<PAGE>
Dreyfus
GNMA Fund, Inc.
Annual Report
April 30, 1998
<PAGE>
Dreyfus GNMA Fund, Inc.
- -------------------------------------------------------------------------------
Letter to Shareholders
Dear Shareholder:
We are pleased to report the performance for the Dreyfus GNMA Fund, Inc. For
the 12-month reporting period ended April 30, 1998, your Fund produced a total
return, including share price changes and dividend income generated, of 10.38%.*
Income dividends paid from net investment income during the period amounted to
$0.907, representing a distribution rate per share of 6.05%.**
Economic Review
The United States is now in the eighth year of economic expansion. Inflation
continues to rise at the slowest pace since 1964 and the unemployment rate has
fallen to a level not seen in 25 years. Not surprisingly, consumer confidence
has soared. Along with continued evidence of the robustness of the economy have
come heightened expectations that the Federal Reserve Board will raise interest
rates in a preemptive move to avoid a reignition of inflation. The last increase
in short-term rates came in March 1997 when the Federal Open Market Committee
(the policy-making arm of The Fed) hiked the target rates for Federal Funds by
one quarter of a percent to 5.5%. (The Federal Funds rate is the rate of
interest that banks charge one another for overnight loans.)
Inflation has remained benign on all fronts, even in the tight labor market,
an area closely watched by the Fed for signs of incipient inflation. The Labor
Department's Employment Cost Index (ECI), a measure of wage, salary and benefit
costs, suggests that wage inflation so far is not a problem. In fact, the first
quarter increase in the ECI (0.7%) was its smallest quarterly rise in two years.
Another inflation gauge, the broad-based Gross Domestic Product Price Deflator,
rose at an annual rate of only 0.9% in the first quarter, its lowest rate since
1964. Inflation as measured by the Consumer Price Index has been similarly tame.
Prices at the consumer level have risen at an annual rate of about 1.5% over the
reporting period. The lack of inflation has been even more dramatic at the
production level of the economy where prices have fallen: in the 12 months ended
March 31, the Producer Price Index declined 1.8%. Such a generally tepid price
environment has been partly fostered by the economic problems in Asia which have
suppressed worldwide demand for commodities, particularly oil.
Reflecting a level of confidence not seen in three decades, consumers
increased their spending over the reporting period, the first-quarter rate
rising at the fastest pace in six years. Not surprisingly, the growth rate in
new-home construction over the reporting period was the strongest in four years.
Plentiful and well-paying jobs (total wage and salary income is 7% higher than a
year ago), low interest rates, the absence of inflation and investment market
gains have resulted in a financially healthy consumer with a corresponding
propensity to spend. Strong domestic demand for lower-priced imports has
contributed further to the quiescent inflation environment while offsetting the
drag on the economy resulting from the Asian financial crisis. It is still
widely expected that the Asian economic slowdown will have a further dampening
effect on the U.S. economy. Although the surge in domestic spending has masked
the full impact of the fall in Asian demand, our trade deficit has reached a
ten-year high, a dramatic sign of deterioration. Expectation of an economic
slowdown is another reason why the Fed has been reluctant to raise short-term
interest rates.
The production side of the economy has remained robust. Factory utilization
has been high, production rates strong, and while exports to Asia have fallen
sharply, they are growing in the rest of the world. Such resilience has been
characteristic of one of the longest, most healthy economic advances in our
history. Yet we remain mindful that the concept of an economic cycle is not
dead, nor is inflation, and we are alert for indications of a resurgence in
price pressures.
<PAGE>
Market Environment
The interest rate environment for the first part of 1998 can be described by
the word "stability." The one negative aspect of this interest rate stability is
that it is coming at a time when the absolute level of interest rates is at an
historic low. This is unfavorable for the mortgage investor. Having interest
rate stability during a historic low interest-rate environment has led to an
extraordinary level of housing purchases and a historically unprecedented level
of homeowner mortgage refinancing. Both of these activities contribute to
increased prepayments on mortgage-backed securities, and increased prepayments
generally cause an erosion of yield for the mortgage-backed security investor.
On the more positive side of this market, the pace of investor demand for
mortgage-backed securities continues to outrun supply. The two large
government-sponsored agencies, Fannie Mae and Freddie Mac, continue to struggle
to grow their retained portfolios. This, along with a general increased demand
for high-yielding, high-quality securities, has helped to keep mortgage
valuations higher.
