LETTER TO SHAREHOLDERS
Dear Shareholder:
As of October 31, 1994, the net asset value of the Dreyfus GNMA Fund,
Inc. was $13.98 per share. For the six-month period ended October 31, 1994,
the total return of your Fund for this period was a negative 0.23%.*
Dividends paid from net investment income during the last six months amounted
to $.47 per share, representing an annualized distribution rate per share of
6.71%, based on the October 31 closing net asset value per share.
In reviewing the bond market properly, one must go back to February 4,
1994 when the Federal Reserve Board first increased the Federal Funds rate by
25 basis points. This was the first time the Federal Reserve had increased
rates in five years. Since this original increase, there have been 5 more
increases. The most recent increase occurred on November 15, when the Federal
Reserve raised short-term rates by 75 basis points and also the discount rate
by 75 basis points. Up until now, the Federal Reserve Board has initiated
rate increases totaling 250 basis points. As a result of these tightening
moves, the 30-year Treasury bond has gone from yielding 6.36% on February 4
to 8.13% on November 18, 1994, representing a 177 basis-point increase in
long-term Treasury yields. Likewise, during this period, interest rates on
the 10-year Treasury note have increased by 294 basis points, and by 248
basis points on the 5-year Treasury note. As one can see, this certainly has
been a period of high volatility and great uncertainty. It is times such as
these that provide for negative bond returns. Such was the case for the
six-month period under review.
We anticipated a market rally in August or September. Our perception was
that the market was oversold. In 1984 and in 1987, the bond-based market put
in a performance very similar to that of this year's market. The technical
aspects of those markets nearly replicated the 1994 market. Unfortunately,
the market continued to trade lower and the portfolio strategy of extending
our maturities to hopefully benefit from a rally produced slightly negative
performance.
Going forward, we anticipate some additional volatility in the market. We
are currently structured defensively, having a shorter average maturity and
duration than the Lehman GNMA Index.** This Index is one of the benchmarks
for GNMA mutual funds. There is a possibility of one more Fed tightening. We
do believe that the stringent Federal Reserve policies will be effective in
fighting domestic inflation. The current levels of interest rates should
reflect value over a period of time.
We look forward to serving your investment needs.
Very truly yours,
(logo signature)
Garitt A. Kono
Portfolio Manager
November 21, 1994
New York, N.Y.
*Total return represents the change during the period in a hypothetical
account with dividends reinvested.
** SOURCE: LEHMAN BROTHERS - The Lehman Brothers GNMA Index is an
unmanaged total return performance benchmark for the GNMA market,
consisting of 15- and 30-year fixed-rate securities backed by mortgage
pools of the Government National Mortgage Association.
<TABLE>
<CAPTION>
DREYFUS GNMA FUND, INC.
STATEMENT OF INVESTMENTS OCTOBER 31, 1994 (UNAUDITED)
PRINCIPAL
BONDS_85.8% AMOUNT VALUE
------------- ------------
<S> <C> <C>
MORTGAGE-BACKED CERTIFICATES
Government National Mortgage Association I:
7% (a).................................................................. $ 50,000,000 $ 44,859,000
7%, 5/15/2007-8/15/2024................................................. 198,490,022 185,596,090
7 1/2%, 5/15/2006-5/15/2009............................................. 90,967,903 88,437,176
8%, 10/15/2001-7/15/2024................................................ 344,706,839 332,763,390
8 1/2%, 2/15/2006-8/15/2024............................................. 280,182,274 277,030,223
9% (a).................................................................. 100,000,000 101,843,000
9%, 7/15/2001-11/15/2001................................................ 765,282 795,893
9 1/4%, 10/15/2023...................................................... 7,040,403 7,084,406
10%, 11/15/2009-10/15/2020.............................................. 55,852,365 59,849,161
10 1/2%, 11/15/2012-6/15/2021........................................... 44,399,694 48,367,694
11%, 7/15/1999-9/15/2019................................................ 60,888,256 67,287,332
11 1/2%, 3/15/2010-7/15/2019............................................ 23,771,767 26,609,403
12%, 2/15/2015.......................................................... 39,280 44,264
------------
1,240,567,032
------------
Government National Mortgage Association II:
9%, 3/20/2016........................................................... 3,541,451 3,558,025
10 1/2%, 7/20/2013-9/20/2018............................................ 7,857,552 8,402,630
12%, 9/20/2013-12/20/2015............................................... 2,091,561 2,288,941
13 1/2%, 9/20/2013-6/20/2015............................................ 1,421,856 1,604,025
------------
15,853,621
------------
Government National Mortgage Association I,
Graduated Payment Mortgage:
10 1/4%, 7/15/2018-10/15/2018........................................... 407,320 437,996
10 3/4%, 3/15/2010-4/15/2016............................................ 1,449,731 1,572,494
11%, 9/15/2010-3/15/2011................................................ 749,001 812,898
11 1/4%, 7/15/2015-1/15/2016............................................ 2,851,052 3,113,862
12 1/4%, 2/15/2014-3/15/2015............................................ 70,580 77,791
------------
6,015,041
------------
Government National Mortgage Association II,
Graduated Payment Mortgage:
11 1/4%, 4/20/2014-1/20/2016............................................ 587,871 640,592
11 3/4%, 6/20/2015-1/20/2016............................................ 437,041 478,013
------------
1,118,605
------------
TOTAL BONDS
(cost $1,301,889,635)................................................... $1,263,554,299
==============
DREYFUS GNMA FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994 (UNAUDITED)
PRINCIPAL
SHORT-TERM INVESTMENTS_17.3% AMOUNT VALUE
------------- ------------
REPURCHASE AGREEMENTS:
Lehman Government Securities Inc., 4.80%
Dated 10/31/1994, Due 11/1/1994 in the amount of $143,019,067
(fully collateralized by $148,670,000 U.S. Treasury Bills
due 1/19/1995 to 3/16/1995, value $148,185,815)......................... $ 143,000,000 $ 143,000,000
UBS Securities Inc., 4 3/4%
Dated 10/19/1994, Due 11/21/1994 in the amount of $112,487,667
(fully collateralized by $62,905,000 U.S. Treasury Bills
due 4/6/1995 and $53,660,000 U.S. Treasury Notes 3 7/8% to 8 1/2%
due from 8/15/1995 to 9/30/1995, value $114,438,489).................... 112,000,000 112,000,000
------------- ------------
TOTAL SHORT-TERM INVESTMENTS
(cost $255,000,000)..................................................... $ 255,000,000
===============
TOTAL INVESTMENTS
(cost $1,556,889,635)................................................... 103.1% $1,518,554,299
====== ==============
LIABILITIES, LESS CASH AND RECEIVABLES...................................... (3.1%) $ (45,809,409)
====== ==============
NET ASSETS.................................................................. 100.0% $1,472,744,890
====== ==============
NOTE TO STATEMENT OF INVESTMENTS;
(a) Purchased on a when-issued basis.
See independent accountants' review report and notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS GNMA FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1994 (UNAUDITED)
ASSETS:
<S> <C> <C>
Investments in securities, at value (cost $1,556,889,635)_see statement
(including repurchase agreements of $255,000,000)_Note 1(a,b)........ $1,518,554,299
Cash.................................................................... 1,947,368
Receivable for investment securities sold............................... 96,514,816
Interest receivable..................................................... 9,038,951
Receivable for subscriptions to Common Stock............................ 6,411
Prepaid expenses........................................................ 112,208
--------------
1,626,174,053
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 1,513,852
Payable for investment securities purchased............................. 148,925,327
Payable for Common Stock redeemed....................................... 2,090,702
Accrued expenses and other liabilities.................................. 899,282 153,429,163
--------------- --------------
NET ASSETS ................................................................ $1,472,744,890
==============
REPRESENTED BY:
Paid-in capital......................................................... $1,701,584,379
Accumulated undistributed investment income-net......................... 10,095,474
Accumulated net realized (loss) on investments.......................... (200,599,627)
Accumulated net unrealized (depreciation) on investments_Note 3......... (38,335,336)
--------------
NET ASSETS at value applicable to 105,344,987 outstanding shares of
Common Stock, equivalent to $13.98 per share
(1.1 billion shares of $.01 par value authorized)....................... $1,472,744,890
==============
See independent accountants' review report and notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS GNMA FUND, INC.
