Dreyfus Strategic Municipals, Inc.
SEMIANNUAL REPORT March 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
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2 Letter from the President
3 Discussion of Fund Performance
6 Statement of Investments
15 Statement of Assets and Liabilities
16 Statement of Operations
17 Statement of Changes in Net Assets
18 Financial Highlights
20 Notes to Financial Statements
25 Officers and 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 semiannual report for Dreyfus Strategic
Municipals, Inc., covering the six-month period from October 1, 1999 through
March 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, Paul Disdier.
The U.S. economy grew strongly over the past six months 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 three times during the
reporting period. These rate hikes contributed to a total interest-rate increase
of 125 basis points since late June 1999, before the current reporting period
began. While higher interest rates led to an erosion of municipal bond prices
during the first half of the reporting period, the tax-exempt bond market showed
renewed signs of strength during the first quarter of 2000.
Municipal bonds were also affected by supply-and-demand considerations. These
technical influences have caused the yields of tax-exempt bonds to rise to very
attractive levels 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 and state income tax brackets.
We appreciate your confidence over the past six months, 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
April 12, 2000
DISCUSSION OF FUND PERFORMANCE
Paul Disdier, Portfolio Manager
How did Dreyfus Strategic Municipals, Inc. perform during the period?
For the six-month period ended March 31, 2000, the fund produced a total return
of 1.52% .(1) The fund provided income dividends of $0.276 per share, which is
equal to an annualized distribution rate of 6.89% over the same period.(2)
We attribute the fund's performance to a rising interest-rate environment, which
caused most municipal bond prices to decline. However, the extent of that
decline was reduced by the fund' s security selection strategy, which was
designed to maximize income by taking advantage of what we believe are
potentially attractive values created during the municipal market's decline.
What is the fund's investment approach?
The fund seeks high current federally tax-exempt income from a portfolio of
municipal bonds.
To this end, we currently have constructed a portfolio by seeking income
opportunities typically through analysis of each bond's structure, including
paying particularly close attention to each bond's yield, maturity and early
redemption features.
Over time, many of the fund's relatively higher yielding bonds mature or are
redeemed by their issuers. We generally attempt to replace those bonds with
comparable securities that, at that time, offer higher than average income
payments. This strategy is designed to help provide high current income. When we
believe an opportunity exists, 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
usually will look to sell bonds that are close to redemption or maturity, a
strategy designed to help
The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
protect the fund's income stream. In addition, we conduct 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?
Although the fund's performance was hurt by a difficult investment environment
during the first half of the reporting period, the second half provided better
market conditions and a market rally.
When the reporting period began on October 1, 1999, investors had become
concerned that strong economic growth might rekindle long-dormant inflationary
pressures. In fact, in an attempt to forestall a reacceleration of inflation,
the Federal Reserve Board raised short-term interest rates three times during
the reporting period, causing most bond prices to fall. These interest-rate
hikes followed two previous increases implemented before the current reporting
period began, for a total increase of 125 basis points since last summer.
Municipal bond prices also fell during the fourth quarter of 1999 because of
adverse supply-and-demand influences. For a variety of reasons, institutional
investors participated less in the tax-exempt market, which reduced overall
demand and drove municipal bond prices down. During the first quarter of 2000,
however, issuance of municipal bonds declined approximately 40% compared to the
same period one year ago. This supply reduction, combined with robust demand
from individual investors, helped support a rebound of municipal bond prices,
especially among longer term bonds.
The fund's performance was also positively influenced by the issuance of auction
preferred shares in January 2000. Leveraging the portfolio in this manner was
designed to enable the fund to purchase additional securities that may help
support the fund' s income stream and to manage the portfolio's rated credit
quality and overall call exposure.
What is the fund's current strategy?
Since we raised an additional $285 million for the fund through the issuance of
auction preferred shares, we have put that cash to work
generating tax-exempt income in the municipal bond market. New purchases have
focused primarily on investment-grade tax-exempt bonds in the 25- to 30-year
maturity range. These bonds feature competitive yields in today's interest-rate
environment, and usually have at least eight years until they are eligible for
redemption by their issuers. Many of the bonds with these characteristics are
backed by the revenues produced by housing projects, hospitals and essential
services such as water and sewer facilities. Others are general obligation bonds
that are backed by the general taxing authority of the issuer.