Our market outlook, going forward, is for lower interest rates. Our
expectations are for the markets to test new lows in interest rates, and for
mortgage refinancing to continue to be high. But we believe that mortgage
investor demand will also remain very strong, and that going forward for the
rest of 1998, mortgage-backed securities have the potential to outperform
comparable term high-quality fixed-income securities. Of course, mortgage
securities tend to offer an incremental yield advantage versus comparable term
U.S. Treasuries. And, as always, there can be no guarantee of how the Fund
actually will perform.
The Portfolio
Consistent with our market view, over the first few months of 1998 we have
continued to focus on insulating the portfolio from the effects of mortgage loan
prepayments. This major theme starts with keeping the Fund duration longer than
that of the Lehman Brothers GNMA Index and, as of April 30, 1998, the Fund's
duration was approximately 5% longer than the duration of the Lehman Brothers
GNMA Index.
In addition to the duration strategy, we have continued to lower the average
dollar price of the securities within the portfolio. During the first quarter of
1998, we reduced our holdings of premium GNMA 7% and 7.50% securities, in favor
of discount 6.50% securities. This was primarily done in the 30-year GNMA
pass-through security holdings. This has the effect of decreasing the Fund's
exposure to mortgage loan prepayments, where an early principal payment does not
decrease the yield earned by the investor on a discount GNMA security.
Last, we have continued to increase the Fund's holdings of non-GNMA
securities. These include U.S. Treasuries, asset-backed securities, commercial
mortgage-backed securities, FNMA CMOs and FHLMC CMOs, as well as non-agency CMOs
issued by large banking institutions. These securities are generally
call-protected from mortgage refinancing activity. In addition to possessing
better call protection, except for U.S. Treasuries, these securities also
generally are higher yielding than GNMAs. Hence, adding CMOs and asset-backed
securities to the Fund has improved the current monthly yield paid to investors.
<PAGE>
It is our continued pleasure to manage this Fund, and with the recently added
investment flexibility, we have been better prepared to handle the mortgage loan
refinancing wave that has hindered the performance of GNMA pass-through
securities. It is our hope that our constant efforts and astute investment
outlook will protect our investors from yield erosion, and we will continue to
provide a stable yield and a healthy return to our shareholders.
Sincerely,
/s/ Michael Hoeh
Michael Hoeh
Portfolio Manager
May 18, 1998
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains paid.
** 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.
<PAGE>
Dreyfus GNMA Fund, Inc.
- -------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS GNMA FUND, INC.
AND THE LEHMAN BROTHERS GNMA INDEX
$24,279
Lehman Brothers
GNMA Index*
$21,404
Dreyfus GNMA
Fund, Inc.
*Source: Lehman Brothers
Average Annual Total Returns
- -------------------------------------------------------------------------------
One Year Ended Five Years Ended Ten Years Ended
April 30, 1998 April 30, 1998 April 30, 1998
--------------- ---------------- ---------------
10.38% 6.19% 7.91%
- -----------
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Dreyfus GNMA Fund, Inc. on
4/30/88 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.
<PAGE>
<TABLE>
<CAPTION>
Dreyfus GNMA Fund, Inc.
