Dreyfus
GNMA Fund, Inc.
SEMIANNUAL REPORT October 31, 2000
(reg.tm)
The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE FUND
--------------------------------------------------
2 Letter from the President
3 Discussion of Fund Performance
6 Statement of Investments
11 Statement of Financial Futures
12 Statement of Assets and Liabilities
13 Statement of Operations
14 Statement of Changes in Net Assets
15 Financial Highlights
16 Notes to Financial Statements
FOR MORE INFORMATION
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Back Cover
The Fund
Dreyfus
GNMA Fund, Inc.
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus GNMA Fund, Inc.,
covering the six-month period from May 1, 2000 through October 31, 2000. Inside,
you' ll find valuable information about how the fund was managed during the
reporting period, including a discussion with the fund's portfolio manager,
Michael Hoeh.
Bond prices were mixed over the six-month reporting period. Despite some
volatility, prices of U.S. Treasury securities generally ended the period near
where they began and prices of corporate bonds generally ended the period at
modestly lower levels than where they began. More recently, most sectors of the
U.S. bond market have been affected by slowing economic growth. Additionally,
the moderating effects of the Federal Reserve Board's (the "Fed") interest-rate
hikes during the first half of 2000 helped the Fed to achieve its goal of
slowing the U.S. economy. Other factors such as higher energy prices and a weak
euro also served to slow economic growth.
In general, the overall investment environment that prevailed in the second half
of the 1990s had provided returns well above their historical averages,
establishing unrealistic expectations for some investors. We believe that as the
risks of the stock market have become more apparent recently, the relative
stability and income potential of bonds can make them an attractive investment
as part of a well-balanced portfolio.
For more information about the economy and financial markets, we encourage you
to visit the Market Commentary section of our website at www.dreyfus.com. Or, to
speak with a Dreyfus customer service representative, call us at 1-800-782-6620
Thank you for investing in Dreyfus GNMA Fund, Inc.
Sincerely,
/s/ Stephen E. Canter
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
November 15, 2000
DISCUSSION OF FUND PERFORMANCE
Michael Hoeh, Portfolio Manager
How did Dreyfus GNMA Fund, Inc. perform relative to its benchmark?
For the six-month period ended October 31, 2000, Dreyfus GNMA Fund, Inc.
produced a total return of 5.07% and income dividends of $0.450 per share. In
addition, a 30-day SEC yield of 6.44% was produced for the reporting period.(1)
In comparison, the fund' s benchmark, the Lehman Brothers GNMA Index (the
" Index" ), produced a total return of 6.06% for the same period.(2)
Although the fund underperformed its benchmark over the six-month period, so did
most other GNMA funds in our peer group. The fund's defensive positioning
prevented us from taking full advantage of the GNMA market rally that occurred
in June.
What is the fund's investment approach?
The fund invests primarily in Government National Mortgage Association ("GNMA"
or "Ginnie Mae" ) securities. The remainder may be allocated to other
mortgage-related securities, including U.S. Government agency securities and
privately issued mortgage-backed securities, as well as to asset-backed
securities, U.S. Treasuries and repurchase agreements. The fund's goal is to
provide a high level of current income consistent with capital preservation.
We use a four-step investment approach:
* PREPAYMENT TREND ANALYSIS. We carefully review the extent to which
homeowners are likely to prepay their mortgages because of home sales or
refinancing, since a sharp increase or decrease in this trend would
adversely affect returns provided by the fund' s mortgage-backed holdings.
* OPTION-ADJUSTED SPREAD ANALYSIS. This analytical tool compares the early
redemption or extension characteristics of different mortgage-backed
securities with other securities, such as U.S. Treasuries. This The Fun
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
analysis helps us measure the relative risk that different types of
mortgage-backed securities may have versus their expected total return.