We have also increased the fund's average duration beyond 10 years in an effort
to capture the incrementally higher income provided by longer dated securities.
Now that we believe the bulk of the Federal Reserve Board's rate hikes are
behind us, and that the market has already discounted significant interest-rate
increases in the near future, longer term current higher yielding bonds have
become more attractive. In fact, because of unusual supply-and-demand factors in
the U.S. Treasury securities market, some 30-year municipal bonds at times
provided higher yields than 30-year U.S. Treasury bonds. A longer average
duration should help us lock in today's relatively high yields if the market
continues to rally.
April 12, 2000
(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 ANNUALIZED, DIVIDED BY THE MARKET PRICE PER
SHARE AT THE END OF THE PERIOD, ADJUSTED FOR CAPITAL GAIN DISTRIBUTIONS.
The Fund
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF INVESTMENTS
March 31, 2000 (Unaudited)
STATEMENT OF INVESTMENTS
Principal
LONG-TERM MUNICIPAL INVESTMENTS--98.4% Amount ($) Value ($)
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ALABAMA--2.1%
Alabama Industrial Development Authority,
SWDR (Pine City Fiber Co.)
6.45%, 12/1/2023 (Guaranteed; Boise Cascade Corp.) 5,000,000 4,794,900
Jefferson County, Sewer Revenue
5.75%, 2/1/2038 (Insured; FGIC) 4,150,000 4,071,192
Houston County Health Care Authority
6.25%, 10/1/2030 (Insured; AMBAC) 8,000,000 8,194,800
ALASKA--1.8%
Alaska Housing Finance Corp.:
5.75%, 6/1/2024 (Insured; MBIA) 6,300,000 6,092,037
6%, 6/1/2049 (Insured; MBIA) 4,250,000 4,182,893
Valdez, Marine Terminal Revenue 5.50%, 10/1/2028 5,000,000 4,613,350
ARKANSAS--1.2%
Arkansas Development Finance Authority, SFMR
(Mortgage Backed Securities Program)
6.45%, 7/1/2031 (Guaranteed; GNMA, FNMA) 10,000,000 10,301,300
ARIZONA--3.8%
Apache County Industrial Development Authority, PCR
(Tucson Electric Power Co. Project):
5.85%, 3/1/2028 5,000,000 4,306,700
5.875%, 3/1/2033 2,500,000 2,123,800
Coconino County, PCR (Nevada Power Co. Project)
6.375%, 10/1/2036 4,250,000 4,004,775
Pima County Industrial Development Authority, Industrial
Revenue (Tucson Electric Power Co. Project) 6%, 9/1/2029 15,500,000 13,542,660
Tempe Industrial Development Authority, IDR
(California Micro Devices Corp. Project) 10.50%, 3/1/2018 7,045,000 7,171,458
ARKANSAS--.3%
Little River County, Revenue
(Pacific Corp. Project) 5.60%, 10/1/2026 3,100,000 2,707,385
CALIFORNIA--1.9%
State of California 6.742%, 12/1/2018 (Insured; FSA) 10,000,000 (a,b) 9,689,000
Foothill / Eastern Corridor Agency, Toll Road Revenue
5.75%, 1/15/2040 6,000,000 5,630,700
COLORADO--2.2%
Bent County, COP
(Medium Security Correctional Facility Project)
9.50%, 7/15/2013 12,530,000 12,943,741
Denver City and County, Airport Revenue:
8%, 11/15/2025 3,670,000 3,816,947
8%, 11/15/2025 (Prerefunded 11/15/2001) 1,330,000 (c) 1,399,187
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
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FLORIDA--7.5%
Escambia County, PCR (Champion International Corp. Project)
6.90%, 8/1/2022 7,000,000 7,139,020
Florida Board of Education, Capital Outlay 8.36%, 6/1/2019 20,000,000 (a,b) 21,530,000
Florida Housing Finance Agency, MFHR
(Palm Aire Retirement Facility Project) 10%, 1/1/2020 4,551,086 (d) 4,551,086
Florida Housing Finance Corp., Housing Revenue
(Nelson Park Apartments)
6.40%, 3/1/2040 (Insured; FSA) 12,380,000 12,701,880
Highlands County Health Facilities Authority, Hospital Revenue
(Adventist Health Systems) 5.25%, 11/15/2028 8,000,000 6,083,680
Orange County Health Facilities Authority, Hospital Revenue
(Regional Healthcare Systems) 6%, 10/1/2026 2,000,000 1,929,400
Palm Beach County, Solid Waste IDR:
(Okeelanta Power Limited Partnership Project)
6.70%, 2/15/2015 3,000,000 (d) 1,627,500
(Osceola Power Limited Partnership Project)
6.95%, 1/1/2022 9,150,000 (d) 4,872,375
South Lake County Hospital District, Health, Hospital and
Nursing Home Revenue (South Lake Hospital Inc.)