- --------------------------------------------------------------------------------
Statement of Investments April 30, 1998
Principal
Bonds and Notes--104.5% Amount Value
- ----------------------------------------------------------------------------- -------------- --------------
<S> <C> <C>
U.S. Government Agencies/
Mortgage-Backed Securities--80.8%
Government National Mortgage Association I:
6-1/2%, 9/15/2008-10/15/2012............................................... $ 107,219,936 $ 108,554,793
6-1/2%, 2/15/2009-10/15/2011............................................... 22,866,246 (a) 23,174,233
6-1/2%..................................................................... 8,000,000 (b) 7,907,441
7%, 6/15/2009............................................................. 9,911,722 (a) 10,202,830
7%,11/15/2022-12/15/2022.................................................. 416,241 424,303
7%........................................................................ 51,400,000 (b) 51,952,602
7-1/2%, 8/15/2000-12/15/2023............................................... 213,643,229 221,115,276
7-1/2%, 12/15/2007......................................................... 5,703,595 (a) 5,913,886
8%, 4/15/2008-9/15/2008................................................... 56,652,983 (a) 59,029,528
8%, 1/15/2018-12/15/2022.................................................. 7,035,964 7,364,525
8-1/2%, 2/15/2006-12/15/2022............................................... 37,059,860 39,563,656
8-1/2%, 10/15/2017-11/15/2017.............................................. 23,321,064 (a) 25,055,451
9%, 7/15/2001-12/15/2022.................................................. 57,087,843 62,054,267
9-1/2%, 1/15/2016-11/15/2024............................................... 38,636,090 42,161,791
11%, 9/15/2000-1/15/2001.................................................. 195,395 207,853
--------------
664,682,435
--------------
Government National Mortgage Association I,
Graduated Payment Mortgage:
10-1/4%, 8/15/2018-10/15/2018.............................................. 142,350 156,051
10-3/4%, 3/15/2010-2/15/2016............................................... 411,016 455,200
12-1/4%, 2/15/2014-3/15/2015............................................... 67,065 76,549
--------------
687,800
--------------
Government National Mortgage Association I,
Project Loans:
6.60%, 9/15/2030.......................................................... 6,453,000 6,525,596
6-5/8%, 3/15/2033-5/15/2033................................................ 5,359,927 5,413,282
6.67%, 2/1/2033........................................................... 2,803,461 2,815,712
6.70%..................................................................... 1,182,300 (b) 1,194,123
6-3/4%, 4/15/2028.......................................................... 2,424,200 2,470,405
6-3/4%..................................................................... 1,510,300 (b) 1,537,198
6.80%, 2/1/2033........................................................... 6,432,912 6,497,242
7%, 12/15/2034............................................................ 4,364,484 4,447,671
7%........................................................................ 500,000 (b) 517,965
7.05%, 10/15/2021......................................................... 4,100,000 4,253,750
7-1/2%, 1/15/2035.......................................................... 6,901,315 7,308,907
9-1/4%, 10/15/2023......................................................... 6,850,439 7,411,286
--------------
50,393,137
--------------
Government National Mortgage Association II:
5%, 4/20/2028............................................................. 59,470,000 (c) 59,042,411
5-1/2%, 2/20/2027-4/20/2028................................................ 58,113,084 (c) 58,278,865
6-1/2%, 11/20/2025-6/20/2027............................................... 11,168,322 (c) 11,028,792
9%, 3/20/2016............................................................. 1,575,920 1,701,001
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Dreyfus GNMA Fund, Inc.
- -------------------------------------------------------------------------------
Principal
Bonds and Notes (continued) Amount Value
- ----------------------------------------------------------------------------- -------------- --------------
<S> <C> <C>
U.S. Government Agencies/
Mortgage-Backed Securities (continued)
Government National Mortgage Association II (continued):
9-1/2%, 2/20/2016-2/20/2025................................................ $ 4,345,691 $ 4,699,757
10-1/2%, 7/20/2013-9/20/2018............................................... 3,429,187 3,748,513
--------------
138,499,339
--------------
Government National Mortgage Association II,
Graduated Payment Mortgage;