* CASH FLOW STRUCTURE ANALYSIS. This helps us determine the predictability
and security of cash flows provided by different bond structures. We
analyze the benefits of 30- and 15-year fixed-rate securities along with
adjustable-rate mortgage securities ("ARMs"). Also within the GNMA market,
we analyze project loans that offer cash flow protection from loan
prepayments.
* TOTAL-RATE-OF-RETURN SCENARIOS. We calculate expected rates of return for
each security relative to U.S. Treasury securities under different
interest-rate scenarios over a six-month time frame. This helps us estimate
which securities are likely to provide above-average returns in any given
interest-rate environment.
What other factors influenced the fund's performance?
When the reporting period began on May 1, 2000, the U.S. economy was growing
strongly, raising concerns that long-dormant inflationary pressures might
reemerge. In response, the Federal Reserve Board (the "Fed") raised short-term
interest rates once during the reporting period. However, signs soon emerged
that the Fed's previous rate hikes were having the desired effect of slowing the
economy, suggesting that the Fed's restrictive monetary policies could be near
an end.
In this environment, long-term fixed-income securities rallied. GNMA securities
performed particularly well for two primary reasons. First, the declining supply
of U.S. Treasury securities caused some investors to turn to other direct
obligations of the U.S. Government, such as Ginnie Mae-issued securities.
Second, indirect obligations such as those issued by the Federal National Home
Mortgage Association ("Fannie Mae") and Federal Home Loan Corporation ("Freddie
Mac" ), were out of favor among investors because of political pressures. Both
factors contributed to an increase in demand for Ginnie Mae mortgage-backed
securities, causing their prices to rise.
However, our defensive positioning in cash and short-term U.S. Treasury
securities during a rising interest-rate environment prevente
us and many of our peers from taking full advantage of the market rally. To
limit the potentially eroding effects of higher interest rates, we had
maintained a relatively shorter average duration -- a measure of sensitivity to
changing interest rates -- than the Index during the first part of the reporting
period. Our holdings of non-GNMA securities, which we used to enhance the fund's
yield and diversification, also held back the fund's overall returns.
What is the fund's current strategy?
When it became apparent last summer that interest rates were likely to stop
rising, we extended the fund's average duration to a point modestly longer than
that of our benchmark. We maintained a relatively long position through the end
of the reporting period. This position potentially should enable us to benefit
if, as we expect, stock market volatility and slower economic growth cause the
Fed to refrain from additional interest-rate hikes.
As of October 31, the fund's assets were allocated 59.7% to 30-year and 15-year
GNMAs, 15.7% to other GNMAs, 2.0% to U.S. Treasury securities, 11.1% to U.S.
Government agency securities, 13.2% to non-agency mortgage-backed securities and
1.0% to repurchase agreements. This allocation reflects a repositioning of the
fund' s holdings to achieve greater protection from prepayment risk, which
typically affects mortgage-related securities when interest rates fall and
homeowners refinance their mortgages. We have recently increased our holdings of
long-term U.S. Treasury bonds, commercial mortgage-backed securities and agency
debentures, all of which are protected explicitly from prepayment risk.
November 15, 2000
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND
INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, FUND SHARES MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
(2) SOURCE: LEHMAN BROTHERS INC. -- REFLECTS THE REINVESTMENT OF DIVIDENDS AND,
WHERE APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE LEHMAN BROTHERS GNMA
INDEX IS AN UNMANAGED, TOTAL RETURN PERFORMANCE BENCHMARK FOR THE GNMA
MARKET CONSISTING OF 15- AND 30-YEAR FIXED-RATE SECURITIES BACKED BY
MORTGAGE POOLS OF THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION.
