Dreyfus
BASIC GNMA Fund
SEMIANNUAL REPORT June 30, 2000
(reg.tm)
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
Contents
THE FUND
--------------------------------------------------
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
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, 2000 through June 30, 2000.
Inside, you' ll find valuable information about how the fund was managed during
the reporting period, including a discussion with the fund's portfolio manager,
Michael Hoeh.
Tighter monetary policy adversely affected most -- but not all -- sectors of the
bond market over the past six months. This was primarily a result of efforts by
the Federal Reserve Board (the "Fed" ) to forestall potential inflationary
pressures. The Fed raised short-term interest rates three times during the
reporting period, for a total increase of 1.00 percentage points. These rate
hikes contributed to a total interest-rate increase of 1.75 percentage points
since late June 1999, before the current reporting period began.
Higher interest rates led to an erosion of most bond prices, especially among
higher yielding securities. U.S. Treasury securities represented a notable
exception. Prices of these direct obligations of the federal government rose
primarily because of reduced supply amid robust demand from domestic and foreign
investors.
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 17, 2000
DISCUSSION OF FUND PERFORMANCE
Michael Hoeh, Portfolio Manager
How did Dreyfus BASIC GNMA Fund perform relative to its benchmark?
For the six-month period ended June 30, 2000, the fund produced a 4.18% total
return.(1) In comparison, the fund's benchmark, the Lehman Brothers GNMA Index,
produced a total return of 4.12% for the same period.(2 )
We attribute the fund' s competitive performance to our sector allocation
strategy, which enabled us to participate in some of the best-performing areas
of the mortgage-backed securities market, including adjustable-rate mortgages
that benefited from a rising interest-rate environment. Late in the period, the
fund also received attractive returns from its investments in non-GNMA
securities, which rebounded strongly as earlier regulatory concerns subsided.
What is the fund's investment approach?
The fund invests primarily in Government National Mortgage Association ("GNMA"
or "Ginnie Mae" ) securities. The fund may also invest in U.S. Treasury
securities, asset-backed securities and other non-agency mortgage-backed
securities. The fund' s goal is to provide a high level of current income
consistent with capital preservation.
We typically use a four-step investment approach:
*PREPAYMENT TREND ANALYSIS MEASURES the rate at which homeowners are likely to
prepay their mortgages because of home sales or refinancing. An increase in this
trend can adversely affect returns provided by mortgage-related securities.
*OPTION-ADJUSTED SPREAD ANALYSIS compares the early redemption characteristics
of different mortgage-backed securities with other securities, such as U.S.
Treasuries to help us measure their vulnerability to early redemption.
The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
*CASH FLOW STRUCTURE ANALYSIS helps us determine the predictability and
security of cash flows provided by different bond structures. We evaluate
fixed-rate versus floating-rate securities, as well as different maturities such
as 15-, 20- and 30-year mortgages.
*TOTAL-RATE-OF-RETURN SCENARIOS calculate expected rates of return for each
security relative to U.S. Treasury securities under different interest-rate
scenarios over a six-month time frame. This helps us estimate which securities
are likely to provide above-average returns in any given interest-rate
environment.
What other factors influenced the fund's performance?
First, the fund was influenced by inflation fears and rising interest rates.
When the reporting period began on January 1, 2000, we were becoming
increasingly concerned that robust economic growth might rekindle long-dormant
inflationary pressures, especially with wages rising in a tight job market. In
an attempt to ease these pressures, the Federal Reserve Board (the "Fed") raised
short-term interest rates three times during the reporting period, causing most
bond prices to fall. These interest-rate hikes followed three previous increases
implemented before the current reporting period began, for a total increase of
1.75 percentage points since June 1999. Although rising interest rates hurt most
bond market sectors, mortgage-backed securities generally declined less than
other types of securities because higher interest rates reduce the risk that
homeowners will prepay their mortgages.
Second, the fund responded to forces that are unique to individual bond market
sectors. For example, in the wake of negative comments in Congress and the U.S.
Treasury Department, prices of some U.S. Government agency securities declined,
including those issued by Federal National Home Mortgage Association ("Fannie
Mae" ) and Federal Home Loan Corporation ("Freddie Mac"). At the same time,
prices of Ginnie Mae securities, which are direct obligations of the federal
government, rose as investors shifted assets from one sector to another. This
shift made by investors benefited the fund's performance.
