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.
DREYFUS BASIC GNMA FUND
- -----------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to report the performance for Dreyfus BASIC GNMA Fund. For the
12-month period ended December 31, 1998, your Fund produced a total return,
including share price changes and dividend income generated, of 4.71%,* compared
to 6.93% for the Lehman Brothers GNMA Index.** Income dividends paid from net
investment income amounted to approximately $0.971 per share, representing a
distribution rate per share of 6.45%.***
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 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 in
yield. This can largely be attributed 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 when compared to U.S. Treasuries for the year.
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.
Their holdings included large quantities of high quality, residential and
commercial mortgage-backed securities. Their forced liquidation of billions of
dollars of commercial mortgage-backed securities overwhelmed the market, causing
an imbalance in its 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 greater liquidity back into the market, and the supply-and-demand
imbalance has begun to normalize.
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 be longer than the Lehman
Brothers GNMA Index, which helped the performance of the Fund. Consistent with
our anticipation of faster 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 the significant shifts in the market discussed above, 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.
During the month of December, we were able to sell approximately 14% of our
GNMA project loans at a significant premium to their normal market value into a
Wall Street securitization (also known as a FNMA ACES REMIC). We have since
replaced approximately 6% of these assets at cheaper, higher yields. It is our
conviction that GNMA project loans will continue to add stability to the Fund
and protection as it faces the current mortgage-refinancing wave that we think
will continue to challenge the GNMA mortgage-backed securities marketplace.
Lastly, we continue to feel commercial mortgage-backed securities in the
portfolio are among the best opportunities in the fixed-income marketplace
today. Even though this allocation to CMBS was the primary reason for the Fund's
weaker performance during the months of September and October, we have continued
to hold this position. In the last two months of 1998, the CMBS market began its
return to market equilibrium. Spreads on AAA-rated, 10-year CMBS have moved in
dramatically, from the very depressed level of 210 basis points that they
reached in the peak of the liquidity crisis, to a spread of 130 basis points
(over the 10-year Treasury) today.
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.
**SOURCE: LEHMAN BROTHERS--The Lehman Brothers GNMA Index is an unmanaged,
total return performance benchmark for the GNMA market, consisting of 15- and
30-year fixed-rate GNMA securities.
*** Distribution rate per share is based upon dividends per share paid from net
investment income during the period divided by the net asset value per share at
the end of the period, adjusted for capital gain distributions.
DREYFUS BASIC GNMA FUND DECEMBER 31, 1998
- -----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS BASIC GNMA FUND
AND THE LEHMAN BROTHERS GNMA INDEX
Dollars
$24,216
Lehman Brothers GNMA Index*
$21,544
Dreyfus BASIC GNMA Fund
*Source: Lehman Brothers
<TABLE>
Average Annual Total Returns
- -----------------------------------------------------------------------------
One Year Ended Five Years Ended Ten Years Ended
December 31, 1998 December 31, 1998 December 31, 1998
___________________ ___________________ ___________________
<S> <C> <C> <C>
4.71% 6.78% 7.98%
- ------------------------
Past performance is not predictive of future performance.
</TABLE>
The above graph compares a $10,000 investment made in Dreyfus BASIC 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.
The Fund invests primarily in Ginnie Maes and its performance shown in the line
graph takes into account all 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.