5.80%, 10/1/2034 2,000,000 1,809,580
GEORGIA--2.5%
Fulton County Development Authority, Special Facilities Revenue
(Delta Airlines Inc. Project) 5.45%, 5/1/2023 2,800,000 2,400,300
Georgia Housing Finance Authority, SFMR 6.45%, 12/1/2030 7,500,000 7,730,400
Private Colleges and Universities Facilities Authority, Revenue
(Clark Atlanta University Project)
8.25%, 1/1/2015 (Prerefunded 1/1/2003) 9,630,000 (c) 10,868,225
HAWAII--1.2%
Hawaii Department of Transportation, Special Facility Revenue:
(Caterair International Corp. Project) 10.125%, 12/1/2010 4,200,000 4,260,060
(Continental Airlines, Inc.) 5.625%, 11/15/2027 6,820,000 5,608,768
ILLINOIS--5.6%
Chicago:
6.125%, 1/1/2028 (Insured; FGIC) 15,815,000 16,155,023
(Wastewater Transmission Revenue)
6%, 1/1/2030 (Insured; MBIA) 5,000,000 5,048,750
Chicago-O'Hare International Airport, Special Facility Revenue:
(Delta Airlines Project) 6.45%, 5/1/2018 3,855,000 3,822,271
(United Airlines, Inc. Project) 8.95%, 5/1/2018 8,875,000 9,263,548
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
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ILLINOIS (CONTINUED)
Illinois Development Finance Authority, Revenue (Community
Rehabilitation Providers Facilities Acquisition Program)
6%, 7/1/2015 3,500,000 3,107,160
Illinois Health Facilities Authority, Revenue (OSF Healthcare
System) 6.25%, 11/15/2029 8,730,000 8,449,505
INDIANA--1.9%
Indiana Housing Finance Authority, SFMR 5.95%, 1/1/2029 3,920,000 3,876,998
Indianapolis Airport Authority 7.579%, 11/15/2031 12,000,000 (a,b) 11,401,200
KANSAS--1.2%
Witchita, HR (Christian Health System Inc.)
6.25%, 11/15/2024 10,000,000 9,930,800
KENTUCKY--2.7%
Kenton County Airport Board, Airport Revenue
(Special Facilities-Delta Airlines Project):
7.50%, 2/1/2020 10,000,000 10,312,700
6.125%, 2/1/2022 13,000,000 12,347,140
LOUISIANA--1.7%
Parish of Saint James, SWDR (Freeport-McMoRan Partnership
Project) 7.70%, 10/1/2022 10,000,000 10,386,600
West Feliciana, Parish PCR (Gulf States) 5.80%, 12/1/2015 4,000,000 3,686,360
MARYLAND--.3%
Baltimore County, PCR
(Bethlehem Steel Corp. Project) 7.50%, 6/1/2015 2,500,000 2,544,525
MASSACHUSETTS--1.0%
Massachusetts Industrial Finance Agency, Revenue
(Ogden Haverhill Project) 5.60%, 12/1/2019 6,000,000 5,277,900
Massachusetts Health and Educational Facilities Authority,
Revenue (Beth Israel Hospital Issue)
8.066%, 7/1/2025 (Insured; AMBAC) 3,000,000 (a) 2,921,250
MICHIGAN--2.9%
Michigan Hospital Finance Authority, HR:
(Ascension Health Credit) 6.125%, 11/15/2026 5,000,000 5,018,950
(Genesys Health System Obligated Group)
8.125%, 10/1/2021 (Prerefunded 10/1/2005) 5,000,000 (c) 5,838,200
Michigan Strategic Fund, SWDR
(Genesee Power Station Project) 7.50%, 1/1/2021 7,000,000 7,210,140
Wayne Charter County, Special Airport Facilities Revenue
(Northwest Airlines, Inc.) 6.75%, 12/1/2015 5,670,000 5,670,964
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
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MISSISSIPPI--2.9%
Claiborne County, PCR (Middle South Energy, Inc.)