The Fund
STATEMENT OF INVESTMENTS
October 31, 2000 (Unaudited)
STATEMENT OF INVESTMENTS
<TABLE>
<CAPTION>
Principal
BONDS AND NOTES--130.0% Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U. S. GOVERNMENT AGENCIES/ MORTGAGE-BACKEDS--110.3%
Government National Mortgage Association I:
6.5%, 9/15/2008-3/15/2029 61,682,821 61,093,538
7%, 11/15/2022-12/15/2022 285,988 285,004
7.5%, 5/15/2002-11/15/2028 108,279,810 109,785,841
8%, 4/15/2008-12/15/2022 63,423,058 64,903,446
8.5%, 2/15/2006-12/15/2022 28,092,588 29,159,909
9%, 7/15/2001-12/15/2022 24,613,120 25,770,737
9.5%, 1/15/2016-11/15/2024 15,617,243 16,402,558
307,401,033
Government National Mortgage Association II:
5.5%, 4/20/2030 12,860,541 (a) 12,645,528
6%, 4/20/2030-9/20/2030 26,664,338 (a) 26,377,589
6.5%, 7/20/2030 6,371,487 (a) 6,351,575
6.75%, 9/20/2027 310,967 (a) 312,376
7% 9,500,000 (b) 9,318,835
7%, 4/20/2024-5/20/2030 19,377,234 19,026,755
7.375%, 2/20/2027 304,361 (a) 305,740
7.5% 194,885,000 (b) 194,822,637
7.5%, 9/20/2030 66,588,443 66,588,442
8% 33,245,000 (b) 33,619,006
8%, 8/20/2030-4/20/2034 27,075,858 27,404,562
9%, 3/20/2016 964,957 993,297
9.5%, 2/20/2016-2/20/2025 1,425,492 1,476,051
10.5%, 7/20/2013-9/20/2018 1,576,947 1,697,129
400,939,522
Government National Mortgage Association I,
Graduated Payment Mortgage:
10.25%, 9/15/2018 43,952 47,275
10.75%, 3/15/2010-2/15/2016 181,767 198,325
245,600
Government National Mortgage Association II,
Graduated Payment Mortgage,
11.75%, 6/20/2015-1/20/2016 155,389 171,996
Government National Mortgage Association I,
Construction Loans:
6.5% 787,979 (b) 740,947
6.5%, 2/15/2001 17,632,021 16,579,610
6.75% 363,386 (b) 347,772
6.75%, 3/15/2040 8,010,314 7,666,121
25,334,450
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
U. S. GOVERNMENT AGENCIES/ MORTGAGE-BACKEDS (CONTINUED)
Government National Mortgage Association I,
Project Loans:
6.3%, 11/15/2038 21,101,928 19,756,681
6.315%, 10/15/2033 1,488,391 1,399,237
6.355%, 8/15/2024 3,287,732 3,107,397
6.36%, 2/15/2037 20,231,853 18,989,491
6.375%, 10/15/2033-1/15/2034 20,674,690 19,459,946
6.38%, 9/15/2033 8,362,295 7,880,157
6.41%, 8/15/2028 1,820,133 1,719,742
6.5%, 12/15/2023-7/15/2029 23,186,061 22,025,895
6.55%, 7/15/2033 7,896,468 7,525,088
6.6%, 9/15/2019-9/15/2030 9,034,278 8,710,623
6.625%, 6/15/2028-5/15/2033 10,842,759 10,455,697
6.75%, 10/15/2033-10/15/2039 24,925,645 23,988,660
6.875%, 5/15/2040 7,843,500 7,572,654
6.95%, 12/15/2038 9,117,276 8,879,372
161,470,640
Federal Home Loan Mortgage Corp.,
REMIC,
Stripped Securities, Interest Only Class:
Ser. 1583, Cl. ID, 7%, 2023 5,059,465 (c) 1,278,122
Ser. 1628, Cl. MA, 6.5%, 2022 4,295,852 (c) 444,073
Ser. 1829, Cl. I, 6.5%, 2017 2,144,752 (c) 99,520
Ser. 1882, Cl. PK, 7%, 2026 3,181,482 (c) 1,257,513
