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.
<TABLE>
DREYFUS PREMIER GNMA FUND
- -----------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to report the performance for Dreyfus Premier GNMA Fund for the
12-month period ended December 31, 1998, as shown in the following table:
Approximate Distribution Rate
Total Return* Income Dividends Per Share**
___________ _____________________ _________________
<S> <C> <C> <C>
Class A Shares 6.51% $0.808 5.18%
Class B Shares 5.90% $0.734 4.92%
Class C Shares 5.62% $0.683 4.59%
Lehman Brothers GNMA Index*** 6.93%
</TABLE>
ECONOMIC REVIEW
During 1998, the main regions of the world had very different economic
fundamentals. The U.S. entered the year with a strong economy near full
employment, with unemployment only slightly above 4%. The tight labor market led
the Federal Reserve Board (the "Fed") to contemplate a rise in interest rates
early in the year, but world economic weakness generated powerful enough
disinflationary forces that the Fed acted instead to ease credit beginning in
September. After many years of subpar economic growth, continental Europe moved
into a sustained economic expansion. The overall European economy benefited as
interest rates in peripheral countries such as Spain and Italy fell, approaching
the lower levels established by Germany, on the eve of currency unification.
Unlike the U.S., Europe has substantial excess capacity of productive plant and
labor. In Asia, weak economies were pervasive as a result of a financial crisis.
The Latin American economies weakened in turn as the financial stresses spread
throughout that region. On balance, there was a substantial weakening of the
world economy over the course of 1998, moderated mainly by the American
consumer's role as "spender of last resort."
A main influence on the U.S. economy during the year was the foreign financial
crisis and consequent cooling of the world economy. The positive effects hit
first. Actual inflation and expected inflation dropped, causing a decline in
long-term Treasury bond yields and mortgage rates. This caused a boom in
housing. The fall in inflation left more of the growth in consumer income with
which to buy goods and services. Thus, consumers benefited from a combination of
good growth in income after inflation, a strong labor market, and increases in
the prices of assets they owned, including bonds, stocks and real estate. In a
sense, 1998 was a year of disinflationary boom in the U.S., as above-trend
economic growth coincided with negligible inflation.
The negative effect of Asian weakness was felt in the industrial sector more
than in the consumer sector. Corporate profits weakened, especially in sectors
affected by the Asian crisis such as world-traded commodities (oil, metals and
paper) and exports.
Evidence of a weaker world economy accumulated during 1998 as the financial
stresses continued. A worsened financial crisis occurred between the Russian
default in mid-August and the fallout from the Long Term Capital Management
hedge fund crisis through early October. However, energetic steps were taken to
stabilize the Japanese banks, design a support package for Brazil, ease monetary
policy, and help overinvested financial institutions rebuild their cash
reserves. Indications of a calming of financial fears were evident in the final
months of the year. In any case, there appears to have been a shift in the
priorities of key policymakers from fighting potential inflation to
restimulating future world economic growth.
The global economy survived a triple financial crisis in 1998 from Japan,
emerging market countries and overextended financial institutions. Excess
capacity persists in many worldwide industries after years of high capital
spending followed by the onset of a worldwide weakening in demand. Fortunately,
the U.S. has led the world in making the transition from the old manufacturing
industries to the new growth industries, such as biotechnology, software,
computer hardware and the Internet. This contributed to the favorable
combination of low unemployment and low inflation in the U.S., and may yet lead
toward more efficient allocation of capital elsewhere in the world.
As 1998 ended, interest rates set by central banks remained in a downtrend in
most parts of the world, including Europe and the U.S. A similar trend had even
begun in many emerging countries, as the stresses of financial crisis relaxed.
MARKET ENVIRONMENT
During the fourth quarter of 1998, U.S. interest rates reached new lows. This
can be attributed mostly to the tremendous flight to quality, or maybe more
appropriately, the financial panic that occurred in the worldwide bond markets.
With several Japanese-based global financial institutions filing for bankruptcy
protection, worldwide liquidity reached dangerously low levels. This led to
widespread demand for U.S. Treasuries, pushing interest rates lower, and to mass
liquidations of many types of fixed income securities.