(System Energy Resources, Inc.) 6.20%, 2/1/2026 5,425,000 5,024,581
Mississippi Business Finance Corp., PCR (System Energy
Resource Inc. Project) 5.875%, 4/1/2022 20,825,000 18,534,458
MONTANA--1.6%
Montana Board of Housing, Single Family Mortgage:
6.45%, 6/1/2029 10,000,000 10,229,700
5.75%, 6/1/2030 2,710,000 2,604,147
NEBRASKA--.6%
Nebraska Investment Finance Authority, Single Family
Housing Revenue 5.70%, 9/1/2029 (Collateralized;
FNMA, GNMA) 5,000,000 4,800,300
NEVADA--3.9%
Clark County, IDR:
(Southwest Gas Corp.) 7.50%, 9/1/2032 4,000,000 4,169,560
(Nevada Power Company Project):
5.50%, 10/1/2030 5,000,000 4,168,450
5.60%, 10/1/2030 7,000,000 5,870,900
5.90%, 10/1/2030 6,000,000 5,260,800
Washoe County (Reno-Sparks Convention Center)
6.40%, 7/1/2029 (Insured; FSA) 12,000,000 12,387,480
NEW HAMPSHIRE--3.2%
New Hampshire Industrial Development Authority, PCR
(Public Service Co. Project):
7.65%, Series A, 5/1/2021 15,645,000 16,058,028
7.65%, Series C, 5/1/2021 3,500,000 3,592,400
New Hampshire Business Finance Authority, PCR
(Public Service Co. Project) 6% 5/1/2021 7,000,000 6,326,460
NEW JERSEY--3.1%
New Jersey Economic Development Authority, Special Facility
Revenue (Continental Airlines Inc. Project):
6.40%, 9/15/2023 3,000,000 2,846,730
6.25%, 9/15/2029 5,000,000 4,604,350
New Jersey Health Facilities Financing Authority, Revenue
(Christian Health Care Center) 8.75%, 7/1/2018 15,295,000 18,075,937
NEW MEXICO--.5%
Farmington, PCR (Tucson Electric Power Co., San Juan)
6.95%, 10/1/2020 4,000,000 3,952,720
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
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NEW YORK--6.5%
Long Island Power Authority,
New York Electric System Revenue
6.746% 12/1/2016 10,000,000 (a,b) 8,988,000
New York City 5.50%, 11/15/2037 15,545,000 14,401,510
New York City Transitional Finance Authority, Revenue
6%, 11/15/2029 10,000,000 10,202,200
New York State Energy Research and Development Authority,
Electric Facilities Revenue (Long Island Lighting Co.):
7.15%, 2/1/2022 3,000,000 3,189,810
6.90%, 8/1/2022 3,275,000 3,491,379
TSASC, Inc., Tobacco Flexible Amortization Bonds:
6.25%, 7/15/2027 8,500,000 8,460,390
6.375%, 7/15/2039 4,500,000 4,506,165
NORTH CAROLINA--.6%
Charlotte, Special Facilities Revenue (Charlotte / Douglas
International Airport) 5.60%, 7/1/2027
(Guaranteed; U.S. Air) 6,000,000 4,829,820
NORTH DAKOTA--1.2%
North Dakota Housing Finance Agency,
Home Mortgage Revenue
(Housing Finance Program) 6.50%, 1/1/2031 10,000,000 10,274,200
OHIO--1.2%
Ohio Housing Finance Agency, Residential Mortgage Revenue:
6.25%, 9/1/2020 (Collateralized; GNMA) 5,000,000 5,103,050
6.35%, 9/1/2031 (Collateralized; GNMA) 5,000,000 5,111,200
OKLAHOMA--1.4%
Oklahoma Industries Authority
(Health System Obligated Group) 5.75%, 8/15/2029 12,230,000 11,883,157
PENNSYLVANIA--4.8%
Beaver County Industrial Development Authority, PCR
(Cleveland Electric Project) 7.625%, 5/1/2025 7,000,000 7,414,400
Butler County Industrial Development Authority, First Mortgage
