Dreyfus
Strategic Municipals, Inc.
ANNUAL REPORT
September 30, 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 Year 2000 Issues (Unaudited)
and its share price.
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 Selected Information
7 Statement of Investments
14 Statement of Assets and Liabilities
15 Statement of Operations
16 Statement of Changes in Net Assets
17 Financial Highlights
18 Notes to Financial Statements
22 Report of Independent Auditors
23 Dividend Reinvestment and
Cash Purchase Plan
25 Important Tax Information
26 Proxy Results
29 Officers & Directors
FOR MORE INFORMATION
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Back Cover
The Fund
Dreyfus Strategic Municipals, Inc.
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this annual report for Dreyfus Strategic Municipals,
Inc., covering the 12-month period from October 1, 1998 through September 30,
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, Paul Disdier.
The past year has been mixed for municipal bond investors. Lower short-term
interest rates adopted by the Federal Reserve Board in the fall of 1998 helped
the U.S. economy withstand the effects of economic weakness in Japan, Asia and
Latin America. As interest rates declined, the prices of many municipal bonds
appreciated.
Soon after 1999 began, however, evidence 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. Higher interest rates led to erosion of
municipal bond prices, especially toward the end of the reporting period
In this environment, however, the yields of tax-exempt bonds have recently been
quite attractive compared to the after-tax yields of taxable bonds of comparable
maturity and credit quality. This is especially true for investors in the higher
federal income tax brackets.
We appreciate your confidence over the past year, and we look forward to your
continued participation in Dreyfus Strategic Municipals, Inc.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
October 15, 1999
DISCUSSION OF FUND PERFORMANCE
Paul Disdier, Portfolio Manager
How did Dreyfus Strategic Municipals, Inc. perform during the period?
The fund produced a total return of -2.15% over the 12-month reporting period
ended September 30, 1999.(1) The fund provided income dividends of $0.572 per
share, which is equal to a distribution rate of 7.15% over the same period.(2)
We attribute the fund's performance to its security selection strategy, which
emphasizes income over total return. In rising interest-rate environments such
as the one that prevailed throughout most of the reporting period, prices of
high income-producing bonds tend to decline less than bonds with lower income
yields. Conversely, when interest rates decline, prices of high-income bonds
tend to appreciate less than their lower yielding counterparts.
What is the fund's investment approach?
The fund seeks high current federally tax-exempt income from a diversified
portfolio of municipal bonds.
To this end, we have constructed a portfolio by seeking income opportunities
through analysis of each bond's structure, paying particularly close attention
to each bond's yield, maturity and early redemption features.
Over time, many of the fund's high yielding bonds matured or were redeemed by
their issuers. We generally attempted to replace those bonds with new comparable
securities that, at that time, offered higher-than-average income payments. This
strategy is designed to help maximize income. We also seek to upgrade the fund
with newly issued bonds that, in our opinion, have better structural or income
characteristics than existing holdings. When such opportunities arise, we will
usually sell bonds that are close to redemption or maturity, a strategy designed
to help protect the fund's income stream. In addi
The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
tion, we conduct extensive credit analysis of our holdings in an attempt to
avoid potential defaults on interest and principal payments.
What other factors influenced the fund's performance?
The fund was affected by changing interest rates over the past year. When the
reporting period began on October 1, 1998, investors were concerned about the
potentially adverse economic effects of the global currency and credit crises,
which had spread from Asia to Russia and were threatening Latin America. In
response, the Federal Reserve Board reduced short-term interest rates last fall
in an attempt to stimulate global economic growth.
The Federal Reserve's strategy apparently was effective. Economies in Japan and
Southeast Asia appear to have halted their deterioration early in 1999, and the
growth of the U.S. economy was stronger than most analysts expected. Municipal
bond yields and prices stabilized in this environment. In the second and third
quarters, however, strong economic growth raised concerns among fixed-income
investors that inflationary pressures might re-emerge. The Federal Reserve Board
increased short-term interest rates twice during the summer of 1999 in an
attempt to forestall inflationary pressures. This change in monetary policy
caused municipal bond prices to fall.
In addition, strong economic conditions have contributed to the nation's first
federal budget surplus in many years. While the government has had less need to
issue U.S. Treasury securities, demand has remained high from domestic and
overseas investors. This imbalance between supply and demand has, at times,
constrained the rise of taxable U.S. Treasury bond yields relative to tax-exempt
bonds. As a result, as of September 30, 1999, municipal bonds were offering
tax-exempt yields that compared very favorably with taxable yields after
adjusting for taxes.
The fund has also been affected by the early redemption of bonds by their
issuers. This has resulted in some erosion of the fund's dividend and income
stream in a lower interest-rate environment than when the fund was initially
constructed 11 years ago.
