DREYFUS GNMA FUND, INC.
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on the Dreyfus GNMA Fund,
Inc. For its fiscal year ended April 30, 1996, your Fund produced a total
return of 8.11%, which includes share price changes and interest income* as
compared to 7.77% for the Lipper GNMA Fund Category Average over the same
period.** Income dividends paid from net investment income of $.959 per share
were paid representing an annualized distribution rate per share of 6.61%.***
THE ECONOMY
Concern that the economy was heading toward recession was eased by the
recent release of brighter-than-expected reports on employment and consumer
spending. Consequently, the Federal Reserve Board has refrained from making
any further reductions in the Federal Funds rate since the last easing of
this benchmark interest rate on January 31. In reaction to the more
optimistic economic news (and the related fears of a potential rekindling of
inflation), long-term interest rates as measured by 30-year Treasury bonds
have risen nearly one percentage point since February.
The rosier tone to the economic outlook was heralded by reports of large
gains in employment for two consecutive months (February and March).
Furthermore, personal income and expenditures data indicated that consumers
continued to spend, despite their present high level of installment credit.
Retail sales reports have correspondingly edged higher, confirming a modest
recovery in consumer spending from its year-end slump.
Supporting the growing consensus that the economy has picked up steam
were reports of slow but steady growth in the manufacturing sector. After
adjusting data for the 17-day General Motors strike, industrial output rose
modestly. New orders for durable goods, a closely watched indicator of future
hiring and production, also posted gains.
Despite the economy's apparent recovery from its year-end pause,
inflation has remained under control. Through March of this year, the
Consumer Price Index rose at an annual rate of 2.8%. It is important to note
that there appear to be few signs of inflationary pressure in the economy.
Factories are running at a relatively comfortable rate of capacity (82.5%),
markedly below this expansion's peak of 85.1% reached over a year ago. With
major industries trying to reduce inventories, there is little to suggest
that product pricing will surge upwards. Reflecting this absence of so-called
pipeline inflationary pressure, price increases at both the wholesale and
production levels of the economy remained similarly under control. The
cautionary stance of the Federal Reserve regarding additional reductions in
interest rates combined with the fiscal restraint from reduced government
spending should serve as additional moderating forces against any resurgence
in inflation.
We are mindful, however, of several signals which prompt us to be alert
to a potential change in what has been a benign inflation picture. The recent
rise in oil prices, along with strength in other commodity prices such as
grain, is not to be dismissed lightly. While they may be only aberrations of
a temporary nature, they also could represent early warning signs of a
fundamental change in inflation which will be seen later in the year.
THE PORTFOLIO
In managing the portfolio, we have attempted to make those changes
necessary to adapt to an environment wherein interest rates were first
falling dramatically, then rising just as dramatically. The entire portfolio
has been restructured so that we now primarily own "seasoned" GNMAs.+ The
strategy behind this investment approach is our belief that seasoned mortgage
securities will prepay more slowly in a falling rate environment when
reinvestment rates are low, and will prepay faster in a rising rate
environment when reinvestment rates are higher. Furthermore, in October of
last year we also started to implement a moderately defensive strategy in the
Fund. We have eliminated our holdings in most Treasury notes and bond issues,
which represented approximately 9% of total holdings. We used those proceeds
and cash to purchase GNMA 15-year mortgages. In a rising rate environment,
15-year GNMAs trade to an average life of about 7 years. The Treasuries that
were sold were in the 10-year maturity and 30-year maturity areas. These
longer securities tend to underperform the shorter maturity securities in a
rising rate environment. Those 15-year GNMA mortgages represent 13% of
holdings. In the 9% coupon area, we eliminated all mortgages issued in 1994
and 1995, which represented 10% of our holdings. In the 7% coupon area, we
did the same thing as with 9% coupons, ultimately increasing our holdings in
seasoned securities by 11%. We did the same in the 7 1/2% coupon area,
increasing our seasoned holdings there by 8%. We believe that these changes
helped the Fund achieve a total return over the past fiscal year which
exceeded the Lipper Category Average. It is hoped that over the next year or
two, all other things remaining relatively stable, this strategy will result
in strong total returns for our shareholders. Of course, we will adjust the
portfolio as circumstances warrant.