Revenue (Saint John Lutheran Care Center):
10%, Series A1, 10/1/2017 8,265,000 9,168,447
10%, Series A2, 10/1/2017 940,000 1,050,365
Lehigh County General Purpose Authority, Revenue (Wiley
House) 9.50%, 11/1/2016 (Prerefunded 11/1/2001) 3,000,000 (c) 3,278,010
Montgomery County Industrial Development Authority, First
Mortgage Revenue (Meadowood Corp. Project):
8.25%, 12/1/2018 (Prerefunded 12/1/2000) 3,750,000 (c) 3,913,875
10.25%, 12/1/2020 (Prerefunded 12/1/2000) 5,000,000 (c) 5,281,500
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
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PENNSYLVANIA (CONTINUED)
Pennsylvania Housing Finance Agency,
SFMR 7.502%, 4/1/2025 6,000,000 (a) 5,887,500
York County Hospital Authority, Revenue
(Health Center--Lutheran Social Services)
6.50%, 4/1/2022 4,250,000 3,943,788
SOUTH CAROLINA--1.2%
Piedmont Municipal Power Agency, Electric Revenue
6.55%, 1/1/2016 1,690,000 1,676,683
Spartanburg County, Hospital Facilities Revenue
(Spartanburg General Hospital System)
8.898%, 4/13/2022 (Prerefunded 4/15/2002) 7,700,000 (a,c) 8,402,625
TENNESSEE--3.0%
Memphis Center City Revenue Finance Corp.,
Tennessee Sports Facility Revenue
(Memphis Redbirds) 6.50%, 9/1/2028 10,000,000 9,219,300
Tennessee Housing Development Agency (Homeownership
Program) 6.40%, 7/1/2031 15,000,000 15,415,950
TEXAS--4.8%
Dallas-Fort Worth International Airport, Airport Facility
Improvement Corp. Revenue (American Airlines Inc.)
6.375%, 5/1/2035 (Guaranteed; American Airlines Inc.) 2,500,000 2,406,850
Harris County Health Facilities Development Corp., HR
(Memorial Hermann Hospital System Project)
5.25%, 6/1/2027 (Insured; FSA) 10,000,000 9,003,700
Houston Airport System, Special Facilities Revenue
Airport Improvement (Continental Airlines):
6.125%, 7/15/2027 8,100,000 7,152,300
5.70%, 7/15/2029 3,750,000 3,105,938
Port Corpus Christi Authority, Nueces County General
Revenue (Union Pacific Corp.) 5.65%, 12/1/2022 7,750,000 6,762,650
Texas Department of Housing and Community Affairs
Collateralized Home Mortgage Revenue
9.409%, 7/2/2024 5,500,000 (a) 5,891,875
Tomball Hospital Authority, Health,
Hospital and Nursing Home
Revenue (Tomball Regional Hospital) 6%, 7/1/2025 3,500,000 3,023,020
Tyler Health Facilities Development Corp., HR
(East Texas Medical Center Regional Health Care
System Project) 6.75%, 11/1/2025 3,000,000 2,482,230
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
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UTAH--.6%
Carbon County, SWDR (Sunnyside Cogeneration):
7.10%, 8/15/2023 5,070,000 4,929,967
Zero Coupon, 8/15/2024 1,545,000 253,210
VERMONT--.8%
Vermont Housing Finance Agency, Single Family Housing
6.40%, 11/1/2030 (Insured; FSA) 6,270,000 6,407,752
VIRGINIA--2.0%
Fairfax County Water Authority, Revenue 7.041%, 4/1/2029 5,000,000 (a,b) 5,065,300
Greater Richmond Convention Center Authority, Hotel Tax
Revenue (Convention Center Expansion Project)
6.25%, 6/15/2032 11,250,000 11,558,363