What is the fund's current strategy?
We have recently made efforts to reduce the fund' s exposure to non-U.S.
Government-guaranteed securities in case of an economic slowdown. While economic
growth has remained robust during the first half of 2000, we have recently seen
signs that the Fed's interest-rate hikes may be having a moderating effect on
the economy. Therefore, we have reduced our holdings of commercial
mortgage-backed securities and other instruments that are not direct obligations
of the federal government or its agencies. Accordingly, as of June 30, 2000, our
sector allocation strategy involved a 75% position in Ginnie Mae mortgage-backed
securities and about 25% in non-GNMA securities, including collateralized
mortgage obligations, commercial mortgage-backed securities, project loans and
pass-through securities issued by Fannie Mae and Freddie Mac.
In this environment, we have maintained the fund's average duration --a measure
of sensitivity to changing interest rates -- at approximately 4.4 years, which
is about 2% longer than our "neutral" position. This modest extension is
intended to help us lock in prevailing yields for a longer time if the economy
slows and interest rates begin to decline.
July 17, 2000
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND
INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, FUND SHARES MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST. PERFORMANCE FIGURES PROVIDED REFLECT THE
ABSORPTION OF FUND EXPENSES BY THE DREYFUS CORPORATION PURSUANT TO AN AGREEMENT
IN WHICH SHAREHOLDERS ARE GIVEN AT LEAST 90 DAYS NOTICE, AT WHICH TIME IT MAY BE
EXTENDED, TERMINATED OR MODIFIED. HAD THESE EXPENSES NOT BEEN ABSORBED, THE
FUND'S RETURNS WOULD HAVE BEEN LOWER.
(2) SOURCE: LEHMAN BROTHERS -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE
APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE LEHMAN BROTHERS GNMA INDEX
(UNHEDGED) 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
STATEMENT OF INVESTMENTS
June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS
Principal
BONDS AND NOTES--143.4% Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES/
MORTGAGE-BACKED--110.0%
Government National Mortgage Association I:
<S> <C> <C>
6.5%, 10/15/2010-5/15/2011 225,330 221,154
7%, 1/15/2024-2/15/2024 1,241,080 1,217,622
7.5%, 12/15/2023 246,013 244,552
8%, 4/15/2008-12/15/2022 6,332,519 6,418,952
8.5%, 2/15/2005-3/15/2022 739,247 763,976
9%, 5/15/2016-11/15/2022 586,736 613,243
9.5%, 1/15/2017-12/15/2021 313,441 329,491
Project Loans:
6.32%, 10/15/2033 2,557,389 2,405,532
6.375%, 10/15/2033-1/15/2034 4,335,626 4,132,845
6.4%, 10/15/2033 1,825,181 1,755,588
6.41%, 8/15/2028 983,906 947,925
6.43%, 9/15/2033 1,480,043 1,400,950
6.45%, 3/15/2034-11/15/2033 5,475,678 5,241,918
6.55%, 12/15/2033 695,760 668,800