Included in this report is a series of detailed statements about your
Fund's holdings and its financial condition. We hope they are informative.
Please know that we greatly appreciate your continued confidence in the Fund
and in The Dreyfus Corporation.
Very truly yours,
[Garitt A. Kono signature logo]
Garitt A. Kono
Portfolio Manager
May 15, 1996
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains
paid.
**SOURCE: LIPPER ANALYTICAL SERVICES, INC.
***Annualized 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.
+ Seasoned GNMAs are those securities that have a final maturity of 27.5 years
or less. Newly issued GNMAs have 30-year final
maturities.
DREYFUS GNMA FUND, INC. APRIL 30, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS GNMA FUND,
INC.
AND THE LEHMAN BROTHERS GNMA INDEX
[Exhibit A:
Dollars
$23,682
Lehman Brothers
GNMA Index*
$20,426
Dreyfus GNMA Fund
*Source: Lehman Brothers]
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS
<S> <C> <C> <C>
ONE YEAR ENDED FIVE YEARS ENDED TEN YEARS ENDED
APRIL 30, 1996 APRIL 30, 1996 APRIL 30, 1996
_________ _________ _________
8.11% 6.95% 7.40%
</TABLE>
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Dreyfus GNMA Fund, Inc.
on 4/30/86 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 GNMA FUND, INC.
STATEMENT OF INVESTMENTS APRIL 30, 1996
<S> <C> <C>
PRINCIPAL
BONDS AND NOTES-96.4% AMOUNT VALUE
________ ________
MORTGAGE-BACKED SECURITIES-95.4%
Government National Mortgage Association I:
7%, 11/15/2007-11/15/2024............................................... $ 317,464,315 $ 309,390,225
7 1/2%, 8/15/2000-8/15/2025............................................. 399,823,118 397,910,846
8%, 4/15/2017-2/15/2025................................................. 133,534,372 135,588,444
8 1/2%, 2/15/2006-12/15/2022............................................ 90,079,465 93,518,339
9%, 7/15/2001-12/15/2022................................................ 84,845,692 89,805,261
9 1/2%, 1/15/2016-11/15/2024............................................ 64,789,599 69,958,408
10%, 11/15/2009-10/15/2020.............................................. 40,947,101 45,330,046
10 1/2%, 11/15/2013-6/15/2021........................................... 31,060,565 34,737,609
11%, 7/15/1999-9/15/2019................................................ 43,794,369 49,166,076
11 1/2%, 3/15/2010-7/15/2019............................................ 17,195,299 19,473,010
12%, 2/15/2015.......................................................... 38,628 44,071
________
1,244,922,335
________
Government National Mortgage Association II:
9%, 3/20/2016........................................................... 2,718,804 2,863,227
9 1/2%, 2/20/2016-2/20/2025............................................. 9,850,399 10,510,269
10 1/2%, 7/20/2013-9/20/2018............................................ 5,596,017 6,131,751
12%, 9/20/2013-12/20/2015............................................... 1,313,042 1,472,656
13 1/2%, 7/20/2014-6/20/2015............................................ 899,608 1,026,111
________
22,004,014
________
Government National Mortgage Association I,
Graduated Payment Mortgage:
10 1/4%, 7/15/2018-10/15/2018........................................... 330,990 366,674
10 3/4%, 3/15/2010-4/15/2016............................................ 884,166 985,543
11%, 9/15/2010-3/15/2011................................................ 500,008 551,494
11 1/4%, 7/15/2015-12/15/2015........................................... 1,732,050 1,918,782
12 1/4%, 2/15/2014-3/15/2015............................................ 69,266 77,427
________
3,899,920
________
Government National Mortgage Association II,
Graduated Payment Mortgage:
11 1/4%, 4/20/2014-1/20/2016............................................ 434,734 480,516
11 3/4%, 6/20/2015-1/20/2016............................................ 268,678 297,475
________
777,991
________
Government National Mortgage Association I,
Project Loan:
7 1/2%, 1/15/2030....................................................... 17,387,018 17,191,414
7 5/8%, 12/15/2030...................................................... 7,488,188 7,448,351
8%, 1/15/2032........................................................... 6,014,785 6,101,217
9 1/4%, 10/15/2023...................................................... 6,966,616 7,371,516
________
38,112,498
