period ended June 30, 1999.
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, 1999, the fund was charged $60,000 pursuant to the Shareholder Services
Plan.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the
Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the fund. During the period
ended June 30, 1999, the fund was charged $35,095 pursuant to the transfer
agency agreement.
The fund compensates Mellon under a custody agreement for providing custodial
services for the fund. During the period ended June 30, 1999, the fund was
charged $13,866 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.
<PAGE>
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, 1999, amounted to $272,875,540 and 258,170,599,
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 instruments. Investments in
financial futures require the fund to "mark to market" on a daily basis, this
represents the change in the market value of the contract 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, 1999, are set forth in the
Statements of Financial Futures.
(b) At June 30, 1999, accumulated net unrealized depreciation on investments and
financial futures was $3,003,522, consisting of $939,666 gross unrealized
appreciation and $3,943,188 gross unrealized depreciation.
At June 30, 1999, the cost of investments for Federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
NOTE 5--Reverse Repurchase Agreements:
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 The Fun
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
based on a percentage of 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. Reverse repurchase agreements may subject the fund to interest rate
risk and counter party credit risk.
As of June 30, 1999, the fund had entered into reverse repurchase agreements in
the amount of $27,516,000. The average daily amount outstanding during the
period ended June 30, 1999 was approximately $21,342,801, with a related
weighted average annualized interest rate of 5.11%.
<PAGE>
For More Information
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
Distributor
Premier Mutual Fund Services, Inc.
60 State Street
Boston, MA 02109
To obtain information:
BY TELEPHONE Call 1-800-645-6561
BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Information can be viewed online or downloaded from:
http://www.dreyfus.com
(c) 1999 Dreyfus Service Corporation 080SA996
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