Municipal
Income, Inc.
Annual Report
September 30, 1995
Dreyfus Municipal Income, Inc.
Letter to Shareholders
Dear Shareholder:
We are pleased to provide you with this report on Dreyfus Municipal
Income, Inc. For its annual reporting period ended September 30, 1995, your
Fund produced a total return, including bond price changes and interest
income, of 11.20% based on net asset value.* Income dividends, exempt from
Federal personal income taxes, of $.668 per share were paid.** This is
equivalent to a tax-free distribution rate per share of 7.13%, comfortably in
excess of the inflation rate of 2.54% as measured by the Consumer Price Index
for the same period.
THE ECONOMY
The Federal Reserve Board relaxed its policy of monetary restraint in
July of 1995 when it lowered the Fed Funds rate on July 6th. This reduction
ended the upward pressure on short-term rates which had prevailed since the
beginning of 1994. Despite the monetary restraint that existed, long-term
rates began their decline early in the year. The Fed's policy of restraint
was based on concern about inflation, given the strong economic news then
prevailing. But by July these same reports indicated a significant weakening
trend in the economy. The July decline in the Fed Funds rate signaled that
economic growth issues outweighed, for a time, the Fed's fear of inflation.
The economic reports indicated lagging home and auto sales and a decline
in new home construction from earlier in the year. Furthermore, rising
business inventories (a frequent harbinger of a business slowdown) and
weakening retail sales lent additional credibility to the case for easier
credit conditions. By midyear, jobless claims were also on the rise as the
trend of corporate cost cutting, and layoffs in particular, continued. After
the easing of the Fed Funds in the early summer, until recently, economic
signals were mixed and inflationary expectations remained subdued.
Accordingly, interest rates stabilized.
Recently, however, economic strength has been reflected in some of the
indicators. Inflation is moderate, but various sectors of the economy such as
consumer spending and housing appear to be picking up. The stronger numbers
may forestall any immediate easing by the Federal Reserve Board.
Nevertheless, one should not rule out the possibility of another Fed move
before year-end.
A word about inflation: despite strong economic growth at the beginning
of the reporting period, inflation remained in check. We believe a
continuation of this moderating trend for prices appears likely, particularly
if the economy remains sluggish. This could be good news for bond investors
since easing inflation often results in falling interest rates. Declining
interest rates, often a corollary to slow business conditions, cause bond
prices to rise. Although we strive to maintain a high level of current tax
exempt income for the Fund, we always are very concerned with credit quality,
so we are mindful of the potential erosion in bond quality if the economy
slips back into a recession. As you know, we manage portfolios with a
long-term perspective, aware that market conditions can change rapidly.
MARKET ENVIRONMENT
The municipal bond market, buffeted by six interest rate hikes by the
Federal Reserve Board in 1994, recovered strongly in 1995. Weaker than
expected December sales figures tumbled rates and this decline persisted
throughout the remainder of the reporting period. This summer's rate cut
confirmed what declining long-term interest rates had indicated all year:
that business conditions were weaker than monetary policy makers thought. If
economic conditions remain sluggish, and Congress is able to arrive at an
acceptable budget accord, we believe further Fed easing is likely. In our
view, this would create a favorable environment for bond markets in general.
We are certainly pleased and encouraged by the good year-to-date performance
of the bond market and by the Fund; however, we are wary that this bond
market strength may be counting too much on continued low inflation. We are
alert to the stimulatory effects of easing monetary policy and are watchful
for any signs of rekindling inflation.
While the municipal market and the Fund have performed well, results for
municipal securities have been trailing the other fixed income markets. The
prospect of tax reform appears to be limiting the enthusiasm for tax exempt
securities. Since April, when serious tax reform proposals began to surface,
the municipal rally has lagged, resulting in an increase in municipal yields
as a percentage of comparable taxable bond yields. Today, long-term municipal
bonds are yielding nearly 90% of U.S. Treasuries, which is a greater yield
ratio than existed before the onset of talk about tax reform. While it could
be years before an actual change in the tax code is adopted, the market's
reaction so early in the proposal cycle suggests that the ultimate
legislation, if any, may have a less radical effect on the market than
feared.