________
TOTAL MORTGAGE-BACKED SECURITIES............................................ 1,309,716,758
========
DREYFUS GNMA FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) APRIL 30, 1996
PRINCIPAL
BONDS AND NOTES (CONTINUED) AMOUNT VALUE
________ ________
U.S. TREASURY NOTES-1.0%
5 5/8%, 2/15/2006....................................................... $ 15,000,000 $ 13,905,469
========
TOTAL BONDS AND NOTES
(cost $1,315,121,654)................................................... $1,323,622,227
========
SHORT-TERM INVESTMENT-3.0%
REPURCHASE AGREEMENT;
Lanston (Aubrey G.) & Co. Inc., 5.30%
Dated 4/30/1996, Due 5/1/1996 in the amount of $41,806,154
(fully collateralized by $43,701,000 U.S. Treasury Bills
due 12/12/1996, value $42,302,568)
(cost $41,800,000)...................................................... $ 41,800,000 $ 41,800,000
========
TOTAL INVESTMENTS
(cost $1,356,921,654)................................................... 99.4% $1,365,422,227
===== ========
CASH AND RECEIVABLES (NET).................................................. .6% $ 8,195,955
===== ========
NET ASSETS ........................................................... 100.0% $1,373,618,182
===== ========
</TABLE>
See notes to financial statements.
<TABLE>
DREYFUS GNMA FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value-Note 1(a,b)
(cost $1,356,921,654)-see statement................................... $1,365,422,227
Cash.................................................................... 1,526,707
Receivable for investment securities sold............................... 30,269,777
Interest receivable..................................................... 8,854,008
Receivable for subscriptions to Common Stock............................ 1,000
Prepaid expenses........................................................ 29,973
________
1,406,103,692
LIABILITIES:
Due to The Dreyfus Corporation and subsidiaries......................... $ 875,178
Due to Distributor...................................................... 33,551
Payable for investment securities purchased............................. 30,219,778
Payable for Common Stock redeemed....................................... 781,337
Accrued expenses........................................................ 575,666 32,485,510
______ ________
NET ASSETS ................................................................ $1,373,618,182
========
REPRESENTED BY:
Paid-in capital......................................................... $1,444,147,681
Accumulated undistributed investment income-net......................... 10,756,047
Accumulated net realized (loss) on investments-Note 1(d)................ (89,786,119)
Accumulated net unrealized appreciation on investments-Note 3........... 8,500,573
________
NET ASSETS at value, applicable to 94,744,882 shares outstanding
(1.1 billion shares of $.01 par value Common Stock authorized).......... $1,373,618,182
========
NET ASSET VALUE, offering and redemption price per share
($1,373,618,182 / 94,744,882 shares).................................... $14.50
========
</TABLE>
See notes to financial statements.
<TABLE>
DREYFUS GNMA FUND, INC.
STATEMENT OF OPERATIONS YEAR ENDED APRIL 30, 1996
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $108,179,285
EXPENSES:
Management fee-Note 2(a).............................................. $ 8,616,559
Shareholder servicing costs-Note 2(b)................................. 4,089,293
Custodian fees........................................................ 463,870
Prospectus and shareholders' reports-Note 2(b)........................ 221,018
Professional fees..................................................... 94,867
Directors' fees and expenses-Note 2(c)................................ 59,268
Registration fees..................................................... 45,233
Miscellaneous......................................................... 169,199
______
TOTAL EXPENSES.................................................. 13,759,307
_______
INVESTMENT INCOME-NET........................................... 94,419,978
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 37,350,721
Net unrealized (depreciation) on investments............................ (18,977,802)
______
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 18,372,919
_______
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $112,792,897
=======
</TABLE>
See notes to financial statements.