On October 15, 1999, shareholders approved a proposal enabling the fund to issue
auction preferred stock. Any auction preferred stock offering would be done for
the purpose of leveraging the fund's capital structure in an effort to provide
incremental earnings and providing the fund with flexibility in managing the
overall call exposure and rated credit quality of its portfolio. Subject to
market conditions, the fund currently intends to issue auction preferred stock
during the first calendar quarter of 2000. The fund will continue to monitor the
applicable market to determine when to issue such stock. An offering of any
auction preferred stock will be made only by prospectus.
What is the fund's current strategy?
We have positioned the fund relatively defensively in a rising interest-rate
environment. As existing holdings have matured or been called, we typically have
reinvested the proceeds in long-term then-current higher yielding bonds, as well
as in inverse floaters, which are adjustable-rate securities that tend to
produce more income.
October 15, 1999
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID,
BASED UPON NET ASSET VALUE PER SHARE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS. INCOME MAY BE SUBJECT TO STATE AND LOCAL TAXES, AND SOME INCOME MAY BE
SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT) FOR CERTAIN INVESTORS.
CAPITAL GAINS, IF ANY, ARE FULLY TAXABLE.
(2) DISTRIBUTION RATE PER SHARE IS BASED UPON DIVIDENDS PER SHARE PAID FROM NET
INVESTMENT INCOME DURING THE PERIOD, DIVIDED BY THE MARKET PRICE PER SHARE AT
THE END OF THE PERIOD.
The Fund
SELECTED INFORMATION
September 30, 1999 (Unaudited)
Market Price per share September 30, 1999 $ 8
Shares Outstanding September 30, 1999 58,549,216
New York Stock Exchange Ticker Symbol LEO
MARKET PRICE (NEW YORK STOCK EXCHANGE)
Fiscal Year Ended September 30, 1999
- -----------------------------------------------------------------
<TABLE>
QUARTER QUARTER QUARTER QUARTER
ENDED ENDED ENDED ENDED
DECEMBER 31, 1998 MARCH 31, 1999 JUNE 30, 1999 SEPTEMBER 30, 1999
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
High $ 10 11_16 $ 10 1_8 $ 9 3_4 $ 9 1_4
Low 9 13_16 9 1_8 9 1_16 7 7_8
Close 9 15_16 9 1_2 9 3_16 8
PERCENTAGE GAIN (LOSS) based on change in Market Price*
September 23, 1987(commencement of operations)
through September 30, 1999 94.15%
October 1, 1989 through September 30, 1999 54.91
October 1, 1994 through September 30, 1999 13.11
October 1, 1998 through September 30, 1999 (17.55)
January 1, 1999 through September 30, 1999 (15.73)
April 1, 1999 through September 30, 1999 (13.17)
July 1, 1999 through September 30, 1999 (11.51)
NET ASSET VALUE PER SHARE
September 23, 1987(commencement of operations) $ 9.32
September 30, 1998 10.22
December 31, 1998 10.09
March 31, 1999 10.03
June 30, 1999 9.75
September 30, 1999 9.41
PERCENTAGE GAIN (LOSS) based on change in Net Asset Value*
September 23, 1987(commencement of operations)
through September 30, 1999 145.02%
October 1, 1989 through September 30, 1999 94.18
October 1, 1994 through September 30, 1999 35.03
October 1, 1998 through September 30, 1999 (2.15)
January 1, 1999 through September 30, 1999 (2.37)
April 1, 1999 through September 30, 1999 (3.26)
July 1, 1999 through September 30, 1999 (1.92)
* WITH DIVIDENDS REINVESTED.
