DREYFUS GNMA FUND, INC.
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to report the performance for the Dreyfus GNMA Fund, Inc.
For the six-month reporting period ended October 31, 1997, your Fund produced
a total return, including share price changes and dividend income, of 6.48%.*
Income dividends paid from net investment income during the period amounted
to $0.45, representing an annualized distribution rate per share of 6.02%.**
Economic Review
With the level of inflation at its lowest since 1964, and unemployment
still near a 23-year low, the economy continued its solid growth over the
reporting period. Gross Domestic Product (GDP) - the dollar total of all
goods and services produced in the United States - has grown in excess of 3%
for the past four quarters, a level and consistency of gain unmatched since
1984. This extraordinary economic performance has been fueled by huge
business investment in new plant and equipment as well as a renewed surge in
consumer spending over the summer. Consumers play a substantial role in
determining the course of the economy, since their spending accounts for
two-thirds of all economic activity. Retail sales rose through the summer and
into September, although there was some sign of deceleration as the third
quarter progressed.
The big economic story continued to be the lack of inflation in an
economy in its seventh year of expansion. This remarkable price stability, at
a time in the business cycle when inflationary pressures would usually be
apparent, has enabled the Federal Reserve Board (the "Fed") to refrain from
tightening monetary policy. The Federal Open Market Committee (FOMC), the
policy-making arm of the Fed, has raised interest rates just once in over two
years, a period roughly coinciding with the surge of growth in the economy.
The last increase in short-term interest rates came on March 25, 1997, when
the FOMC increased the Federal Funds rate by a modest one-quarter of a
percentage point to 5.50%. (The Federal Funds rate is the rate of interest
that banks charge one another for overnight loans.)
Of course, the recent financial market turbulence arising from currency
devaluations in some of the economically weaker Southeast Asian countries has
added a cautionary note to any Fed monetary actions that might further roil
investment markets. The Southeast Asian economies have been cooling or in
outright recession for some time and represent a large share of the global
economy and the U.S. import/export market. The recent crisis has boosted the
value of the U.S. dollar and could further dampen the demand for U.S. exports
to this region. This bodes well for continued low inflation in the U.S. and
weakens the argument that we are on the brink of price acceleration.
In fact, inflation remains in check. The Implicit Price Deflator, an
indicator of inflation that measures the prices of all goods and services in
the U.S., has risen at an annual rate of less than 2% for the past two
quarters. This favorable trend in prices has been mirrored by both the
Consumer Price and Producer Price Indices. The Labor Department's Employment
Cost Index, a broad measure of changes in wages and benefits, has indicated
relatively modest increases in labor costs. Still, the labor market remains
tight, with the unemployment rate at a level unmatched in 23 years.
Whether the economy will slow without further monetary restraint by the
Fed remains an open question. Industrial production has been strong and
operating rates, an indicator of possible future price pressures, have edged
to their highest level in two years. Of paramount concern to Fed Chairman
Alan Greenspan is the possibility of continuing economic growth so strong
that the unemployment rate is driven even lower and a subsequent
corresponding upsurge in wage rates reignites inflation. The performance of
the economy over the coming months appears crucial in determining whether the
Fed will actively restrain the economy. We remain alert to changes in
economic trends that would increase the risk of rising inflation and,
consequently, the prospect of higher interest rates.
Market Environment
The U.S. fixed-income market rallied on a flight-to-quality shift by
investors worldwide as the recent financial market crisis in several of the
weaker Southeast Asian countries caused large-scale buying of U.S.
Treasuries. The yield on the ten-year Treasury has moved consistently lower;
from May 1, 1996 to October 31, 1997 the ten-year Treasury yield decreased 85
basis points to 5.83% from 6.64%. This dramatic decrease in yield has
resulted in positive returns over the last six months on Treasury bond market
indices. With further negative news announcements likely to come from Asia,
market sentiment will remain positive, with a bias toward lower interest
rates.
