Dreyfus
GNMA Fund, Inc.
SEMIANNUAL REPORT October 31, 1999
(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
Year 2000 Issues (Unaudited)
The fund could be adversely affected if the computer systems used by The Dreyfus
Corporation and the fund's other service providers do not properly process and
calculate date-related information from and after January 1, 2000. The Dreyfus
Corporation is working to avoid Year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by Year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
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, 1999 through October 31, 1999. 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.
The past six months have been highly volatile for most bonds. When the reporting
period began, evidence had emerged that the U.S. economy was growing strongly in
an environment characterized by high levels of consumer spending and low levels
of unemployment. Concerns that inflationary pressures might re-emerge caused the
Federal Reserve Board to raise short-term interest rates twice during the summer
of 1999, effectively offsetting most of last fall' s interest-rate cuts
Higher interest rates led to some erosion of bond prices, especially among the
higher yielding market sectors. In this environment, however, the yields of many
higher yielding bonds -- including corporate bonds and U.S. government agency
securities -- have recently been quite attractive compared to the yields of U.S.
Treasury securities of comparable maturity.
We appreciate your confidence over the past six months, and we look forward to
your continued participation in Dreyfus GNMA Fund, Inc.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
November 15, 1999
DISCUSSION OF FUND PERFORMANCE
Michael Hoeh, Portfolio Manager Dreyfus Taxable Fixed Income Team
How did Dreyfus GNMA Fund, Inc. perform relative to its benchmark?
For the six-month period ended October 31, 1999, the fund produced a 0.39% total
return.(1) This performance modestly lagged the 0.60% return provided by the
fund's benchmark, the Lehman Brothers GNMA Index,(2) for the same period.
The fund' s performance is attributable to our asset allocation and duration
strategies. We successfully anticipated historically low prepayment levels
within the mortgage-financing market, which substantially outperformed the U.S.
Treasury securities market. However, because the fund's benchmark index is
composed exclusively of GNMA securities while the fund also contains other types
of U.S. government agency and non-agency securities, the fund did not surpass
the benchmark's return.
What is the fund's investment approach?
The fund invests primarily in GNMA (Government National Mortgage Association or
" Ginnie Mae" ) securities. The remainder may be allocated to other
mortgage-related securities, including U.S. government agency securities, and
privately issued mortgage- and asset-backed securities. The fund also invests in
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
an increase in this trend would adversely affect returns provided by the fund's
mortgage-related holdings.
The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
*OPTION-ADJUSTED SPREAD ANALYSIS. This analytical tool quantifies the yield
advantage of mortgage-backed securities compared to other securities, such as
U.S. Treasuries. This analysis helps us measure the risk that individual
securities may be vulnerable to early redemption.
*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-year and 15-year fixed-rate securities along with adjustable-rate
mortgage securities (ARMs) . Also within the GNMA market, we analyze project
loans which 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 potentially 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, 1999, there was concern that economic
recovery in overseas markets and continued economic strength in the United
States might rekindle long-dormant inflationary pressures. In fact, in an
attempt to forestall a potential reacceleration of inflation, the Federal
Reserve Board raised short-term interest rates twice during the summer of 1999.
The Federal Reserve's interest-rate hikes caused a dramatic rise in Treasury and
mortgage rates, and drove mortgage prepayment rates back down to below the
historic average. In this environment, mortgage-backed securities substantially
outperformed U.S. Treasuries as well as other investment-grade fixed-income
securities.(3) We took care to structure the fund to benefit from the relative
performance advantage of mortgage-backed securities during the period.
What is the fund's current strategy?
The fund was relatively successful in a rising interest-rate environment largely
because we focused on the residential mortgage-backed secu
rities, commercial mortgage-backed securities and asset-backed securities that
led the market' s recovery from last year' s financial crises. GNMA
Adjustable-Rate Mortgage securities (ARMs) were the best-performing securities
in the portfolio, comprising 12.83% of the fund's net assets as of October 31,
1999. Unlike fixed-rate securities, which tend to decline in price as interest
rates advance, the income payments on adjustable-rate securities generally rise
and fall with changes in interest rates. In addition, our emphasis on securities
that mature in 15 years was rewarded when those securities outperformed 30-year
bonds.