</TABLE>
STATEMENT OF INVESTMENTS
<TABLE>
September 30, 1999
Principal
LONG-TERM MUNICIPAL INVESTMENTS--98.0% Amount ($) Value ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ALABAMA--.9%
Alabama Industrial Development Authority, SWDR (Pine City Fiber
Co.) 6.45%, 12/1/2023 (Guaranteed; Boise Cascade Corp.) 5,000,000 5,002,800
ALASKA--1.9%
Alaska Housing Finance Corp. 5.75%, 6/1/2024 (Insured; MBIA)
6,300,000 6,082,272
Valdez, Marine Terminal Revenue 5.50%, 10/1/2028 5,000,000 4,655,100
ARIZONA--6.0%
Apache County Industrial Development Authority, PCR
(Tucson Electric Power Co. Project):
5.85%, 3/1/2028 5,000,000 4,544,950
5.875%, 3/1/2033 2,500,000 2,296,675
Coconino County, PCR (Nevada Power Co. Project)
6.375%, 10/1/2036 4,250,000 4,330,028
Pima County Industrial Development Authority, Industrial Revenue
(Tucson Electric Power Co. Project) 6%, 9/1/2029 15,500,000 14,444,140
Tempe Industrial Development Authority, IDR
(California Micro Devices Corp. Project) 10.50%, 3/1/2018 7,185,000 7,325,179
ARKANSAS-.5%
Little River County, Revenue
(Pacific Corp. Project) 5.60%, 10/1/2026 3,100,000 2,798,959
CALIFORNIA--2.6%
California 7.131%, 12/1/2018 10,000,000 (a,b) 9,456,000
Foothill / Eastern Corridor Agency, Toll Road Revenue
5.75%, 1/15/2040 5,000,000 4,763,200
COLORADO--3.4%
Bent County, COP (Medium Security Correctional Facility Project)
9.50%, 7/15/2013 12,530,000 13,186,572
Denver City and County, Airport Revenue:
8%, 11/15/2025 3,670,000 3,876,511
8%, 11/15/2025 (Prerefunded 11/15/2001) 1,330,000 (c) 1,431,705
CONNECTICUT--.7%
Connecticut Housing Finance Authority, Housing Mortgage Finance
Program 5.85%, 11/15/2028 4,120,000 4,068,582
FLORIDA--9.5%
Escambia County, PCR (Champion International Corp. Project)
6.90%, 8/1/2022 7,000,000 7,455,140
Florida Board of Education, Capital Outlay 8.55%, 6/1/2019 20,000,000 (a,b) 21,950,400
Florida Housing Finance Agency, MFHR
(Palm Aire Retirement Facility Project) 10%, 1/1/2020 4,551,086 (d) 4,551,086
Highlands County Health Facilities Authority, Hospital Revenue
(Adventist Health Systems) 5.25%, 11/15/2028 8,000,000 6,961,360
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
FLORIDA (CONTINUED)
Orange County Health Facilities Authority, Hospital Revenue
(Regional Healthcare Systems) 6%, 10/1/2026 2,000,000 1,946,600
Palm Beach County, Solid Waste IDR:
(Okeelanta Power Limited Partnership Project)
6.70%, 2/15/2015 3,000,000 (d) 1,845,000
(Osceola Power Limited Partnership Project)
6.95%, 1/1/2022 9,150,000 (d) 5,535,750
South Lake County Hospital District, Health, Hospital and
Nursing Home Revenue (South Lake Hospital Inc.)
5.80%, 10/1/2034 2,000,000 1,866,020
GEORGIA--2.5%
Fulton County Development Authority, Special Facilities Revenue
(Delta Airlines Inc. Project) 5.45%, 5/1/2023 2,300,000 2,065,285
Private Colleges and Universities Facilities Authority, Revenue
(Clark Atlanta University Project)
8.25%, 1/1/2015 (Prerefunded 1/1/2003) 9,950,000 (c) 11,495,733
HAWAII--1.9%
Hawaii Department of Transportation, Special Facility Revenue
(Caterair International Corp. Project) 10.125%, 12/1/2010 4,300,000 4,422,335
(Continental Airlines, Inc.) 5.625%, 11/15/2027 6,820,000 5,989,801
ILLINOIS--3.0%
Chicago-O'Hare International Airport, Special Facility Revenue:
(Delta Airlines Project) 6.45%, 5/1/2018 3,855,000 3,941,969
(United Airlines, Inc. Project) 8.95%, 5/1/2018 8,875,000 9,476,636
Illinois Development Finance Authority, Revenue (Community
Rehabilitation Providers Facilities Acquisition Program)
6%, 7/1/2015 3,500,000 3,325,000
INDIANA--3.8%
Indiana Health Facilities Financing Authority, Hospital Revenue
(Charity Obligation Group) 5.50%, 11/15/2024 5,000,000 4,643,700
Indiana Housing Finance Authority, SFMR 5.95%, 1/1/2029 3,960,000 4,008,074
Indianapolis Airport Authority 8.697%, 11/15/2031 12,000,000 (a,b) 12,216,000
KENTUCKY--4.2%
Kenton County Airport Board, Airport Revenue
(Special Facilities-Delta Airlines Project):
7.50%, 2/1/2020 10,000,000 10,582,000
6.125%, 2/1/2022 13,000,000 12,674,740
LOUISIANA--2.8%
Parish of Saint James, SWDR (Freeport-McMoRan Partnership
Project) 7.70%, 10/1/2022 10,000,000 10,512,500
West Feliciana Parish, PCR, (Gulf States) 5.8%, 12/1/2015 5,000,000 4,721,600
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
MARYLAND--.5%
Baltimore County, PCR
(Bethlehem Steel Corp. Project) 7.50%, 6/1/2015 2,500,000 2,644,975
MASSACHUSETTS--1.6%
Massachusetts Industrial Finance Agency, Revenue
(Ogden Haverhill Project) 5.60%, 12/1/2019 6,000,000 5,604,600
Massachusetts Health and Educational Facilities Authority, Revenue
(Beth Israel Hospital Issue)
8.674%, 7/1/2025 (Insured; AMBAC) 3,000,000 (a) 3,011,250
MICHIGAN--3.5%
Michigan Hospital Finance Authority, HR
(Genesys Health System Obligated Group)
8.125%, 10/1/2021 (Prerefunded 10/1/2005) 5,000,000 (c) 5,962,650
Michigan Strategic Fund, SWDR
(Genesee Power Station Project) 7.50%, 1/1/2021 7,000,000 7,333,480
Wayne Charter County, Special Airport Facilities Revenue
(Northwest Airlines, Inc.) 6.75%, 12/1/2015 5,680,000 5,847,901
MISSISSIPPI--4.2%
Claiborne County, PCR (Middle South Energy, Inc.)