11-3/4%, 6/20/2015-1/20/2016............................................... 217,128 245,013
--------------
Federal Home Loan Mortgage Corp., Real Estate Mortgage Investment Conduit,
Stripped Securities, Interest Only Class:
Ser. 1379, Cl. T, 7-1/2%, 2021............................................. 10,000,000 (d) 2,809,800
Ser. 1628, Cl. MA, 6-1/2%, 2022............................................ 12,538,056 (d) 1,516,729
Ser. 1829, Cl. I, 6-1/2%, 2017............................................. 5,990,962 (d) 670,239
Ser. 1882, Cl. PK, 7%, 2026............................................... 3,181,482 (d) 1,398,589
Ser. 1969, Cl. PI, 7% 2009................................................ 6,451,714 (d) 1,189,567
Ser. 1998, Cl. PK, 7%, 2026............................................... 14,974,466 (d) 3,604,653
Ser. 1999, Cl. QK, 7%, 2025............................................... 10,459,067 (d) 2,565,400
Ser. 2021, Cl. PS, 6-1/2%, 2026............................................ 10,917,075 (d) 3,043,135
Ser. 2043, Cl. IE, 6-1/2%, 2023............................................ 29,993,269 (d) 7,278,054
Ser. 2048, Cl. QI, 6-1/2%, 2026............................................ 11,420,700 (d) 2,573,227
--------------
26,649,393
--------------
Federal National Mortgage Association:
6.82%, 2028............................................................... 3,592,126 3,634,782
Real Estate Mortgage Investment Conduit,
Collateralized Mortgage Obligations,
Ser. 1996-64, Cl. PK, 6-1/2%, 2011....................................... 39,500,000 39,879,200
Ser. 1997-40, Cl. PI, 7%, 2027.......................................... 31,676,142 12,335,640
Stripped Securities, Interest Only Class:
Ser. 1993-133, Cl. HA, 9.96%, 2022...................................... 8,200,000 (d) 2,978,009
Ser. 1997-84, Cl. PI, 6-1/2%, 2021....................................... 2,414,201 (d) 744,630
Ser. 1997-85, Cl. PI, 7%, 2012.......................................... 17,980,858 (d) 4,040,074
Ser. 1997-16, Cl. PJ, 7%, 2026.......................................... 10,391,204 (d) 2,419,385
--------------
66,031,720
--------------
Total U. S. Government Agencies/
Mortgage-Backed Securities.................................................. 947,188,837
==============
Asset-Backed Securities--4.3%
California Infrastucture:
Pacific Gas & Electric-1,
Ser.1997-1, Cl. A-6, 6.32%, 2005........................................ 2,500,000 2,522,656
Southern California Edison-1,
Ser. 1997-1, Cl. A-5, 6.28%, 2005....................................... 18,257,000 18,489,046
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Dreyfus GNMA Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Investments (continued) April 30, 1998
Principal
Bonds and Notes (continued) Amount Value
- ----------------------------------------------------------------------------- -------------- --------------
<S> <C> <C>
Asset-Backed Securities (continued)
Equivantage Home Equity Loan Trust,
Ser. 1997-1, Cl. A-4, 7.275%, 2028........................................ $ 7,000,000 $ 7,079,844
The Money Store Home Equity Trust,
Asset-Backed Ctfs.,
Ser. 1998-A, Cl. AF-7, 6.87%, 2039........................................ 15,750,000 15,690,938
Nomura Depositor Trust,
Ser. 1998-ST1A, Cl. A-3, 6.205%, 2003..................................... 7,500,000 (e,f) 7,518,748
--------------
Total Asset-Backed Securities............................................... 51,301,232
==============
Commercial Mortgage-Backed Securities--15.2%
Asset Securitization,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1997-D5, Cl. A-2, 7.068%, 2041....................................... 41,450,781 41,891,196
BTC Mortgage Investors Trust,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1997-S1, Cl. C, 6.645%, 2009......................................... 20,000,000 (e) 20,156,250
Deutsche Mortgage and Asset Receiving,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1998-C1, Cl. C, 6.861%, 2008......................................... 20,000,000 20,156,250
DLJ Commercial Mortgage,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1998-STFA, Cl. A-1, 5.908%, 2000..................................... 3,700,000 (e,f) 3,700,000
GMAC Commercial Mortgage Securities,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1997-C2, Cl. C, 6.91%, 2007.......................................... 24,725,000 25,103,602
Library Tower Trust I,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1998-I, Cl. B, 6.66%, 2029........................................... 6,500,000 (e) 6,456,962
Merrill Lynch Mortgage Investors,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1997-SD1, Cl. F, 6.138%, 2010........................................ 5,000,000 (e,f) 5,000,000