This environment of lower rates and continued demand for high-quality
assets affects the mortgage-backed securities market, including GNMAs. Lower
interest rates and positive Treasury returns imply potentially higher levels
of returns for mortgage-backed securities. With falling interest rates,
mortgage-backed securities tend to lag other fixed-income markets. Their
spread to Treasuries becomes wider as we move to lower rates. As a result,
GNMAs have underperformed Treasuries over the last six-month period, and are
likely to continue this underperformance if interest rates continue to
decrease. Of course, past performance is no guarantee of future results, and
there can be no guarantee as to future economic or market events, or as to
investment performance.
The other negative for the mortgage market has been the dramatic increase
in interest-rate volatility. This has increased to its highest level in over
two years and, as volatility has increased, the valuation of mortgage-backed
securities has lagged the market. This also has contributed to the
underperformance of GNMAs over Treasuries during the last three months.
The Portfolio
During this period of change in economic fundamentals, there have been
several adjustments to the portfolio. The most significant change was the
increase in the Fund's duration from neutral relative to our current
benchmark, the Lehman Brothers GNMA Index, to 10% longer than the Index.
Fortunately, this adjustment of duration was implemented at the beginning of
the drop in interest rates, and that led the Fund to outperform the Lehman
GNMA Index during the months of July, August, and September.
The lengthening of duration was accomplished by buying a combination of
newly-issued GNMA 7.0% 30-year securities and 30-year Treasury bonds. The
cash was attained from shorter-duration securities: specifically, GNMA
15-year 6.50% and shorter-duration Treasuries. Thirty-year GNMAs at 7.0% have
more interest-rate sensitivity and still provide a high level of prepayment
protection to the investor. If the market continues to experience lower
interest rates, more investors may well look for protection in the 30-year
GNMA discount market, which could increase demand and improve the valuation
of this sector.
We continue to hold a 5% position in GNMA project loans. GNMA projects
are securities backed by multifamily loans on HUD-sponsored low-income
housing projects. These securities have all the standard government
guarantees of single-family GNMAs but offer the investor higher yields and
explicit call protection from borrower prepayments. Since they are currently
yielding 100 basis points over comparable-term Treasuries, currently we are
enhancing the Fund's yield as well as its call protection significantly.
Also significant for the Fund was the approval by shareholders, at a
meeting of shareholders held on October 14, 1997, of revisions to the Fund's
investment restrictions to expand the array of fixed-income securities in
which the Fund can invest. This change gives the Fund the ability to invest
now in higher-yielding Fannie Maes, Freddie Macs, government and
private-issued CMOs, and asset-backed securities, among other
mortgage-related securities. Despite this change,
remember that at least 65% of the Fund's assets normally will be invested in
GNMAs. Following the meeting, we have started restructuring the portfolio to
take advantage of opportunities in these markets. With these changes in
place, we believe that the Fund has a better potential for performing well in
this type of market environment.
Very truly yours,
[Michael Hoeh signature logo]
Michael Hoeh
Portfolio Manager
November 18, 1997
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 (annualized), divided by the net
asset value per share at the end of the period.
<TABLE>
<CAPTION>
DREYFUS GNMA FUND, INC.