(System Energy Resources, Inc.) 6.20%, 2/1/2026 5,425,000 5,331,202
Mississippi Business Finance Corp., PCR
(System Energy Resource Inc. Project):
5.875%, 4/1/2022 12,825,000 11,876,976
5.90, 5/1/2022 6,400,000 5,944,512
MONTANA--.7%
Montana Board of Housing, Single Family Mortgage
5.75%, 6/1/2030 4,000,000 3,854,720
NEVADA--2.9%
Clark County, IDR:
(Southwest Gas Corp.) 7.50%, 9/1/2032 4,000,000 4,278,280
(Nevada Power Company Project):
5.60%, 10/1/2030 7,000,000 6,292,230
5.90%, 10/1/2030 6,000,000 5,673,180
NEW HAMPSHIRE--4.8%
New Hampshire Industrial Development Authority, PCR
(Public Service Co. Project):
7.65%, Series A, 5/1/2021 15,645,000 16,236,537
7.65%, Series C, 5/1/2021 3,500,000 3,632,335
New Hampshire Business Finance Authority, PCR, Revenue
(Public Service Co. Project) 6% 5/1/2021 7,000,000 6,561,800
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
NEW JERSEY--3.9%
New Jersey Economic Development Authority,
Special Facility Revenue
(Continental Airlines Inc. Project) 6.40%, 9/15/2023 3,000,000 2,983,170
New Jersey Health Facilities Financing Authority, Revenue
(Christian Health Care Center) 8.75%, 7/1/2018 15,295,000 18,568,895
NEW MEXICO--.8%
Farmington, PCR (Tucson Electric Power Co., San Juan)
6.95%, 10/1/2020 4,000,000 4,163,680
NEW YORK--2.8%
Long Island Power Authority, New York Electric System Revenue
6.85% 12/1/2016 10,000,000 (a,b) 8,741,200
New York State Energy Research and Development Authority,
Electric Facilities Revenue (Long Island Lighting Co.):
7.15%, 2/1/2022 3,000,000 3,257,100
6.90%, 8/1/2022 3,275,000 3,573,320
NORTH CAROLINA--.9%
Charlotte, Special Facilities Revenue (Charlotte / Douglas
International Airport) 5.60%, 7/1/2027 (Guaranteed; U.S. Air) 6,000,000 5,070,000
OHIO--.9%
Cleveland, Airport Special Revenue
(Continental Airlines, Inc. Project)
5.375%, 9/15/2027 5,455,000 4,696,646
PENNSYLVANIA--7.6%
Beaver County Industrial Development Authority, PCR
(Cleveland Electric Project) 7.625%, 5/1/2025 7,000,000 7,648,970
Butler County Industrial Development Authority,
First Mortgage Revenue
(Saint John Lutheran Care Center):
10%, Series A1, 10/1/2017 8,450,000 9,791,776
10%, Series A2, 10/1/2017 940,000 1,097,478
Lehigh County General Purpose Authority, Revenue (Wiley House)
9.50%, 11/1/2016 (Prerefunded 11/1/2001) 3,000,000 (c) 3,368,280
Montgomery County Industrial Development Authority,
First Mortgage Revenue
(Meadowood Corp. Project):
8.25%, 12/1/2018 (Prerefunded 12/1/2000) 3,750,000 (c) 4,001,550
10.25%, 12/1/2020 (Prerefunded 12/1/2000) 5,000,000 (c) 5,446,900
Pennsylvania Housing Finance Agency, SFMR, 8.577%, 4/1/2025 6,000,000 (a) 6,172,500
York County Hospital Authority, Revenue
(Health Center--Lutheran Social Services) 6.50%, 4/1/2022 4,250,000 4,289,695
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
SOUTH CAROLINA--2.0%
Piedmont Municipal Power Agency, Electric Revenue
6.55%, 1/1/2016 1,690,000 1,690,406
South Carolina Housing Authority,
Homeownership Mortgage Revenue
9%, 7/1/2018 690,000 694,244
Spartanburg County, Hospital Facilities Revenue
(Spartanburg General Hospital System) 8.898%, 4/13/2022
(Prerefunded 4/15/2002) 7,700,000 (a,c) 8,672,125
TENNESSEE--1.7%
Memphis Center City Revenue Finance Corp., Tennessee Sports