As one might expect, the market for mortgage-backed securities faced a very
difficult time, especially in September and October. As shown by the Mortgage
Banker Association's Index, homeowner refinancing activity reached an all-time
high during the month of October. That activity is the primary contributor to
mortgage-backed securities prepayments; hence, the prepayment spreads of both
agency and non-agency mortgage-backed securities reached some of the highest
levels in history. All this contributed to the underperformance of
mortgage-backed securities compared to U.S. Treasuries.
The flight-to-quality frenzy that occurred in September and October shook
other areas of the mortgage-backed securities market as well. Most notable was
the liquidation of large holdings of the huge hedge fund, Long Term Capital
Management. Its holdings included large quantities of high quality residential
and commercial mortgage-backed securities. Its forced liquidation of billions of
dollars of commercial mortgage-backed securities overwhelmed the market, causing
an imbalance of supply and demand. This imbalance resulted in the sudden
widening of the yield spread by over 100 basis points on AAA commercial
mortgage-backed securities.
Fortunately the Fed saw fit to continue cutting the Fed funds rate. This has
helped bring liquidity back into the market, and the supply and demand imbalance
has begun to normalize. Our market outlook, going forward, is for lower
long-term U.S. interest rates during 1999 and for mortgage refinancing to
continue at a high level. Also, we expect that liquidity might improve, as
investors continue to return to the marketplace at the start of 1999 looking for
high-yielding securities. Therefore, we also expect that spreads on
call-protected assets with relatively high yield may be in strong demand. These
securities would include GNMA project loans, commercial mortgage-backed
securities, and discount dollar-priced GNMA securities.
PORTFOLIO OVERVIEW
As might be expected, during this dramatic shift in the fixed-income markets,
we did make some significant changes to the Fund's holdings. Most notably, we
increased the Fund' s average effective duration to 7% longer than the Lehman
GNMA Index. Consistent with our anticipation of increased mortgage loan
refinancing, we' ve also continued to look for further prepayment protection.
Hence, we have continued to add discounted GNMA 30-year pass-through securities
to the portfolio. We have also continued to sell our higher dollar-priced
securities.
With these significant shifts in the market, liquidity has been at a premium;
hence, we have continued to use our existing GNMA adjustable rate,
mortgage-backed securities (ARMs) as a highly liquid, yield-improving cash
substitute. Even though mortgage prepayments have been at extremely high levels,
discount GNMA ARMs have continued to add additional yield and liquidity to the
Fund.
Lastly, during the month of December, we were able to sell 7% of our GNMA
project loans at a significant premium to their normal market value. We have
since replaced 5% of these assets into the Fund with GNMA project loans at
higher yields. GNMA project loans should continue to add stability and
protection to the Fund as it faces the ongoing mortgage-refinancing wave.
Sincerely,
[Michael Hoeh signature]
Michael Hoeh
Portfolio Manager
January 15, 1999
New York, N.Y.
*Total return includes reinvestment of dividends and any capital gains paid,
and does not take into consideration the maximum initial sales charge in the
case of Class A shares or the applicable contingent deferred sales charge
imposed on redemptions in the case of Class B and Class C shares.
**Distribution rate per share is based upon dividends per share paid from net
investment income during the period, divided by the maximum offering price per
share at the end of the period, in the case of Class A shares, or the net asset
value per share in the case of Class B or Class C shares.
