Dreyfus
Municipal
Income, Inc.
Semi-Annual
Report
March 31, 1999
<PAGE>
Year 2000 Issues (Unaudited)
The fund could be adversely affected if the computer systems used by The
Dreyfus Corporation and the fund's other service providers do not properly
process and calculate date-related information from and after January 1, 2000.
The Dreyfus Corporation is working to avoid Year 2000-related problems in its
systems and to obtain assurances from other service providers that they are
taking similar steps. In addition, issuers of securities in which the fund
invests may be adversely affected by Year 2000-related problems. This could have
an impact on the value of the fund's investments and its share price.
<PAGE>
Dreyfus Municipal Income, Inc.
- -------------------------------------------------------------------------------
Letter to Shareholders
Dear Shareholder:
We are pleased to provide you with this report on Dreyfus Municipal Income,
Inc. for the six-month period ended March 31, 1999. Your fund produced a total
return, including share price changes and dividend income generated, of 1.13%.*
During the reporting period, the fund produced income dividends exempt from
federal personal income taxes of $.280 per share.** This is equivalent to an
annualized federally tax-free distribution rate per share of 6.27%.***
Economic Review
The economy in the period ended March 31, 1999 had several persistent themes.
These included weakness in the world economy, strength in the U.S. economy,
pervasive disinflation and multiple rounds of central bank easing, which lowered
interest rates in many parts of the world.
Weakness in the world economy started in Asia with economic and financial
stresses throughout most of the continent. While China was able to generate
economic expansion by government spending, economic declines occurred in most of
the rest of Asia. The most severe phase of these crises occurred when Asian
currencies dropped and short-term interest rates rose there as well. Then Latin
America began to weaken, particularly Brazil. Tentative signs of a bottoming in
Asia had emerged by the end of your fund's fiscal period; however, Brazil had
not yet turned the corner.
Europe was full of optimism about the benefits of currency unification into
the Euro as of year-end 1998. The reality was that economic growth in Europe
began the last year at a modest pace and showed signs of stagnation in early
1999. Even so, the new European central bank postponed the reduction in interest
rates at the beginning of 1999, probably because of a desire to build
anti-inflationary credibility. The bank finally eased in April of this year.
The U.S. economy proved to be a superperformer during the period, growing at
an above-trend rate despite the economic weakness overseas. A major reason for
this was that the negative effects of foreign economic weakness on the
traditional industrial sector were offset by positive effects elsewhere in the
economy. Low inflation and low interest rates stimulated the housing and
consumer sectors, while the technology sector continued to expand.
The Federal Reserve eased monetary policy three times beginning on September
30, 1998, lowering the federal funds rate from 5.50% to 4.75%. This was not
because of any shortfall in U.S. economic growth. Rather, it was a response to a
financial crisis linked to the Russian default and the financial problems of a
major hedge fund. Despite widespread fears, the U.S. economy never did slow.
Long-term interest rates declined into early October, when fears of financial
crisis, deflation and possible economic recession were at their greatest.
However, those rates then drifted higher as the financial stresses eased and the
feared economic slowdown did not materialize.
Market Environment
Moderating economic growth in the U.S., a negligible rate of inflation, and
relatively low interest rates continue to foster a positive atmosphere for
municipal bonds. As measured by commonly accepted indexes, municipal bond yields
have moved very little over the last six-month period, compared to yields of
U.S. Treasury bonds. Treasuries, of course, were affected uniquely because of
the safe haven they provided during the economic and currency collapses of
several foreign countries; lately there has been some liquidation of Treasuries
as recovery in several foreign nations began, thus their price movements *4 have
been more volatile.
Municipal yields continue to be historically generous vis-a-vis Treasury bond
yields, and that lends support to current price levels. Presently, municipal
bonds with maturities of 20 years and longer provide federally tax-free yields
that exceed 90% of the taxable yields provided by Treasury bonds with comparable
maturities. Also helping to firm up price levels of municipal bonds is a
shortage of supply in the new-issue market. So far in 1999, newly marketed
issues amount to just 77% of 1998's volume. Some reduction in 1999 is expected
when compared to 1998, when a number of refundings helped to swell that year's
total issuance to $284 billion, but at this time new issues are running somewhat
behind expectations for 1999.