THE PORTFOLIO
Market yields have dropped significantly since our last report to you and
the Fund has registered a 13.05% total return based on net asset value since
the start of the calendar year.* Certainly, management could have elected to
lengthen the duration of the portfolio earlier in the year in anticipation of
falling interest rates. Although enacting such a strategy might have added to
the Fund's total performance, income would have been lowered as
higher-yielding bonds were sold. While we are emphasizing yield, we are wary
because as municipal bonds age, the possibility increases of having
relatively high-yielding bonds redeemed. We are working to lessen any effect
this might have on the portfolio. Of course, when possible we will seek to
maintain credit quality and income in the Fund, while limiting price
volatility of the underlying bonds.
The issuance of new tax-exempt bonds continues at a lackluster pace
while, at the same time, a substantial number of outstanding bonds are being
retired. Therefore our strategies are influenced and their implementations
limited, at times, by the fact that there exists a limited inventory of
securities from which to choose.
The Fund's goal-to maximize current income exempt from Federal income
taxes to the extent consistent with the preservation of capital - continues
to guide our portfolio management decisions. The high level of volatility
exhibited by the market in recent years highlights the need to maintain a
disciplined, long-term focus. Solid market performance thus far in 1995 has
rewarded the patient investor.
Included in this report is a series of detailed statements about your
Fund's holdings and its financial condition. We hope they are informative.
Please know that we appreciate greatly your continued confidence in the Fund.
Very truly yours,
[Richard J. Moynihan signature logo]
Richard J. Moynihan
Director, Municipal Portfolio Management
The Dreyfus Corporation
October 16, 1995
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains
paid.
**Some income may be subject to the Federal Alternative Minimum Tax (AMT) for
certain shareholders.
Distribution rate per share is based upon dividends per share paid from net
investment income during the period, divided by the market value per share at
the end of the period.
Source: Lipper Analytical Services, Inc. The Consumer Price Index is
published by the Bureau of Labor Statistics and is a widely accepted measure
of inflation in the United States.
<TABLE>
<CAPTION>
Dreyfus Municipal Income, Inc.
Selected Information
SEPTEMBER 30, 1995 (UNAUDITED)
<S> <C> <C>
Market Price per share September 30, 1995........................... $ 9 3/8
Shares Outstanding September 30, 1995............................... 20,083,550
American Stock Exchange Ticker Symbol............................... DMF
</TABLE>
<TABLE>
<CAPTION>
MARKET PRICE (AMERICAN STOCK EXCHANGE)
Fiscal Year Ended September 30,1995
____________________________________________________________________________________
Quarter Quarter Quarter Quarter
Ended Ended Ended Ended
December 31,1994 March 31,1995 June 30,1995 September 30,1995
________________ ______________ ________ _________________
<S> <C> <C> <C> <C>
High $9 1\8 $9 7\8 $9 3\4 $ 9 3\8
Low 7 3\4 8 5\8 8 7\8 8 3\4
Close 8 5\8 9 1\2 8 15\16 9 3\8
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE GAIN based on change in Market Price*
<S> <C> <C>
October 24, 1988 (commencement of operations) through September 30, 1995.............. 55.80%
October 1, 1990 through September 30, 1995............................................ 47.97
October 1, 1994 through September 30, 1995............................................ 13.48
January 1, 1995 through September 30, 1995............................................ 14.55
April 1, 1995 through September 30, 1995.............................................. 2.13
July 1, 1995 through September 30, 1995............................................... 6.68
NET ASSET VALUE PER SHARE
October 24, 1988 (commencement of operations)........... $9.26
September 30, 1994...................................... 9.41
December 31, 1994....................................... 9.08
March 31, 1995.......................................... 9.54
June 30, 1995........................................... 9.62
September 30, 1995...................................... 9.74
PERCENTAGE GAIN based on change in Net Asset Value*
October 24, 1988 (commencement of operations) through September 30, 1995.............. 74.80%
October 1, 1990 through September 30, 1995............................................ 52.25
October 1, 1994 through September 30, 1995............................................ 11.20
January 1, 1995 through September 30, 1995............................................ 13.05
April 1, 1995 through September 30, 1995.............................................. 5.66
July 1, 1995 through September 30, 1995............................................... 2.97
*With dividends reinvested.