***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.
<TABLE>
DREYFUS PREMIER GNMA FUND DECEMBER 31, 1998
- -----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS PREMIER GNMA FUND
CLASS A SHARES AND THE LEHMAN BROTHERS GNMA INDEX
Dollars
$24,216
Lehman Brothers GNMA Index*
$21,416
Dreyfus Premier GNMA Fund (Class A Shares)
*Source: Lehman Brothers
Average Annual Total Returns
- -----------------------------------------------------------------------------
Class A Shares Class B Shares
_______________________________________________________ ________________________________________________________
% Return Reflecting
% Return Applicable Contingent
Reflecting % Return Deferred Sales
% Return Without Maximum Initial Assuming No Charge Upon
Period Ended 12/31/98 Sales Charge Sales Charge (4.5%) Period Ended 12/31/98 Redemption Redemption*
___________________ ____________ ________________ ________________ __________ ________________
<S> <C> <C> <C> <C> <C>
1 Year 6.51% 1.68% 1 Year 5.90% 1.90%
5 Years 6.27 5.29 5 Years 5.73 5.41
10 Years 8.41 7.91 From Inception (1/15/93) 5.94 5.81
Class C Shares
_______________________________________________________
% Return Reflecting
Applicable Contingent
% Return Deferred Sales
Assuming Charge Upon
Period Ended 12/31/98 No Redemption Redemption**
___________________ ____________ __________________
1 Year 5.62% 4.62%
From Inception (10/16/95) 6.11 6.11
- ---------------
Past performance is not predictive of future performance.
</TABLE>
The above graph compares a $10,000 investment made in Class A shares of Dreyfus
Premier GNMA Fund on 12/31/88 to a $10,000 investment made in the Lehman
Brothers GNMA Index on that date. All dividends and capital gain distributions
are reinvested. Performance for Class B and Class C shares will vary from the
performance of Class A shares shown above due to differences in charges and
expenses.
The Fund invests primarily in Ginnie Maes, and its performance shown in the line
graph takes into account the maximum initial sales charge on Class A shares and
all other applicable fees and expenses. Unlike the Fund, 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. All issues
have at least one year to maturity and an outstanding par value of at least $100
million. The Index does not take into account charges, fees and other expenses.
These factors can contribute to the Index potentially outperforming the Fund.
Further information relating to Fund performance, including expense
reimbursements, if applicable, is contained in the Financial Highlights section
of the Prospectus and elsewhere in this report.
* The maximum contingent deferred sales charge for Class B shares is 4% and is
reduced to 0% after six years.
** The maximum contingent deferred sales charge for Class C shares is 1% for
shares redeemed within one year of the date of purchase.
<TABLE>
DREYFUS PREMIER GNMA FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS DECEMBER 31, 1998
Principal
Bonds and Notes--113.4% Amount Value
- ------------------------------------------------------- ___________ ____________
<S> <C> <C>
Mortgage-Backed Securities--99.4%
Government National Mortgage Association I:
6% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,000,000 (a) $ 6,940,920
6.50% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,500,000 (a) 20,660,105
6.50%, 11/15/2007-7/15/2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,315,428 11,587,678
6.50%, 5/15/2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,652,541 (b) 4,767,366
7%, 2/15/2022-12/15/2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,658,284 13,023,180
7.50%, 3/15/2002-12/15/2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,857,634 10,231,349
8%, 4/15/2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,208,378 (b) 4,376,712
8%, 12/15/2021-1/15/2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 615,318 645,506
8.50%, 10/15/2017-12/15/2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,486,492 3,738,791
9%, 4/15/2016-12/15/2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,973,956 4,262,802
9.50%, 11/15/2016-1/15/2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,808,116 4,133,356
11.50%, 1/15/2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,580 77,285
_____________
84,445,050
_____________
Government National Mortgage Association I,
Project Loans:
6.25%, 11/15/2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,496,941 1,520,788
6.32%, 10/15/2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,528,168 1,543,450
6.35%, 6/15/2030 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 996,701 1,017,562
6.375%, 2/15/2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,489,408 1,521,521
6.45%, 8/15/2033-11/15/2033 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,865,815 5,002,013
6.50% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,184,500 (a) 2,256,851
6.50%, 7/15/2033 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 932,842 959,950
6.625%, 11/15/2033 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,728,011 1,783,618
6.70% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,727,100 (a) 3,834,254
9.25%, 10/15/2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,694,183 (b) 4,697,093
_____________
24,137,100
_____________
Government National Mortgage Association II:
5%, 4/20/2028-5/20/2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,059,987 (c) 18,138,910