6.6%, 5/15/2028 1,902,377 1,826,872
6.625%, 8/15/2028-1/15/2034 15,236,872 14,749,082
6.7%, 3/15/2028 632,872 622,190
6.75%, 12/15/2023-9/15/2036 13,201,189 12,772,151
Government National Mortgage Association II:
6% 2,000,000 (a,b) 1,958,120
6%, 4/20/2030 5,148,254 (b) 5,035,611
7%, 8/20/2028-9/1/2028 2,419,634 2,347,795
8% 41,675,000 (a,b) 41,794,498
8%, 9/20/2029-2/20/2034 1,659,394 1,670,411
9%, 5/20/2016-7/20/2025 445,909 456,694
9.5%, 9/20/2021-12/20/2021 97,480 101,503
Federal Home Loan Mortgage Corp.,
Stripped Securities, Interest Only Class:
Ser. 1541, Cl. FA, 7%, 5/15/2019 4,904,658 (c) 393,403
Ser. 1542, Cl. QC, 7%, 10/15/2020 624,792 (c) 55,194
Ser. 1590, Cl. JA, 6.5%, 10/15/2021 6,000,000 (c) 830,472
Ser. 1596, Cl. L, 6.5%, 12/15/2012 27,655 (c) 2,956
Ser. 1916, Cl. PI, 7%, 12/15/2011 1,001,417 (c) 207,023
Ser. 1987, Cl. PI, 7%, 9/15/2012 1,045,340 (c) 220,190
Federal Housing Administration,
Project Loans:
7.2%, 2/1/2033 1,109,756 1,054,615
7.625%, 4/1/2031 1,227,531 1,191,473
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES/
MORTGAGE-BACKED (CONTINUED)
Federal National Mortgage Association:
7.5% 6,600,000 (a) 6,505,092
Deb.:
7.125%, 2007 1,000,000 1,004,240
7.25%, 2010 1,500,000 1,514,825
Stripped Securities, Interest Only Class:
Ser. 1993-119, Cl. JA, 7%, 5/25/2019 131,418 (c) 714
Ser. 1997-74, Cl. PK, 7%, 11/18/2027 4,000,000 (c) 1,513,984
124,191,656
ASSET-BACKED CTFS.--9.5%
Conseco Finance Securitizations,
Ser. 2000-1, Cl. A-3, 7.3%, 2031 1,000,000 996,215
Countrywide,
Ser. 2000-2, Cl. AF-5, 8.12%, 2031 2,000,000 1,999,375
The Money Store Home Equity Trust,
Ser. 1998-B, Cl. AF-8, 6.11%, 2010 1,000,000 956,875
Nomura Depositor Trust:
Ser. 1998-ST1, Cl. A-3, 7.231%, 2003 500,000 (d,e) 493,359
Ser. 1998-ST1, Cl. A-5, 7.901%, 2003 3,500,000 (d,e) 3,368,203
Residential Funding Mortgage Securities II,
Ser. 2000-HI3, Cl. AI-2, 7.97%, 2010 (Insured; AMBAC) 2,000,000 2,007,188
WFS Financial Owner Trust,
Ser. 2000-A, Cl. A-4, 7.41%, 2007 1,000,000 974,063
10,795,278
COMMERCIAL MORTGAGE PASS-THROUGH CTFS.--5.9%
CS First Boston Mortgage Securities,
Ser. 1998-C1, Cl. C, 6.78%, 2009 1,000,000 931,316
GGP Ala Moana,
Ser. 1999-C1, Cl. D, 7.735%, 2004 250,000 (d,e) 250,156
Heller Financial Commercial Mortgage,
Ser. 2000-PH1, Cl. C, 8.208%, 2010 1,500,000 (e) 1,517,344
Morgan (J.P.) Commercial Mortgage Finance,
Ser. 2000-C9, Cl. C, 8.199%, 2032 1,000,000 (e) 1,012,447
PNC Mortgage Acceptance,
Ser. 2000-C1, Cl. A-2, 7.61%, 2010 3000000 3,002,813
6,714,076
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL MORTGAGE PASS-THROUGH CTFS.--13.3%
BA Mortgage Securities,
Ser. 1998-2, Cl. 2B-2, 6.5%, 2013 281,883 252,107
Chase Mortgage Finance,
Ser. 1998-S3, Cl. B-2, 6.5%, 2013 617,317 558,728
Norwest Asset Securities:
