August 24, 1994
DREYFUS GNMA FUND, INC.
SUPPLEMENT TO PROSPECTUS DATED JUNE 24, 1994
THE FOLLOWING ANTICIPATED CHANGES HAVE OCCURRED:
I. CONSUMMATION OF THE MERGER
THE FOLLOWING INFORMATION SUPPLEMENTS AND SUPERSEDES ANY CONTRARY
INFORMATION CONTAINED IN THE FUND'S PROSPECTUS.
On this date, the previously announced merger between The Dreyfus
Corporation ("Dreyfus") and a subsidiary of Mellon Bank Corporation
("Mellon") was completed, and as a result, Dreyfus now is a wholly-owned
subsidiary of Mellon Bank, N.A. instead of a publicly-owned corporation.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding companies in
the United States based on total assets. Mellon's principal wholly-owned
subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc., AFCO Credit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, Mellon managed more than $130 billion in assets as of July
31, 1994, including approximately $6 billion in mutual fund assets. As of
June 30, 1994, various subsidiaries of Mellon provided non-investment
services, such as custodial or administration services, for more than $747
billion in assets, including approximately $97 billion in mutual fund assets.
II. NEW DISTRIBUTOR
THE FOLLOWING INFORMATION SUPERSEDES AND REPLACES ANY CONTRARY
INFORMATION CONTAINED IN THE FUND'S PROSPECTUS AND SPECIFICALLY IN THE
SECTION ENTITLED "HOW TO BUY FUND SHARES."
The Fund's distributor is Premier Mutual Fund Services, Inc. (the
"Distributor"), located at One Exchange Place, Boston, Massachusetts 02109.
The Distributor is a wholly-owned subsidiary of Institutional Administration
Services, Inc., a provider of mutual fund administration services, the parent
company of which is Boston Institutional Group, Inc.
Accordingly, references in the Prospectus to Dreyfus Service
Corporation as the Fund's distributor should be substituted with Premier
Mutual Fund Services, Inc.
III.NEW RULE 12b-1 PLAN ARRANGEMENTS IMPLEMENTED
THE FOLLOWING INFORMATION SUPERSEDES AND REPLACES THE INFORMATION IN
THE FIRST AND FOURTH PARAGRAPHS CONTAINED IN THE SECTION IN THE FUND'S
PROSPECTUS ENTITLED "SERVICE PLAN."
Under the Service Plan, adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940, the Fund (a) reimburses the Distributor for
payments to certain Service Agents for distributing the Fund's shares and
servicing shareholder accounts ("Servicing") and (b) pays The Dreyfus
Corporation, Dreyfus Service Corporation and any affiliate of either of them
(collectively, "Dreyfus") for advertising and marketing relating to the Fund
and for Servicing, at an aggregate annual rate of .20 of 1% of the value of
the Fund's average daily net assets. Each of the Distributor and Dreyfus may
pay one or more Service Agents a fee in respect of the Fund's shares owned by
(CONTINUED ON REVERSE SIDE)
shareholders with whom the Service Agent has a Servicing relationship or for
whom the Service Agent is the dealer or holder of record. Each of the
Distributor and Dreyfus determine the amounts, if any, to be paid to Service
Agents under the Service Plan and the basis on which such payments are made.
The fees payable under the Service Plan are payable without regard to actual
expenses incurred.
IV. RESULTS OF FUND SHAREHOLDER VOTE
THE FOLLOWING INFORMATION SUPPLEMENTS AND SUPERSEDES ANY CONTRARY
INFORMATION CONTAINED IN THE FUND'S PROSPECTUS.
On August 2, 1994, the Fund's shareholders voted to (a) approve (i) a
new investment advisory agreement with Dreyfus, and (ii) a new Service Plan,
each of which became effective upon consummation of the merger between
Dreyfus and a subsidiary of Mellon; and (b) change certain of the Fund's
fundamental policies and investment restrictions to permit the Fund to (i)
borrow money to the extent permitted under the Investment Company Act of
1940, as amended, (ii) pledge its assets to the extent necessary to secure
borrowings and make such policy non-fundamental, (iii) invest up to 15% of
the value of its net assets in illiquid securities and make such policy
non-fundamental.
V. REVISED MANAGEMENT POLICIES
LEVERAGE THROUGH BORROWING -- The Fund may borrow for investment
purposes. This borrowing, which is known as leveraging, generally will be
unsecured, except to the extent the Fund enters into reverse repurchase
agreements described below. The Investment Company Act of 1940 requires the
Fund to maintain continuous asset coverage (that is, total assets including
borrowings, less liabilities exclusive of borrowings) of 300% of the amount
borrowed. If the 300% asset coverage should decline as a result of market
fluctuations or other reasons, the Fund may be required to sell some of its
portfolio holdings within three days to reduce the debt and restore the 300%
asset coverage, even though it may be disadvantageous from an investment
standpoint to sell securities at that time. Leveraging may exaggerate the
effect on net asset value of any increase or decrease in the market value of
the Fund's portfolio. Money borrowed for leveraging will be subject to
interest costs that may or may not be recovered by appreciation of the
securities purchased; in certain cases, interest costs may exceed the return
received on the securities purchased. The Fund also may be required to
maintain minimum average balances in connection with such borrowing or to pay
a commitment or other fee to maintain a line of credit; either of these
requirements would increase the cost of borrowing over the stated interest
rate.
Among the forms of borrowing in which the Fund may engage is the
entry into reverse repurchase agreements with banks, brokers or dealers.
These transactions involve the transfer by the Fund of an underlying debt
instrument in return for cash proceeds based on a percentage of the 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. In certain types of
agreements, there is no agreed upon repurchase date and interest payments are
calculated daily, often based on the prevailing overnight repurchase rate.
The Fund will maintain in a segregated custodial account cash or U.S.
Government securities or other high quality liquid debt securities at least
equal to the aggregate amount of its reverse repurchase obligations, plus
accrued interest, in certain cases, in accordance with releases promulgated
by the Securities and Exchange Commission. The Securities and Exchange
Commission views reverse repurchase transactions as collateralized borrowings
by the Fund. These agreements, which are treated as if reestablished each
day, are expected to provide the Fund with a flexible borrowing tool.
DOLLAR ROLL TRANSACTIONS -- The Fund may engage in dollar roll
transactions, which is a form of secured borrowing. A dollar roll transaction
involves a sale by the Fund of a security to a financial institution, such as
a bank or broker-dealer, concurrently with an agreement by the Fund to
repurchase a similar security from the institution at a later date at an
agreed-upon price. The securities that are repurchased will bear the same
interest rate as those sold, but generally will be collateralized by
different pools of mortgages with different prepayment histories than those
sold. Proceeds of the sale will be invested in additional instruments for the
Fund, and the income from these investments, together with any additional fee
income received on the sale, are expected to generate income for the Fund
exceeding the yield on the securities sold. Dollar roll transactions involve
the risk that the market value of the securities sold by the Fund may decline
below the repurchase price of those securities.
265/stkr082494