5.50%, 4/20/2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,611,082 (c) 6,660,666
9%, 7/20/2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,191,677 3,389,147
11%, 12/20/2013-10/20/2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,018,175 1,144,778
_____________
29,333,501
_____________
Total Mortgage-Backed Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,915,651
_____________
DREYFUS PREMIER GNMA FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998
Principal
Bonds and Notes (continued) Amount Value
- ------------------------------------------------------- ___________ ____________
U.S. Governments--14.0%
U.S. Treasury Bonds:
4.75%, 11/15/2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,000,000 $ 5,038,900
5.25%, 11/15/2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,000 5,121,800
_____________
10,160,700
_____________
U.S. Treasury Notes;
5.375%, 6/30/2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000,000 (a) 9,265,230
_____________
Total U.S. Governments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,425,930
_____________
TOTAL BONDS AND NOTES
(cost $155,268,083) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $157,341,581
_____________
Short-Term Investments--10.0%
- -------------------------------------------------------
U.S. Treasury Bills:
4.39%, 2/18/1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60,000 (b) $ 59,674
4.38%, 3/18/1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,912,000 (b) 13,788,879
4.38%, 3/25/1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,000 (b) 35,640
_____________
TOTAL SHORT-TERM INVESTMENTS
(cost $13,877,894) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,884,193
_____________
TOTAL INVESTMENTS
(cost $169,145,977) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123.4% $171,225,774
_______ _____________
LIABILITIES, LESS CASH AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . (23.4%) $ (32,520,958)
_______ _____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $138,704,816
_______ _____________
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.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS PREMIER GNMA FUND
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998
Cost Value
____________ ____________
<S> <C> <C>
ASSETS: Investments in securities--See Statement of Investments . . $169,145,977 $171,225,774
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 512,761
Receivable for investment securities sold . . . . . . . . 7,192,947
Interest receivable . . . . . . . . . . . . . . . . . . . 778,130
Receivable for shares of Beneficial Interest subscribed . . 101,324
Prepaid expenses . . . . . . . . . . . . . . . . . . . . 14,863
_____________
179,825,799
_____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates . . . . . . 90,528
Due to Distributor . . . . . . . . . . . . . . . . . . . 37,862
Payable for investment securities purchased . . . . . . . 40,869,819
Payable for shares of Beneficial Interest redeemed . . . 29,787
Accrued expenses . . . . . . . . . . . . . . . . . . . . 92,987
_____________
41,120,983
_____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $138,704,816
_____________
REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . $140,363,914
Accumulated undistributed investment income--net . . . . 6,436
Accumulated net realized gain (loss) on investments . . . (3,745,331)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 . . . . . . . . . . . . . . . . 2,079,797
_____________
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $138,704,816
_____________
NET ASSET VALUE PER SHARE
______________________________________________________________________________
Class A Class B Class C
___________ _____________ ____________
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $94,369,229 $41,774,992 $2,560,595
Shares Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,338,704 2,803,629 171,879
NET ASSET VALUE PER SHARE . . . . . . . . . . . . . . . . . . . . . . . $14.89 $14.90 $14.90
_______ _______ _______
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS PREMIER GNMA FUND
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME
<S> <C> <C>
INCOME Interest Income . . . . . . . . . . . . . . . . . $8,735,048
EXPENSES: Management fee--Note 3(a) . . . . . . . . . . . . $ 740,305
Shareholder servicing costs--Note 3(c) . . . . . 464,162
Distribution fees--Note 3(b) . . . . . . . . . . 202,184
Registration fees . . . . . . . . . . . . . . . . 57,426
Professional fees . . . . . . . . . . . . . . . . 47,481
Trustees' fees and expenses--Note 3(d) . . . . . 37,046
Custodian fees--Note 3(c) . . . . . . . . . . . . 34,192
Prospectus and shareholders' reports . . . . . . 21,694
Loan commitment fees--Note 2 . . . . . . . . . . 1,175
Miscellaneous . . . . . . . . . . . . . . . . . . 15,020
___________
Total Expenses . . . . . . . . . . . . . . . . 1,620,685
___________
INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,114,363
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments . . . . . $2,797,330
Net unrealized appreciation (depreciation)
on investments . . . . . . . . . . . . . . . . (1,696,582)
___________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . 1,100,748
___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . $8,215,111
___________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS PREMIER GNMA FUND
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, 1998 December 31, 1997