Ser. 1997-3, Cl. B-1, 7.25%, 2027 2,414,459 2,271,425
Ser. 1997-3, Cl. B-2, 7.25%, 2027 965,784 872,381
Ser. 1997-7, Cl. B-2, 7%, 2027 772,674 686,103
Ser. 1997-9, Cl. B-2, 7%, 2012 413,285 385,772
Ser. 1997-11, Cl. B-2, 7%, 2027 511,373 452,897
Ser. 1997-15, Cl. B-2, 6.75%, 2012 601,053 553,845
Ser. 1997-20, Cl. B-2, 6.75%, 2012 379,335 348,896
Ser. 1998-18, Cl. B-3, 6.25%, 2028 857,644 709,494
Ocwen Residential MBS,
Ser. 1998-R1, Cl. B-1, 7%, 2040 385,873 (d) 348,431
PNC Mortgage Securities:
Ser. 1997-8, Cl. 3B-3, 6.75%, 2012 279,298 256,759
Ser. 1998-2, Cl. 3B-3, 6.75%, 2013 529,701 485,582
Ser. 1998-2, Cl. 4B-3, 6.75%, 2027 387,478 338,811
Ser. 1998-11, Cl. 2B-3, 6.25%, 2013 488,404 428,558
Residential Accredit Loans:
Ser. 1997-QS6, Cl. M-2, 7.5%, 2012 930,595 911,726
Ser. 1997-QS6,Cl. M-3, 7.5%, 2012 604,883 577,538
Residential Funding Mortgage Securities I:
Ser. 1997-S10, Cl. M-3, 7%, 2012 469,606 437,785
Ser. 1997-S11, Cl. M-3, 7%, 2012 680,143 634,495
Ser. 1997-S19, Cl. M-3, 6.5%, 2012 618,047 561,298
Ser. 1997-S21, Cl. M-3, 6.5%, 2012 356,538 323,879
Ser. 1998-NS1, Cl. M-2, 6.375%, 2009 134,370 127,460
Ser. 1998-NS1, Cl. M-3, 6.375%, 2009 67,185 62,407
Ser. 1998-S9, Cl. 1M-3, 6.5%, 2013 939,560 850,772
Ser. 1998-S14, Cl. M-3, 6.5%, 2013 785,308 710,495
Ser. 1998-S30, Cl. M-3, 6.5%, 2028 984,821 827,865
14,975,509
U. S. GOVERNMENTS--4.7%
U. S. Treasury Inflation Protection Securities:
3.625%, 7/15/2002 2,000,000 (f) 2,123,655
3.875%, 4/15/2029 1,600,000 (f) 1,661,357
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
U. S. GOVERNMENTS (CONTINUED)
U. S. Treasury Notes,
6.5%, 2/15/2010 1,500,000 1,549,650
5,334,662
TOTAL BONDS AND NOTES
(cost $165,311,159) 162,011,181
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SHORT-TERM INVESTMENTS--1.1%
--------------------------------------------------------------------------------
U. S. GOVERNMENTS--.5%
U. S. Treasury Bills:
5.64%, 7/27/2000 340,000 (g) 338,796
5.65%, 7/20/2000 195,000 (g) 194,501
533,297
U. S. GOVERNMENT AGENCIES--.6%
Federal Home Loan Banks,
Discount Notes,
6.3%, 7/3/2000 675,000 674,764
TOTAL SHORT-TERM INVESTMENTS
(cost $1,207,800) 1,208,061
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS 144.5% 163,219,242
(cost $166,518,959)
LIABILITIES, LESS CASH AND RECEIVABLES (44.5%) (50,262,942)
NET ASSETS 100.0% 112,956,300
(A) PURCHASED ON A FORWARD COMMITMENT BASIS.
(B) ADJUSTABLE RATE MORTGAGE--INTEREST RATE SUBJECT TO CHANGE PERIODICALLY.
(C) REFLECTS NOTIONAL FACE.
(D) 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, 2000,
THESE SECURITIES AMOUNTED TO $4,460,149 OR 3.9% OF NET ASSETS.
(E) VARIABLE RATE SECURITY--INTEREST RATE SUBJECT TO CHANGE PERIODICALLY.
(F) PRINCIPAL AMOUNT FOR ACCRUAL PURPOSES IS PERIODICALLY ADJUSTED BASED ON
CHANGES TO THE CONSUMER PRICE INDEX.