Ser. 1969, Cl. PI, 7%, 2009 3,598,122 (c) 348,226
Ser. 1998, Cl. PK, 7%, 2026 10,665,918 (c) 2,261,937
Ser. 2043, Cl. IE, 6.5%, 2023 26,991,953 (c) 4,155,873
Ser. 2048, Cl. PJ, 7%, 2028 5,000,000 (c) 1,898,200
Ser. 2065, Cl. PH, 6.5%, 2021 4,473,679 (c) 608,080
12,351,544
Federal National Mortgage Association:
Notes, 6.75%, 2002 4,200,000 4,221,433
Notes, 7.125%, 2010 10,000,000 10,327,860
6.82%, 1/1/2028 3,504,583 3,363,255
6.897%, 6/1/2030 8,345,725 (a) 8,297,821
7% 37,250,000 (b) 36,528,095
7.5% 8,400,000 (b) 8,397,312
Stripped Securities, Interest Only Class:
Ser. 1993-133, Cl. HA, 9.96%, 2022 78,992 (c) 1,552,197
Ser. 1996-55, Cl. PL, 7%, 2025 4,244,218 (c) 835,581
Ser. 1997-16, Cl. PJ, 7%, 2026 7,035,717 (c) 1,442,748
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------------------------
U. S. GOVERNMENT AGENCIES/ MORTGAGE-BACKEDS (CONTINUED)
Federal National Mortgage Association (continued):
Stripped Securities, Interest Only Class (continued):
Ser. 1997-40, Cl. PI, 7%, 2027 31,676,142 (c) 9,873,976
Ser. 1997-84, Cl. PI, 6.5%, 2021 2,414,201 (c) 494,235
Ser. 1997-85, Cl. PI, 7%, 2018 17,980,858 (c) 2,100,277
87,434,790
TOTAL U. S. GOVERNMENT AGENCIES/
MORTGAGE-BACKEDS 995,349,575
ASSET-BACKED CTFS.--6.5%
ACLC Business Loan Receivables Trust,
Ser. 1998-1, Cl. A-1, 6.435%, 2019 8,202,267 (d) 7,830,602
Advanta Mortgage Loan Trust,
Ser. 2000-2, Cl. A-6, 7.72%, 2015 4,275,000 4,344,469
Conseco Finance,
Ser. 2000-D, Cl. A-3, 7.89%, 2018 5,300,000 5,412,175
Equivantage Home Equity Loan Trust:
Ser. 1996-2, Cl. A-4, 8.05%, 2027 6,251,000 6,285,849
Ser. 1997-1, Cl. A-4, 7.275%, 2028 6,679,628 6,708,767
GMAC Mortgage Corp. Loan Trust,
Ser. 2000-HE3, Cl. A-2, 7.17%, 2015 5,000,000 4,990,625
The Money Store Home Equity Trust:
Ser. 1995-B, Cl. A-6, 7.5%, 2026 8,000,000 8,056,120
Ser. 1997-D, Cl. AF-7, 6.485%, 2038 7,225,000 7,035,669
Ser. 1998-B, Cl. AF-8, 6.11%, 2010 5,400,000 5,253,201
Nomura Depositor Trust,
Ser. 1998-ST1, Cl. A-3, 7.2%, 2003 3,000,000 (d) 2,983,594
TOTAL ASSET-BACKED CTFS. 58,901,071
COMMERCIAL MORTGAGE PASS-THROUGH CTFS.--5.5%
CS First Boston Mortgage Securities,
Ser. 1998-C1, Cl. C, 6.78% 2009 13,000,000 12,434,674
GGP Ala Moana,
Ser. 1999-C1, Cl. D, 7.72%, 2004 4,500,000 (d,e) 4,500,000
Heller Financial Commercial Mortgage Assets,
Ser. 2000-PH1, Cl. C, 7.961%, 2010 8,500,000 (e) 8,808,015
Morgan (J.P.) Commercial Mortgage Finance,
Ser. 2000-C10, Cl. C, 7.537%, 2032 11,430,000 (e) 11,580,019
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL MORTGAGE PASS-THROUGH CTFS. (CONTINUED)
Morgan Stanley Dean Witter Capital I,
Ser. 2000-1345, Cl. B, 7.738%, 2010 12,500,000 (d,e) 12,722,656
TOTAL COMMERCIAL MORTGAGE PASS-THROUGH CTFS. 50,045,364
RESIDENTIAL MORTGAGE PASS-THROUGH CTFS.--5.3%