<TABLE>
DREYFUS BASIC GNMA FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS DECEMBER 31, 1998
Principal
Bonds and Notes--162.5% Amount Value
- ------------------------------------------------------- _____________ ____________
<S> <C> <C>
U.S. Government Agencies/Mortgage-Backed Securities--114.0%
Government National Mortgage Association I:
6% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,500,000 (a) $ 16,360,740
6.50% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,500,000 (a) 13,605,435
6.50%, 10/15/2010-12/15/2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,244,859 4,294,995
6.50%, 4/15/2011-6/15/2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,193,989 1,222,718
7.50%, 12/15/2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350,277 (b) 361,661
8%, 1/15/2022-4/15/2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 408,011 427,748
8%, 4/15/2008-9/15/2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,569,176 (b) 2,671,943
8.50%, 2/15/2005-3/15/2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 927,604 992,279
8.50%, 1/15/2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291,819 (b) 312,428
9%, 5/15/2016-11/15/2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,162,719 1,247,276
9.50%, 1/15/2017-12/15/2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 548,464 595,424
_____________
42,092,647
_____________
Government National Mortgage Association I;
Construction Loans;
6.75% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,505,500 (a) 6,601,944
_____________
Government National Mortgage Association I,
Project Loans:
6.32%, 10/15/2033 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,586,899 (b) 2,612,769
6.375% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,186,600 (a) 1,205,135
6.375%, 10/15/2033 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,196,307 3,265,219
6.40%, 10/15/2033 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,846,463 1,894,933
6.41%, 8/15/2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 997,813 1,025,254
6.43% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500,000 (a) 1,523,430
6.45%, 11/15/2033 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,998,211 (b) 3,085,340
6.55%, 12/15/2033 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703,500 718,667
6.60%, 5/15/2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,934,698 1,972,173
6.625% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,472,700 (a) 5,590,691
6.625%, 8/15/2028-1/15/2034 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,347,133 9,688,787
6.70%, 3/15/2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 642,887 669,606
6.75%, 12/15/2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,872,200 7,091,217
9.25%, 10/15/2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 938,836 939,419
_____________
41,282,640
_____________
Government National Mortgage Association II:
5%, 4/20/2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 487,833 (c) 489,956
5%, 5/20/2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,915,599 (b,c) 2,928,341
9%, 3/20/2016-7/20/2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 882,776 937,768
9.50%, 9/20/2021-12/20/2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184,460 198,826
_____________
4,554,891
_____________
Government National Mortgage Association II,
Real Estate Mortgage Investment Conduit,
Collateralized Mortgage Obligations,
Ser. 1997-2, Cl. K, 7.50%, 1/20/2024 . . . . . . . . . . . . . . . . . . . . . . . . . 2,780,000 (d) 2,843,912
_____________
DREYFUS BASIC GNMA FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998
Principal
Bonds and Notes (continued) Amount Value
- ------------------------------------------------------- _____________ ____________
U.S. Government Agencies/Mortgage-Backed Securities (continued)
Federal Home Loan Mortgage Corp.:
Real Estate Mortgage Investment Conduit,
Collateralized Mortgage Obligations,
Ser. 1092, Cl. J, 8.50%, 5/15/2020 . . . . . . . . . . . . . . . . . . . . . . . . $ 176,739 (d) $ 176,666
Federal Home Loan Mortgage Corp. (continued)
Stripped Securities, Interest Only Class:
Ser. 1541, Cl. FA, 7%, 5/15/2019 . . . . . . . . . . . . . . . . . . . . . . . . . 4,904,658 (d,e) 658,254
Ser. 1547, Cl. B, 7%, 2/15/2022 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,750,000 (e) 286,073