STATEMENT OF INVESTMENTS OCTOBER 31, 1997 (UNAUDITED)
Principal
Bonds and Notes-117.9% Amount Value
______________ ______________
<S> <C> <C>
U.S. Government Agency Mortgage-Backed Securities-112.8%
Government National Mortgage Association I:
61\2%, 9/15/2008-10/15/2012....................................... $ 128,176,861 $ 129,036,495
61\2%, 2/15/2009-10/15/2011....................................... 24,588,723 (a) 24,864,661
7%................................................................ 5,000,000 (b) 5,021,850
7%, 9/15/2022-12/15/2023.......................................... 16,679,303 16,866,383
7%, 6/15/2009..................................................... 17,504,898 (a) 17,920,639
71\2%, 8/15/2000-12/15/2023....................................... 240,943,275 247,934,052
71\2%, 12/15/2007-8/15/2025....................................... 39,037,411 (a) 40,120,077
8%................................................................ 27,000,000 (b) 27,987,120
8%, 1/15/2018-12/15/2022.......................................... 8,097,661 8,459,547
8%, 4/15/2008-9/15/2008........................................... 63,664,353 (a) 66,492,938
81\2%, 2/15/2006-12/15/2022....................................... 43,258,835 45,849,782
81\2%, 10/15/2017-11/15/2017...................................... 26,493,565 (a) 28,306,520
9%, 7/15/2001-12/15/2022.......................................... 67,519,983 73,102,664
91\2%, 1/15/2016-11/15/2024....................................... 45,552,646 49,666,432
91\2%, 11/15/2017................................................. 28,848,021 (a) 31,687,532
10%, 11/15/2009-10/15/2020........................................ 28,320,913 31,205,964
101\2%, 11/15/2013-6/15/2021...................................... 21,086,533 23,366,408
11%, 7/15/1999-1/15/2001.......................................... 245,970 261,803
______________
868,150,867
______________
Government National Mortgage Association I,
Graduated Payment Mortgage:
101\4%, 7/15/2018-10/15/2018.................................... 185,066 203,572
103\4%, 3/15/2010-2/15/2016..................................... 466,169 517,448
121\4%, 2/15/2014-3/15/2015..................................... 67,666 77,097
______________
798,117
______________
Government National Mortgage Association I,
Project Loans:
63\4%........................................................... 3,700,000 (b) 3,704,625
63\4%, 1/15/2034................................................ 13,359,748 (a) 13,246,991
7%.............................................................. 5,454,300 (b) 5,525,860
71\8%, 10/15/2032............................................... 12,047,100 (a) 12,246,360
7.20%, 11/15/2032............................................... 2,052,500 (a) 2,091,621
71\2%, 10/15/2032............................................... 3,066,400 (a) 3,190,957
7.71% 6/15/2027................................................. 3,157,107 (a) 3,316,920
73\4%, 12/15/2035............................................... 4,316,617 (a) 4,544,578
7.90%, 9/15/2032................................................ 4,927,928 (a) 5,242,084
91\4%, 10/15/2023............................................... 6,881,576 (a) 7,427,767
______________
60,537,763
______________
Government National Mortgage Association II:
51\2%............................................................. 159,000,000 (b,c) 158,651,790
51\2%, 11/20/2026-9/20/2027....................................... 49,027,811 (b,c) 49,364,597
6%................................................................ 19,550,000 (b,c) 19,677,371
61\2%, 11/20/2025-6/20/2027....................................... 11,479,892 11,307,997
7%, 5/20/2026-10/20/2027.......................................... 181,453,004 181,879,535
DREYFUS GNMA FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) OCTOBER 31, 1997 (UNAUDITED)
Principal
Bonds and Notes (continued) Amount Value
______________ ______________
U.S. Government Agency Mortgage-Backed Securities (continued)
Government National Mortgage Association II (continued):
9%, 3/20/2016..................................................... $ 1,723,024 $ 1,854,939
91\2%, 2/20/2016-2/20/2025........................................ 5,449,241 5,886,941
101\2%, 7/20/2013-9/20/2018....................................... 3,958,605 4,347,024
______________
432,970,194
______________
Government National Mortgage Association II,
Graduated Payment Mortgage:
113\4%, 6/20/2015-1/20/2016....................................... 218,879 246,442
______________
Federal Home Loan Mortgage Corp.,
Stripped Securities, Interest Only Class:
Ser. 1969, Cl. PI,
7%, 12/15/2009.................................................. 6,451,714 (d) 1,306,472
Ser. 1999, Cl. QK,
7%, 10/20/2025.................................................. 10,698,428 (d) 2,718,069
______________
4,024,541
______________
Total U.S. Government Agency Mortgage-Backed Securities............. 1,366,727,924
==============
Commercial Mortgage-Backed Securities-4.2%
Asset Securitization Corp.,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1997-D5, Cl. A-D,
6.85%, 2041....................................................... 40,000,000 40,625,000
Merrill Lynch Mortgage Investors,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1996-C2, Cl. C,
6.96%, 2028....................................................... 10,000,000 10,120,313
______________
Total Commercial Mortgage-Backed Securities......................... 50,745,313
==============
U.S. Treasury Bonds-.9%
63\8%, 8/15/2027.................................................. 10,700,000 (a) 11,014,313
==============
TOTAL BONDS AND NOTES
(cost $1,392,897,414)............................................. 117.9% $1,428,487,550
===== ==============
LIABILITIES, LESS CASH AND RECEIVABLES.............................. (17.9%) $ (216,904,946)
===== ==============
NET ASSETS.......................................................... 100.0% $1,211,582,604
===== ==============
DREYFUS GNMA FUND, INC.