BA Mortgage Securities,
Ser. 1998-2, Cl. 2B1, 6.5%, 2013 415,574 390,014
Bank of America Mortgage Securities:
Ser. 2000-6:
Cl. B-1, 7.75%, 2030 7,058,000 6,975,372
Cl. B-2, 7.75%, 2030 2,253,000 2,196,625
Countrywide Home Loans,
Ser. 2000-5, Cl. B-1, 7.75%, 2030 7,497,737 7,313,135
GE Capital Mortgage Services:
Ser. 1997-13, Cl. B-1, 6.75%, 2012 439,614 418,573
Ser. 1998-1, Cl. B-1, 6.75%, 2013 883,410 854,519
Ser. 1998-16, Cl. B-1, 6.5%, 2013 568,117 531,820
Ser. 1998-16, Cl. M, 6.5%, 2013 1,704,352 1,646,821
Norwest Asset Securities:
Ser. 1997-20, Cl. B-1, 6.75%, 2012 892,348 864,478
Ser. 1998-14, Cl. B-2, 6.5%, 2013 1,345,866 1,289,047
Ocwen Residential MBS,
Ser. 1998-R1, Cl. B-1, 7%, 2040 5,756,250 (d) 5,310,141
PNC Mortgage Securities:
Ser. 1998-2, Cl. 3B2, 6.75%, 2013 695,149 660,461
Ser. 1998-2, Cl. 4B2, 6.75%, 2027 641,360 614,225
Ser. 1998-11, Cl. 2B2, 6.25%, 2013 480,365 438,830
Ser. 2000-C2, Cl. C, 7.64%, 2010 11,000,000 11,089,375
Residential Funding Mortgage Securities I:
Ser. 1997-S6, Cl. B-1, 7%, 2012 984,006 961,607
Ser. 1997-S10, Cl. M-2, 7%, 2012 790,077 771,399
Ser. 1997-S11, Cl. M-2, 7%, 2012 667,070 661,404
Ser. 1997-S16, Cl. M-2, 6.75%, 2012 1,115,443 1,062,438
Ser. 1998-S1, Cl. M-2, 6.5%, 2013 993,960 953,347
Ser. 1998-S14, Cl. M-2, 6.5%, 2013 1,543,641 1,477,924
Ser. 1998-S16, Cl. M-1, 6.5%, 2013 972,959 941,149
Ser. 1998-S16, Cl. M-2, 6.5%, 2013 347,550 325,564
TOTAL RESIDENTIAL MORTGAGE PASS-THROUGH CTFS. 47,748,268
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
U. S. GOVERNMENTS--2.4%
U. S. Treasury Bonds:
6.25%, 5/15/2030 5,500,000 5,860,030
12%, 8/15/2013 990,000 1,354,529
U. S. Treasury Inflation Protection Securities,
3.625%, 7/15/2002 12,200,000 (f) 13,182,349
U. S. Treasury Notes,
5.75%, 8/15/2010 1,000,000 (f) 999,370
TOTAL U. S. GOVERNMENTS 21,396,278
TOTAL BONDS AND NOTES
(cost $1,185,713,687) 1,173,440,556
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SHORT-TERM INVESTMENTS--1.6%
------------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--1.3%
Greenwich Capital Markets,
6.45% dated 10/31/2000, due 11/1/2000
in the amount of $11,282,021
(fully collateralized by $11,824,000
U. S. Treasury Bills due 4/5/2001,
value $11,516,001) 11,280,000 11,280,000
U. S. GOVERNMENTS--.3%
U. S. Treasury Bills:
5.92%, 11/2/2000 1,405,000 (g) 1,404,761
5.95%, 12/21/2000 1,405,000 (g) 1,392,622
TOTAL U. S. GOVERNMENTS 2,797,383
TOTAL SHORT-TERM INVESTMENTS
(cost $14,077,490) 14,077,383
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TOTAL INVESTMENTS
(cost $1,199,791,177) 131.6% 1,187,517,939
LIABILITIES, LESS CASH AND RECEIVABLES (31.6%) (285,054,353)
NET ASSETS 100.0% 902,463,586
(A) ADJUSTABLE RATE MORTGAGE--INTEREST RATE SUBJECT TO CHANGE PERIODICALLY.