(G) SECURITIES HELD IN WHOLE OR IN PART BY THE CUSTODIAN IN A SEGREGATED
ACCOUNT AS COLLATERAL FOR OPEN FINANCIAL FUTURES POSITIONS.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
<TABLE>
<CAPTION>
STATEMENT OF FINANCIAL FUTURES
June 30, 2000 (Unaudited)
Unrealized
Market Value Appreciation
Covered by (Depreciation)
Contracts Contracts ($) Expiration at 6/30/2000 ($)
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL FUTURES SHORT
<S> <C> <C> <C> <C>
U. S. Treasury 5 year Notes 117 (11,584,828) September 2000 (125,297)
U. S. Treasury Bonds 178 (17,327,188) September 2000 (553,469)
FINANCIAL FUTURES LONG
U. S. Treasury 10 year Notes 7 689,391 September 2000 (1,422)
U. S. Treasury 10 year
Agency Notes 32 2,959,500 September 2000 86,469
(593,719)
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000 (Unaudited)
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 166,518,959 163,219,242
Cash 212,468
Interest receivable 1,096,119
Receivable for shares of Beneficial Interest subscribed 133,515
Receivable for investment securities sold 28,400
Receivable for futures variation margin--Note 4(a) 21,281
Paydowns receivable 3,911
Prepaid expenses 11,842
164,726,778
--------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 53,715
Payable for investment securities purchased 51,503,394
Payable for shares of Beneficial Interest redeemed 153,078
Accrued expenses 60,291
51,770,478
--------------------------------------------------------------------------------
NET ASSETS ($) 112,956,300
--------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 117,470,456
Accumulated undistributed investment income--net 9,001
Accumulated net realized gain (loss)
on investments and financial futures
(629,721)
Accumulated net unrealized appreciation (depreciation)
on investments [including ($593,719) net unrealized
(depreciation) on financial futures]--Note 4(b) (3,893,436)
--------------------------------------------------------------------------------
NET ASSETS ($) 112,956,300
--------------------------------------------------------------------------------
SHARES OUTSTANDING
(unlimited number of $.001 par value
shares of Beneficial Interest authorized)
7,784,120
NET ASSET VALUE, offering and redemption price per share ($) 14.51
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INTEREST INCOME 3,887,004
EXPENSES:
Management fee--Note 3(a) 329,012
Shareholder servicing costs--Note 3(b) 128,136
Professional fees 19,646
Trustees' fees and expenses--Note 3(c) 19,437
Custodian fees--Note 3(b) 16,202
Registration fees 12,660
Prospectus and shareholders' reports 5,879
Interest expense--Note 5 5,825
Miscellaneous 5,981
TOTAL EXPENSES 542,778
Less--reduction in management fee due to
undertaking--Note 3(a) (180,519)
NET EXPENSES 362,259
INVESTMENT INCOME--NET 3,524,745
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (38,646)
Net realized gain (loss) on financial futures 34,965
NET REALIZED GAIN (LOSS) (3,681)
Net unrealized appreciation (depreciation) on investments
[including ($959,836) net unrealized
(depreciation) on financial futures] 935,960
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 932,279
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 4,457,024
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 2000 Year Ended
(Unaudited) December 31, 1999
--------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 3,524,745 7,029,822
Net realized gain (loss) on investments (3,681) 517,315
Net unrealized appreciation (depreciation)
on investments 935,960 (4,354,884)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 4,457,024 3,192,253
--------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net (3,537,666) (7,019,327)
Net realized gain on investments -- (469,048)
In excess of net realized gain on investments -- (170,796)
TOTAL DIVIDENDS (3,537,666) (7,659,171)
--------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS ($):
Net proceeds from shares sold 15,130,789 47,925,201
Dividends reinvested 2,668,602 5,675,387
Cost of shares redeemed (18,014,235) (33,728,168)
INCREASE (DECREASE) IN NET ASSETS
FROM BENEFICIAL INTEREST TRANSACTIONS (214,844) 19,872,420
TOTAL INCREASE (DECREASE) IN NET ASSETS 704,514 15,405,502
--------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 112,251,786 96,846,284
END OF PERIOD 112,956,300 112,251,786
Undistributed investment income--net 9,001 21,922
--------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold 1,057,564 3,250,861
Shares issued for dividends reinvested 186,549 387,227
Shares redeemed (1,259,585) (2,292,435)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (15,472) 1,345,653
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements.
Six Months Ended
June 30, 2000 Year Ended December 31,
---------------- -------------------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value,
<S> <C> <C> <C> <C> <C> <C>
beginning of period 14.39 15.01 15.32 15.14 15.42 14.16
Investment Operations:
Investment income--net .46 .96 .97 .99 .98 1.03
Net realized and unrealized
gain (loss) on investments .12 (.54) (.26) .41 (.27) 1.25
Total from Investment Operations .58 .42 .71 1.40 .71 2.28
Distributions:
Dividends from investment
income--net (.46) (.96) (.97) (.99) (.99) (1.02)
Dividends from net realized
gain on investments -- (.06) (.05) (.23) -- --
Dividends in excess of net
realized gain on investments -- (.02) -- -- -- --
Total Distributions (.46) (1.04) (1.02) (1.22) (.99) (1.02)
Net asset value, end of period 14.51 14.39 15.01 15.32 15.14 15.42
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 8.38(a) 2.82 4.71 9.55 4.81 16.62
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses
to average net assets .65(a) .65 .65 .65 .65 .50
Ratio of interest expense
and loan commitment
fees to average net assets .01(a) .90 .17 -- -- --
Ratio of net investment income
to average net assets 6.41(a) 6.54 6.34 6.46 6.50 6.86
Decrease reflected in above
expense ratios due to
undertakings by
The Dreyfus Corporation .33(a) .34 .39 .42 .52 .78
Portfolio Turnover Rate 341.66(b) 366.43 388.97 534.25 332.96 254.36
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
($ x 1,000) 112,956 112,252 96,846 75,930 57,665 55,615
(A) ANNUALIZED.