</TABLE>
<TABLE>
<CAPTION>
Dreyfus Municipal Income, Inc.
Statement of Investments SEPTEMBER 30, 1995
Principal
LONG-TERM MUNICIPAL INVESTMENTS-100.0% Amount Value
_______ _______
<S> <C> <C>
Arizona-1.5%
Tucson Airport Authority, Special Facility Revenue (Lockheed Aeromod Center Inc.)
8.70%, 9/1/2019......................................................... $ 2,500,000 $2,870,975
California-1.9%
Foothill/Eastern Transportation Corridor Agency, Toll Road Revenue
Zero Coupon, 1/1/2019................................................... 18,000,000 3,576,600
Colorado-7.7%
City and County of Denver,
Airport Revenue:
8.25%, 11/15/2012..................................................... 6,500,000 7,296,965
8%, 11/15/2017........................................................ 2,000,000 2,151,720
8.50%, 11/15/2023..................................................... 2,475,000 2,809,125
Special Facilities Airport Revenue,
(United Airlines Inc. Project) 6.875%, 10/1/2032...................... 2,480,000 2,508,966
Florida-11.0%
Orange County Health Facilities Authority, Revenue (Health Facility-Mental
Health Services)
9.25%, 7/1/2020 (Prerefunded 7/1/2000) (a).............................. 4,840,000 5,850,350
Palm Beach County, Solid Waste IDR:
(Okeelanta Power Limited Partnership Project)
6.85%, 2/15/2021...................................................... 7,450,000 7,369,689
(Osceola Power Limited Partnership Project)
6.95%, 1/1/2022....................................................... 2,700,000 2,696,355
Pinellas County Housing Finance Authority, SFMR (Multi-County Program)
6.70%, 2/1/2028......................................................... 5,000,000 5,159,750
Georgia-4.0%
Private Colleges and Universities Facilities Authority, Revenue,
Refunding (Clark Atlanta University Project) 8.25%, 1/1/2015............ 7,000,000 7,749,350
Illinois-20.2%
Chicago O'Hare International Airport, Special Facility Revenue:
(American Airlines Inc. Project):
7.875%, 11/1/2025..................................................... 2,000,000 2,143,540
Refunding 8.20%, 12/1/2024............................................ 1,000,000 1,148,080
(United Airlines Inc. Project):
8.40%, 5/1/2018....................................................... 8,280,000 9,056,830
8.50%, 5/1/2018....................................................... 2,000,000 2,190,320
Illinois Development Finance Authority, Revenue
(Community Rehabilitation Providers Facility Acquisition):
8.75%, 3/1/2010....................................................... 2,155,000 2,322,314
8.50%, 9/1/2010....................................................... 5,000,000 5,298,200
Dreyfus Municipal Income, Inc.