(B) PURCHASED ON A FORWARD COMMITMENT BASIS.
(C) REFLECTS NOTIONAL FACE.
(D) 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 OCTOBER 31,
2000, THESE SECURITIES AMOUNTED $33,346,993 OR 3.7% OF NET ASSETS.
(E) VARIABLE RATE SECURITY-INTEREST RATE SUBJECT TO CHANGE PERIODICALLY.
(F) PRINCIPAL AMOUNT FOR ACCRUAL PURPOSES IS PERIODICALLY ADJUSTED BASED
ON CHANGES TO THE CONSUMER PRICE INDEX.
(G) SECURITIES HELD BY BROKER AS COLLATERAL FOR OPEN FINANCIAL FUTURES
POSITIONS.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
STATEMENT OF FINANCIAL FUTURES
October 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Unrealized
Market Value Appreciation
Covered (Depreciation)
Contracts by Contracts Expiration at 10/31/2000 ($)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL FUTURES SHORT
U. S. Treasury 5 year Notes 61 6,141,938 December 2000 (6,812)
U. S. Treasury 10 year Notes 275 27,693,359 December 2000 194,703
187,891
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Fund
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000 (Unaudited)
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--
See Statement of Investments--Note 1(b) 1,199,791,177 1,187,517,939
Receivable for investment securities sold 18,323,205
Receivable for shares of Common Stock subscribed 8,968
Interest receivable 7,550,879
Receivable for futures variation margin--Note 4(a) 68,266
Paydowns receivable 4,869
Prepaid expenses 8,310
1,213,482,436
--------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 691,648
Cash overdraft due to Custodian 6,007,256
Payable for investment securities purchased 303,590,195
Payable for shares of Common Stock redeemed 241,946
Accrued expenses 487,805
311,018,850
--------------------------------------------------------------------------------
NET ASSETS ($) 902,463,586
--------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 1,001,390,105
Accumulated undistributed investment income--net 7,606,400
Accumulated net realized gain (loss) on investments (94,447,572)
Accumulated net unrealized appreciation (depreciation)
on investments (including $187,891 net unrealized
appreciation on financial futures)--Note 4(b) (12,085,347)
--------------------------------------------------------------------------------
NET ASSETS ($) 902,463,586
--------------------------------------------------------------------------------
SHARES OUTSTANDING
(1.1 billion shares of $.001 par value Common Stock authorized) 63,937,411
NET ASSET VALUE, offering and redemption price per share ($) 14.11
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
Six Months Ended October 31, 2000 (Unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INTEREST INCOME 33,330,190
EXPENSES:
Management fee--Note 3(a) 2,738,008
Shareholder servicing costs--Note 3(b) 1,140,250
Custodian fees--Note 3(b) 112,423
Interest expense--Note 2 91,170
Professional fees 37,520
Prospectus and shareholders' reports--Note 3(b) 29,475
Directors' fees and expenses--Note 3(c) 23,786
Registration fees 16,413
Miscellaneous 73,618
TOTAL EXPENSES 4,262,663
INVESTMENT INCOME--NET 29,067,527
-------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments 545,960
Net realized gain (loss) on financial futures (3,694,590)
NET REALIZED GAIN (LOSS) (3,148,630)
Net unrealized appreciation (depreciation) on investments
[including $802,414 net unrealized appreciation on financial
futures] 17,957,578
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 14,808,948
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 43,876,475
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
October 31, 2000 Year Ended
(Unaudited) April 30, 2000
--------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 29,067,527 62,706,803