Facility Revenue (Memphis Redbirds) 6.50%, 9/1/2028 10,000,000 9,587,800
TEXAS--4.2%
Houston Airport System, Special Facilities Revenue
Airport Improvement (Continental Airlines):
6.125%, 7/15/2027 8,100,000 7,680,906
5.70%, 7/15/2029 3,750,000 3,343,200
Texas Department of Housing and Community Affairs
Collateralized Home Mortgage Revenue 9.612%, 7/2/2024 5,500,000 (a) 6,201,250
Tomball Hospital Authority, Health, Hospital and Nursing Home
Revenue (Tomball Regional Hospital) 6%, 7/1/2025 3,500,000 3,315,585
Tyler Health Facilities Development Corp., HR
(East Texas Medical Center Regional Health
Care System Project) 6.75%, 11/1/2025 3,000,000 2,681,160
UTAH--1.8%
Carbon County, SWDR (Sunnyside Cogeneration):
7.10%, 8/15/2023 5,070,000 5,136,671
Zero Coupon, 8/15/2024 1,545,000 261,815
Toelle County, Hazardous Waste Treatment Revenue
(Union Pacific Project) 5.70%, 11/1/2026 5,000,000 4,549,100
VIRGINIA--.9%
Fairfax County Water Authority, Revenue 7.346%, 4/1/2029 5,000,000 (a,b) 5,161,100
WASHINGTON--.7%
Public Utility District No. 1 of Pend Orielle County,
Electric Revenue
6.375%, 1/1/2015 3,755,000 3,956,230
WEST VIRGINIA--2.5%
Braxton County, SWDR (Weyerhaeuser Co. Project)
5.80%, 6/1/2027 14,390,000 13,824,328
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
WISCONSIN--3.0%
Wisconsin Health and Educational Facilities Authority,
Health, Hospital and Nursing Home Revenue
(Aurora Health Care Inc.) 5.60%, 2/15/2029 7,000,000 6,207,320
Wisconsin Housing and Economic Development Authority,
Homeownership Revenue 8.749%, 7/1/2025 10,000,000 (a,b) 10,478,200
WYOMING--.8%
Sweetwater County, SWDR (FMC Corp. Project):
7%, 6/1/2024 2,200,000 2,303,862
6.90%, 9/1/2024 2,000,000 2,086,220
U. S. RELATED--1.6%
Puerto Rico Highway and Transportation Authority,
Transportation Revenue 6.09%, 7/1/2038 8,000,000 (a,b) 6,021,440
Puerto Rico Infrastructure Financing Authority
6.495%, 7/1/2015 (Insured; AMBAC) 3,000,000 (a,b) 2,731,740
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(cost $544,334,683) 98.0% 539,991,892
CASH AND RECEIVABLES (NET) 2.0% 10,763,091
NET ASSETS 100.0% 550,754,983
Summary of Abbreviations
AMBAC American Municipal Bond Assurance MFHR Multi-Family Housing
Corporation Revenue
COP Certificate of Participation PCR Pollution Control Revenue
HR Hospital Revenue SFMR Single Family Mortgage
IDR Industrial Development Revenue Revenue
MBIA Municipal Bond Investors Assurance SWDR Solid Waste Disposal Revenue
Insurance Corporation
Summary of Combined Ratings (Unaudited)
Fitch or Moody's or Standard & Poor's Value (%)
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa AAA 8.8
AA Aa AA 11.4
A A A 7.1
BBB Baa BBB 32.4
BB Ba BB 6.9
B B B 5.2
Not Rated (e) Not Rated (e) Not Rated (e) 28.2
100.0
(A) INVERSE FLOATER SECURITY-THE INTEREST RATE IS SUBJECT TO CHANGE PERIODICALLY.
(B) 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 SEPTEMBER 30, 1999,
THESE SECURITIES AMOUNTED TO $76,756,080 OR 13.9% OF NET ASSETS.
(C) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT
SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND INTEREST
ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE EARLIEST REFUNDING
DATE.
(D) NON-INCOME ACCRUING SECURITY.