_________________ _________________
<S> <C> <C>
OPERATIONS:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,114,363 $ 8,000,888
Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . 2,797,330 897,569
Net unrealized appreciation (depreciation) on investments . . . . . . . . . . . . (1,696,582) 2,761,124
_____________ _____________
Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . 8,215,111 11,659,581
_____________ _____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net:
Class A shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,149,217) (5,918,534)
Class B shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,926,683) (2,072,934)
Class C shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (39,780) (1,667)
_____________ _____________
Total Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,115,680) (7,993,135)
_____________ _____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,066,526 32,138,926
Class B shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,810,406 4,659,005
Class C shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,868,856 107,034
Dividends reinvested:
Class A shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,495,046 4,022,706
Class B shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,344,579 1,431,495
Class C shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,643 1,502
Cost of shares redeemed:
Class A shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (61,029,061) (54,989,643)
Class B shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,479,877) (8,182,513)
Class C shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (450,210) (16,644)
_____________ _____________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions . 3,649,908 (20,828,132)
_____________ _____________
Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . 4,749,339 (17,161,686)
NET ASSETS:
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133,955,477 151,117,163
_____________ _____________
End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $138,704,816 $133,955,477
_____________ _____________
UNDISTRIBUTED INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . $ 6,436 $ 7,753
_____________ _____________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS PREMIER GNMA FUND
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
Shares
_______________________________
Year Ended Year Ended
December 31, 1998 December 31, 1997
_________________ _________________
<S> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Class A
_______
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,776,757 2,194,845
Shares issued for dividends reinvested . . . . . . . . . . . . . . . . . . . . . . 235,306 277,860
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,112,467) (3,775,941)
__________ __________
Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . (100,404) (1,303,236)
__________ __________
Class B
_______
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 861,589 320,620
Shares issued for dividends reinvested . . . . . . . . . . . . . . . . . . . . . . 90,452 98,717
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (772,433) (564,582)
__________ __________
Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . 179,608 (145,245)
__________ __________
Class C
_______
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193,103 7,322
Shares issued for dividends reinvested . . . . . . . . . . . . . . . . . . . . . . 1,589 103
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,238) (1,160)
__________ __________
Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . 164,454 6,265
__________ __________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS PREMIER 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.
Class A Shares
__________________________________________________
Year Ended December 31,
__________________________________________________
PER SHARE DATA: 1998 1997 1996 1995 1994
______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period . . . . . . . . . . . . . $14.76 $14.37 $14.66 $13.54 $14.84
______ ______ ______ ______ ______
Investment Operations:
Investment income--net . . . . . . . . . . . . . . . . . . . . .81 .85 .88 .91 .88
Net realized and unrealized gain (loss) on investments . . . . .13 .39 (.29) 1.12 (1.30)
______ ______ ______ ______ ______
Total from Investment Operations . . . . . . . . . . . . . . . .94 1.24 .59 2.03 (.42)
______ ______ ______ ______ ______
Distributions:
Dividends from investment income--net . . . . . . . . . . . . . (.81) (.85) (.88) (.91) (.88)
______ ______ ______ ______ ______
Net asset value, end of period . . . . . . . . . . . . . . . . $14.89 $14.76 $14.37 $14.66 $13.54
______ ______ ______ ______ ______
TOTAL INVESTMENT RETURN* . . . . . . . . . . . . . . . . . . . . . 6.51% 8.91% 4.25% 15.43% (2.91%)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets . . . . . . . . . . . . 1.05% 1.05% 1.04% 1.03% .94%
Ratio of net investment income to average net assets . . . . . 5.44% 5.87% 6.17% 6.45% 6.20%
Decrease reflected in above expense ratios
due to undertakings by the Manager . . . . . . . . . . . . -- -- -- -- .06%
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . 283.20% 518.62% 267.22% 349.24% 427.27%
Net Assets, end of period (000's Omitted) . . . . . . . . . . . $94,369 $95,071 $111,267 $134,545 $141,456
- ------------
* Exclusive of sales load.