Statement of Investments (continued) SEPTEMBER 30, 1995
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount Value
_______ _______
Illinois (continued)
Illinois Health Facilities Authority, Revenue, Refunding (Galesburg Cottage
Hospital)
9.625%, 5/1/2011 (Prerefunded 5/1/1997) (a)............................. $5,000,000 $ 5,516,600
Robbins, RRR (Robbins Resource Recovery Partners)
9.25%, 10/15/2016....................................................... 10,000,000 11,007,200
Indiana-3.2%
Fishers Economic Development, First Mortgage Revenue
(United Student Funds Inc.) 8.375%, 9/1/2014............................ 5,700,000 6,104,244
Kentucky-1.9%
Perry County, SWDR (TJ International Project)
7%, 6/1/2024............................................................ 3,500,000 3,546,725
Massachusetts-3.3%
Massachusetts Housing Finance Agency, Residential Housing Revenue
8.10%, 8/1/2023......................................................... 505,000 528,962
Massachusetts Industrial Finance Agency, Revenue
(Water Treatment-American Hingham) 6.95%, 12/1/2035..................... 5,640,000 5,713,151
Michigan-7.0%
Michigan Hospital Finance Authority, HR,
Refunding (Genesys Health System Obligated Group) 8.125%, 10/1/2021..... 7,670,000 8,278,691
Michigan Strategic Fund, SWDR, Refunding (Genesee Power Station Project)
7.50%, 1/1/2021......................................................... 5,000,000 5,059,650
Nevada-1.7%
Clark County, IDR (Southwest Gas Corp.) 7.50%, 9/1/2032..................... 3,000,000 3,187,950
New Hampshire-2.8%
New Hampshire Industrial Development Authority, PCR
(Public Service Co. Project) 7.65%, 5/1/2021............................ 5,000,000 5,303,950
New York-3.7%
New York City:
8.25%, 11/15/2010....................................................... 1,555,000 1,722,940
8.25%, 11/15/2010 (Prerefunded 11/15/2001) (a).......................... 1,445,000 1,742,728
New York City Industrial Development Agency, Special Facility Revenue
(American Airlines Inc. Project) 7.75%, 7/1/2019........................ 3,390,000 3,601,977
North Dakota-.6%
North Dakota Housing Finance Agency, SFMR 8.30%, 1/1/2012................... 1,137,000 1,199,057
Pennsylvania-6.8%
Huntingdon County Industrial Development Authority, First Mortgage Revenue
(Presbyterian Homes-Woodland Retirement Center Project) 8%, 12/1/2020... 3,000,000 3,191,520
Lancaster County Hospital Authority, Health Care Revenue
(United Church Homes Project) 9.125%, 10/1/2014 (Prerefunded 10/1/1999) (a) 2,000,000 2,373,120
Dreyfus Municipal Income, Inc.
Statement of Investments (continued) SEPTEMBER 30, 1995
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount Value
_______ _______
Pennsylvania (continued)
Montgomery County Higher Education and Health Authority, HR
(United Hospital Inc.- Saint Christopher) 8.50%, 11/1/2017.............. $ 4,865,000 $ 5,065,195
Pennsylvania Economic Development Financing Authority, RRR
(Northampton Generating) 6.60%, 1/1/2019................................ 2,500,000 2,371,900
Texas-14.5%
Alliance Airport Authority Inc., Special Facilities Revenue (American Airlines Inc. Project)
7.50%, 12/1/2029........................................................ 2,375,000 2,504,936
Austin, Convention Center Revenue
8.25%, 11/15/2014 (Prerefunded 11/15/1999)(a)........................... 5,500,000 6,176,005
Bell County Health Facilities Development Corp., Revenue
(Southern Healthcare-Southview) 10.50%, 3/1/2020........................ 4,895,000 5,460,275
Montgomery County Health Facilities Development Corp., Hospital Mortgage Revenue,
Refunding (Woodlands Medical Center Project) 8.85%, 8/15/2014........... 5,205,000 5,659,709
Texas Housing Agency, Mortgage Revenue:
Residential Development:
8.40%, 7/1/2020....................................................... 1,610,000 1,726,645
8.40%, 1/1/2021....................................................... 2,170,000 2,313,046
Single Family 9.375%, 9/1/2016.......................................... 3,845,000 3,945,393
Utah-4.0%
Carbon County, SWDR, Refunding (Sunnyside Cogeneration)
9.25%, 7/1/2018......................................................... 7,000,000 7,651,840
West Virginia-2.6%
Braxton County, SWDR (Weyerhaeuser Co. Project)
6.50%, 4/1/2025......................................................... 5,000,000 5,072,750
Wyoming-1.6%
Sweetwater County, SWDR (FMC Corp. Project)
7%, 6/1/2024............................................................ 3,000,000 3,090,480
__________
TOTAL INVESTMENTS
(cost $177,137,430)..................................................... $191,315,768
============
</TABLE>
Dreyfus Municipal Income, Inc.