Net realized gain (loss) on investments (3,148,630) (19,130,997)
Net unrealized appreciation (depreciation)
on investments 17,957,578 (27,168,893)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 43,876,475 16,406,913
--------------------------------------------------------------------------------
NET EQUALIZATION (DEBITS)-NOTE 1(E) (121,845) (717,240)
--------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
INVESTMENT INCOME--NET (29,248,634) (62,737,407)
--------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS ($):
Net proceeds from shares sold 54,196,544 118,532,256
Dividends reinvested 22,340,362 47,809,405
Cost of shares redeemed (99,548,608) (276,671,801)
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL STOCK TRANSACTIONS (23,011,702) (110,330,140)
TOTAL INCREASE (DECREASE) IN NET ASSETS (8,505,706) (157,377,874)
--------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 910,969,292 1,068,347,166
END OF PERIOD 902,463,586 910,969,292
Undistributed investment income--net 7,606,400 7,909,352
--------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold 3,911,247 8,539,358
Shares issued for dividends reinvested 1,614,206 3,417,595
Shares redeemed (7,186,030) (19,858,760)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (1,660,577) (7,901,807)
SEE NOTES TO FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements.
<TABLE>
<CAPTION>
Six Months Ended
October 31, 2000 Year Ended April 30,
-------------------------------------------------------------------
(Unaudited) 2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA ($):
Net asset value,
beginning of period 13.89 14.54 14.99 14.44 14.50 14.32
Investment Operations:
Investment income--net .45 .90 .92 .91 .92 .96
Net realized and unrealized
gain (loss) on investments .22 (.65) (.46) .55 (.05) .18
Total from Investment Operations .67 .25 .46 1.46 .87 1.14
Distributions:
Dividends from investment
income--net (.45) (.90) (.91) (.91) (.93) (.96)
Net asset value, end of period 14.11 13.89 14.54 14.99 14.44 14.50
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 10.06(a) 1.75 3.17 10.38 6.17 8.11
-----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses to
average net assets .91(a) .92 .94 .96 .96 .96
Ratio of interest expense
and loan commitment fees
to average net assets .02(a) -- .25 -- -- --
Ratio of net investment income
to average net assets 6.37(a) 6.40 6.19 6.16 6.38 6.57
Portfolio Turnover Rate 206.77(b) 420.18 206.15 342.71 323.99 144.43
-----------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
($ x 1,000) 902,464 910,969 1,068,347 1,172,792 1,240,459 1,373,618
(A) ANNUALIZED.
(B) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Fund
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, as amended (the "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 (the "Manager") serves as
the fund' s investment adviser. The Manager is a direct subsidiary of Mellon
Bank, N.A., which is a wholly-owned subsidiary of Mellon Financial Corporation.
Dreyfus Service Corporation (the "Distributor"), a wholly-owned subsidiary of
the Manager, is the Distributor of the fund's shares, which are sold to the
public without a sales charge.
The fund' s financial statements are prepared in accordance with accounting
principles generally accepted in the United States, 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, other than U.S. Treasury Bills, 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 sale 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. Under the terms of custody agreement, the
fund received net earnings credits of $117,465 during the period ended October
31, 2000 based on available cash balances left on deposit. Interest earned under
this arrangement is included in interest income.