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS PREMIER GNMA FUND
- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
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.
Class B Shares
__________________________________________________
Year Ended December 31,
__________________________________________________
PER SHARE DATA: 1998 1997 1996 1995 1994
______ ______ ______ ______ ______
Net asset value, beginning of period . . . . . . . . . . . . . $14.78 $14.38 $14.67 $13.55 $14.84
______ ______ ______ ______ ______
Investment Operations:
Investment income--net . . . . . . . . . . . . . . . . . . . . .73 .78 .81 .84 .80
Net realized and unrealized gain (loss) on investments . . . . .12 .40 (.29) 1.12 (1.29)
______ ______ ______ ______ ______
Total from Investment Operations . . . . . . . . . . . . . . . .85 1.18 .52 1.96 (.49)
______ ______ ______ ______ ______
Distributions:
Dividends from investment income--net . . . . . . . . . . . . . (.73) (.78) (.81) (.84) (.80)
______ ______ ______ ______ ______
Net asset value, end of period . . . . . . . . . . . . . . . . $14.90 $14.78 $14.38 $14.67 $13.55
______ ______ ______ ______ ______
TOTAL INVESTMENT RETURN* . . . . . . . . . . . . . . . . . . . . . 5.90% 8.43% 3.71% 14.83% (3.39%)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets . . . . . . . . . . . . 1.56% 1.55% 1.55% 1.55% 1.51%
Ratio of net investment income to average net assets . . . . . 4.93% 5.36% 5.65% 5.89% 5.61%
Decrease reflected in above expense ratios
due to undertakings by the Manager . . . . . . . . . . . . -- -- -- -- .05%
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . 283.20% 518.62% 267.22% 349.24% 427.27%
Net Assets, end of period (000's Omitted) . . . . . . . . . . . $41,775 $38,775 $39,833 $41,934 $35,710
- ------------
* Exclusive of sales load.
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS PREMIER GNMA FUND
- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
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.
Class C Shares
_____________________________________________
Year Ended December 31,
_____________________________________________
PER SHARE DATA: 1998 1997 1996 1995(1)
______ _______ _______ _______
Net asset value, beginning of period . . . . . . . . . . . . . . . . . $14.77 $14.38 $14.67 $14.48
______ _______ _______ _______
Investment Operations:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . .68 .75 .77 .16
Net realized and unrealized gain (loss) on investments . . . . . . . . .13 .39 (.29) .19
______ _______ _______ _______
Total from Investment Operations . . . . . . . . . . . . . . . . . . . .81 1.14 .48 .35
______ _______ _______ _______
Distributions:
Dividends from investment income--net . . . . . . . . . . . . . . . . . (.68) (.75) (.77) (.16)
______ _______ _______ _______
Net asset value, end of period . . . . . . . . . . . . . . . . . . . . $14.90 $14.77 $14.38 $14.67
______ _______ _______ _______
TOTAL INVESTMENT RETURN(2) . . . . . . . . . . . . . . . . . . . . . . . . 5.62% 8.13% 3.44% 11.47%(3)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets . . . . . . . . . . . . . . . . 1.80% 1.80% 1.79% 1.79%(3)
Ratio of net investment income to average net assets . . . . . . . . . 4.40% 5.11% 5.42% 5.25%(3)
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . . . . . 283.20% 518.62% 267.22% 349.24%
Net Assets, end of period (000's Omitted) . . . . . . . . . . . . . . . $2,561 $110 $17 $1
- ------------
(1) From October 16, 1995 (commencement of intital offering) to December 31,
1995.
(2) Exclusive of sales load.