(E) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S
HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE RATED
SECURITIES IN WHICH THE FUND MAY INVEST.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Fund
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1999
Cost Value
- --------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 544,334,683 539,991,892
Cash 19,342
Interest receivable 11,255,488
Prepaid expenses 25,646
551,292,368
- --------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 414,885
Accrued expenses 122,500
537,385
- --------------------------------------------------------------------------------
NET ASSETS ($) 550,754,983
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 555,354,097
Distributions in excess of investment income-net (1,018,933)
Accumulated net realized gain (loss) on investments 762,610
Accumulated net unrealized appreciation (depreciation)
on investments --Note 4 (4,342,791)
NET ASSETS ($) 550,754,983
- --------------------------------------------------------------------------------
SHARES OUTSTANDING
(500 million shares of $.001 par value Common Stock authorized) 58,549,216
NET ASSET VALUE, per share ($) 9.41
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
Year Ended September 30, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INTEREST INCOME 37,600,544
EXPENSES:
Management fee--Note 3(a) 4,353,807
Shareholder servicing costs 178,162
Custodian fees--Note 3(b) 112,189
Shareholders' reports 75,356
Directors' fees and expenses--Note 3(c) 64,309
Registration fees 52,859
Professional fees 41,166
Interest expense--Note 2 966
Miscellaneous 23,204
TOTAL EXPENSES 4,902,018
INVESTMENT INCOME--NET 32,698,526
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments 4,578,741
Net unrealized appreciation (depreciation) on investments (51,129,931)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (46,551,190)
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (13,852,664)
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF CHANGES IN NET ASSETS
Year Ended September 30,
--------------------------------
1999 1998
- --------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 32,698,526 33,858,717
Net realized gain (loss) on investments 4,578,741 (2,094,022)
Net unrealized appreciation (depreciation)
on investments (51,129,931) 16,608,666
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (13,852,664) 48,373,361
- --------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
INVESTMENT INCOME--NET (33,466,174) (36,879,678)
- --------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS ($):
DIVIDENDS REINVESTED--NOTE 1(C) 2,380,500 6,990,423
TOTAL INCREASE (DECREASE) IN NET ASSETS (44,938,338) 18,484,106
- --------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 595,693,321 577,209,215
END OF PERIOD 550,754,983 595,693,321
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (SHARES):
INCREASE IN SHARES OUTSTANDING AS A
RESULT OF DIVIDENDS REINVESTED 235,695 688,950
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 and market price data for the fund's shares.
<TABLE>
Year Ended September 30,
----------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA ($):
Net asset value, beginning of period 10.22 10.02 9.88 9.96 9.73
Investment Operations:
Investment income--net .56 .59 .66 .68 .71
Net realized and unrealized
gain (loss) on investments (.80) .25 .16 (.09) .23
Total from Investment Operations (.24) .84 .82 .59 .94
Distributions:
Dividends from investment income--net (.57) (.64) (.68) (.67) (.71)
Net asset value, end of period 9.41 10.22 10.02 9.88 9.96
Market value, end of period 8 10 5_16 10 5_8 10 9 5_8
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (A) (17.55) 3.35 13.77 11.23 4.91
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets .84 .85 .85 .86 .87
Ratio of net investment income
to average net assets 5.63 5.78 6.64 6.92 7.30
Portfolio Turnover Rate 27.05 20.95 16.66 19.27 13.68
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 550,755 595,693 577,209 560,072 559,862
(A) CALCULATED BASED ON MARKET VALUE
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Fund
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
Dreyfus Strategic Municipals, Inc. (the "fund" ) is registered under the
Investment Company Act of 1940, as amended ( the "Act"), as a diversified
closed-end management investment company. The fund's investment objective is to
maximize current income exempt from Federal income tax to the extent consistent
with the preservation of capital. The Dreyfus Corporation (the "Manager") serves
as the fund's investment adviser. The Manager is a direct subsidiary of Mellon
Bank, N.A.
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 municipal debt securities (excluding
options and financial futures on municipal and U.S. treasury securities) are
valued on the last business day of each week and month 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
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market on
the last business day of each week and month. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at
the average of the most recent bid and asked prices. Bid price is used when no
asked price is available.
(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,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
(C) DIVIDENDS TO SHAREHOLDERS OF COMMON STOCK (" COMMON SHAREHOLDER(S)"):
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 at least annually. To the extent that net
realized capital gain can be offset by capital loss carryovers, if any, it is
the policy of the fund not to distribute such gain.
For Common Shareholders who elect to receive their distributions in additional
shares of the fund, in lieu of cash, such distributions will be reinvested at
the lower of the market price or net asset value per share (but not less than
95% of the market price) as defined in the dividend reinvestment and cash
purchase plan.
On September 30, 1999, the Board of Directors declared a cash dividend of $.046
per share from investment income-net, payable on October 28, 1999 to Common
Shareholders of record as of the close of business on October 14, 1999.
(D) FEDERAL INCOME TAXES: It is the policy of the fund to continue to qualify as
a regulated investment company, which can distribute tax exempt dividends, by
complying with the applicable provisions of the Internal Revenue Code of 1986,
as amended and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--Bank Line of Credit:
The fund participates with other Dreyfus-managed funds in a $100 million
unsecured line of credit primarily to be utilized for temporary or emergency
purposes. Interest is charged to the fund at rates which are related to the
Federal Funds rate in effect at the time of borrowings.
The average daily amount of borrowings outstanding during the period ended
August 31, 1999 was approximately $18,000, with a related weighted average
annualized interest of 5.34% .