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.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS GNMA FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1997 (UNAUDITED)
Cost Value
_______________ _______________
<S> <C> <C> <C>
ASSETS: Investments in securities-See Statement of Investments
$1,392,897,414 $1,428,487,550
Cash....................................... 22,603,592
Receivable for investment securities sold.. 25,568,845
Interest receivable........................ 8,075,742
Receivable for shares of Common Stock subscribed 462,696
Paydowns receivable........................ 121,380
_______________
1,485,319,805
_______________
LIABILITIES: Due to The Dreyfus Corporation and affiliates 908,514
Due to Distributor......................... 25,150
Payable for investment securities purchased 271,416,489
Payable for shares of Common Stock redeemed 959,393
Accrued expenses........................... 427,655
_______________
273,737,201
_______________
NET ASSETS.................................................................. $1,211,582,604
===============
REPRESENTED BY: Paid-in capital............................ $1,248,751,421
Accumulated undistributed investment income-net 8,893,113
Accumulated net realized gain (loss) on investments (81,652,066)
Accumulated net unrealized appreciation (depreciation)
....................... on investments-Note 4 35,590,136
_______________
NET ASSETS.................................................................. $1,211,582,604
===============
SHARES OUTSTANDING
(1.1 billion shares of $.01 par value Common Stock authorized).............. 81,245,226
NET ASSET VALUE, offering and redemption price per share.................... $14.91
======
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS GNMA FUND, INC.
STATEMENT OF OPERATIONS SIX MONTHS ENDED OCTOBER 31, 1997 (UNAUDITED)
INVESTMENT INCOME
<S> <C> <C> <C>
INCOME Interest Income............................ $43,760,952
EXPENSES: Management fee-Note 3(a)................... $ 3,714,378
Shareholder servicing costs-Note 3(b)...... 1,891,771
Custodian fees-Note 3(b)................... 140,820
Professional fees.......................... 81,184
Prospectus and shareholders' reports-Note 3(b) 75,078
Directors' fees and expenses-Note 3(c)..... 27,865
Registration fees.......................... 25,860
Loan commitment fees-Note 2................ 5,605
Miscellaneous.............................. 143,620
____________
Total Expenses....................... 6,106,181
____________
INVESTMENT INCOME-NET....................................................... 37,654,771
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-Note 4:
Net realized gain (loss) on investments.... $21,372,067
Net unrealized appreciation (depreciation) on investments 18,092,312
____________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...................... 39,464,379
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $77,119,150
============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS GNMA FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
October 31, 1997 Year Ended
(Unaudited) April 30, 1997
________________ _______________
<S> <C> <C>
OPERATIONS:
Investment income-net................................................. $ 37,654,771 $ 84,040,993
Net realized gain (loss) on investments............................... 21,372,067 (13,238,014)
Net unrealized appreciation (depreciation) on investments............. 18,092,312 8,997,251
_______________ _______________
Net Increase (Decrease) in Net Assets Resulting from Operations..... 77,119,150 79,800,230
_______________ _______________
NET EQUALIZATION (DEBITS)-Note 1(e)..................................... (416,888) (790,025)
_______________ _______________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net................................................. (37,771,515) (84,580,270)
_______________ _______________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold......................................... 54,413,756 74,830,297
Dividends reinvested.................................................. 28,806,880 64,574,352
Cost of shares redeemed............................................... (151,027,439) (266,994,106)
_______________ _______________
Increase (Decrease) in Net Assets from Capital Stock Transactions... (67,806,803) (127,589,457)
_______________ _______________
Total Increase (Decrease) in Net Assets........................... (28,876,056) (133,159,522)
NET ASSETS:
Beginning of Period................................................... 1,240,458,660 1,373,618,182
