Dreyfus
Municipal Income, Inc.
ANNUAL REPORT
September 30, 1999
(reg.tm)
The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured
* Not Bank-Guaranteed
* May Lose Value
Year 2000 Issues (Unaudited)
The fund could be adversely affected if the computer systems used by The Dreyfus
Corporation and the fund's other service providers do not properly process and
calculate date-related information from and after January 1, 2000. The Dreyfus
Corporation is working to avoid Year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by Year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
Contents
THE FUND
- --------------------------------------------------
2 Letter from the President
3 Discussion of Fund Performance
6 Selected Information
7 Statement of Investments
13 Statement of Assets and Liabilities
14 Statement of Operations
15 Statement of Changes in Net Assets
16 Financial Highlights
17 Notes to Financial Statements
21 Report of Independent Auditors
22 Dividend Reinvestment Plan
24 Important Tax Information
25 Proxy Results
29 Officers and Directors
FOR MORE INFORMATION
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Back Cover
The Fund
Dreyfus
Municipal Income, Inc.
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this annual report for Dreyfus Municipal Income, Inc.
covering the 12-month period from October 1, 1998 through September 30, 1999.
Inside, you' ll find valuable information about how the fund was managed during
the reporting period, including a discussion with the fund's portfolio manager,
Joseph Darcy.
The past year has been mixed for municipal bond investors. Lower short-term
interest rates adopted by the Federal Reserve Board in the fall of 1998 helped
the U.S. economy withstand the effects of economic weakness in Japan, Asia and
Latin America. As interest rates declined, the prices of many municipal bonds
appreciated.
Soon after 1999 began, however, evidence emerged that the U.S. economy was
growing strongly in an environment characterized by high levels of consumer
spending and low levels of unemployment. Concerns that inflationary pressures
might re-emerge caused the Federal Reserve Board to raise short-term interest
rates twice during the summer of 1999. Higher interest rates led to erosion of
municipal bond prices, especially toward the end of the reporting period
In this environment, however, the yields of tax-exempt bonds have recently been
quite attractive compared to the after-tax yields of taxable bonds of comparable
maturity and credit quality. This is especially true for investors in the higher
federal income tax brackets.
We appreciate your confidence over the past year, and we look forward to your
continued participation in Dreyfus Municipal Income, Inc.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
October 15, 1999
DISCUSSION OF FUND PERFORMANCE
Joseph Darcy, Portfolio Manager
How did Dreyfus Municipal Income, Inc. perform during the period?
The fund produced a total return of -2.59% for the 12-month reporting period
ended September 30, 1999.(1) The fund provided income dividends of $0.544 per
share, which is equal to a distribution rate of 7.13% over the same period.(2)
We attribute the fund's performance to its security selection strategy, which
emphasizes income over total return. In rising interest-rate environments, such
as the one that prevailed throughout most of the reporting period, prices of
high income-producing bonds tend to decline less than bonds with lower income
yields. Conversely, when interest rates decline, prices of high-income bonds
tend to appreciate less than their lower yielding counterparts.
What is the fund's investment approach?
The fund seeks high current federally tax-exempt income from a portfolio of
municipal bonds. In so doing, we strive to identify bonds that we believe are
likely to help the fund maximize income.
We employ two primary strategies. First, we attempt to add value by evaluating
interest-rate trends and supply-and-demand factors. Based on that assessment, we
select the bonds that we believe are most likely to provide high current levels
of income consistent with the fund' s management policies. We look at such
criteria as the bond's yield, price, age, the creditworthiness of its issuer,
and any provisions for early redemption.
Second, we actively manage the fund' s average duration -- a measure of
sensitivity to changes in interest rates -- in anticipation of temporary
supply-and-demand changes. If we expect the supply of newly issued bonds to
increase temporarily, we may reduce the fund's average duration to make cash
available for the purchase of higher yielding securities. Conversely, if we
expect demand for municipal bonds to surge at a time
The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
when we anticipate little issuance, we may increase the fund's average duration
to maintain current yields for as long as practical.
When bonds within the fund mature or are redeemed by their issuers, we generally
attempt to replace them with new comparable securities that offer then-current
higher-than-average income payments. We also look to upgrade the fund with newly
issued bonds that, in our opinion, have better structural or income
characteristics than existing holdings.