WASHINGTON--1.7%
Public Utility District No. 1 of Pend Orielle County, Electric
Revenue 6.375%, 1/1/2015 3,755,000 3,879,553
Seattle, Water System Revenue
6%, 7/1/2029 (Insured; FGIC) 10,000,000 10,140,300
WEST VIRGINIA--4.1%
Braxton County, SWDR (Weyerhaeuser Co. Project):
5.40%, 5/1/2025 12,800,000 11,390,336
6.125%, 4/1/2026 14,000,000 13,803,020
West Virginia Housing Development Fund, Housing Finance
6.50%, 5/1/2028 5,935,000 6,143,081
West Virginia Water Development Authority, Water
Development Revenue 6.375%, 7/1/2039 2,250,000 2,317,275
WISCONSIN--3.7%
Wisconsin Health and Educational Facilities Authority, Health,
Hospital and Nursing Home Revenue
(Aurora Health Care Inc.) 5.60%, 2/15/2029 7,000,000 5,634,930
Wisconsin Housing and Economic Development Authority,
Homeownership Revenue:
8.136%, 7/1/2025 10,000,000 (a,b) 10,280,800
6.45%, 9/1/2030 14,110,000 14,459,787
WYOMING--.5%
Sweetwater County, SWDR (FMC Corp. Project):
7%, 6/1/2024 2,200,000 2,216,962
6.90%, 9/1/2024 2,000,000 2,004,960
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
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U. S. RELATED--2.7%
Guam Housing Corp., SFMR
5.75%, 9/1/2031 (Collaterallized; FHLMC) 8,225,000 8,123,175
Puerto Rico Highway and Transportation Authority,
Transportation Revenue 5%, 7/1/2038 (Insured; MBIA) 16,000,000 14,094,720
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TOTAL INVESTMENTS
(cost $815,815,920) 98.4% 811,101,457
CASH AND RECEIVABLES (NET) 1.6% 12,925,416
NET ASSETS 100.0% 824,026,873
The Fund
</TABLE>
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Summary of Abbreviations
AMBAC American Municipal Bond
Assurance Corporation
COP Certificate of Participation
FGIC Financial Guaranty
Insurance Company
FNMA Federal National
Mortgage Association
FSA Financial Security Assurance
GNMA Government National
Mortgage Association
HR Hospital Revenue
IDR Industrial Development Revenue
MBIA Municipal Bond
Investors Assurance
Insurance Corporation
MFHR Multi-Family Housing Revenue
PCR Pollution Control Revenue
SFMR Single Family Mortgage Revenue
SWDR Solid Waste Disposal Revenue
Summary of Combined Ratings (Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fitch or Moody's or Standard & Poor's Value (%)
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AAA Aaa AAA 26.0
AA Aa AA 15.8
A A A 11.4
BBB Baa BBB 22.2
BB Ba BB 7.2
B B B .3
Not Rated (e) Not Rated (e) Not Rated (e) 17.1
100.0
</TABLE>
(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 MARCH 31,2000,
THESE SECURITIES AMOUNTED TO $66,954,300 OR 8.1% OF NET ASSETS.
(C) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT
SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND INTEREST
ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE EARLIEST REFUNDING
DATE.
(D) NON-INCOME ACCRUING SECURITY.
(E) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S
HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE RATED
SECURITIES IN WHICH THE FUND MAY INVEST.