Ser. 1590, Cl. JA, 6.50%, 10/15/2021 . . . . . . . . . . . . . . . . . . . . . . . 6,000,000 (e) 1,070,625
Ser. 1596, Cl. L, 6.50%, 12/15/2012 . . . . . . . . . . . . . . . . . . . . . . . . 1,800,000 (d,e) 271,800
Ser. 1916, Cl. PI, 7%, 12/15/2011 . . . . . . . . . . . . . . . . . . . . . . . . . 1,241,033 (d,e) 186,924
Ser. 1987, Cl. PI, 7%, 9/15/2012 . . . . . . . . . . . . . . . . . . . . . . . . . 1,298,396 (e) 213,911
Ser. 1999, Cl. PW, 7%, 8/15/2026 . . . . . . . . . . . . . . . . . . . . . . . . . 3,934,384 (d,e) 644,255
Ser. 2066, Cl. PM, 6.50%, 12/15/2026 . . . . . . . . . . . . . . . . . . . . . . . 3,843,569 (e) 731,479
_____________
4,239,987
_____________
Federal Housing Administration,
Project Loans:
7.20%, 2/1/2033 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,121,021 1,164,811
7.625%, 4/1/2031 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,240,479 1,313,745
_____________
2,478,556
_____________
Federal National Mortgage Association:
6.94% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,269,553 (a) 4,483,030
Real Estate Mortgage Investment Conduit,
Stripped Securities, Interest Only Class:
Ser. 1993-61, Cl. N, 7%, 3/25/2022 . . . . . . . . . . . . . . . . . . . . . . . . 7,218,166 (d) 1,116,217
Ser. 1993-137, Cl. PT, 7%, 6/25/2022 . . . . . . . . . . . . . . . . . . . . . . . 4,000,000 (d) 641,250
_____________
6,240,497
_____________
Total U.S. Government Agencies/Mortgage-Backed Securities. . . . . . . . . . . . . . . . . 110,335,074
_____________
Asset-Backed Securities--8.6%
Illinois Power Special Purpose Trust,
Ser. 1998-1, Cl. A-5, 5.38%, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 1,993,375
Nomura Depositor Trust,
Ser. 1998-ST-1:
Cl. A-3, 6.127%, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 (a,f,g) 949,375
Cl. A-5, 6.80%, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,500,000 (a,f,g) 3,358,906
The Money Store Home Equity Trust,
Ser. 1997-A, Cl. A-9, 7.235%, 2028 . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,055,938
_____________
Total Asset-Backed Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,357,594
_____________
DREYFUS BASIC GNMA FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998
Principal
Bonds and Notes (continued) Amount Value
- ------------------------------------------------------- _____________ ____________
Commercial Mortgage Pass-Through Ctfs.--19.3%
Asset Securitization,
Ser. 1997-D5, Cl. A1-D, 6.85%, 2041 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,250,000 (d) $ 2,349,141
Chase Commercial Mortgage Securities,
Ser. 1998-SN1, Cl. D, 6.486%, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . 750,000 (d,f,e) 724,805
CS First Boston Mortgage Securities,
Ser. 1998-C1, Cl. C, 6.78%, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 (d) 2,061,910
DLJ Commercial Mortgage,
Ser. 1998-ST1A, Cl. B-1, 6.567%, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . 2,400,000 (d,f,g) 2,352,750
GS Mortgage Securities II:
Ser. 1998-GL2, Cl. A-2, 6.562%, 2031 . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 (d) 3,120,000
Ser. 1998-GS1:
Cl. C, 5.854%, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 (d,f,g) 2,970,938
Cl. D, 6.154%, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,750,000 (d,f,g) 1,731,406
Merrill Lynch Mortgage Investors,
Ser. 1997-SD1, Cl. E, 6.280%, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . 3,500,000 (d) 3,397,188
_____________
Total Commercial Mortgage Pass-Through Ctfs. . . . . . . . . . . . . . . . . . . . . . . . 18,708,138
_____________
Residential Mortgage Pass-Through Ctfs.--20.6%
BA Mortgage Securities,
Ser. 1998-2, Cl. 2B-2, 6.50%, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . 301,630 (d) 279,008
Chase Mortgage Finance,
Ser. 1998-S3:
Cl. B-1, 6.50%, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 774,697 (d) 756,674
Cl. B-2, 6.50%, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664,025 (d) 648,577
GE Capital Mortgage Services,
Ser. 1998-16, Cl. B-2, 6.50%, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . 617,424 (d) 588,096
Norwest Asset Securities:
Ser. 1997-3:
Cl. B-1, 7.25%, 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,456,485 (d) 2,481,198
Cl. B-2, 7.25%, 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 982,594 (d) 984,923