(B) NOT ANNUALIZED.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
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"), which is a wholly-owned subsidiary of Mellon Financial
Corporation. Effective March 22, 2000, Dreyfus Service Corporation ("DSC"), a
wholly-owned subsidiary of the Manager, became the distributor of the fund's
shares, which are sold to the public without a sales charge. Prior to March 22,
2000, Premier Mutual Fund Services, Inc. was the distributor.
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,
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
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 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, if any, it is the policy of the fund not to distribute such
gain.
(d) Federal income taxes: It is the policy of the fund to continue to qualify as
a regulated investment company, if such qualification is in the best interests
of its shareholders, by complying with the applicable provisions of the Code,
and to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes.
NOTE 2--Bank Line of Credit:
The fund participates with other Dreyfus-managed funds in a $100 million
unsecured line of credit primarily to be utilized for temporary or emergency
purposes, including the financing of redemptions. Interest is charged to the
fund at rates which are related to the Federal Funds rate in effect at the time
of borrowings. During the period ended June 30, 2000, the fund did not borrow
under the line of credit.
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 fees, interest on borrowings, commitment fees and extraordinary
expenses, but including the management fee, exceed an annual rate of .65 of 1%
of the value of the fund's average daily net assets, the fund may deduct from
the payments to be made to the Manager under the Management Agreement, or the
Manager will bear, such excess expense. The reduction in management fee,
pursuant to the undertaking, amounted to $180,519 during the period ended June
30, 2000.
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 DSC an amount not
to exceed an annual rate of .25 of 1% of the value of the
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
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, 2000, the fund was charged $81,000
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, 2000, the fund was charged $35,787 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, 2000, the fund was
charged $16,202 pursuant to the custody agreement.
(c) Each Board member also serves as a Board member of other funds within the
Dreyfus complex (collectively, the "Fund Group"). Effective April 11, 2000, each
Board member who is not an "affiliated person" as defined in the Act receives an
annual fee of $30,000 and an attendance fee of $4,000 for each in person meeting
and $500 for telephone meetings. These fees are allocated among the funds in the
Fund Group. The Chairman of the Board receives an additional 25% of such
compensation. Prior to April 11, 2000, each Board member who was not an
" affiliated person" as defined in the Act received from the fund an annual fee
of $2,500 and an attendance fee of $250 per meeting. The Chairman of the Board
received an additional 25% of such compensation. Subject to the fund's Emeritus
Program Guidelines, Emeritus Board members, if any, receive 50% of the fund's
annual retainer fee and per meeting fee paid at the time the Board member
achieves emeritus status.
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, 2000, amounted to $531,963,776 and
$530,393,723, 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, 2000, are set forth in the
Statement of Financial Futures.
The fund may purchase or sell securities on a forward commitment basis. The
price of the underlying securities is fixed at the time the transaction is
negotiated and settlement may take place a month or more after that date. With
respect to purchase commitments, the fund will identify securities as segregated
in its records with a value at least equal to the amount of its commitments.
Losses may arise due to changes in the market value of the underlying
securities, if the counter-party does not meet the terms of the settlement
agreement, or if the issuer does not issue the securities due to political,
economic, or other factors.
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
(b) At June 30, 2000, accumulated net unrealized depreciation on investments and
financial futures was $3,893,436, consisting of $642,243 gross unrealized
appreciation and $4,535,679 gross unrealized depreciation.
At June 30, 2000, 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 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.
The average daily amount outstanding during the period ended June 30, 2000, was
approximately $186,900, with a related weighted average annualized interest rate
of 6.27%.
The Fund
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
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
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) 2000 Dreyfus Service Corporation 080SA006