<PAGE>
Demand continues to be sparked by the after-tax benefits of municipal bond
ownership, recognized mainly by individuals and crossover buyers, the latter
being buyers who commonly operate in both taxable and tax-exempt markets,
depending on yield ratios and after-tax benefits. Institutional demand is not
especially strong right now, and that demand is very specific, centering on
coupon, maturity and several technical features. With supply and demand well
balanced, and no discernible indications of rising inflation and higher interest
rates, it appears that the municipal environment will continue to be hospitable.
Portfolio Focus
As discussed in previous communications to shareholders, the fund strives to
maximize tax-exempt income. During the reporting period, opportunities to
enhance the dividend payout remained limited. Yield differentials between the
most highly rated and less highly rated securities remained historically tight.
The decline in interest rates continues to have an impact as well. As the fund
has matured, many of the securities purchased years ago in a
higher-interest-rate environment have been called. The proceeds have been
reinvested in bonds yielding less than those redeemed. For this reason, it was
necessary to reduce the distributed dividend in February. Despite this
adjustment, Dreyfus Municipal Income, Inc. generated a tax-free yield of 5.91%
as of March 31, 1999 based on its stock price. Management continues to be alert
for opportunities while recognizing that future dividend reductions may be
required.
We continue to maintain a positive market outlook for two reasons: the supply
of new tax-exempt issues coming to market is running below last year's pace,
while demand from individual investors and from professional arbitrageurs has
been supportive. The municipal bond market has traded in a very narrow range
over the past several months and, with volatility measures at near-record lows,
we currently don't anticipate much of a change in market conditions in the near
term. Because of our constructive long-term market outlook, we have extended the
fund's average duration.
In summary, if recent market behavior continues, we believe that income
should be the key to relative market performance in the months ahead. We look
forward to serving you in the future.
Very truly yours,
/s/ Richard J. Moynihan
Richard J. Moynihan
Director, Municipal Portfolio Management
The Dreyfus Corporation
April 19, 1999
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains paid,
based upon net asset value per share.
** 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 (annualized), divided by the
market price per share at the end of the period.
<PAGE>
<TABLE>
<CAPTION>
Dreyfus Municipal Income, Inc.
- -------------------------------------------------------------------------------
Statement of Investments March 31, 1999 (Unaudited)
Principal
Long-Term Municipal Investments--97.7% Amount Value
- ------------------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Alabama--1.4%
Courtland Industrial Development Board, SWDR
(Champion International Corp. Project) 6.50%, 9/1/2025....................... $ 2,500,000 $ 2,667,350
Arizona--1.4%
Tucson Airport Authority, Special Facility Revenue (Lockheed Aeromod Center Inc.)
8.70%, 9/1/2019.............................................................. 2,500,000 2,697,925
California--5.6%
California Housing Finance Agency, MFHR
6.05%, 8/1/2038 (Insured; MBIA).............................................. 2,500,000 2,626,400
California Statewide Communties Development Authority, COP
(The Internext Group) 5.375%, 4/1/2030....................................... 2,000,000 1,960,080
Foothill/Eastern Transportation Corridor Agency, Toll Road Revenue
Zero Coupon, 1/1/2019........................................................ 18,000,000 6,326,460
Colorado--5.0%
City and County of Denver, Airport Revenue:
8.25%, 11/15/2012 (Prerefunded 11/15/2000) (a)............................... 560,000 613,441
8.25%, 11/15/2012............................................................ 5,940,000 6,391,381
(Special Facilities-United Airlines Inc. Project) 6.875%, 10/1/2032.......... 2,480,000 2,649,111
Florida--8.6%
Orange County Health Facilities Authority, Revenue
(Health Facility-Mental Health Services)
9.25%, 7/1/2020 (Prerefunded 7/1/2000) (a)................................... 4,665,000 5,083,404
Palm Beach County, Solid Waste IDR:
(Okeelanta Power Limited Partnership Project)
6.85%, 2/15/2021 (b)....................................................... 6,950,000 5,351,500
(Osceola Power Limited Partnership Project)
6.95%, 1/1/2022 (b)........................................................ 2,700,000 2,052,000
Pinellas County Housing Finance Authority, SFMR (Multi-County Program)
6.70%, 2/1/2028.............................................................. 3,990,000 4,281,868
Georgia--3.9%
Private Colleges and Universities Facilities Authority, Revenue, Refunding
(Clark Atlanta University Project)
8.25%, 1/1/2015 (Prerefunded 1/1/2003) (a)................................... 6,315,000 7,525,649
Illinois--10.5%
Chicago-O'Hare International Airport, Special Facility Revenue:
(American Airlines Inc. Project):
7.875%, 11/1/2025.......................................................... 2,000,000 2,145,760
Refunding 8.20%, 12/1/2024................................................. 1,000,000 1,178,300
(United Airlines Inc. Project):
8.40%, 5/1/2018 (Prerefunded 5/1/1999) (a)................................. 7,865,000 8,133,039
8.50%, 5/1/2018............................................................ 2,000,000 2,126,180
<PAGE>
Dreyfus Municipal Income, Inc.