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
HR Hospital Revenue RRR Resources Recovery Revenue
IDR Industrial Development Revenue SFMR Single Family Mortgage Revenue
PCR Pollution Control Revenue SWDR Solid Waste Disposal Revenue
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
Fitch (b) or Moody's or Standard & Poor's Percentage of Value
_______ _______ _________________ ______________________
<S> <C> <C> <C>
AAA Aaa AAA 8.8%
AA Aa AA 4.8
A A A 1.5
BBB Baa BBB 39.9
BB Ba BB 2.6
F1 MIG1/P1 SP1/A1 2.7
Not Rated (c) Not Rated (c) Not Rated (c) 39.7
_____
100.0%
======
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) 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 bonds in full at the
earliest refunding date.
(b) Fitch currently provides creditworthiness information for a limited
number of investments.
(c) Securities which, while not rated by Fitch, Moody's or 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>
<CAPTION>
Dreyfus Municipal Income, Inc.
Statement of Assets and Liabilities SEPTEMBER 30, 1995
ASSETS:
<S> <C> <C>
Investments in securities, at value
(cost $177,137,430)-see statement..................................... $191,315,768
Cash.................................................................... 81,535
Interest receivable..................................................... 4,340,849
Prepaid expenses........................................................ 7,096
___________
195,745,248
___________
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $112,571
Accrued expenses........................................................ 116,098 228,669
__________ ___________
NET ASSETS.................................................................. $195,516,579
___________
REPRESENTED BY:
Paid-in capital......................................................... $187,005,400
Accumulated undistributed investment income-net......................... 1,316,576
Accumulated net realized (loss) on investments.......................... (6,983,735)
Accumulated net unrealized appreciation on investments-Note 3........... 14,178,338
___________
NET ASSETS at value applicable to 20,083,550 shares outstanding
(110 million shares of $.001 par value Common Stock authorized)......... $195,516,579
===========
NET ASSET VALUE, per share
($195,516,579 / 20,083,550 shares)...................................... $9.74
======
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
Dreyfus Municipal Income, Inc.
Statement of Operations
INVESTMENT INCOME: YEAR ENDED SEPTEMBER 30, 1995
<S> <C> <C>
Interest Income......................................................... $14,584,714
Expenses:
Management fee-Note 2(a).............................................. $ 1,323,079
Shareholder servicing costs-Note 2(b)................................. 92,047
Professional fees..................................................... 59,125
Shareholders' reports................................................. 57,160
Directors' fees and expenses-Note 2(c)................................ 35,604
Custodian fees........................................................ 20,889
Registration fees..................................................... 9,062
Miscellaneous......................................................... 12,943
__________
Total Expenses.................................................. 1,609,909
___________
INVESTMENT INCOME-NET........................................... 12,974,805
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized (loss) on investments-Note 3............................... $ (6,240,533)
Net unrealized appreciation on investments.............................. 13,217,463
___________
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 6,976,930
___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $19,951,735
===========
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
Dreyfus Municipal Income, Inc.