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 .75 of 1% of the value of the
fund' s average weekly net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the fund's aggregate
expenses, exclusive of taxes, interest on borrowings, brokerage and
extraordinary expenses, in any full fiscal year exceed the lesser of (1) the
expense limitation of any state having jurisdiction over the fund or (2) 2% of
the first $10 million, 11_2% of the next $20 million and 1% of the excess over
$30 million of the average value of the fund's net assets. During the period
ended September 30, 1999, there was no expense reimbursement pursuant to the
agreement.
(B) The fund compensates Boston Safe Deposit and Trust Company, an affiliate of
the Manager, under a custody agreement for providing custodial services to the
fund. During the period ended September 30, 1999, $112,189 was charged by Boston
Safe Deposit and Trust Company 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 and the Director Emeritus receives 50% of such compensation.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities, during the period ended September 30, 1999, amounted to
$154,725,527 and $154,251,223 respectively.
At September 30, 1999, accumulated net unrealized depreciation on investments
was $4,342,791, consisting of $19,102,034 gross unrealized appreciation and
$23,444,825 gross unrealized depreciation.
At September 30, 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).
The Fund
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Dreyfus Strategic Municipals, Inc.
We have audited the accompanying statement of assets and liabilities of Dreyfus
Strategic Municipals, Inc. including the statement of investments, as of
September 30, 1999, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund' s management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included verification by
examination of securities held by the custodian as of September 30, 1999 and
confirmation of securities not held by the custodian by correspondence with
others. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreyfus Strategic Municipals, Inc. at September 30, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the indicated years, in conformity with generally accepted accounting
principles.
New York, New York
November 5, 1999
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (Unaudited)
Under the fund' s Dividend Reinvestment and Cash Purchase Plan (the "Plan"), a
Common Shareholder who has fund shares registered in his name will have all
distributions reinvested automatically by The Bank of New York, as Plan agent
(the "Agent" ), in additional shares of the fund at the lower of prevailing
market price or net asset value (but not less than 95% of market value at the
time of valuation) unless such Common Shareholder elects to receive cash as
provided below. If market price is equal to or exceeds net asset value, shares
will be issued at net asset value. If net asset value exceeds market price or if
a cash dividend only is declared, the Agent, as agent for the Plan participants,
will buy fund shares in the open market. A Plan participant is not relieved of
any income tax that may be payable on such dividends or distributions.
A Common Shareholder who owns fund shares registered in nominee name through his
broker/dealer (i.e., in "street name") may not participate in the Plan, but may
elect to have cash dividend distributions reinvested by his broker/dealer in
additional shares of the fund if such service is provided by the broker/dealer;
otherwise such dividends and distributions will be treated like any other cash
dividend.
A Common Shareholder who has fund shares registered in his name may elect to
withdraw from the Plan at any time for a $2.50 fee and thereby elect to receive
cash in lieu of shares of the fund. Changes in elections must be in writing,
sent to The Bank of New York, Dividend Reinvestment Department, P.O. Box 1958,
Newark, New Jersey 07101-9774, should include the shareholder's name and address
as they appear on the Agent's records and will be effective only if received
more than fifteen days prior to the record date for any distribution.
A Plan participant who has fund shares in his name has the option of making
additional cash payments to the Agent, semi-annually, in any amount from $1,000
to $10,000, for investment in the fund's shares in the open market on or about
January 15 and July 15. Any voluntary cash payments received more than 30 days
prior to these dates will be returned by the Agent, and interest will not be
paid on any uninvested cash payments. A participant may withdraw a voluntary
cash payment
The Fund
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN (Unaudited) (CONTINUED)
by written notice, if the notice is received by the Agent not less than 48 hours
before the payment is to be invested. A Common Shareholder who owns fund shares
registered in street name should consult his broker/dealer to determine whether
an additional cash purchase option is available through his broker/dealer.
The Agent maintains all Common Shareholder accounts in the Plan and furnishes
written confirmations of all transactions in the account. Shares in the account
of each Plan participant will be held by the Agent in non-certificated form in
the name of the participant, and each such participant's proxy will include
those shares purchased pursuant to the Plan.
The fund pays the Agent's fee for reinvestment of dividends and distributions.
Plan participants pay a pro rata share of brokerage commissions incurred with
respect to the Agent's open market purchases and purchases from voluntary cash
payments, and a $1.25 fee for each purchase made from a voluntary cash payment.
The fund reserves the right to amend or terminate the Plan as applied to any
voluntary cash payments made and any dividend or distribution paid subsequent to
notice of the change sent to Plan participants at least 90 days before the
record date for such dividend or distribution. The Plan also may be amended or
terminated by the Agent on at least 90 days' written notice to Plan
participants.
IMPORTANT TAX INFORMATION (Unaudited)
In accordance with Federal tax law, the fund hereby designates all the dividends
paid from investment income-net during the fiscal year ended September 30, 1999
as "exempt-interest dividends" (not generally subject to regular Federal income
tax.)