What other factors influenced the fund's performance?
The fund was affected by changing interest rates over the past year. When the
reporting period began on October 1, 1998, investors were concerned about the
potentially adverse economic effects of the global currency and credit crisis.
In response, the Fed reduced short-term interest rates last fall in an attempt
to stimulate global economic growth.
The Fed' s strategy apparently was effective. Foreign economies appear to have
halted their deterioration early in 1999, and the growth of the U.S. economy was
stronger than most analysts expected. Municipal bond yields and prices
stabilized in this environment. In the second quarter, however, strong economic
growth raised concerns that inflationary pressures might re-emerge. The Fed
increased short-term interest rates twice during the summer of 1999 in an
attempt to forestall a reacceleration of inflation. This change in monetary
policy caused municipal bond prices to fall in July, August and September.
In addition, strong economic conditions have contributed to the nation's first
federal budget surplus in many years. While the government has had less need to
issue U.S. Treasury securities, demand has remained high from domestic and
overseas investors. This imbalance between supply and demand has recently
constrained the rise of taxable bond yields relative to tax-exempt bonds. As a
result, as of September 30, 1999, municipal bonds generally were offering
tax-exempt yields that compare very favorably with taxable yields after
adjusting for taxes.
What is the fund's current strategy?
Because some of our municipal bond holdings have been redeemed early by their
issuers in a lower interest-rate environment, the fund has experienced some
erosion of its dividend and income stream. We recently took steps designed to
support the income stream through the issuance of auction preferred stock issued
in September 1999. We are investing the proceeds from the sale of the auction
preferred stock in additional municipal bonds as, in our view, attractive
investment opportunities arise.
While the volume of municipal bond issuance has declined by more than 20% this
year and secondary market activity has contracted accordingly, we remain
vigilant in our pursuit of opportunities to upgrade the portfolio's holdings
October 15, 1999
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID,
BASED UPON NET ASSET VALUE PER SHARE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS. INCOME MAY BE SUBJECT TO STATE AND LOCAL TAXES, AND SOME INCOME MAY BE
SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT) FOR CERTAIN INVESTORS.
CAPITAL GAINS, IF ANY, ARE FULLY TAXABLE.
(2) DISTRIBUTION RATE PER SHARE IS BASED UPON DIVIDENDS PER SHARE PAID FROM NET
INVESTMENT INCOME DURING THE PERIOD, DIVIDED BY THE MARKET PRICE PER SHARE AT
THE END OF THE PERIOD.
The Fund
SELECTED INFORMATION
September 30, 1999 (Unaudited)
Market Price per share September 30, 1999 $7 5/8
Shares Outstanding September 30, 1999 20,382,927
American Stock Exchange Ticker Symbol DMF
<TABLE>
MARKET PRICE (AMERICAN STOCK EXCHANGE)
Fiscal Year Ended September 30, 1999
-----------------------------------------------------------------
QUARTER QUARTER QUARTER QUARTER
ENDED ENDED ENDED ENDED
DECEMBER 31, 1998 MARCH 31, 1999 JUNE 30, 1999 SEPTEMBER 30, 1999
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
High $ 10 1/16 $ 9 13/16 $ 9 $ 8 11/16
Low 9 1/2 8 13/16 8 9/16 7 5/8
Close 9 9/16 8 15/16 8 9/16 7 5/8
PERCENTAGE GAIN (LOSS) based on change in Market Price*
October 24, 1988 (commencement of operations)
through September 30, 1999 63.25%
October 1, 1989 through September 30, 1999 54.73
October 1, 1994 through September 30, 1999 18.91
October 1, 1998 through September 30, 1999 (16.35)
January 1, 1999 through September 30, 1999 (16.52)
April 1, 1999 through September 30, 1999 (12.00)
July 1, 1999 through September 30, 1999 ( 9.50)
NET ASSET VALUE PER SHARE
October 24, 1988 (commencement of operations) $ 9.26
September 30, 1998 9.71
December 31, 1998 9.60
March 31, 1999 9.53
June 30, 1999 9.28
September 30, 1999 8.90
PERCENTAGE GAIN (LOSS) based on change in Net Asset Value*
October 24, 1988 (commencement of operations)
through September 30, 1999 105.78%
October 1, 1989 through September 30, 1999 89.70
October 1, 1994 through September 30, 1999 30.90
October 1, 1998 through September 30, 1999 ( 2.59)
January 1, 1999 through September 30, 1999 ( 2.93)
April 1, 1999 through September 30, 1999 ( 3.67)
July 1, 1999 through September 30, 1999 ( 2.54)
* WITH DIVIDENDS REINVESTED.