Statement of Changes in Net Assets
Year Ended September 30,
________________
1994 1995
_______ _______
OPERATIONS:
<S> <C> <C>
Investment income-net................................................... $ 13,397,733 $12,974,805
Net realized (loss) on investments...................................... (733,724) (6,240,533)
Net unrealized appreciation (depreciation) on investments for the year.. (17,910,279) 13,217,463
___________ __________
Net Increase (Decrease) In Net Assets Resulting From Operations....... (5,246,270) 19,951,735
___________ __________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net................................................... (13,971,942) (13,407,003)
Net realized gain on investments........................................ (1,517,848) __
___________ __________
Total Dividends....................................................... (15,489,790) (13,407,003)
___________ __________
CAPITAL STOCK TRANSACTIONS;
Dividends reinvested-Note 1(c).......................................... 2,466,951 241,835
___________ __________
Total Increase (Decrease) In Net Assets............................... (18,269,109) 6,786,567
NET ASSETS:
Beginning of year....................................................... 206,999,121 188,730,012
___________ __________
End of year (including undistributed investment income-net:
$1,748,774 in 1994 and $1,316,576 in 1995)............................ $188,730,012 $195,516,579
============ ===========
Shares Shares
___________ __________
CAPITAL SHARE TRANSACTIONS;
Increase In Shares Outstanding As A Result Of Dividends Reinvested...... 243,882 25,537
============ ===========
</TABLE>
See notes to financial statements.
Dreyfus Municipal Income, Inc.
Financial Highlights
Contained below is per share operating performance data for a share of
Common Stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each year indicated. This information
has been derived from the financial statements and market price data for the
Fund's shares.
<TABLE>
<CAPTION>
Year Ended September 30,
______________________________________________________
PER SHARE DATA: 1991 1992 1993 1994 1995
_____ _____ _____ _____ _____
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........... $ 9.34 $ 9.83 $10.06 $10.45 $ 9.41
_____ _____ _____ _____ _____
Investment Operations:
Investment income-net........................ .72 .71 .71 .67 .65
Net realized and unrealized gain (loss) on investments .49 .30 .44 (.93) .35
_____ _____ _____ _____ _____
Total from Investment Operations........... 1.21 1.01 1.15 (.26) 1.00
_____ _____ _____ _____ _____
Distributions:
Dividends from investment income-net......... (.68) (.70) (.70) (.70) (.67)
Dividends from net realized gain on investments (.04) (.08) (.06) (.08) -
_____ _____ _____ _____ _____
Total Distributions........................ (.72) (.78) (.76) (.78) (.67)
_____ _____ _____ _____ _____
Net asset value, end of year................. $ 9.83 $10.06 $10.45 $ 9.41 $ 9.74
======= ====== ====== ====== ======
Market Value, end of year.................... $ 10 $10 1\2 $10 3\4 $ 8 7\8 $ 9 3\8
======= ====== ====== ====== ======
TOTAL INVESTMENT RETURN*......................... 16.61% 13.61% 10.30% (10.77%) 13.48%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets...... .88% .86% .83% .84% .85%
Ratio of net investment income to average net assets 7.61% 7.20% 7.01% 6.76% 6.86%
Portfolio Turnover Rate...................... 36.40% 22.75% 11.94% 14.41% 36.09%
Net Assets, end of year (000's Omitted)...... $188,441 $195,991 $206,999 $188,730 $195,517
* Calculated based on market value.
</TABLE>
See notes to financial statements.
Dreyfus Municipal Income, Inc.
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940 ("Act")
as a non-diversified closed-end management investment company. The Dreyfus
Corporation ("Manager") serves as the Fund's investment adviser. The Manager
is a direct subsidiary of Mellon Bank, N.A.
(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: 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 declared and paid at
least annually. 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.
For 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 plan.
On September 28, 1995, the Board of Directors declared a cash dividend of
$.052 per share from investment income-net, payable on October 26, 1995 to
shareholders of record as of the close of business on October 12, 1995.