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2000 (Unaudited)
Cost Value
- -------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 815,815,920 811,101,457
Receivable for investment securities sold 35,356,804
Interest receivable 14,891,976
Prepaid expenses 50,508
861,400,745
- --------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 552,881
Cash overdraft due to Custodian 43,242
Payable for investment securities purchased 36,437,977
Dividends payable to preferred shareholders 132,378
Accrued expenses and other liabilities 207,394
37,373,872
- --------------------------------------------------------------------------------
NET ASSETS ($) 824,026,873
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Auction Preferred Stock, Series M, T, W, TH and F par value
$.001 per share (11,400 shares issued and outstanding at
$25,000 per share liquidation preference)--Note 1 285,000,000
Common Stock par value, $.001 per share (58,549,216 shares
issued and outstanding) 58,549
Paid-in capital 552,245,547
Accumulated distributions in excess of investment income--net (544,133)
Accumulated net realized gain (loss) on investments (8,018,627)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 (4,714,463)
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 539,026,873
- --------------------------------------------------------------------------------
NET ASSETS ($) 824,026,873
- --------------------------------------------------------------------------------
SHARES OUTSTANDING
(500 million shares of $.001 par value Common Stock authorized) 58,549,216
NET ASSET VALUE PER COMMON STOCK,
offering and redemption price per share ($)
9.21
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2000 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME ($):
Interest Income 21,128,363
EXPENSES:
Management fee--Note 3(a) 2,346,248
Commission--Note 1 114,420
Shareholder servicing costs 84,705
Professional fees 77,549
Custodian fees--Note 3(b) 49,056
Directors' fees and expenses--Note 3(c) 30,824
Registration fees 21,982
Shareholders' reports 8,047
Miscellaneous 12,587
TOTAL EXPENSES 2,745,418
INVESTMENT INCOME--NET 18,382,945
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (7,885,435)
Net unrealized appreciation (depreciation) on investments (371,672)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (8,257,107)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 10,125,838
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
March 31, 2000 Year Ended
(Unaudited) September 30, 1999
- --------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 18,382,945 32,698,526
Net realized gain (loss) on investments (7,885,435) 4,578,741
Net unrealized appreciation (depreciation)
on investments (371,672) (51,129,931)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 10,125,838 (13,852,664)
- --------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net:
Common Stock (16,159,590) (33,466,174)
Preferred Stock (1,748,555) --
Net realized gain on investments (895,803) --
TOTAL DIVIDENDS (18,803,948) (33,466,174)
- --------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS ($):
Proceeds from issuance of Preferred Stock 285,000,000 --
Dividends reinvested--Note 1 (c) -- 2,380,500
Offering costs charged
to paid-in capital resulting
from issuance of Preferred Stock (3,050,000) --
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL STOCK TRANSACTIONS 281,950,000 2,380,500
TOTAL INCREASE (DECREASE) IN NET ASSETS 273,271,890 (44,938,338)
- --------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 550,754,983 595,693,321
END OF PERIOD 824,026,873 550,754,983
- -------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (COMMON SHARES):
INCREASE IN SHARES OUTSTANDING AS A
RESULT OF DIVIDENDS REINVESTED -- 235,695
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
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 date for the fund's shares.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Six Months Ended
March 31, 2000 Year Ended September 30,
-----------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value,
beginning of period 9.41 10.22 10.02 9.88 9.96 9.73
Investment Operations:
Investment income--net .31 .56 .59 .66 .68 .71
Net realized and unrealized
gain (loss) on investments (.13) (.80) .25 .16 (.09) .23
Total from
Investment Operations .18 (.24) .84 .82 .59 .94
Distributions:
Dividends from
investment income--net:
Common Stock (.28) (.57) (.64) (.68) (.67) (.71)
Preferred Stock (.03) -- -- -- -- --
Dividends from net realized
gain on investments (.02) -- -- -- -- --
Total Distributions (.33) (.57) (.64) (.68) (.67) (.71)
Capital Stock transactions,
net effect of
Preferred Stock offering (.05) -- -- -- -- --
Net asset value, end of period 9.21 9.41 10.22 10.02 9.88 9.96
Market value, end of period 8 8 10 5_16 10 5_8 10 9 5_8
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%)(a) 7.44(b) (17.55) 3.35 13.77 11.23 4.91
Six Months Ended
March 31, 2000 Year Ended September 30,
-----------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL
DATA (%):
Ratio of expenses to
average net assets
applicable to Common Stock .88(b,c) .84 .85 .85 .86 .87
Ratio of net investment income
to average net assets applicable
to Common Stock 5.86(b,c) 5.63 5.78 6.64 6.92 7.30
Portfolio Turnover Rate 10.86(d) 27.05 20.95 16.66 19.27 13.68
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, net of
Preferred Stock,
end of period ($ x 1,000) 539,027 550,755 595,693 577,209 560,072 59,862
Preferred Stock outstanding,
end of period ($ x 1,000) 285,000 -- -- -- -- --
Asset Coverage of
Preferred Stock,
end of period (%) 289 -- -- -- -- --
(A) CALCULATED BASED ON MARKET VALUE.
(B) ANNUALIZED.