Mortgage Capital Funding,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1997-MC2, Cl. C, 6.881%, 2007........................................ 20,028,864 20,185,340
Morgan Stanley Capital I,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1997-ALIC, Cl. C, 6.84%, 2007........................................ 10,000,000 10,025,000
Nomura Asset Securities,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1998-D6, Cl. A-3, 6.979%, 2028....................................... 25,000,000 25,171,875
--------------
Total Commercial Mortgage-Backed Securities................................. 177,846,475
==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Dreyfus GNMA Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Investments (continued) April 30, 1998
Principal
Bonds and Notes (continued) Amount Value
- ----------------------------------------------------------------------------- -------------- --------------
<S> <C> <C>
Residential Mortgage-Backed Securities--4.1%
Blackrock Capital Finance,
Mortgage Pass-Through Ctfs.,
Ser. 1997-R3, Cl. B-2, 7-1/4%, 2028........................................ $ 12,925,029 (e) $ 12,787,701
GE Capital Mortgage Services,
Multi-Class Pass-Through Ctfs.:
Ser. 1997-13, Cl. B-1, 6-3/4%, 2012........................................ 495,503 491,524
Ser. 1998-1, Cl. B-1, 6-3/4%, 2013......................................... 991,578 983,576
Norwest Asset Securities,
Mortgage Pass-Through Ctfs.:
Ser. 1997-20, Cl. B-1, 6-3/4%, 2012........................................ 1,004,988 996,958
Ser. 1998-9:
Cl. B-1, 6-1/2%, 2028.................................................... 3,300,268 3,231,168
Cl. B-2, 6-1/2%, 2028.................................................... 3,162,381 3,076,899
Ser. 1998-14, Cl. B-2, 6-1/2%, 2013........................................ 1,500,000 1,467,045
PNC Mortgage Securities,
Mortgage Pass-Through Ctfs.,
Ser. 1998-2:
Cl. 3B-2, 6-3/4%, 2013................................................... 771,504 766,441
Cl. 4B-2, 6-3/4%, 2027................................................... 672,212 655,197
Prudential Home Mortgage Securities,
Mortgage Pass-Through Ctfs.:
Ser. 1995-6, Cl. B-1, 7-1/2%, 2025......................................... 4,249,426 4,347,694
Ser. 1995-7, Cl. B-1, 7%, 2025............................................ 3,955,420 (e) 3,985,086
Ser. 1996-8, Cl. B-1, 6-3/4%, 2026......................................... 2,643,004 2,623,181
Residential Funding Mortgage Securities I,
Mortgage Pass-Through Ctfs.:
Ser. 1995-S17, Cl. M-2, 7-1/2%, 2025....................................... 5,466,988 5,557,535
Ser. 1996-S7, Cl. M-2, 7%, 2026........................................... 4,864,165 4,876,325
Ser. 1997-S16, Cl. M-2, 6-3/4%, 2012....................................... 1,258,850 1,248,817
Ser. 1998-S1, Cl. M-2, 6-1/2%, 2013........................................ 1,118,218 1,093,461
--------------
Total Residential Mortgage-Backed Securities................................ 48,188,608
==============
U.S. Government--.1%
U.S. Treasury Bonds,
6-1/8%, 11/15/2027......................................................... 1,000,000 1,024,160
==============
TOTAL BONDS AND NOTES
(cost $1,201,158,125)..................................................... $1,225,549,312
==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Dreyfus GNMA Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Investments (continued) April 30, 1998
Principal
Short-Term Investments--.1% Amount Value
- ----------------------------------------------------------------------------- -------------- --------------
<S> <C> <C>
U.S. Treasury Bills;
5.54%, 5/28/1998
(cost $796,970)........................................................... $ 800,000 (g) $ 797,264
==============
TOTAL INVESTMENTS
(cost $1,201,955,095)..................................................... 104.6% $1,226,346,576
====== ==============
LIABILITIES, LESS CASH AND RECEIVABLES...................................... (4.6%) $ (53,554,753)
====== ==============
NET ASSETS.................................................................. 100.0% $1,172,791,823
====== ==============
<FN>
Notes to Statement of Investments:
- -------------------------------------------------------------------------------
(a) Held by the custodian in a segregated account as collateral for securities
purchased on a forward commitment basis.
(b) Purchased on a forward commitment basis.
(c) Adjustable rate mortgage-interest rate subject to change periodically.
(d) Reflects notional face.
(e) 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 April 30, 1998
these securities amounted to $59,604,749 or 5.1% of net assets.
(f) Variable rate security-interest rate subject to change periodically.
(g) Held by the custodian in a segregated account as collateral for open
financial futures positions.