Ser. 1997-7, Cl. B-2, 7%, 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 786,813 (d) 782,422
Ser. 1997-9, Cl. B-2, 7%, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 446,746 (d) 430,346
Ser. 1997-15, Cl. B-2, 6.75%, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . 648,091 (d) 647,527
Ser. 1997-20, Cl. B-2, 6.75%, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . 408,037 (d) 404,348
Ser. 1998-14, Cl. B-3, 6.50%, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . 611,629 (d) 569,414
Ser. 1998-18, Cl. B-3, 6.25%, 2028 . . . . . . . . . . . . . . . . . . . . . . . . . . 872,245 (d) 772,210
PNC Mortgage Securities:
Ser. 1997-8, Cl. 3B-3, 6.75%, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . 296,731 (d) 307,553
Ser. 1998-2:
Cl. 3B-3, 6.75%, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 563,879 (d) 581,624
Cl. 4B-3, 6.75%, 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 398,318 (d) 409,793
Ser. 1998-11, Cl. 2B-3, 6.25%, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . 521,897 (d) 475,904
Prudential Home Mortgage Securities,
Ser. 1995-6, Cl. B-2, 7.50%, 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,108,448 (d) 2,130,249
DREYFUS BASIC GNMA FUND
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1998
Principal
Bonds and Notes (continued) Amount Value
- ------------------------------------------------------- _____________ ____________
Residential Mortgage Pass-Through Ctfs. (continued)
Residential Accredit Loans,
Ser. 1997-QS6:
Cl. M-2, 7.50%, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,001,944 (d) $ 1,031,874
Cl. M-3, 7.50%, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651,259 (d) 670,713
Residential Funding Mortgage Securities I:
Ser. 1997-S10, Cl. M-3, 7%, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . 504,715 (d) 507,016
Ser. 1997-S11, Cl. M-3, 7%, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . 732,860 (d) 745,965
Ser. 1998-S12, Cl. M-3, 6.75%, 2028 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,044,329 (d) 962,578
Ser. 1998-S14, Cl. M-3, 6.50%, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . 840,675 (d) 840,309
Ser. 1998-S16, Cl. M-3, 6.50%, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . 755,657 (d) 710,317
Ser. 1997-S19, Cl. M-3, 6.50%, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . 664,080 (d) 629,814
Ser. 1997-S21, Cl. M-3, 6.50%, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . 383,765 (d) 394,422
Ser. 1998-NS1:
Cl. M-2, 6.375%, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,435 (d) 153,367
Cl. M-3, 6.375%, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,717 (d) 73,181
_____________
Total Residential Mortgage Pass-Through Ctfs.. . . . . . . . . . . . . . . . . . . . . . . 19,969,422
_____________
TOTAL BONDS AND NOTES
(cost $157,996,984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $157,370,228
_____________
Short-Term Investments--.3%
- -------------------------------------------------------
U.S. Treasury Bills:
5.03%, 1/14/1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 200,000 (h) $ 199,741
5.05%, 1/21/1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 (h) 99,755
_____________
TOTAL SHORT-TERM INVESTMENTS
(cost $299,483) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 299,496
_____________
TOTAL INVESTMENTS
(cost $158,296,467) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162.8% $157,669,724
_______ _____________
LIABILITIES, LESS CASH AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . (62.8%) $ (60,823,440)
_______ _____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $ 96,846,284
_______ _____________
Notes to Statement of Investments:
- -----------------------------------------------------------------------------
(a) Purchased on a forward commitment basis.
(b) Held by broker as collateral for open reverse repurchase agreements.
(c) Adjustable rate mortgage--interest rate subject to change periodically.
(d) Held by the custodian in a segregated account as collateral for securities
purchased on a forward commitment basis.
(e) Reflects notional face amount.
(f) 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 December 31,
1998, these securities amounted to $12,088,180 or 12.5% of net assets.
(g) Variable rate security--interest rate subject to change periodically.