<TABLE>
DREYFUS GNMA FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED APRIL 30,
____________________________________
1995 1996
________ ________
<S> <C> <C>
OPERATIONS:
Investment income-net.................................................. $ 103,047,317 $ 94,419,978
Net realized gain (loss) on investments................................ (80,789,008) 37,350,721
Net unrealized appreciation (depreciation) on investments for the year. 59,067,593 (18,977,802)
________ ________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................. 81,325,902 112,792,897
________ ________
NET EQUALIZATION (DEBITS)-NOTE 1(E)........................................ (782,557) (542,312)
________ ________
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net.................................................. (100,907,536) (94,057,379)
________ ________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold.......................................... 98,695,554 94,687,640
Dividends reinvested................................................... 76,473,356 71,629,184
Cost of shares redeemed................................................ (320,877,856) (246,765,286)
________ ________
(DECREASE) IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS............. (145,708,946) (80,448,462)
________ ________
TOTAL (DECREASE) IN NET ASSETS................................... (166,073,137) (62,255,256)
NET ASSETS:
Beginning of year...................................................... 1,601,946,575 1,435,873,438
________ ________
End of year (including undistributed investment income-net:
$10,935,760 in 1995 and $10,756,047 in 1996)......................... $1,435,873,438 $1,373,618,182
======== ========
SHARES SHARES
________ ________
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................ 6,996,614 6,485,788
Shares issued for dividends reinvested................................. 5,428,508 4,914,131
Shares redeemed........................................................ (22,822,022) (16,918,960)
________ ________
NET (DECREASE) IN SHARES OUTSTANDING................................. (10,396,900) (5,519,041)
======== ========
</TABLE>
See notes to financial statements.
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
asets and other supplemental data for each year indicated. This information
has been derived from the Fund's financial statements.
<TABLE>
YEAR ENDED APRIL 30,
____________________________________________________________
PER SHARE DATA: 1992 1993 1994 1995 1996
____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........... $14.74 $14.90 $15.35 $14.48 $14.32
____ ____ ____ ____ ____
INVESTMENT OPERATIONS:
Investment income-net........................ 1.20 1.10 .99 .98 .96
Net realized and unrealized gain (loss)
on investments............................. .17 .46 (.87) (.18) .18
____ ____ ____ ____ ____
TOTAL FROM INVESTMENT OPERATIONS........... 1.37 1.56 .12 .80 1.14
____ ____ ____ ____ ____
DISTRIBUTIONS;
Dividends from investment income-net......... (1.21) (1.11) (.99) (.96) (.96)
____ ____ ____ ____ ____
Net asset value, end of year................. $14.90 $15.35 $14.48 $14.32 $14.50
____ ____ ____ ____ ____
____ ____ ____ ____ ____
TOTAL INVESTMENT RETURN.......................... 9.65% 10.80% .71% 5.81% 8.11%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets...... .95% .94% .95% .97% .96%
Ratio of net investment income to average net assets 8.05% 7.20% 6.54% 6.90% 6.57%
Portfolio Turnover Rate...................... 61.00% 155.90% 211.40% 362.70% 144.43%
Net Assets, end of year (000's Omitted)...... $1,756,776 $1,857,468 $1,601,947 $1,435,873 $1,373,618
</TABLE>
See notes to financial statements.
DREYFUS GNMA FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus GNMA Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940 ("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 ("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")
acts as the distributor of the Fund's shares, which are sold to the public
without a sales load.
(A) PORTFOLIO VALUATION: The Fund's investments (excluding U.S.
Government obligations and 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. Investments in U.S. Government obligations are
valued at the mean between quoted bid and asked prices. 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 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.