- -------------------------------------------------------------------------------
Statement of Investments (continued) March 31, 1999 (Unaudited)
Principal
Long-Term Municipal Investments (continued) Amount Value
- ------------------------------------------------------------------------------- ------------- -------------
IIllinois (continued)
llinois Development Finance Authority, Revenue
(Community Rehabilitation Providers Facilities Acquisition Program):
8.75%, 3/1/2010............................................................ $ 120,000 $ 123,941
8.50%, 9/1/2010 (Prerefunded 9/1/2000) (a)................................. 3,290,000 3,575,177
8.50%, 9/1/2010............................................................ 1,710,000 1,800,339
5.50%, 7/1/2012............................................................ 1,405,000 1,405,450
Kentucky--2.0%
Perry County, SWDR (TJ International Project)
7%, 6/1/2024................................................................. 3,500,000 3,803,520
Massachusetts--3.2%
Massachusetts Industrial Finance Agency, Revenue
(Water Treatment-American Hingham) 6.95%, 12/1/2035.......................... 5,640,000 6,193,171
Michigan--7.7%
Michigan Hospital Finance Authority, HR,
Refunding (Genesys Health System Obligated Group)
8.125%, 10/1/2021 (Prerefunded 10/1/2005) (a)................................ 7,670,000 9,550,761
Michigan Strategic Fund, SWDR, Refunding (Genesee Power Station Project)
7.50%, 1/1/2021.............................................................. 5,000,000 5,373,100
Mississippi--2.6%
Mississippi Business Finance Corp., PCR, Refunding
(System Energy Resource Inc. Project) 5.875%, 4/1/2022....................... 5,000,000 5,030,800
Nevada--5.1% Clark County, IDR:
Refunding (Nevada Power Co. Project) 5.90%, 10/1/2030........................ 4,000,000 4,085,680
(Southwest Gas Corp.):
7.50%, 9/1/2032............................................................ 3,000,000 3,305,820
6.50%, 12/1/2033........................................................... 2,300,000 2,465,899
New Hampshire--4.1%
New Hampshire Industrial Development Authority, PCR
(Public Service Co. Project) 7.65%, 5/1/2021................................. 7,500,000 7,926,225
New York--1.7%
New York City 8.25%, 11/15/2010 (Prerefunded 11/15/2001) (a)................... 3,000,000 3,390,750
North Dakota--.3%
North Dakota Housing Finance Agency, SFMR 8.30%, 1/1/2012...................... 607,400 627,711
Pennsylvania--3.0%
Lancaster County Hospital Authority, Revenue
(Health Center-United Church of Christ Homes Inc.)
9.125%, 10/1/2014 (Prerefunded 10/1/1999) (a)................................ 2,000,000 2,097,060
Pennsylvania Economic Development Financing Authority, RRR
(Northampton Generating Project) 6.60%, 1/1/2019............................. 3,500,000 3,707,200
<PAGE>
Dreyfus Municipal Income, Inc.