Our sector allocation strategy -- which led to increased exposure to
asset-backed securities, commercial mortgage-backed securities and residential
mortgage-backed securities -- also had a positive effect on the fund's
performance.
Toward the end of the reporting period, when we determined that the bulk of
interest-rate hikes was likely to be behind us, we lengthened the fund's
duration to match the Lehman GNMA Index to lock in prevailing yields and capture
potential capital appreciation from longer maturity securities. We have reduced
our holdings of credit-sensitive securities in order to lock in profits, and we
have increased our participation in GNMA project loans that offer protection
from early redemption in the event of a market rally. We have also increased our
exposure to U.S. Treasury securities.
November 15, 1999
(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. -- 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.
(3) BASED ON A COMPARISON OF THE MERRILL LYNCH U.S. GOVERNMENT & CORPORATE,
1-10 YEARS, A-RATED AND ABOVE INDEX AND THE MERRILL LYNCH MORTGAGES, GNMA MASTER
INDEX OVER THE 10 MONTHS ENDED OCTOBER 31, 1999.
The Fund
STATEMENT OF INVESTMENTS
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal
BONDS AND NOTES--123.4% Amount ($) Value ($)
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U.S. GOVERNMENT AGENCIES/
MORTGAGE-BACKED SECURITIES--101.0%
Government National Mortgage Association I:
<S> <C> <C>
6% 9,500,000 (a) 8,820,085
6.5% 47,250,000 (a) 45,167,693
6.5%, 9/15/2008-3/15/2029 90,687,639 (b) 88,939,819
7% 32,650,000 (a) 32,037,813
7%, 11/15/2022-12/15/2022 318,035 315,009
7.5% 35,450,000 (a) 35,560,604
7.5%, 8/15/2000-12/15/2023 120,178,523 121,624,169
8%, 4/15/2008-12/15/2022 77,613,245 (b) 79,702,899
8.5%, 10/15/2017-12/15/2022 33,859,752 (b) 35,623,669
9%, 7/15/2001-12/15/2022 30,532,997 (a) 32,459,634
9.5%, 1/15/2016-11/15/2024 20,118,589 21,816,041
11%, 9/15/2000-1/15/2001 44,681 47,012
502,114,447
Government National Mortgage Association II:
5% 35,000,000 (a,c) 34,125,000
5.5% 70,309,444 (a,c) 69,276,598
6% 22,517,000 (a,c) 22,411,395
6.375%, 2/20/2027 423,265 (c) 425,114
7% 40,460,000 (a) 39,701,375
7%, 4/20/2024-8/20/2029 12,646,434 12,369,470
9%, 3/20/2016 1,118,351 1,174,269
9.5%, 2/20/2016-2/20/2025 2,058,372 2,199,765
10.5%, 7/20/2013-9/20/2018 1,913,624 2,068,583
183,751,569
Government National Mortgage Association I,
Graduated Payment Mortgage:
10.25%, 8/15/2018-9/15/2018 62,648 68,286
10.75%, 3/15/2010-2/15/2016 256,733 281,260
349,546
Government National Mortgage Association II,
Graduated Payment Mortgage,
11.75%, 6/20/2015-1/20/2016 158,907 177,032
Government National Mortgage Association I,
Construction Loans:
6.5% 4,904,682 (a) 4,369,765
6.5%, 2/15/2001 13,515,318 12,041,304
6.75% 4,418,689 (a) 4,040,339
6.75%, 7/15/2000-3/15/2040 14,958,011 13,677,231
6.875% 2,482,140 (a) 2,289,387
6.875%, 2/15/2040 4,987,860 4,600,521
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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U.S. GOVERNMENT AGENCIES/
MORTGAGE-BACKED SECURITIES (CONTINUED)
Government National Mortgage Association I,
Construction Loans (continued):
7.25%, 7/15/2039 7,984,621 7,654,008
48,672,555
Government National Mortgage Association I,
Project Loans:
5.95%, 11/15/2033 4,519,647 4,194,775
6.3%, 11/15/2038 21,222,869 (b) 20,334,055
6.315%, 10/15/2033 1,500,584 1,439,615
6.355%, 8/15/2024 3,341,586 3,213,135
6.36%, 2/15/2037 20,361,324 (b) 19,438,549
6.375%, 10/15/2033-1/15/2034 20,841,228 19,991,227
6.38%, 9/15/2033 8,430,762 8,151,451
6.4%, 10/15/2033-9/15/2038 12,743,876 12,044,681
6.41%, 8/15/2028 1,838,019 1,782,290
6.47%, 9/15/2033 3,196,096 3,110,185
6.5%, 12/15/2023-10/15/2033 44,423,927 (b) 43,203,465
6.55%, 7/15/2033 7,959,495 7,787,809
6.6%, 9/15/2019-9/15/2030 9,165,332 (b) 9,013,462
6.625%, 6/15/2028-10/15/2033 22,794,798 22,422,845
6.75%, 10/15/2033-1/15/2034 14,068,348 (b) 13,878,367
6.95%, 12/15/2038 9,160,880 (b) 9,014,855
7.25%, 5/15/2033 6,960,393 (b) 7,121,318
206,142,084
Federal Home Loan Mortgage Corp.:
Real Estate Mortgage Investment Conduit,
Stripped Securities, Interest Only Class:
Ser. 1379, Cl. T, 7.5%, 2021 10,000,000 (d) 2,024,200
Ser. 1583, CI. ID, 7%, 2023 5,059,464 (d) 1,465,170
Ser. 1628, CI. MA, 6.5%, 2022 7,238,471 (d) 748,729
Ser. 1829, CI. I, 6.5%, 2017 3,614,513 (d) 267,700
Ser. 1882, CI. PK, 7%, 2026 3,181,482 (d) 1,413,151
Ser. 1969, CI. PI, 7%, 2009 4,904,645 (d) 631,718
Ser. 1998, CI. PK, 7%, 2026 12,413,530 (d) 2,676,667
Ser. 1999, CI. QK, 7%, 2025 8,832,558 (d) 1,862,345
Ser. 2043, CI. IE, 6.5%, 2023 29,993,269 (d) 5,619,051
Ser. 2065, CI. PH, 6.5%, 2021 4,642,230 (d) 831,249
Structured Pass-Through Securities,
Ser. T-14, Cl. A-5, 6.4%, 2028 13,289,000 (b) 11,827,210
29,367,190
The Fund
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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U.S. GOVERNMENT AGENCIES/
MORTGAGE-BACKED SECURITIES (CONTINUED)
Federal National Mortgage Association:
6.82%, 2028 3,541,606 3,374,011
Stripped Securities, Interest Only Class:
Ser. 1993-133, CI. HA, 9.96%, 2022 8,200,000 (d) 2,246,800
Ser. 1997-16, CI. PJ, 7%, 2026 8,321,533 (d) 1,742,321
Ser. 1997-40, CI. PI, 7%, 2027 31,676,142 (d) 10,759,989
Ser. 1997-60, Cl. PJ, 7%, 2027 4,933,607 (d) 1,951,858
Ser. 1997-84, CI. PI, 6.5%, 2021 2,414,201 (d) 606,302
Ser. 1997-85, CI. PI, 7%, 2018 17,980,858 (d) 2,910,651
23,591,932
TOTAL U.S. GOVERNMENT AGENCIES/
MORTGAGE-BACKED SECURITIES 994,166,355
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ASSET-BACKED SECURITIES--4.6%
ACLC Business Loan Receivables Trust,
Ser. 1998-1, Cl. A-1, 6.435%, 2019 9,282,007 (b,e) 8,806,304
BMW Vehicle Owner Trust,
Ser. 1999-A, Cl. A-4, 6.54%, 2004 2,000,000 (b) 1,999,620
Equivantage Home Equity Loan Trust:
Ser. 1996-2, Cl. A-4, 8.05%, 2027 6,251,000 (b) 6,305,790
Ser. 1997-1, Cl. A-4, 7.275%, 2028 7,000,000 (b) 7,021,945
MMCA Automobile Trust,
Ser. 1999-2, Cl. A-3, 7%, 2004 7,000,000 (b) 7,030,625
The Money Store Home Equity Trust,
Ser. 1997-D, Cl. AF-7, 6.485%, 2038 7,225,000 (b) 6,997,087
Nomura Depositor Trust,
Ser. 1998-ST1, Cl. A-3, 5.986%, 2003 7,500,000 (b,e,f) 7,470,703
TOTAL ASSET-BACKED SECURITIES 45,632,074
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COMMERCIAL MORTGAGE PASS-THROUGH CTFS.--9.0%
Asset Securitization,
Ser. 1997-D5, Cl. A-2, 6.816%, 2041 11,450,781 (b,f) 10,799,518
BTC Mortgage Investors Trust,
Ser. 1997-S1, Cl. C, 6.645%, 2009 5,135,002 (b,e) 5,122,165
CS First Boston Mortgage Securities,
Ser. 1998-C1, Cl. C, 6.78%, 2009 32,000,000 (b) 30,221,920
GGP Ala Moana,