The fund may enter into repurchase agreements with financial institutions,
deemed to be creditworthy by the fund' s Manager, subject to the seller's
agreement to repurchase and the fund's agreement to resell such securities at a
mutually agreed upon price. Securities purchased subject to repurchase
agreements are deposited with the fund's custodian and, pursuant to the terms of
the repurchase agreement, must have an aggregate market value greater than or
equal to the repurchase price plus accrued interest at all times. If the value
of the underlying securities falls below the value of the repurchase price plus
accrued interest, the fund will require the seller to deposit additional
collateral by the next business day. If the request for additional collateral is
not met, or the seller defaults on its repurchase obligation, the fund maintains
the right to sell the underlying securities at market value and may claim any
resulting loss against the seller.
(c) Dividends to shareholders: Dividends are recorded on the ex-dividend date.
Dividends from investment income-net are declared and paid monthly. Dividends
from net realized capital gain, if any, are normally declared and paid annually,
but the fund may make distributions on a more frequent basis to comply with the
distribution requirements of the Internal Revenue Code of 1986, as amended The
Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
(the" 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, 2000, the Board of Directors declared a cash dividend of $.077
per share from undistributed investment income-net, payable on November 1, 2000
(ex-dividend date) to shareholders of record as of the close of business on
October 31, 2000.
(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 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 $79,624,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to April 30, 2000. If not
applied, $58,671,000 of the carryover expires in fiscal 2003, $5,711,000 expires
in fiscal 2005, $6,916,000 expires in fiscal 2007 and $8,326,000 expires in
fiscal 2008.
(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 may borrow up to $20 million for leveraging purposes under a short-term
unsecured line of credit and participates with other Dreyfus-managed funds in a
$100 million unsecured line of credit primarily to be utilized for temporary or
emergency purposes, including the financing of redemptions. Interest is charged
to the fund at rates
which are related to the Federal Funds rate in effect at the time of borrowings.
During the period ended October 31, 2000, the fund did not borrow under either
line of credit.
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 11_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 October 31, 2000, pursuant to the Agreement.
(b) Under the Service Plan (the "Plan") adopted pursuant to Rule 12b-1 under the
Act, the fund pays the Distributor for distributing the fund's shares, for
servicing shareholder accounts and for advertising and marketing relating to the
fund. The Plan provides for payments to be made at an aggregate annual rate not
to exceed .20 of 1% of the value of the fund's average daily net assets. The
Distributor determines 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, 2000, the fund was charged $679,379 pursuant to the Plan.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the
Manager, under a transfer agency agreement for provid The Fun
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
ing personnel and facilities to perform transfer agency services for the fund.
During the period ended October 31, 2000, the fund was charged $279,821 pursuant
to the transfer agency agreement.
The fund compensates Mellon under a custody agreement for providing custodial
services for the fund. During the period ended October 31, 2000, the fund was
charged $112,423 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.
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 October 31, 2000, amounted to $2,407,897,025 and
$2,415,941,081, 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 October 31, 2000, are set
forth in the Statement of Financial Futures.
(b) At October 31, 2000, accumulated net unrealized depreciation on investments
and financial futures was $12,085,347, consisting of $8,924,754 gross unrealized
appreciation and $21,010,101 gross unrealized depreciation.
At October 31, 2000, 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).
Note 5--Reverse Repurchase Agreements:
The fund may enter into reverse repurchase agreements with banks, brokers or
dealers. This form of borrowing involves the transfer by the fund of an
underlying debt instrument in return for cash proceeds based on a percentage of
value of the security. The fund retains the right to receive interest and
principal payments on the security. At an agreed upon future date, the fund
repurchases the security at principal plus accrued interest. Reverse repurchase
agreements may subject the fund to interest rate risk and counter party credit
risk. During the period ended October 31, 2000, the fund did not enter into any
reverse repurchase agreements.
The Fund
For More Information
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
Distributor
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
To obtain information:
BY TELEPHONE Call 1-800-645-6561
BY MAIL Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Information can be viewed online or downloaded from:
http://www.dreyfus.com
(c) 2000 Dreyfus Service Corporation 265SA0010