</TABLE>
STATEMENT OF INVESTMENTS
September 30, 1999
<TABLE>
Principal
LONG-TERM MUNICIPAL INVESTMENTS--95.8% Amount ($) Value ($)
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<S> <C> <C>
ALABAMA--3.5%
Courtland Industrial Development Board, SWDR
(Champion International Corp. Project) 6.50%, 9/1/2025 2,500,000 2,545,425
Jefferson County, Sewer Revenue, Capital Improvement
5.75%, 2/1/2038 (Insured; FGIC) 7,500,000 7,268,325
ALASKA--6.7%
Alaska Housing Finance Corp., General Mortgage Revenue
6.05%, 6/1/2039 (Insured; MBIA) 7,000,000 6,978,370
Valdez, Marine Terminal Revenue:
(British Petroleum Pipeline Inc. Project) 5.50%, 10/1/2028 5,000,000 4,655,100
(Mobil Alaska Pipeline) 5.75%, 11/1/2028 7,500,000 7,248,000
ARIZONA--.9%
Tucson Airport Authority, Special Facility Revenue
(Lockheed Aeromod Center Inc.)
8.70%, 9/1/2019 2,500,000 2,633,125
CALIFORNIA--3.0%
Abag Financial Authority For Nonprofit Corps., MFHR
(Civic Center Drive Apartments)
5.875% 9/1/2032 (Insured; FSA) 4,000,000 3,999,760
California Housing Finance Agency, MFHR
6.05%, 8/1/2038 (Insured; MBIA) 2,500,000 2,526,375
California Statewide Communties Development Authority, COP
(The Internext Group) 5.375%, 4/1/2030 2,000,000 1,757,940
COLORADO--3.3%
City and County of Denver, Airport Revenue:
8.25%, 11/15/2012 (Prerefunded 11/15/2000) 560,000 (a) 597,453
8.25%, 11/15/2012 5,940,000 6,256,127
(Special Facilities-United Airlines Inc. Project)
6.875%, 10/1/2032 2,480,000 2,550,531
FLORIDA--7.6%
Highlands County Health Facilities Authority,HR
(Adventist Health System) 5.25%, 11/15/2028 2,600,000 2,262,442
Orange County Health Facilities Authority, Revenue:
(Health Facility-Mental Health Services)
9.25%, 7/1/2020 (Prerefunded 7/1/2000) 4,590,000 (a) 4,860,948
(Orlando Regional Healthcare System) 6%, 10/1/2026 1,500,000 1,459,950
Palm Beach County, Solid Waste IDR:
(Okeelanta Power Limited Partnership Project)
6.85%, 2/15/2021 6,950,000 (b) 4,274,250
(Osceola Power Limited Partnership Project)
6.95%, 1/1/2022 2,700,000 (b) 1,633,500
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
FLORIDA (CONTINUED)
Pinellas County Housing Finance Authority, SFMR
(Multi-County Program) 6.70%, 2/1/2028 3,990,000 4,134,239
South Lake County Hospital District, Revenue
(South Lake Hospital Inc.) 5.80%, 10/1/2034 3,000,000 2,799,030
GEORGIA--2.6%
Private Colleges and Universities Facilities Authority, Revenue,
Refunding (Clark Atlanta University Project)
8.25%, 1/1/2015 (Prerefunded 1/1/2003) 6,315,000 (a) 7,296,035
ILLINOIS--6.0%
Chicago-O'Hare International Airport, Special Facility Revenue:
(American Airlines Inc. Project):
7.875%, 11/1/2025 2,000,000 2,093,920
8.20%, 12/1/2024 1,000,000 1,134,810
(United Airlines Inc. Project) 8.50%, 5/1/2018 2,000,000 2,077,880
Illinois Development Finance Authority, Revenue