Ser. 1999-C1, Cl. D, 6.516%, 2004 10,000,000 (b,e,f) 9,956,250
Library Tower Trust I,
Ser. 1998-I, Cl. B, 6.66%, 2029 6,500,000 (b,e) 6,071,007
Merrill Lynch Mortgage Investors,
Ser. 1997-SD1, Cl. C, 5.888%, 2004 5,000,000 (b,e,f) 4,847,656
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL MORTGAGE PASS-THROUGH CTFS. (CONTINUED)
Nomura Asset Securities,
Ser. 1998-D6, Cl. A-3, 6.981%, 2028 18,000,000 (b,f) 16,470,000
Trizec Hahn Office Properties Trust,
Ser. 1999-TOPA, Cl. D, 6.58%, 2007 5,500,000 (b,e,f) 5,453,594
TOTAL COMMERCIAL MORTGAGE PASS-THROUGH CTFS. 88,942,110
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RESIDENTIAL MORTGAGE PASS-THROUGH CTFS.--4.6%
BA Mortgage Securities,
Ser. 1998-2, Cl. 2B-1, 6.5%, 2013 436,611 406,184
Blackrock Capital Finance,
Ser. 1997-R3, Cl. B-2, 7.25%, 2028 12,557,067 (e) 9,001,847
GE Capital Mortgage Services:
Ser. 1998-1, Cl. B-1, 6.75%, 2013 930,154 868,754
Ser. 1998-13, Cl. B-1, 6.75%, 2012 463,553 422,477
Ser. 1998-16:
Cl. B-1, 6.5%, 2013 596,207 551,080
Cl. M, 6.5%, 2013 1,788,623 1,719,010
Norwest Asset Securities:
Ser. 1997-20, Cl. B-1, 6.75%, 2012 941,278 885,338
Ser. 1998-9:
Cl. B-1, 6.5%, 2028 3,248,150 3,083,371
Cl. B-2, 6.5%, 2028 3,112,441 2,919,719
Ser. 1998-14, Cl. B-2, 6.5%, 2013 1,415,566 1,328,438
PNC Mortgage Securities:
Ser. 1998-2:
Cl. 3B-2, 6.75%, 2013 727,373 703,894
Cl. 4B-2, 6.75%, 2027 654,181 605,389
Ser. 1998-11, Cl. 2B-2, 6.25%, 2013 503,827 459,978
Prudential Home Mortgage Securities:
Ser. 1995-7, Cl. B-1, 7%, 2025 3,879,954 (e) 3,820,358
Ser. 1996-8, Cl. B-1, 6.75%, 2026 2,594,480 2,494,514
Residential Asset Securities,
Ser. 1997-KS4, Cl. AI-5, 6.98%, 2027 10,000,000 9,566,450
Residential Funding Mortgage Securities I:
Ser. 1997-S10, Cl. M-2, 7%, 2012 833,201 809,883
Ser. 1997-S11, Cl. M-2, 7%, 2012 704,945 685,189
Ser. 1997-S16, Cl. M-2, 6.75%, 2012 1,176,292 1,135,381
Ser. 1998-S1, Cl. M-2, 6.5%, 2013 1,047,373 1,003,541
Ser. 1998-S14, Cl. M-2, 6.5%, 2013 1,621,880 1,542,805
Ser. 1998-S16:
Cl. M-1, 6.5%, 2013 1,021,056 980,683
Cl. M-2, 6.5%, 2013 364,731 343,029
TOTAL RESIDENTIAL MORTGAGE PASS-THROUGH CTFS. 45,337,312
The Fund
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
BONDS AND NOTES (CONTINUED) Amount ($) Value ($)
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U.S. GOVERNMENTS--4.2%
U.S. Treasury Bonds,
6.125%, 2029 21,050,000 20,976,116
U.S. Treasury Notes:
5.625%, 2001 15,000,000 14,949,450
6%, 2004 5,150,000 5,164,266
TOTAL U.S. GOVERNMENTS 41,089,832
TOTAL BONDS AND NOTES
(cost $1,238,960,765) 1,215,167,683
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SHORT-TERM INVESTMENTS--5.4%
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REPURCHASE AGREEMENTS--5.2%
UBS Securities Inc.,
5.21%, Dated 10/29/1999,Due 11/1/1999
in the amount of $51,387,301
(fully collateralized by $51,619,000,
U.S. Treasury Notes due 8/31/2000
value $52,442,741) 51,365,000 51,365,000
U.S. TREASURY BILLS--.2%
5.175%, 12/9/1999 1,600,000 (g) 1,592,528
TOTAL SHORT-TERM INVESTMENTS 52,957,528
(cost $52,957,400 )
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TOTAL INVESMENTS
(cost $1,291,918,165) 128.8% 1,268,125,211
LIABILITIES, LESS CASH AND RECEIVABLES (28.8%) (283,854,956)
NET ASSETS 100.0% 984,270,255
(A) PURCHASED ON A FORWARD COMMITMENT BASIS.