_______________ _______________
End of Period......................................................... $ 1,211,582,604 $ 1,240,458,660
=============== ===============
Undistributed investment income-net..................................... $ 8,893,113 $ 9,426,745
_______________ _______________
Shares Shares
_______________ _______________
CAPITAL SHARE TRANSACTIONS:
Shares sold........................................................... 3,728,973 5,183,472
Shares issued for dividends reinvested................................ 1,980,066 4,480,721
Shares redeemed....................................................... (10,347,365) (18,525,523)
_______________ _______________
Net Increase (Decrease) in Shares Outstanding....................... (4,638,326) (8,861,330)
=============== ===============
SEE 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
October 31, 1997 Year Ended April 30,
____________________________________________________
PER SHARE DATA: (Unaudited) 1997 1996 1995 1994 1993
__________ _____ _____ _____ _____ _____
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.44 $14.50 $14.32 $14.48 $15.35 $14.90
_____ _____ _____ _____ _____ _____
Investment Operations:
Investment income-net......... .45 .92 .96 .98 .99 1.10
Net realized and unrealized gain (loss)
on investments.............. .47 (.05) .18 (.18) (.87) .46
_____ _____ _____ _____ _____ _____
Total from Investment Operations .92 .87 1.14 .80 .12 1.56
_____ _____ _____ _____ _____ _____
Distributions:
Dividends from investment income-net (.45) (.93) (.96) (.96) (.99) (1.11)
_____ _____ _____ _____ _____ _____
Net asset value, end of period $14.91 $14.44 $14.50 $14.32 $14.48 $15.35
===== ===== ===== _____ _____ _____
TOTAL INVESTMENT RETURN........... 12.85%(1) 6.17% 8.11% 5.81% .71% 10.80%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .99%(1) .96% .96% .97% .95% .94%
Ratio of net investment income
to average net assets....... 6.08%(1) 6.38% 6.57% 6.90% 6.54% 7.20%
Portfolio Turnover Rate....... 201.42%(2) 323.99% 144.43% 362.70% 211.40% 155.90%
Net Assets, end of period
(000's Omitted)............. $1,211,583 $1,240,459 $1,373,618 $1,435,873 $1,601,947 $1,857,468
(1) Annualized.
(2) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS GNMA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 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.
(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 October 31, 1997, the Board of Directors declared a cash dividend of
$.074 per share from undistributed investment income-net, payable on November
3, 1997 (ex-dividend date) to shareholders of record as of the close of
business on October 31, 1997.
(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
$95,479,000 available for Federal income tax purposes to be applied against
future net securities profits, if any, realized subsequent to April 30, 1997.
The carryover does not include net realized securities losses from November
1, 1996 through April 30, 1997 which are treated, for Federal income tax
purposes, as arising in fiscal 1998. If not applied, $20,521,000 of the
carryover expires in fiscal 1998, $69,247,000 expires in fiscal 2003 and
$5,711,000 expires in fiscal 2005.
DREYFUS GNMA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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. For the period ended
October 31, 1997, 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 to the extent required by
state law. No expense reimbursement was required for the period ended October
31, 1997.
(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 period ended October 31, 1997, the Fund
was charged $1,255,519 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 October 31, 1997, the Fund was charged $392,898 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 October 31, 1997,
the Fund was charged $140,820 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.
DREYFUS GNMA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 4-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales (including paydowns) of
investment securities, excluding short-term securities, during the period
ended October 31, 1997 amounted to $3,066,901,410 and $3,091,314,599,
respectively.
At October 31, 1997, accumulated net unrealized appreciation on
investments was $35,590,136, consisting of $35,680,542 gross unrealized
appreciation and $90,406 gross unrealized depreciation.
At October 31, 1997, 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).
Registration Mark
[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.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 265SA9710
GNMA
Fund, Inc.
Semi-Annual
Report
October 31, 1997
Registration Mark
[Dreyfus logo]