STATEMENT OF OPERATIONS SIX MONTHS ENDED OCTOBER 31, 1994 (UNAUDITED)
INVESTMENT INCOME:
<S> <C> <C>
INTEREST INCOME......................................................... $59,535,993
EXPENSES:
Management fee_Note 2(a)............................................. $ 4,685,461
Shareholder servicing costs_Note 2(b)................................. 2,330,218
Custodian fees........................................................ 283,462
Prospectus and shareholders' reports_Note 2(b)........................ 54,091
Professional fees..................................................... 46,325
Directors' fees and expenses_Note 2(c)................................ 18,588
Registration fees..................................................... 16,720
Miscellaneous......................................................... 71,627
-------------
TOTAL EXPENSES.................................................... 7,506,492
-----------
INVESTMENT INCOME_NET............................................ 52,029,501
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized (loss) on investments_Note 3.............................. $(47,852,180)
Net unrealized (depreciation) on investments............................ (6,746,118)
-------------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS................. (54,598,298)
-----------
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...................... $ (2,568,797)
==============
See independent accountants' review report and notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS GNMA FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SIX MONTHS ENDED
APRIL 30, OCTOBER 31, 1994
1994 (UNAUDITED)
--------------- ----------------
<S> <C> <C>
OPERATIONS:
Investment income_net................................................ $ 118,163,136 $ 52,029,501
Net realized (loss) on investments.................................... (17,084,575) (47,852,180)
Net unrealized (depreciation) on investments for the period........... (83,513,627) (6,746,118)
--------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS..... 17,564,934 (2,568,797)
--------------- ----------------
NET EQUALIZATION (DEBITS)_NOTE 1(E)...................................... (705,521) (383,748)
--------------- ----------------
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income_net................................................ (118,531,793) (51,128,815)
--------------- ----------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold......................................... 213,775,561 56,678,104
Dividends reinvested.................................................. 90,441,867 38,555,811
Cost of shares redeemed............................................... (458,066,041) (170,354,240)
--------------- ----------------
(DECREASE) IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS............ (153,848,613) (75,120,325)
--------------- ----------------
TOTAL (DECREASE) IN NET ASSETS.................................. (255,520,993) (129,201,685)
NET ASSETS:
Beginning of period................................................... 1,857,467,568 1,601,946,575
--------------- ----------------
End of period (including undistributed investment income-net:
$9,578,536 and $10,095,474, respectively)........................... $1,601,946,575 $1,472,744,890
============== ==============
SHARES SHARES
--------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Shares sold........................................................... 14,080,956 3,983,815
Shares issued for dividends reinvested................................ 5,964,089 2,705,950
Shares redeemed....................................................... (30,353,818) (12,005,601)
--------------- ----------------
NET (DECREASE) IN SHARES OUTSTANDING................................ (10,308,773) (5,315,836)
============== ==============
See independent accountants' review report and notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS GNMA FUND, INC.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Common Stock 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.
SIX MONTHS ENDED
YEAR ENDED APRIL 30, OCTOBER 31, 1994
------------------------------------------------- -----------------
PER SHARE DATA: 1990 1991 1992 1993 1994 (UNAUDITED)
------ ------ ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.. $14.18 $14.07 $14.74 $14.90 $15.35 $14.48
------ ------ ----- ------ ------ ------
INVESTMENT OPERATIONS:
Investment income_net................ 1.29 1.27 1.20 1.10 .99 .48
Net realized and unrealized gain (loss)
on investments...................... (.10) .68 .17 .46 (.87) (.51)
------ ------ ----- ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS.... 1.19 1.95 1.37 1.56 .12 (.03)
------ ------ ----- ------ ------ ------
DISTRIBUTIONS;
Dividends from investment income_net. (1.30) (1.28) (1.21) (1.11) (.99) (.47)
------ ------ ----- ------ ------ ------
Net asset value, end of period........ $14.07 $14.74 $14.90 $15.35 $14.48 $13.98
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN 8.56% 14.44% 9.65% 10.80% .71% (.46%)(1)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .97% .97% .95% .94% .95% .96%(1)
Ratio of net investment income to average
net assets.......................... 8.98% 8.81% 8.05% 7.20% 6.54% 6.66%(1)
Portfolio Turnover Rate............... 272.40% 25.85% 61.00% 155.90% 211.40% 184.31%(2)
Net Assets, end of period (000's Omitted) $1,496,469 $1,583,793 $1,756,776 $1,857,468 $1,601,947 $1,472,745
(1) Annualized.
(2) Not annualized.
See independent accountants' review report and notes to financial statements.
</TABLE>
DREYFUS GNMA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1_SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940 ("Act")
as a diversified open-end management investment company. Dreyfus Service
Corporation, until August 24, 1994, acted as the distributor of the Fund's
shares, which are sold to the public without a sales load. Dreyfus Service
Corporation is a wholly-owned subsidiary of The Dreyfus Corporation
("Manager"). Effective August 24, 1994, the Manager became a direct
subsidiary of Mellon Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The Distributor,
located at One Exchange Place, Boston, Massachusetts 02109, is a wholly-owned
subsidiary of Institutional Administrative Services, Inc., a provider of
mutual fund administrative services, the parent company of which is Boston
Institutional Group, Inc.
(A) PORTFOLIO VALUATION: The Fund's investments (excluding short-term
investments) are valued each business day by an independent pricing service
("Service") approved by the Board of Directors. 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 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.
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: Dividends are recorded on the ex-dividend
date. Dividends from investment income-net are declared and paid monthly.
Dividends from net realized capital gain, if any, 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. 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.
DREYFUS GNMA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
On October 31, 1994, the Board of Directors declared a cash dividend of
$.080 per share from undistributed investment income-net, payable on November
1, 1994 (ex-dividend date) to shareholders of record as of the close of
business on October 31, 1994.
(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
$132,464,000 available for Federal income tax purposes to be applied against
future net securities profits, if any, realized subsequent to April 30, 1994.