(Community Rehabilitation Providers Facilities Acquisition
Program):
8.75%, 3/1/2010 120,000 122,485
8.50%, 9/1/2010 (Prerefunded 9/1/2000) 3,290,000 (a) 3,483,946
8.50%, 9/1/2010 1,710,000 1,772,073
5.50%, 7/1/2012 1,405,000 1,313,169
Illinois Health Facilities Authority, Revenue
(OSF Healthcare System) 6.25%, 11/15/2029 5,000,000 (c) 4,929,500
INDIANA--.7%
Indiana Health Facility Financing Authority, HR
(Charity Obligation Group) 5.50%, 11/15/2024 2,000,000 1,857,480
KENTUCKY--1.3%
Perry County, SWDR (TJ International Project) 7%, 6/1/2024 3,500,000 3,672,620
MASSACHUSETTS--2.1%
Massachusetts Industrial Finance Agency, Revenue
(Water Treatment-American Hingham) 6.95%, 12/1/2035 5,640,000 6,000,847
MICHIGAN--5.8%
Hancock Hospital Finance Authority, Mortgage Revenue
(Portgage Health) 5.45%, 8/1/2047 (Insured; MBIA) 2,200,000 2,006,884
Michigan Hospital Finance Authority, HR,
(Genesys Health System Obligated Group)
8.125%, 10/1/2021 (Prerefunded 10/1/2005) 7,670,000 (a) 9,146,705
Michigan Strategic Fund, SWDR (Genesee Power Station Project)
7.50%, 1/1/2021 5,000,000 5,238,200
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
MINNESOTA--.4%
Minnesota Housing Finance Agency, Single Family Mortgage
5.60%, 7/1/2022 1,200,000 1,165,344
MISSISSIPPI--1.7%
Mississippi Business Finance Corp., PCR
(System Energy Resource Inc. Project) 5.875%, 4/1/2022 5,000,000 4,630,400
MONTANA--.9%
Montana Health Facility Authority, Health Care Revenue
(Sidney Health Center) 5.75%, 9/1/2019 (Insured; ACA) 2,725,000 2,626,355
NEVADA--4.8%
Clark County, IDR:
(Nevada Power Co. Project) 5.90%, 10/1/2030 4,000,000 3,782,120
(Southwest Gas Corp.):
7.50%, 9/1/2032 3,000,000 3,208,710
6.50%, 12/1/2033 2,300,000 2,364,285
6.10%, 12/1/2038 4,000,000 4,009,480
NEW HAMPSHIRE--2.8%
New Hampshire Industrial Development Authority, PCR
(Public Service Co. Project) 7.65%, 5/1/2021 7,500,000 7,783,575
NEW YORK--5.6%
New York City 8.25%, 11/15/2010 (Prerefunded 11/15/2001) 3,000,000 (a) 3,290,550
New York City Municipal Water Finance Authority,
Water and Sewer System Revenue
5.75%, 6/15/2031 (Insured; FGIC) 6,000,000 (c) 5,913,300
New York State Urban Development Corporation
5.50%, 7/1/2022 7,000,000 6,646,920
NORTH DAKOTA--.2%
North Dakota Housing Finance Agency, SFMR 8.30%, 1/1/2012 537,400 553,581
OHIO--3.5%
Cuyahoga County, Hospital Improvement Revenue
(The Metrohealth System Project) 6.125%, 2/15/2024 5,000,000 4,955,850
Ohio Housing Finance Agency,Residential Mortgage Revenue
5.75%, 9/1/2030 5,000,000 4,845,350
PENNSYLVANIA--1.3%
Pennsylvania Economic Development Financing Authority, RRR
(Northampton Generating Project) 6.60%, 1/1/2019 3,500,000 3,601,325
SOUTH CAROLINA--3.0%
Medical University, Hospital Facilities Revenue
6%, 7/1/2019 5,000,000 4,939,650
Piedmont Municipal Power Agency, Electric Revenue:
6.55%, 1/1/2016 880,000 880,211