As required by Federal tax law rules, shareholders will receive notification of
their portion of the fund's taxable ordinary dividends (if any) and capital gain
distributions (if any) paid for the 1999 calendar year on Form 1099-DIV which
will be mailed by January 31, 2000.
The Fund
PROXY RESULTS (Unaudited)
During the fiscal year ended September 30, 1999, shareholders voted on the
following proposals presented at the annual shareholders' meeting held on May
14, 1999. The description of each proposal and the number of shares voted are as
follows:
<TABLE>
Shares
----------------------------------
For Authority Withheld
----------------------------------
<S> <C> <C>
To elect two Class II Directors:*
Ehud Houminer 47,201,285 828,675
Robin A. Pringle 47,222,407 807,553
Shares
---------------------------------------------------------------------------------
For Against Abstained
---------------------------------------------------------------------------------
To ratify the selection of
Ernst & Young LLP as
independent auditors for
the fund 47,242,700 226,247 561,013
On October 15, 1999, a special meeting of shareholders was held, to approve a
change to a fundamental policy of the fund to permit the fund to issue preferred
stock. The number of shares voted are as follows:
---------------------------------------------------------------------------------
For Against Abstained
---------------------------------------------------------------------------------
24,412,465 5,508,512 1,582,953
</TABLE>
* THE TERMS OF THESE CLASS II DIRECTORS EXPIRE IN 2002.
NOTES
OFFICERS AND DIRECTORS
Dreyfus Strategic Municipals, Inc.
200 Park Avenue
New York, NY 10166
DIRECTORS
Joseph S. DiMartino
David W. Burke
Hodding Carter, III
Ehud Houminer
Richard C. Leone
Hans C. Mautner
Robin R. Pringle
John E. Zuccotti
OFFICERS
President and Treasurer
Marie E. Connolly
Vice President and Secretary
Margaret W. Chambers
Vice President, Assistant Treasurer and
Assistant Secretary
Frederic C. Dey
Vice President, Assistant Treasurer and Assistant Secretary
Stephanie Pierce
Vice President and Assistant Treasurer
Mary A. Nelson
Vice President and Assistant Treasurer
George A. Rio
Vice President and Assistant Treasurer
Joseph F. Tower, III
Vice President and Assistant Treasurer
John P. Cavino
Vice President and Assistant Secretary
Douglas C. Conroy
Vice President and Assistant Secretary
Christopher J. Kelley
Vice President and Assistant Secretary
Kathleen K. Morrisey
Vice President and Assistant Secretary
Elba Vasquez
Vice President and Assistant Secretary
Karen Jacoppo-Wood
PORTFOLIO MANAGERS:
Joseph P. Darcy
A. Paul Disdier
Douglas J. Gaylor
Joseph A. Irace
Richard J. Moynihan
Colleen A. Meehan
W. Michael Petty
Jill C. Shaffro
Scott Spraver
L. Lawrence Troutman
Samuel J. Weinstock
Monica S. Wieboldt
INVESTMENT ADVISER
The Dreyfus Corporation
CUSTODIAN
Boston Safe Deposit
and Trust Company
COUNSEL
Stroock & Stroock & Lavan LLP
TRANSFER AGENT, DIVIDEND DISTRIBUTION AGENT AND REGISTRAR
The Bank of New York
STOCK EXCHANGE LISTING
NYSE Symbol: LEO
INITIAL SEC EFFECTIVE DATE
9/23/87
THE NET ASSET VALUE APPEARS IN THE FOLLOWING PUBLICATIONS: BARRON'S, CLOSED-END
BOND FUNDS SECTION UNDER THE HEADING "MUNICIPAL BOND FUNDS" EVERY MONDAY; WALL
STREET JOURNAL, MUTUAL FUNDS SECTION UNDER THE HEADING "CLOSED-END BOND FUNDS"
EVERY MONDAY; NEW YORK TIMES, BUSINESS SECTION UNDER THE HEADING "CLOSED-END
BOND FUNDS--SINGLE STATE MUNICIPAL BOND FUNDS" EVERY SUNDAY.
NOTICE IS HEREBY GIVEN IN ACCORDANCE WITH SECTION 23(C) OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED, THAT THE FUND MAY PURCHASE SHARES OF ITS COMMON
STOCK IN THE OPEN MARKET WHEN IT CAN DO SO AT PRICES BELOW THE THEN CURRENT NET
ASSET VALUE PER SHARE.
The Fund
For More Information
Dreyfus Strategic Municipals, Inc.
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Boston Safe Deposit and
Trust Company
One Boston Place
Boston, MA 02108
Transfer Agent &
Dividend Disbursing Agent
and Registrar
The Bank of New York
101 Barclay Street
New York, NY 10286
(c) 1999 Dreyfus Service Corporation 853AR999