If not applied, $47,417,000 of the carryover expires in fiscal 1996,
$39,660,000 expires in fiscal 1997, $39,156,000 expires in fiscal 1998 and
$6,231,000 expires in fiscal 1999.
(E) Equalization: The Fund follows the accounting practice known as
"equalization" by which a portion of the amounts received on issuances and
the amounts paid on redemptions of Fund shares (equivalent, on a per share
basis, to the amount of distributable investment income-net on the date of
the transaction) is allocated to undistributed investment income-net so that
undistributed investment income-net per share is unaffected by Fund shares
issued or redeemed.
NOTE 2_MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .60 of 1% of the average
daily value of the Fund's net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Fund's
aggregate expenses, exclusive of taxes, interest, brokerage and extraordinary
expenses, exceed 1 1/2% of the average daily value of the Fund's net assets
for any full fiscal year. No expense reimbursement was required for the six
months ended October 31, 1994.
(B) On August 2, 1994, Fund shareholders approved a revised Service Plan
(the "Plan") pursuant to Rule 12b-1 under the Act. Pursuant to the Plan,
effective August 24, 1994, the Fund (a) reimburses the Distributor for
payments to certain Service Agents for distributing the Fund's shares and
servicing shareholder accounts and (b) pays the Manager, Dreyfus Service
Corporation or any affiliate (collectively "Dreyfus") for advertising and
marketing relating to the Fund and servicing shareholders accounts, at an aggr
egate 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 Service Agents (a
securities dealer, financial institution or other industry professional) a
fee in respect of the Fund's shares owned by 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
determines the amounts to be paid to Service Agents to which it will make
payments and the basis on which such payments are made. The Plan also
separately provides for the Fund to bear the costs of preparing, printing and
distributing certain of the Fund's prospectuses and statements of additional
information and costs associated with implementing and operating the Plan,
not to exceed the greater of $100,000 or .005 of 1% of the Fund's average
daily net assets for any full fiscal year.
DREYFUS GNMA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Prior to August 24, 1994, the Fund's Service Plan ("prior Service Plan")
provided that the Fund pay Dreyfus Service Corporation at an annual rate of
.20 of 1% of the value of the Fund's average daily net assets, for costs and
expenses in connection with advertising, marketing and distributing the
Fund's shares and for servicing shareholder accounts. Dreyfus Service
Corporation made payments to one or more Service Agents based on the value of
the Fund's shares owned by clients of the Service Agent. The prior Service
Plan also separately provided for the Fund to bear the costs of preparing,
printing and distributing certain of the Fund's prospectuses and statements
of additional information and costs associated with implementing and
operating the Plan, not to exceed the greater of $100,000 or .005 of 1% of
the Fund's average daily net assets for any full fiscal year.
During the six months ended October 31, 1994, $574,522 was charged to the
Fund pursuant to the Plan and $992,986 was charged pursuant to the prior
Service Plan.
(C) Prior to August 24, 1994 certain officers and directors of the Fund
were "affiliated persons," as defined in the Act, of the Manager and/or
Dreyfus Service Corporation. Each director who is not an "affiliated person"
receives an annual fee of $4,500 and an attendance fee of $500 per meeting.
NOTE 3_SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales (including paydowns) of
investment securities, excluding short-term securities, during the six months
ended October 31, 1994, amounted to $2,538,238,550 and $2,641,449,090,
respectively.
At October 31, 1994, accumulated net unrealized depreciation on
investments was $38,335,336, consisting of $11,319,088 gross unrealized
appreciation and $49,654,424 gross unrealized depreciation.
At October 31, 1994, 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 GNMA FUND, INC.
REVIEW REPORT OF ERNST & YOUNG LLP, INDEPENDENT ACCOUNTANTS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS GNMA FUND, INC.
We have reviewed the accompanying statement of assets and liabilities of
Dreyfus GNMA Fund, Inc., including the statement of investments, as of
October 31, 1994, and the related statements of operations and changes in net
assets and financial highlights for the six month period ended October 31,
1994. These financial statements and financial highlights are the
responsibility of the Fund's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which
will be performed for the full year with the objective of expressing an
opinion regarding the financial statements and financial highlights taken as
a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the interim financial statements and financial highlights
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the statement of changes in net assets for the year ended
April 30, 1994 and financial highlights for each of the five years in the
period ended April 30, 1994 and in our report dated June 8, 1994, we
expressed an unqualified opinion on such statement of changes in net assets
and financial highlights.
New York, New York
December 9, 1994
DREYFUS GNMA FUND, INC.
144 Glenn Curtiss Boulevard
Uniondale, NY 11556
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
The Shareholder Services Group, Inc.
P.O. Box 9671
Providence, RI 02940
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A. 265SA9410
GNMA
Fund, Inc.
Semi-Annual
Report
October 31, 1994