(h) Held by the custodian in a segregated account as collateral for open
financial futures positions.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS BASIC GNMA FUND
- -----------------------------------------------------------------------------
STATEMENT OF FINANCIAL FUTURES DECEMBER 31, 1998
Market Value Unrealized
Covered Appreciation
Financial Futures Short Contracts by Contracts Expiration at 12/31/98
____________________ ________ ____________ _________ ____________
<S> <C> <C> <C> <C>
U.S. Treasury 5 year notes . . . . . . . . . . . . . . . 69 $7,820,719 March '99 $ 63,156
U.S. Treasury 10 year notes. . . . . . . . . . . . . . . 66 7,864,312 March '99 89,075
_________
$152,231
_________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS BASIC GNMA FUND
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1998
Cost Value
____________ ____________
<S> <C> <C>
ASSETS: Investments in securities--See Statement of Investments . . $158,296,467 $157,669,724
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 246,140
Interest receivable . . . . . . . . . . . . . . . . . . . 1,009,459
Receivable for shares of Beneficial Interest subscribed . . 41,673
Paydown receivables . . . . . . . . . . . . . . . . . . . 36,863
Receivable for investment securities sold . . . . . . . . 4,485
Prepaid expenses . . . . . . . . . . . . . . . . . . . . 7,729
______________
159,016,073
______________
LIABILITIES: Due to The Dreyfus Corporation and affiliates . . . . . . 44,121
Payable for investment securities purchased . . . . . . . 44,957,346
Payable for Reverse Repurchase Agreements--Note 5 . . . . 16,958,000
Payable for shares of Beneficial Interest redeemed . . . 121,716
Interest payable--Note 5 . . . . . . . . . . . . . . . . 17,163
Payable for futures variation margin--Note 4(a) . . . . . 300
Accrued expenses . . . . . . . . . . . . . . . . . . . . 71,143
______________
62,169,789
______________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 96,846,284
______________
REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . $ 97,812,880
Accumulated undistributed investment income--net . . . . 11,427
Accumulated net realized gain (loss) on investments . . . (503,511)
Accumulated net unrealized appreciation (depreciation)
of investments (including $152,231 net unrealized
appreciation on financial futures)--Note 4(b) . . . . . (474,512)
______________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 96,846,284
______________
SHARES OUTSTANDING
(UNLIMITED NUMBER OF $.001 PAR VALUE SHARES OF BENEFICIAL INTEREST AUTHORIZED) . . . . . . 6,453,939
NET ASSET VALUE, offering and redemption price per share . . . . . . . . . . . . . . . . . $15.01
________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS BASIC GNMA FUND
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME
<S> <C> <C>
INCOME Interest Income . . . . . . . . . . . . . . . . . $ 6,269,499
EXPENSES: Management fee--Note 3(a) . . . . . . . . . . . . $ 525,492
Shareholder servicing costs--Note 3(b) . . . . . 218,728
Interest expense--Note 5 . . . . . . . . . . . . 144,148
Professional fees . . . . . . . . . . . . . . . . 39,592
Trustees' fees and expenses--Note 3(c) . . . . . 37,041
Registration fees . . . . . . . . . . . . . . . . 34,108
Custodian fees--Note 3(b) . . . . . . . . . . . . 23,658
Prospectus and shareholders' reports . . . . . . 17,983
Loan commitment fees--Note 2 . . . . . . . . . . 622
Miscellaneous . . . . . . . . . . . . . . . . . . 13,322
___________
Total Expenses . . . . . . . . . . . . . . 1,054,694
Less--reduction in management fee due to
undertaking--Note 3(a) . . . . . . . . . . . . (340,642)
___________
Net Expenses . . . . . . . . . . . . . . . 714,052
___________
INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,555,447
___________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments
and securities sold short . . . . . . . . . . $ 1,267,159
Net realized gain (loss) on financial futures . . (1,774,271)
___________
Net Realized Gain (Loss) . . . . . . . . . (507,112)
Net unrealized appreciation (depreciation) on
investments and securities sold short (including
$152,231 net unrealized appreciation
on financial futures) . . . . . . . . . . . . (1,328,489)