On April 30, 1996, the Board of Directors declared a cash dividend of
$.079 per share from undistributed investment income-net, payable on May 1,
1996 (ex-dividend date) to shareholders of record as of the close of business
on April 30, 1996.
DREYFUS GNMA FUND, INC.
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
$89,768,000 available for Federal income tax purposes to be applied against
future net securities profits, if any, realized subsequent to April 30, 1996.
If not applied, $20,521,000 of the carryover expires in fiscal 1998 and
$69,247,000 expires in fiscal 2003.
In connection with the adoption of Statement of Position 93-2
("Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies"),
the Fund has reclassified $7,257,708 from accumulated net realized loss on
investments to paid-in-capital. Results of operations and net assets were not
affected by this reclassification.
(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 value
of the Fund's average daily 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, brokerage, interest on borrowings 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 year ended April 30, 1996.
(B) Under the Service Plan (the "Plan") adopted pursuant to Rule 12b-1
under the Act, the Fund (a) reimburses the Distributor for payments to
certain Service Agents (a securities dealer, financial institution or other
industry professional) for distributing the Fund's shares and servicing
shareholder accounts ("Servicing") and (b) pays the Manager, Dreyfus Service
Corporation, a wholly-owned subsidiary of the Manager, and any affiliate or
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. Both the Distributor
and Dreyfus may pay one or more Service Agents 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.
Both the Distributor and Dreyfus determine the amounts, if any, 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 value of the Fund's average daily net assets
for any full fiscal year. During the year ended April 30, 1996, $2,892,389
was charged to the Fund pursuant to the Plan.
DREYFUS GNMA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Effective December 1, 1995, 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. Such compensation amounted to $366,276
for the period from December 1, 1995 through April 30, 1996.
Effective May 29, 1996, the Fund entered into a Custody Agreement with
Mellon to provide custodial services for the Fund.
(C) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $4,500 and an attendance fee of $500
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales (including paydowns) of
investment securities, excluding short-term securities, during the year ended
April 30, 1996, amounted to $2,000,864,682 and $2,065,676,081, respectively.
At April 30, 1996, accumulated net unrealized appreciation on investments
was $8,500,573, consisting of $27,210,792 gross unrealized appreciation and
$18,710,219 gross unrealized depreciation.
At April 30, 1996, 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.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS GNMA FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Dreyfus GNMA Fund, Inc., including the statement of investments, as of April
30, 1996, 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. Our procedures included confirmation of
securities owned as of April 30, 1996 by correspondence with the custodian
and brokers. 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 GNMA Fund, Inc. at April 30, 1996, 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.
[Ernst and Young LLP signature logo]
New York, New York
June 7, 1996
[Dreyfus lion "d" logo]
DREYFUS GNMA FUND, INC.
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.
One American Express Plaza
Providence, RI 02903
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A. 265AR964
[Dreyfus logo]
GNMA
Fund, Inc.
Annual Report
April 30, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN DREYFUS GNMA FUND, INC. AND THE
LEHMAN BROTHERS GNMA INDEX
EXHIBIT A:
______________________________________________________
| | | |
| PERIOD | LEHMAN BROTHERS | DREYFUS |
| | GNMA INDEX * | GNMA FUND |
|----------- | ---------------------- | ------------ |
| 4/30/86 | 10,000 | 10,000 |
| 4/30/87 | 10,630 | 10,448 |
| 4/30/88 | 11,590 | 11,183 |
| 4/30/89 | 12,560 | 11,749 |
| 4/30/90 | 13,935 | 12,754 |
| 4/30/91 | 16,180 | 14,596 |
| 4/30/92 | 18,072 | 16,004 |
| 4/30/93 | 20,008 | 17,731 |
| 4/30/94 | 20,021 | 17,857 |
| 4/30/95 | 21,739 | 18,894 |
| 4/30/96 | 23,682 | 20,426 |
|--------------------------------------------------- |
*Source: Lehman Brothers