Dreyfus Municipal Income, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
(D) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):
Net Increase
Net Realized & (Decrease)
Unrealized In Net Assets
Total Investment Net Investment Gain (Loss) Resulting From
Income Income On Investments Operations
_________________ ________________ _______________ _________________
(000's) Per (000's) Per (000's) Per (000's) Per
Quarter Ended Omitted Share Omitted Share Omitted Share Omitted Share
_______ _______ _______ _______ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1993.............. $ 3,857 $0.19 $ 3,415 $0.17 $ (691) $(0.03) $2,724 $ 0.14
March 31, 1994................. 3,810 0.19 3,398 0.17 (13,072) (0.65) (9,674) (0.48)
June 30, 1994.................. 3,725 0.19 3,316 0.17 (1,564) (0.08) 1,752 0.09
September 30, 1994............. 3,673 0.18 3,269 0.16 (3,317) (0.17) (48) (0.01)
_______ _______ _______ _______ _______ _______ _______ _______
Total...................... $15,065 $0.75 $13,398 $0.67 $(18,644) $(0.93) $ (5,246) $(0.26)
======= ======= ======= ======= ======= ======= ======= =======
December 31, 1994.............. $ 3,662 $0.18 $3,267 $0.16 $(6,326) $(0.31) $ (3,059) $(0.15)
March 31, 1995................. 3,666 0.18 3,252 0.16 9,315 0.46 12,567 0.62
June 30, 1995.................. 3,639 0.19 3,258 0.17 1,681 0.09 4,939 0.26
September 30, 1995............. 3,618 0.18 3,198 0.16 2,307 0.11 5,505 0.27
_______ _______ _______ _______ _______ _______ _______ _______
Total...................... $14,585 $0.73 $12,975 $0.65 $ 6,977 $ 0.35 $19,952 $ 1.00
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
(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, 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 has an unused capital loss carryover of approximately $734,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to September 30, 1995. The
carryover does not include net realized securities losses from November 1,
1994 through September 30, 1995 which are treated, for Federal income tax
purposes, as arising in fiscal 1996. If not applied, the carryover expires in
fiscal 2003.
NOTE 2-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 .70 of 1% of the average
weekly value of the Fund's 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, exceed the expense limitation of any state having
jurisdiction over the Fund for any full fiscal year. There was no expense
reimbursement for the year ended September 30, 1995.
(B) The Fund compensates Mellon Bank, N.A. (the parent of the Manager)
under a Transfer Agency Agreement for providing transfer agency services for
the Fund. Such compensation amounted to $92,047 for the year ended September
30, 1995.
Dreyfus Municipal Income, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
(C) Prior to February 1, 1995, certain officers, of the Fund were
"affiliated persons," as defined in the Act, of the Manager and/or Dreyfus
Service Corporation, a wholly-owned subsidiary of the Manager. Each director
who is not an "affiliated person" receives an annual fee of $2,500 and an
attendance fee of $250 per meeting. The Chairman of the Board receives an
additional 25% of such compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities
amounted to $110,826,054 and $111,356,924, respectively, for the year ended
September 30, 1995, and consisted entirely of long-term and short-term
municipal investments.
At September 30, 1995, accumulated net unrealized appreciation on
investments was $14,178,338, consisting of $14,181,983 gross unrealized
appreciation and $3,645 gross unrealized depreciation.
At September 30, 1995, 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).
Dreyfus Municipal Income, Inc.
Report of Ernst & Young LLP, Independent Auditors
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS MUNICIPAL INCOME, INC.
We have audited the accompanying statement of assets and liabilities of
Dreyfus Municipal Income, Inc., including the statement of investments, as of
September 30, 1995, 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. Our procedures included confirmation of
securities owned as of September 30, 1995 by correspondence with the custodian.
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 Municipal Income, Inc. at September 30, 1995, 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.
[Ernst and Young LLP signature logo]
New York, New York
November 3, 1995
Dreyfus Municipal Income, Inc.
DIVIDEND REINVESTMENT PLAN (Unaudited)
The Fund generally distributes net investment income monthly. From and
after any issuance of Preferred Stock, monthly distributions to the holders
of the Common Stock (the "Common Shareholders") will consist of all net
investment income of the Fund remaining after payment of dividends on such
Preferred Stock. Any net realized short-term capital gains and any net
realized long-term capital gains will be distributed at least annually.