- -------------------------------------------------------------------------------
Statement of Investments (continued) March 31, 1999 (Unaudited)
Principal
Long-Term Municipal Investments (continued) Amount Value
- ------------------------------------------------------------------------------- ------------- -------------
South Carolina--2.9%
Piedmont Municipal Power Agency, Electric Revenue, Refunding:
6.55%, 1/1/2016.............................................................. $ 880,000 $ 882,147
5.25%, 1/1/2021.............................................................. 5,000,000 4,778,050
Texas--11.2%
Alliance Airport Authority Inc., Special Facilities Revenue
(American Airlines Inc. Project) 7.50%, 12/1/2029............................ 2,375,000 2,540,229
Austin, Convention Center Revenue
8.25%, 11/15/2014 (Prerefunded 11/15/1999) (a)............................... 5,130,000 5,391,117
Bell County Health Facilities Development Corp., Revenue
(Southern Healthcare-Southview) 10.50%, 3/1/2020 (Prerefunded 3/1/2000) (a).. 4,665,000 5,054,528
Montgomery County Health Facilities Development Corp., Hospital Mortgage Revenue,
Refunding (Woodlands Medical Center Project)
8.85%, 8/15/2014 (Prerefunded 8/15/1999) (a)................................. 1,845,000 1,920,479
Port of Corpus Christi Authority, Nueces County, General Revenue, Refunding
(Union Pacific) 5.65%, 12/1/2022............................................. 4,000,000 4,004,160
Texas Housing Agency, Mortgage Revenue
(Residential Development):
8.40%, 7/1/2020............................................................ 1,190,000 1,220,666
8.40%, 1/1/2021............................................................ 1,580,000 1,619,310
Utah--2.2%
Carbon County, SWDR, Refunding (Sunnyside Cogeneration)
9.25%, 7/1/2018 (b).......................................................... 7,000,000 4,201,400
Washington--1.1%
Public Utility District No. 1 of Pend Orielle County, Electric Revenue
6.375%, 1/1/2015............................................................. 2,000,000 2,199,500
West Virginia--5.2%
Braxton County, SWDR (Weyerhaeuser Co. Project):
6.50%, 4/1/2025.............................................................. 5,000,000 5,440,000
5.80%, 6/1/2027.............................................................. 4,450,000 4,647,091
Wisconsin--1.9%
Wisconsin Housing and Economic Development Authority, Home Ownership Revenue
5.75%, 9/1/2028.............................................................. 3,500,000 3,599,260
Wyoming--1.7%
Sweetwater County, SWDR (FMC Corp. Project)
7%, 6/1/2024................................................................. 3,000,000 3,281,490
U.S. Related--5.4%
Puerto Rico Highway and Transportation Authority, Transportation Revenue:
6.83%, 7/1/2038 (Insured; MBIA) (c,d)........................................ 4,000,000 3,965,280
7.49%, 7/1/2038 (d).......................................................... 2,500,000 2,478,300
Puerto Rico Infrastructure Financing Authority, Special Tax Revenue,
Residual Certficates
6.855%, 7/1/2015 (d)......................................................... 4,000,000 4,142,720
-------------
TOTAL LONG-TERM INVESTMENTS (cost $180,565,868)................................ $ 189,638,179
=============
<PAGE>
Dreyfus Municipal Income, Inc.
- -------------------------------------------------------------------------------
Statement of Investments (continued) March 31, 1999 (Unaudited)
Principal
Short-Term Municipal Investment--.6% Amount Value
- ------------------------------------------------------------------------------- ------------- -------------
Alabama;
Stevenson Industrial Development Board, Environmental Improvement Revenue
VRDN (Mead Corp. Project) 3.35% (LOC; First Chicago Corp.) (e)
(cost $1,200,000)............................................................ $ 1,200,000 $ 1,200,000
=============
TOTAL INVESTMENTS (cost $181,765,868).......................................... 98.3% $ 190,838,179
======= =============
CASH AND RECEIVABLES (NET)..................................................... 1.7% $ 3,385,476
======= =============
NET ASSETS..................................................................... 100.0% $ 194,223,655
======= =============
</TABLE>
<TABLE>
<CAPTION>
Summary of Abbreviations
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COP Certificate of Participation MFHR Multi-Family Housing Revenue
HR Hospital Revenue PCR Pollution Control Revenue
IDR Industrial Development Revenue RRR Resources Recovery Revenue
LOC Letter of Credit SFMR Single Family Mortgage Revenue
MBIA Municipal Bond Investors Assurance SWDR Solid Waste Disposal Revenue
Insurance Corporation VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
<CAPTION>
Summary of Combined Ratings (Unaudited)
- --------------------------------------------------------------------------------------------------------------
Fitch or Moody's or Standard & Poor's Percentage of Value
- ---- -------- ---------------- ------------------
<S> <C> <C> <C>
AAA Aaa AAA 17.0%
AA Aa AA 3.7
A A A 7.8
BBB Baa BBB 43.4
BB Ba BB 4.2
F1 MIG1/P1 SP1/A1 .6
Not Rated (f) Not Rated (f) Not Rated (f) 23.3
-------
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 the bonds in full at the earliest refunding
date.
(b) Non-income producing security; interest payment in default.
(c) Security exempt from registration under Rule 144A of the Securities Act of
1933.This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At March 31, 1999, this security
amounted to $3,965,280 or 2.0% of net assets.
(d) Inverse floater security-the interest rate is subject to change
periodically.
(e) Securities payable on demand. Variable interest rate-subject to
periodic change.
(f) 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.
<PAGE>
<TABLE>
<CAPTION>
Dreyfus Municipal Income, Inc.