(B) SECURITIES HELD IN WHOLE OR IN PART BY THE CUSTODIAN IN A SEGREGATED
ACCOUNT AS COLLATERAL FOR SECURITIES 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 OCTOBER 31,
1999. THESE SECURITIES AMOUNTED TO $60,549,884, OR 6.2% OF NET ASSETS.
(F) VARIABLE RATE SECURITY-INTEREST RATE SUBJECT TO CHANGE PERIODICALLY.
(G) HELD BY THE CUSTODIAN IN A SEGREGATED ACCOUNT AS COLLATERAL FOR OPEN
FINANCIAL FUTURES POSITIONS.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
STATEMENT OF FINANCIAL FUTURES
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Market Value Unrealized
Covered by Appreciation
Contracts Contracts ($) Expiration at 10/31/99 ($)
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL FUTURES LONG
<S> <C> <C> <C> <C>
U.S. Treasury 5 year Notes 538 58,078,781 December '99 64,751
U.S. Treasury 10 year Notes 201 22,053,469 December '99 147,187
211,938
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Fund
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999 (Unaudited)
Cost Value
- --------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments--Note 1(b) 1,291,918,165 1,268,125,211
Cash 7,134,248
Receivable for investment securities sold 25,879,991
Interest receivable 7,350,180
Receivable for futures variation margin--Note 4(a) 426,031
Paydowns receivable 6,581
Receivable for shares of Common Stock subscribed 5,341
Prepaid expenses 3,177
1,308,930,760
- --------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 794,549
Due to Distributor 28,247
Payable for investment securities purchased 322,995,327
Payable for shares of Common Stock redeemed 461,379
Accrued expenses 381,003
324,660,505
- --------------------------------------------------------------------------------
NET ASSETS ($) 984,270,255
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 1,079,901,36
Accumulated undistributed investment income--net 8,238,519
Accumulated net realized gain (loss) on investments (80,288,615)
Accumulated net unrealized appreciation (depreciation)
on investments (including $211,938 net unrealized
appreciation on financial futures)--Note 4(b) (23,581,016)
- --------------------------------------------------------------------------------
NET ASSETS ($) 984,270,255
- --------------------------------------------------------------------------------
SHARES OUTSTANDING
(1.1 billion shares of $.01 par value Common Stock authorized) 69,615,916
NET ASSET VALUE, offering and redemption price per share ($) 14.14
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
Six Months Ended October 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INTEREST INCOME 37,033,374
EXPENSES:
Management fee--Note 3(a) 3,063,842
Shareholder servicing costs--Note 3(b) 1,313,061
Custodian fees--Note 3(b) 101,612
Prospectus and shareholders' reports--Note 3(b) 43,269
Professional fees 40,970
Directors' fees and expenses--Note 3(c) 31,024
Registration fees 23,181
Miscellaneous 103,286
TOTAL EXPENSES 4,720,245
INVESTMENT INCOME--NET 32,313,129
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (12,297,710)
Net realized gain (loss) on financial futures 4,177,040
NET REALIZED GAIN (LOSS) (8,120,670)
Net unrealized appreciation (depreciation) on investments
[including ($498,140) net unrealized (depreciation) on financial
futures] (20,706,984)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (28,827,654)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 3,485,475
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
October 31, 1999 Year Ended
(Unaudited) April 30, 1999
- --------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 32,313,129 69,574,106
Net realized gain (loss) on investments (8,120,670) (7,675,911)
Net unrealized appreciation (depreciation)
on investments (20,706,984) (26,810,826)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 3,485,475 35,087,369
NET EQUALIZATION (DEBITS)--NOTE 1(E) (384,643) (459,399)
- --------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
INVESTMENT INCOME--NET (32,347,163) (69,470,086)
- --------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS ($):
Net proceeds from shares sold 41,335,629 104,458,260
Dividends reinvested 24,658,073 52,915,133
Cost of shares redeemed (120,824,282) (226,975,934)
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL STOCK TRANSACTIONS (54,830,580) (69,602,541)
TOTAL INCREASE (DECREASE) IN NET ASSETS (84,076,911) (104,444,657)