___________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . (1,835,601)
___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . $ 3,719,846
___________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS BASIC 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,555,447 $ 4,055,809
Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . (507,112) 954,499
Net unrealized appreciation (depreciation) on investments . . . . . . . . . . . . (1,328,489) 776,447
_____________ _____________
Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . . . 3,719,846 5,786,755
_____________ _____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,545,920) (4,053,909)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . (291,592) (1,027,054)
_____________ _____________
Total Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,837,512) (5,080,963)
_____________ _____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . 43,371,763 31,673,859
Dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,345,234 3,692,556
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,682,862) (17,807,854)
_____________ _____________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions . . . 23,034,135 17,558,561
_____________ _____________
Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . . 20,916,469 18,264,353
NET ASSETS:
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,929,815 57,665,462
_____________ _____________
End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 96,846,284 $ 75,929,815
_____________ _____________
UNDISTRIBUTED INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . $ 11,427 $ 1,900
_____________ _____________
Shares Shares
_____________ _____________
CAPITAL SHARE TRANSACTIONS:
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,827,468 2,070,281
Shares issued for dividends reinvested . . . . . . . . . . . . . . . . . . . . . 283,676 241,976
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,611,860) (1,167,399)
_____________ _____________
Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . . . 1,499,284 1,144,858
_____________ _____________
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS BASIC GNMA FUND
- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average net
assets and other supplemental data for each period indicated. This information
has been derived from the Fund's financial statements.
Year Ended December 31,
_______________________________________________________
PER SHARE DATA: 1998 1997 1996 1995 1994
_______ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period . . . . . . . . . . $15.32 $15.14 $15.42 $14.16 $15.39
_______ _______ _______ _______ _______
Investment Operations:
Investment income--net . . . . . . . . . . . . . . . . . .97 .99 .98 1.03 1.08
Net realized and unrealized gain (loss) on investments . (.26) .41 (.27) 1.25 (1.23)
_______ _______ _______ _______ _______
TOTAL FROM INVESTMENT OPERATIONS . . . . . . . . . . . . .71 1.40 .71 2.28 (.15)
_______ _______ _______ _______ _______
Distributions:
Dividends from investment income--net . . . . . . . . . . (.97) (.99) (.99) (1.02) (1.08)
Dividends from net realized gain on investments . . . . . (.05) (.23) -- -- --
_______ _______ _______ _______ _______
TOTAL DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . (1.02) (1.22) (.99) (1.02) (1.08)
_______ _______ _______ _______ _______
Net asset value, end of period . . . . . . . . . . . . . $15.01 $15.32 $15.14 $15.42 $14.16
_______ _______ _______ _______ _______
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . . . . 4.71% 9.55% 4.81% 16.62% (.99%)
RATIOS/SUPPLEMENTAL DATA:
Ratio of operating expenses to average net assets . . . .. .65% .65% .65% .50% .06%
Ratio of interest expense and loan commitment
fees to average net assets . . . . . . . . . . . . . . .17% -- -- -- --
Ratio of net investment income to average net assets . . 6.34% 6.46% 6.50% 6.86% 7.34%
Decrease reflected in above expense ratios
due to undertakings by the Manager . . . . . . . . . . .39% .42% .52% .78% 1.43%
Portfolio Turnover Rate . . . . . . . . . . . . . . . . 388.97% 534.25% 332.96% 254.36% 290.20%
Net Assets, end of period (000's Omitted) . . . . . . . $96,846 $75,930 $57,665 $55,615 $44,937
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS BASIC GNMA FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
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 an investor
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 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.