- -------------------------------------------------------------------------------
Statement of Assets and Liabilities March 31, 1999 (Unaudited)
Cost Value
------------ ------------
<S> <C> <C> <C>
ASSETS: Investments in securities-See Statement of Investments $181,765,868 $190,838,179
Cash....................................................... 39,994
Interest receivable........................................ 3,537,666
Prepaid expenses........................................... 2,442
------------
194,418,281
------------
LIABILITIES: Due to The Dreyfus Corporation and affiliates............. 127,342
Accrued expenses.......................................... 67,284
------------
194,626
------------
NET ASSETS...................................................................... $194,223,655
============
REPRESENTED BY: Paid-in capital........................................... $189,911,223
Accumulated distributions in excess of
investment income-net.................................. (144,772)
Accumulated net realized gain (loss) on investments (4,615,107)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4................................. 9,072,311
------------
NET ASSETS..................................................................... $194,223,655
============
SHARES OUTSTANDING
(110 million shares of $.001 par value Common Stock authorized)................ 20,382,927
NET ASSET VALUE per share...................................................... $9.53
=====
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
<PAGE>
Dreyfus Municipal Income, Inc.
- -------------------------------------------------------------------------------
Statement of Operations Six Months Ended March 31, 1999 (Unaudited)
<S> <C> <C> <C>
INVESTMENT INCOME
INCOME Interest Income.................................. $6,320,639
EXPENSES: Management fee-Note 3(a)......................... $ 682,495
Shareholder servicing costs-Note 3(b)............ 35,742
Shareholders' reports............................ 23,932
Professional fees................................ 20,364
Directors' fees and expenses-Note 3(c)........... 18,543
Custodian fees-Note 3(b)......................... 7,212
Registration fees................................ 3,955
Miscellaneous.................................... 6,764
-----------
Total Expenses................................. 799,007
---------
INVESTMENT INCOME--NET......................................................... 5,521,632
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-Note 4:
Net realized gain (loss) on investments.......... $ 567,763
Net unrealized appreciation (depreciation)
on investments (4,039,658)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS......................... (3,471,895)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................... $ 2,049,737
===========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
<PAGE>
Dreyfus Municipal Income, Inc.
- -------------------------------------------------------------------------------
Statement of Changes in Net Assets
Six Months Ended
March 31, 1999 Year Ended
(Unaudited) September 30, 1998
------------- ------------------
<S> <C> <C>
OPERATIONS:
Investment income-net............................................... $ 5,521,632 $11,259,548
Net realized gain (loss) on investments............................. 567,763 112,944
Net unrealized appreciation (depreciation) on investments........... (4,039,658) 4,039,493
------------ ------------
Net Increase (Decrease) in Net Assets Resulting from Operations... 2,049,737 15,411,985
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net............................................... (5,703,500) (12,192,007)
------------ ------------
CAPITAL STOCK TRANSACTIONS:
Dividends reinvested-Note 1(c)...................................... 372,814 706,813
------------ ------------
Total Increase (Decrease) in Net Assets........................... (3,280,949) 3,926,791
NET ASSETS:
Beginning of Period................................................. 197,504,604 193,577,813
------------ ------------
End of Period....................................................... $194,223,655 $197,504,604
============ ============
Undistributed investment income (distributions in excess of
investment income)-net............................................. $ (144,772) $ 37,096
------------ ------------
Shares Shares
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Increase in Shares Outstanding as a Result of Dividends Reinvested.. 38,754 71,263
============ ============
See notes to financial statements.
</TABLE>
<PAGE>
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 period indicated. This information has
been derived from the financial statements and market price data for the Fund's
shares.