- --------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 1,068,347,166 1,172,791,823
END OF PERIOD 984,270,255 1,068,347,166
Undistributed investment income--net 8,238,519 8,657,196
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold 2,937,348 7,125,121
Shares issued for dividends reinvested 1,744,784 3,607,778
Shares redeemed (8,566,011) (15,495,970)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (3,833,879) (4,763,071)
SEE NOTES TO FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the fund would have increased
(or decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements.
<TABLE>
<CAPTION>
Six Months Ended
October 31, 1999 Year Ended April 30,
----------------------------------------------------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value,
<S> <C> <C> <C> <C> <C> <C>
beginning of period 14.54 14.99 14.44 14.50 14.32 14.48
Investment Operations:
Investment income--net .46 .92 .91 .92 .96 .98
Net realized and unrealized
gain (loss) on investments (.41) (.46) .55 (.05) .18 (.18)
Total from Investment
Operations .05 .46 1.46 .87 1.14 .80
Distributions:
Dividends from investment
income--net (.45) (.91) (.91) (.93) (.96) (.96)
Net asset value, end of period 14.14 14.54 14.99 14.44 14.50 14.32
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) .77(a) 3.17 10.38 6.17 8.11 5.81
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses
to average net assets .92(a) .94 .96 .96 .96 .97
Ratio of interest expense and loan
commitment fees to average
net assets -- .25 -- -- -- --
Ratio of net investment income
to average net assets 6.31(a) 6.19 6.16 6.38 6.57 6.90
Portfolio Turnover Rate 162.93(b) 206.15 342.71 323.99 144.43 362.70
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
($ x 1,000) 984,270 1,068,347 1,172,792 1,240,459 1,373,618 1,435,873
(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. (" Mellon"), which is a wholly-owned subsidiary of Mellon Financial
Corporation. Premier Mutual Fund Services, Inc. (the "Distributor") 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 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 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 receives net earnings credits based on available cash
balances left on deposit.
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
" 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.
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
On October 31, 1999, the Board of Directors declared a cash dividend of $.075
per share from undistributed investment income-net, payable on November 1, 1999
(ex-dividend date) to shareholders of record as of the close of business on
October 29, 1999.
(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 $71,298,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to April 30, 1999. If not
applied, $58,671,000 of the carryover expires in fiscal 2003, $5,711,000 expires
in fiscal 2005 and $6,916,000 expires in fiscal 2007.
(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 Lines of Credit:
The fund may borrow up to $10 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, 1999, 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, 1999.
(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 not to exceed .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 The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
full fiscal year. During the period ended October 31, 1999, the fund was charged
$818,800 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, 1999, the fund was charged $326,290 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, 1999, the fund was
charged $101,612 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, 1999, amounted to $2,087,046,024 and
$2,023,978,501, 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, 1999, are set forth in the Statement of Financial Futures.
(b) At October 31, 1999, accumulated net unrealized depreciation on investments
and financial futures was $23,581,016, consisting of $9,994,923 gross unrealized
appreciation and $33,575,939 gross unrealized depreciation.
At October 31, 1999, 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. As of October 31, 1999, the fund had no reverse repurchase agreements
outstanding.
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
Premier Mutual Fund Services, Inc.
60 State Street
Boston, MA 02109
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) 1999 Dreyfus Service Corporation 265SA9910