5.25%, 1/1/2021 3,000,000 2,620,800
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
TENNESSEE--1.8%
Tennessee Housing Development Agency, Homeownership Program
6%, 1/1/2028 5,000,000 4,972,500
TEXAS--9.7%
Alliance Airport Authority Inc., Special Facilities Revenue
(American Airlines Inc. Project) 7.50%, 12/1/2029 2,375,000 2,481,234
Austin, Convention Center Revenue
8.25%, 11/15/2014 (Prerefunded 11/15/1999) 5,130,000 (a) 5,260,507
Bell County Health Facilities Development Corp., Revenue
(Southern Healthcare-Southview)
10.50%, 3/1/2020 (Prerefunded 3/1/2000) 4,665,000 (a) 4,883,835
Dallas County Utility and Reclamation District
5.875%, 2/15/2029 (Insured: AMBAC) 4,000,000 (c) 3,974,520
Port of Corpus Christi Authority, Nueces County, General Revenue
(Union Pacific) 5.65%, 12/1/2022 4,000,000 3,683,160
Texas, Veterans Housing Assistance Program 6.10%, 6/1/2031 7,000,000 (c) 6,999,300
UTAH--2.2%
Carbon County, SWDR (Sunnyside Cogeneration):
7.10%, 8/15/2023 3,550,000 3,596,683
Zero Coupon, 8/15/2024 1,080,000 183,017
Utah Housing Finance Agency, Single Family Mortgage
6%, 1/1/2031 2,500,000 (c) 2,482,275
WASHINGTON--2.5%
Public Utility District No. 1 of Pend Orielle County,
Electric Revenue
6.375%, 1/1/2015 2,000,000 2,107,180
Washington Higher Education Facilities Authority, Revenue
(Whitman College Project) 5.875%, 10/1/2029 5,000,000 (c) 4,944,400
WEST VIRGINIA--4.4%
Braxton County, SWDR (Weyerhaeuser Co. Project):
6.50%, 4/1/2025 5,000,000 5,246,100
5.80%, 6/1/2027 7,450,000 7,157,140
WISCONSIN--2.7%
Wisconsin Health and Educational Facilities Authority, Revenue
(Aurora Health Care, Inc.) 5.60%, 2/15/2029 4,750,000 4,212,110
Wisconsin Housing and Economic Development Authority,
Home Ownership Revenue
5.75%, 9/1/2028 3,500,000 3,380,335
WYOMING--1.1%
Sweetwater County, SWDR (FMC Corp. Project) 7%, 6/1/2024 3,000,000 3,141,630
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. RELATED--3.7%
Puerto Rico Highway and Transportation Authority,
Transportation Revenue:
6.09%, 7/1/2038 (Insured; MBIA) 4,000,000 (d,e) 3,010,720
6.09%, 7/1/2038 5,000,000 (e) 3,763,400
Puerto Rico Infrastructure Financing Authority,
Special Tax Revenue, Residual Certficates
6.495%, 7/1/2015 4,000,000 (e) 3,642,320
TOTAL LONG-TERM INVESTMENTS
(cost $ 271,042,400) 269,527,616
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SHORT-TERM MUNICIPAL INVESTMENTS--16.3%
- ------------------------------------------------------------------------------------------------------------------------------------
ILLINOIS--.1%
Illinois Health Facilities Authority, Revenue, VRDN
(University of Chicago Hospitals) 3.95% (Insured; MBIA) 200,000 (f) 200,000
INDIANA--1.2%
Jasper County, PCR, VRDN
(Northern Indiana Public Service) 3.80% 3,300,000 (f) 3,300,000
MICHIGAN--2.5%
Michigan Strategic Fund, LOR, VRDN (Detriot Edison Co.)