</FN>
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Dreyfus GNMA Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Financial Futures April 30, 1998
Market Value Unrealized
Covered (Depreciation)
Financial Futures Long Contracts by Contracts Expiration at 4/30/98
- ---------------------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
U.S. Treasury 5 year notes....................... 650 $70,778,906 June '98 $(317,187)
U.S. Treasury 10 year notes...................... 200 22,462,500 June '98 (137,500)
----------
$(454,687)
==========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Dreyfus GNMA Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Assets and Liabilities April 30, 1998
Cost Value
-------------- -------------
<S> <C> <C> <C>
ASSETS: Investments in securities--See Statement of Investments $1,201,955,095 $1,226,346,576
Cash............................................. 7,587,815
Receivable for investment securities sold........ 176,101,698
Interest receivable.............................. 7,826,231
Receivable for futures variation margin--Note 4(a) 517,969
Receivable for shares of Common Stock subscribed. 117,630
Paydowns receivable.............................. 43,305
Prepaid expenses................................. 21,936
--------------
1,418,563,160
--------------
LIABILITIES: Due to The Dreyfus Corporation and affiliates.... 911,721
Due to Distributor............................... 30,695
Payable for investment securities purchased...... 243,404,309
Payable for shares of Common Stock redeemed...... 1,047,065
Accrued expenses................................. 377,547
--------------
245,771,337
--------------
NET ASSETS..................................................................... $1,172,791,823
==============
REPRESENTED BY: Paid-in capital.................................. $1,204,334,488
Accumulated undistributed investment income--net. 9,012,575
Accumulated net realized gain (loss) on investments (64,492,034)
Accumulated net unrealized appreciation (depreciation)
on investments [including ($454,687) net unrealized
(depreciation) on financial futures]--Note 4(b) 23,936,794
--------------
NET ASSETS..................................................................... $1,172,791,823
==============
SHARES OUTSTANDING
(1.1 billion shares of $.01 par value Common Stock authorized)................. 78,262,866
NET ASSET VALUE, offering and redemption price per share....................... $14.99
======
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
Dreyfus GNMA Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Operations Year Ended April 30, 1998
INVESTMENT INCOME
<S> <C> <C> <C>
INCOME Interest Income.................................. $ 86,337,788
EXPENSES: Management fee--Note 3(a)........................ $ 7,273,135
Shareholder servicing costs--Note 3(b)........... 3,646,536
Custodian fees--Note 3(b)........................ 267,071
Prospectus and shareholders' reports--Note 3(b).. 168,470
Professional fees................................ 113,398
Directors' fees and expenses--Note 3(c).......... 55,277
Registration fees................................ 41,353
Loan commitment fees--Note 2..................... 11,786
Miscellaneous.................................... 110,695
-----------
Total Expenses.............................. 11,687,721
------------
INVESTMENT INCOME--NET......................................................... 74,650,067
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments.......... $39,222,542
Net realized gain (loss) on financial futures.... (690,443)
-----------
Net Realized Gain (Loss).................... 38,532,099
Net unrealized appreciation (depreciation) on investments
[including ($454,687) net unrealized (depreciation)
on financial futures].......................... 6,438,970
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS......................... 44,971,069
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................... $119,621,136
============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Dreyfus GNMA Fund, Inc.
- -------------------------------------------------------------------------------
Statement of Changes in Net Assets
Year Ended Year Ended
April 30, 1998 April 30, 1997
-------------- --------------
<S> <C> <C>
OPERATIONS:
Investment income--net.................................................. $ 74,650,067 $ 84,040,993
Net realized gain (loss) on investments................................. 38,532,099 (13,238,014)
Net unrealized appreciation (depreciation) on investments............... 6,438,970 8,997,251
-------------- --------------
Net Increase (Decrease) in Net Assets Resulting from Operations....... 119,621,136 79,800,230
-------------- --------------
NET EQUALIZATION (DEBITS)--Note 1(e)...................................... (695,148) (790,025)
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net.................................................. (74,369,089) (84,580,270)
-------------- --------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold........................................... 114,622,488 74,830,297
Dividends reinvested.................................................... 56,722,579 64,574,352
Cost of shares redeemed................................................. (283,568,803) (266,994,106)
-------------- --------------
Increase (Decrease) in Net Assets from Capital Stock Transactions..... (112,223,736) (127,589,457)
-------------- --------------
Total Increase (Decrease) in Net Assets............................. (67,666,837) (133,159,522)
NET ASSETS:
Beginning of Period..................................................... 1,240,458,660 1,373,618,182
-------------- --------------
End of Period........................................................... $1,172,791,823 $1,240,458,660
-------------- --------------
-------------- --------------
Undistributed investment income--net...................................... $ 9,012,575 $ 9,426,745
-------------- --------------
Shares Shares
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 7,775,411 5,183,472
Shares issued for dividends reinvested.................................. 3,860,656 4,480,721
Shares redeemed......................................................... (19,256,753) (18,525,523)
-------------- --------------
Net Increase (Decrease) in Shares Outstanding......................... (7,620,686) (8,861,330)
-------------- --------------
-------------- --------------
</TABLE>
See notes to financial statements.
<PAGE>
<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.