Net realized short- or long-term capital gains, if any, will be
distributed to Common Shareholders at least once a year to the extent not
necessary to pay dividends on or meet the liquidation preference of shares of
any Preferred Stock. While there are any shares of Preferred Stock
outstanding, the Fund may not declare any cash dividend or other distribution
on its Common Stock, unless at the time of such declaration, (i) all accrued
Preferred Stock dividends have been paid and (ii) the net asset value of the
Fund's portfolio (determined after deducting the amount of such dividend or
other distribution) is at least 200% of the liquidation value of the
outstanding Preferred Stock (expected to equal the original purchase price
per share plus any accrued and unpaid dividends thereon). This limitation on
the Fund's ability to make distributions on its Common Stock could under
certain circumstances impair the ability of the Fund to maintain its
qualification for taxation as a regulated investment company.
Under the Fund's Dividend Reinvestment Plan (the "Plan"), a Common
Shareholder who has Fund shares registered in his name will have all
dividends and distributions reinvested automatically by Mellon Bank, N.A., 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 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 dividends and 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 or distribution.
A Common Shareholder who has Fund shares registered in his name may elect
to withdraw from the Plan at any time for a $5.00 fee and thereby elect to
receive cash in lieu of shares of the Fund. Changes in elections must be in
writing, sent to Mellon Bank, N.A., P.O. Box 750, Pittsburgh, Pennsylvania
15230, Attention: Dividend Reinvestment, 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 ten business days prior to the record date for any
distribution.
The Agent maintains all 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.
Dreyfus Municipal Income, Inc.
DIVIDEND REINVESTMENT PLAN (Unaudited) (continued)
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 in
connection with the reinvestment of dividends or distributions.
The Fund reserves the right to amend or terminate the Plan as applied to
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.
Dreyfus Municipal Income, Inc.
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, 1995 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 1995 calendar year
on Form 1099-DIV which will be mailed by January 31, 1996.
OFFICERS AND DIRECTORS
DREYFUS MUNICIPAL INCOME, INC.
200 Park Avenue
New York, NY 10166
Directors
Joseph S. DiMartino, Chairman
Lucy Wilson Benson
David W. Burke
Martin D. Fife
Whitney I. Gerard
Robert R. Glauber
Arthur A. Hartman
George L. Perry
Paul Wolfowitz
Officers
President and Treasurer
Marie E. Connolly
Vice President and Secretary
John E. Pelletier
Vice President and Assistant Treasurer
Frederick C. Dey
Vice President and Assistant Secretary
Eric B. Fischman
Assistant Treasurer
John J. Pyburn
Assistant Treasurer
Joseph F. Tower, III
Assistant Secretary
Ruth Leibert
Portfolio Managers
Joseph P. Darcy
A. Paul Disdier
Karen M. Hand
Stephen C. Kris
Richard J. Moynihan
Jill C. Shaffro
L. Lawrence Troutman
Samuel J. Weinstock
Monica S. Wieboldt
MANAGER
The Dreyfus Corporation
CUSTODIAN
The Bank of New York
COUNSEL
Stroock & Stroock & Lavan
TRANSFER AGENT,
DIVIDEND DISTRIBUTION AGENT
AND REGISTRAR
Mellon Bank, N.A.
STOCK EXCHANGE LISTING
AMEX Symbol: DMF
INITIAL SEC EFFECTIVE DATE
10/21/88
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"
every Monday.
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.
[Dreyfus lion "d" logo]
DREYFUS MUNICIPAL INCOME, INC.
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT,
DIVIDEND DISTRIBUTION AGENT
AND REGISTRAR
Mellon Bank, N.A.
85 Challenger Road
Ridgefield Park, NJ 07660
Printed in U.S.A. 856AR959
[Dreyfus logo]