(3) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS PREMIER GNMA FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Premier 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. (the "Distributor") is the distributor of
the Fund's shares. The Fund is authorized to issue an unlimited number of $.001
par value shares in the following classes of shares: Class A, Class B and Class
C. Class A shares are subject to a sales charge imposed at the time of purchase,
Class B shares are subject to a contingent deferred sales charge ("CDSC")
imposed on Class B share redemptions made within six years of purchase (five
years for shareholders beneficially owning Class B shares on November 30, 1996)
and Class C shares are subject to a CDSC imposed on shares redeemed within one
year of purchase. Other differences between the classes include the services
offered to and the expenses borne by each class and certain voting rights.
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) 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.
(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 received net earnings credits of $4,537 during the period
ended December 31, 1998 based on available cash balances left on deposit. Income
earned under this arrangement is included in interest income.
(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.
(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 $3,705,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to December 31, 1998. If not
applied, the carryover expires in fiscal 2002.
DREYFUS PREMIER GNMA FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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
December 31, 1998, the Fund did not borrow under the Facility.
NOTE 3--MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement with the Manager, the management fee is
computed at the annual rate of .55 of 1% of the value of the Fund's average
daily net assets and is payable monthly.
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager,
retained $2,534 during the period ended December 31, 1998, from commissions
earned on sales of the Fund's shares.
(B) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act,
Class B and Class C shares pay the Distributor for distributing their shares at
an annual rate of .50 of 1% of the value of the average daily net assets of
Class B shares and .75 of 1% of the value of the average daily net assets of
Class C shares. During the period ended December 31, 1998, Class B and Class C
shares were charged $195,385 and $6,799, respectively, pursuant to the
Distribution Plan.
(C) Under the Shareholder Services Plan, Class A, Class B and Class C shares
pay the Distributor at an annual rate of .25 of 1% of the value of their average
daily net assets for the provision of certain services. 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. The Distributor may make payments to Service Agents (a securities
dealer, financial institution or other industry professional) in respect of
these services. The Distributor determines the amounts to be paid to Service
Agents. During the period ended December 31, 1998, Class A, Class B and Class C
shares were charged $236,544, $97,692 and $2,266, respectively, 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 December 31, 1998, the Fund was charged $99,157 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 December 31, 1998, the Fund was
charged $34,192 pursuant to the custody agreement.
(D) 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 $500 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
DREYFUS PREMIER GNMA FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales (including paydowns) of investment
securities, excluding short-term securities, during the period ended December
31, 1998 amounted to $425,739,757 and $424,195,952, respectively.
At December 31, 1998, accumulated net unrealized appreciation on investments
was $2,079,797, consisting of $2,307,077 gross unrealized appreciation and
$227,280 gross unrealized depreciation.
At December 31, 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 PREMIER GNMA FUND
- -----------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
DREYFUS PREMIER GNMA FUND
We have audited the accompanying statement of assets and liabilities of
Dreyfus Premier GNMA Fund, including the statement of investments, as of
December 31, 1998, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included verification by
examination of securities held by the custodian as of December 31, 1998 and
confirmation of securities not held by the custodian by correspondence with
others. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreyfus Premier GNMA Fund at December 31, 1998, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the indicated
years, in conformity with generally accepted accounting principles.
New York, New York
February 4, 1999
DREYFUS PREMIER 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. 027/614AR9812
ANNUAL REPORT
- -------------------------------------------------------------------------------
DREYFUS PREMIER
GNMA FUND
- -------------------------------------------------------------------------------
DECEMBER 31, 1998
[reg.tm logo]
[Dreyfus lion/2hres logo]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN DREYFUS PREMIER GNMA FUND CLASS A SHARES AND THE
LEHMAN BROTHERS GNMA INDEX
EXHIBIT A:
LEHMAN DREYFUS
BROTHERS PREMIER
PERIOD GNMA GNMA FUND
INDEX * (CLASS A SHARES)
12/31/88 10,000 9,550
12/31/89 11,569 10,745
12/31/90 12,792 11,880
12/31/91 14,845 13,713
12/31/92 15,945 14,604
12/31/93 16,994 15,802
12/31/94 16,738 15,342
12/31/95 19,593 17,709
12/31/96 20,677 18,462
12/31/97 22,648 20,107
12/31/98 24,216 21,416
*Source: Lehman Brothers