DREYFUS BASIC GNMA FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to qualify
as a regulated investment company, if such qualification is in the best
interests of its shareholders, by complying with the applicable provisions of
the Internal Revenue Code, and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and excise taxes
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 (" 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 .60 of 1% of the value of the Fund's average
daily net assets and is payable monthly. The Manager has undertaken from January
1, 1998 through December 31, 1998, and thereafter, until such time as it gives
shareholders at least 90 days' notice to the contrary, to reduce the management
fee paid by the Fund, to the extent that the Fund's aggregate expenses,
exclusive of taxes, brokerage, interest on borrowings, commitment fees and
extraordinary expenses, exceed an annual rate of .65 of 1% of the value of the
Fund' s average daily net assets. The reduction in management fee, pursuant to
the undertaking, amounted to $340,642 during the period ended December 31, 1998
The undertaking may be extended, modified or terminated by the Manager,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
(B) Under the Shareholder Services Plan, the Fund reimburses Dreyfus Service
Corporation, a wholly-owned subsidiary of the Manager, an amount not to exceed
an annual rate of .25 of 1% of the value of the Fund's average daily net assets
for certain allocated expenses of providing personal services and/or maintaining
shareholder accounts. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder inquiries
regarding the Fund and providing reports and other information, and services
related to the maintenance of shareholder accounts. During the period ended
December 31, 1998, the Fund was charged $134,372 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 $30,649 pursuant to the transfer
agency agreement.
The Fund compensates Mellon under a custody agreement for providing custodial
services for the Fund. During the period ended December 31, 1998, the Fund was
charged $23,658 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.
DREYFUS BASIC GNMA FUND
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--SECURITIES TRANSACTIONS:
(A) The following summarizes the aggregate amount of purchases and sales
(including paydowns) of investment securities and securities sold short,
excluding short-term securities and financial futures, during the period ended
December 31, 1998:
<TABLE>
Purchases Sales
_____________ _____________
<S> <C> <C>
Long transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $515,977,078 $446,258,944
Short sale transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,046,875 --
_____________ _____________
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $518,023,953 $446,258,944
_____________ _____________
</TABLE>
The Fund may engage in short-selling which obligates the Fund to replace a
security borrowed by purchasing the security at current market value. The Fund
would incur a loss if the price of the security increases between the date of
the short sale and the date on which the Fund replaces the borrowed security.
The Fund would realize a gain if the price of the security declines between
those dates. Until the Fund replaces the borrowed security, the Fund will
maintain daily, a segregated account with the custodian, of cash and /or U.S.
Government securities sufficient to cover its short position. At December 31,
1998, there were no securities sold short outstanding.
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 December 31, 1998, are set forth in the
Statement of Financial Futures.
(B) At December 31, 1998, accumulated net unrealized depreciation on
investments and financial futures was $474,512, consisting of $1,847,467 gross
unrealized appreciation and $2,321,979 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).
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.
As of December 31, 1998, the Fund had entered into reverse repurchase
agreements in the amount of $16,958,000. The average daily amount outstanding
during the period ended December 31, 1998 was approximately $2,498,000, with a
related weighted average annualized interest rate of 5.77%.
DREYFUS BASIC GNMA FUND
- -----------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
DREYFUS BASIC GNMA FUND
We have audited the accompanying statement of assets and liabilities of
Dreyfus BASIC GNMA Fund, including the statements of investments and financial
futures, 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 BASIC 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 BASIC GNMA FUND
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IMPORTANT TAX INFORMATION (UNAUDITED)
For Federal tax purposes, the Fund hereby designates $.0023 per share as a
long-term capital gain distribution of the $.0499 per share paid on August 31,
1998.
[reg.tm logo]
(reg.tm)
DREYFUS BASIC
GNMA FUND
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 080AR9812
BASIC
GNMA
Fund
Annual Report
December 31, 1998
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN DREYFUS BASIC GNMA FUND AND
THE LEHMAN BROTHERS GNMA INDEX
EXHIBIT A:
LEHMAN BROTHERS
PERIOD GNMA DREYFUS BASIC
INDEX * GNMA FUND
12/31/88 10,000 10,000
12/31/89 11,569 10,842
12/31/90 12,792 11,772
12/31/91 14,845 13,336
12/31/92 15,945 14,272
12/31/93 16,994 15,521
12/31/94 16,738 15,367
12/31/95 19,593 17,921
12/31/96 20,677 18,784
12/31/97 22,648 20,576
12/31/98 24,216 21,544
*Source: Lehman Brothers