(C) DOES NOT REFLECT THE EFFECT OF DIVIDENDS TO PREFERRED STOCK SHAREHOLDERS.
(D) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited)
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., which is a wholly-owned subsidiary of Mellon Financial Corporation.
On January 27, 2000, the fund issued 2,280 shares of each Series M, Series T,
Series W, Series TH and Series F Auction Preferred Stock ("APS"), with a
liquidation preference of $25,000 per share (plus an amount equal to accumulated
but unpaid dividends upon liquidation) . APS dividend rates are determined
pursuant to periodic auctions. Bankers Trust Company, as Auction Agent, receives
a fee from the fund for its services in connection with such auctions. The fund
also compensates broker-dealers generally at an annual rate of .25% of the
purchase price of the shares of APS placed by the broker/dealer in an auction.
The fund is subject to certain restrictions relating to the APS. Failure to
comply with these restrictions could preclude the fund from declaring any
distributions to common shareholders or repurchasing common shares and/or could
trigger the mandatory redemption of APS at liquidation value.
The holders of the APS, voting as a separate class, have the right to elect at
least two directors. The holders of the APS will vote as a separate class on
certain other matters, as required by law. The fund has designated Martin D.
Fife and Whitney I. Gerard to represent holders of APS on the fund's Board of
Directors.
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 Shareholders(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
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
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) based on the record date's respective price. If the net
asset value per share on the record date is lower than the market price per
share, shares will be issued by the fund at the record date's net asset value on
the payable date of the distribution. If the net asset value per share is less
than 95% of market value, shares will be issued by the fund at 95% of market
value. If market price is lower than the net asset value per share on the record
date, The Bank of New York will purchase fund shares in the open market
commencing on the payable date and reinvest those shares accordingly. As a
result of purchasing fund shares in the open market, fund shares outstanding
will not be affected by this form of reinvestment.
On March 30, 2000, the Board of Directors declared a cash dividend of $.046 per
share from investment income-net, payable on April 28, 2000 to Common
Shareholders of record as of the close of business on April 13, 2000.
(d) Dividends to shareholders of APS: For APS, dividends are currently reset
every 7 days. The most recent auction dates were March 27, 2000 for Series M,
March 28, 2000 for Series T, March 29, 2000 for Series W, March 30, 2000 for
Series TH and March 31, 2000 for Series F. The dividend rates were as follows:
3.78% for Series M payable on April 4, 2000, 3.80% for Series T payable on April
5, 2000, 3.80% for Series W payable on April 6, 2000, 3.85% for Series TH
payable on April 7, 2000 and 3.78% for Series F payable on April 10, 2000.
(e) 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
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, 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 March 31, 2000, the fund did not borrow
under the 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 .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, 1 1/2% 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 March 31, 2000, there was no expense reimbursement pursuant to the
agreement.
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
(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 March 31, 2000, $49,056 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 March 31, 2000, amounted to
$346,202,902 and $66,667,048, respectively.
At March 31, 2000, accumulated net unrealized depreciation on investments was
$4,714,463, consisting of $24,253,821 gross unrealized appreciation and
$28,968,284 gross unrealized depreciation.
At March 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).
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
Stephen E. Canter
Vice President and Treasurer
Joseph Connolly
Executive Vice President
Paul Disdier
Vice President
Mark N. Jacobs
Secretary
John B. Hammalian
Assistant Secretary
Steven F. Newman
Assistant Secretary
Michael A. Rosenberg
Assistant Treasurer
Gregory S. Gruber
PORTFOLIO MANAGERS
Joseph P. Darcy
A. Paul Disdier
Douglas J. Gaylor
Joseph A. Irace
Colleen A. Meehan
PORTFOLIO MANAGERS (CONTINUED)
Richard J. Moynihan
W. Michael Petty
Jill C. Shaffro
Scott Sprauer
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 (Common Stock)
Bankers Trust (Auction Preferred Stock)
AUCTION AGENT
Bankers Trust (Auction Preferred Stock)
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 FUNDS" EVERY
MONDAY; NEW YORK TIMES, BUSINESS SECTION UNDER THE HEADING "CLOSED-END BOND
FUNDS--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) 2000 Dreyfus Service Corporation 853SA003