Year Ended April 30,
----------------------------------------------------
PER SHARE DATA: 1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $14.44 $14.50 $14.32 $14.48 $15.35
------ ------ ------ ------ ------
Investment Operations:
Investment income--net............................ .91 .92 .96 .98 .99
Net realized and unrealized gain (loss)
on investments................................. .55 (.05) .18 (.18) (.87)
------ ------ ------ ------ ------
Total from Investment Operations.................. 1.46 .87 1.14 .80 .12
------ ------ ------ ------ ------
Distributions:
Dividends from investment income--net............. (.91) (.93) (.96) (.96) (.99)
------ ------ ------ ------ ------
Net asset value, end of period.................... $14.99 $14.44 $14.50 $14.32 $14.48
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL INVESTMENT RETURN.............................. 10.38% 6.17% 8.11% 5.81% .71%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets........... .96% .96% .96% .97% .95%
Ratio of net investment income
to average net assets.......................... 6.16% 6.38% 6.57% 6.90% 6.54%
Portfolio Turnover Rate........................... 342.71% 323.99% 144.43% 362.70% 211.40%
Net Assets, end of period (000's Omitted)......... $1,172,792 $1,240,459 $1,373,618 $1,435,873 $1,601,947
</TABLE>
See notes to financial statements.
<PAGE>
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") is the distributor of the
Fund's shares, which are sold to the public without a sales load.
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 and financial futures) 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, 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.
(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, 1998, the Board of Directors declared a cash dividend of $.077
per share from undistributed investment income-net, payable on May 1, 1998
(ex-dividend date) to shareholders of record as of the close of business on
April 30, 1998.
(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 $64,382,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to April 30, 1998. If not
applied, $58,671,000 of the carryover expires in fiscal 2003 and $5,711,000
expires in fiscal 2005.
<PAGE>
Dreyfus GNMA Fund, Inc.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
(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--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 April
30, 1998, the Fund did not borrow under the Facility.
NOTE 3--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
that if in any full year the aggregate expenses of the Fund, exclusive of taxes,
brokerage, interest on borrowings, commitment fees and extraordinary expenses,
exceed 1-1/2% of the value of the Fund's average daily net assets, the Fund
may deduct from payments to be made to the Manager, or the Manager will bear the
amount of such excess. No expense reimbursement was required for the period
ended April 30, 1998.
(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 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. 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 period ended April
30, 1998, the Fund was charged $2,456,732 pursuant to the 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 April 30, 1998, the Fund was charged $770,464 pursuant to the transfer
agency agreement.
The Fund compensates Mellon under a custody agreement to provide custodial
services for the Fund. During the period ended April 30, 1998, the Fund was
charged $267,071 pursuant to the custody agreement.
(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.
<PAGE>
Dreyfus GNMA Fund, Inc.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 4--Securities Transactions:
(a) The aggregate amount of purchases and sales (including paydowns) of
investment securities, excluding short-term securities and financial futures,
during the period ended April 30, 1998 amounted to $4,977,191,291 and
$5,209,253,342, respectively.
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 financial instruments.
Investments in financial futures require the Fund to "mark to market" on a daily
basis, which reflects the change in the market value of the contracts 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 April 30, 1998 are set
forth in the Statement of Financial Futures.
(b) At April 30, 1998, accumulated net unrealized appreciation on investments
and financial futures was $23,936,794, consisting of $26,919,567 gross
unrealized appreciation and $2,982,773 gross unrealized depreciation.
At April 30, 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).
<PAGE>
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 statements of investments and financial
futures, as of April 30, 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 April 30, 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 GNMA Fund, Inc. at April 30, 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.
ERNST & YOUNG LLP
New York, New York
June 19, 1998
<PAGE>
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.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 265AR984
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN DREYFUS GNMA FUND, INC. AND THE LEHMAN BROTHERS
GNMA INDEX
EXHIBIT A:
LEHMAN DREYFUS
PERIOD BROTHERS GNMA
GNMA INDEX * FUND, INC.
4/30/88 10,000 10,000
4/30/89 10,837 10,506
4/30/90 12,023 11,405
4/30/91 13,960 13,052
4/30/92 15,592 14,311
4/30/93 17,263 15,856
4/30/94 17,274 15,968
4/30/95 18,756 16,895
4/30/96 20,432 18,265
4/30/97 22,072 19,391
4/30/98 24,279 21,404
*Source: Lehman Brothers