<TABLE>
<CAPTION>
Six Months Ended Year Ended September 30,
March 31, 1999 --------------------------------------------
PER SHARE DATA: (Unaudited) 1998 1997 1996 1995 1994
---------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $ 9.71 $ 9.55 $ 9.60 $ 9.74 $ 9.41 $ 10.45
-------- -------- ------- ------- ------- -------
Investment Operations:
Investment income-net...................... .27 .55 .61 .64 .65 .67
Net realized and unrealized gain (loss)
on investments.......................... (.17) .21 (.02) (.16) .35 (.93)
-------- -------- ------- ------- ------- -------
Total from Investment Operations........... .10 .76 .59 .48 1.00 (.26)
-------- -------- ------- ------- ------- -------
Distributions:
Dividends from investment income-net....... (.28) (.60) (.64) (.62) (.67) (.70)
Dividends from net realized gain on investments -- -- -- -- -- (.08)
-------- -------- ------- ------- ------- -------
Total Distributions........................ (.28) (.60) (.64) (.62) (.67) (.78)
-------- -------- ------- ------- ------- -------
Net asset value, end of period............. $ 9.53 $ 9.71 $ 9.55 $ 9.60 $ 9.74 $ 9.41
======== ======== ======= ======= ======= =======
Market value, end of period................ $8 15/16 $9 11/16 $10 3/8 $9 9/16 $ 9 3/8 $ 8 7/8
======== ======== ======= ======= ======= =======
TOTAL INVESTMENT RETURN (1)................... (9.91%)(2) (.69%) 15.90% 8.83% 13.48% (10.77%)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.... .82%(2) .82% .82% .83% .85% .84%
Ratio of net investment income
to average net assets................... 5.66%(2) 5.75% 6.36% 6.61% 6.86% 6.76%
Portfolio Turnover Rate.................... 17.92%(3) 8.84% 10.67% 8.56% 36.09% 14.41%
Net Assets, end of period (000's Omitted).. $194,224 $197,505 $193,578 $193,165 $195,517 $188,730
<FN>
- -----------
(1) Calculated based on market value.
(2) Annualized.
(3) Not annualized.
</FN>
See notes to financial statements.
</TABLE>
<PAGE>
Dreyfus Municipal Income, Inc.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Municipal Income, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a non-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. ("Mellon").
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: 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 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) based on the record date's respective prices. 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 the market value, shares will be issued by the Fund at 95% of the market
value. If the market price is lower than the net asset value per share on the
record date, Mellon 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.
<PAGE>
Dreyfus Municipal Income, Inc.
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NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
On March 31, 1999, the Board of Directors declared a cash dividend of $.044
per share from investment income-net, payable on April 29, 1999 to shareholders
of record as of the close of business on April 15, 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 has an unused capital loss carryover of approximately $5,183,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to September 30, 1998. If not
applied the carryover expires in fiscal 2004.
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. During the period ended
March 31, 1999, 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 .70 of 1% of the value of the
Fund's average weekly net assets and is payable monthly. The Agreement provides
that if in any full fiscal year the aggregate expenses of the Fund, exclusive of
taxes, interest on borrowings, brokerage and extraordinary expenses, exceed the
expense limitation of any state having jurisdiction over the Fund, the Fund may
deduct from payments to be made to the Manager, or the Manager will bear the
amount of such excess to the extent required by state law. There was no expense
reimbursement for the period ended March 31, 1999.
(b) The Fund compensates Mellon under a transfer agency agreement for
providing personnel and facilities to perform transfer agency services for the
Fund. During the period ended March 31, 1999, the Fund was charged $14,611
pursuant to the transfer agency agreement.
The Fund compensates Mellon under a custody agreement for providing custodial
services for the Fund. During the period ended March 31, 1999, the Fund was
charged $7,212 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 $2,500 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
<PAGE>
Dreyfus Municipal Income, Inc.
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NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the period ended March 31, 1999
amounted to $34,553,780 and $34,125,118, respectively.
At March 31, 1999, accumulated net unrealized appreciation on investments
was $9,072,311, consisting of $13,940,319 gross unrealized appreciation and
$4,868,008 gross unrealized depreciation.
At March 31, 1999, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see
the Statement of Investments).
<PAGE>
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
Margaret W. Chambers
Vice President and Assistant Treasurer
Mary A. Nelson
Vice President, Assistant Treasurer and Assistant Secretary
Stephanie Pierce
Vice President and Assistant Treasurer
George A. Rio
Vice President and Assistant Treasurer
Joseph F. Tower, III
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
Portfolio Managers
Joseph P. Darcy
A. Paul Disdier
Karen M. Hand
Stephen C. Kris
Richard J. Moynihan
Jill C. Shaffro
Samuel J. Weinstock
Monica S. Wieboldt
Investment Adviser
The Dreyfus Corporation
Custodian
Mellon Bank, N.A.
Counsel
Stroock & Stroock & Lavan LLP
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, Money and
Business Section under the heading "Closed-End Bond Funds--National Municipal
Bond Funds" every Sunday.
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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.
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<PAGE>
Dreyfus Municipal Income, Inc.
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent,
Dividend Distribution Agent
and Registrar
Mellon Bank, N.A.
85 Challenger Road
Ridgefield Park, NJ 07660
Printed in U.S.A. 856SA993