3.95% (LOC; Barclays Bank PLC.) 4,000,000 (f) 4,000,000
Royal Oak Hospital Finance Authority, HR, VRDN
(William Beaumont Hospital) 3.90% 3,000,000 (f) 3,000,000
MINNESOTA--4.2%
Minneapolis and Saint Paul Housing And Redevelopment Authority,
Health Care Systems Revenue, VRDN (Childrens' Health Care)
4% (Insured; FSA) 11,970,000 (f) 11,970,000
NEW YORK--3.7%
New York City 3.80% (LOC; Morgan Guaranty Trust Company) 10,500,000 (f) 10,500,000
TEXAS--4.6%
Harris County Health Facilities Development Corporation, HR,
VRDN (Texas Childrens Hospital) 3.75% (Insured; MBIA) 13,000,000 (f) 13,000,000
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $45,970,000) 45,970,000
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TOTAL INVESTMENTS (cost $317,012,400) 112.1% 315,497,616
LIABILITIES, LESS CASH AND RECEIVABLES (12.1%) (34,182,723)
NET ASSETS 100.0% 281,314,893
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Summary of Abbreviations
ACA American Capital Access MBIA Municipal Bond Investors
AMBAC American Municipal Bond Assurance Assurance Insurance
Corporation Corporation
COP Certificate of Participation MFHR Multi-Family Housing
FGIC Financial Guaranty Insurance Company Revenue
FSA Financial Security Assurance PCR Pollution Control Revenue
HR Hospital Revenue RRR Resources Recovery Revenue
IDR Industrial Development Revenue SFMR Single Family Mortgage
LOC Letter of Credit Revenue
LOR Limited Obligation Revenue SWDR Solid Waste Disposal Revenue
VRDN Variable Rate Demand Notes
Summary of Combined Ratings (Unaudited)
Fitch or Moody's or Standard & Poor's Value (%)
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa AAA 21.1
AA Aa AA 11.3
A A A 18.0
BBB Baa BBB 22.6
F1 MIG1/P1 SP1/A1 14.6
Not Rated(g) Not Rated(g) Not Rated(g) 12.4
100.0
(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 PAYMENTS IN DEFAULT.
(C) PURCHASED ON A DELAYED DELIVERY BASIS.
(D) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF
1933. THIS SECURITY MAY BE RESOLD IN A TRANSACTION EXEMPT FROM REGISTRATION,
NORMALLY TO A QUALIFIED INSTITUTIONAL BUYER. AT SEPTEMBER 30, 1999, THIS
SECURITY AMOUNTED TO $3,010,720 OR 1.1% OF NET ASSETS.
(E) INVERSE FLOATER SECURITY--THE INTEREST RATE IS SUBJECT TO CHANGE
PERIODICALLY.
(F) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC
CHANGE.
(G) 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.
(H) AT SEPTEMBER 30, 1999, THE FUND HAD $80,862,761 (28.7%) OF NET ASSETS
INVESTED IN SECURITIES WHOSE PAYMENT OF PRINCIPAL AND INTEREST IS DEPENDENT UPON
REVENUES GENERATED FROM HEALTH CARE PROJECTS.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1999
Cost Value
- --------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 317,012,400 315,497,616
Cash 128,908
Interest receivable 4,435,029
Prepaid expenses 1,415
320,062,968
- --------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 126,501
Payable for investment securities purchased 38,211,890
Dividends payable 102,466
Accrued expenses and other liabilities 307,218
38,748,075
- --------------------------------------------------------------------------------
NET ASSETS ($) 281,314,893
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Auction Preferred Stock, Series A and B, par value $.001 per share
(4,000 shares issued and outstanding at
$25,000 per share liquidation preference)--Note 1 100,000,000
Common Stock, par value, $.001 per share (20,382,927 shares issued
and outstanding) 20,383
Paid-in capital 188,690,840
Accumulated distributions in excess of investment income--net (158,171)
Accumulated net realized gain (loss) on investments (5,723,375)
Accumulated net unrealized appreciation (depreciation)
on investments --Note 4 (1,514,784)
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 181,314,893
- --------------------------------------------------------------------------------
NET ASSETS ($) 281,314,893
- --------------------------------------------------------------------------------
SHARES OUTSTANDING
(110 million shares of $.001 par value Capital Stock authorized) 20,382,927
NET ASSET VALUE per common stock, offering and
redemption price per share ($) 8.90
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF OPERATIONS
Year Ended September 30, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INTEREST INCOME 12,634,220
EXPENSES:
Management fee--Note 3(a) 1,367,237
Shareholder servicing costs--Note 3(b) 78,885
Professional fees 60,350
Prospectus and shareholders' reports 51,007
Directors' fees and expenses--Note 3(c) 44,939
Custodian fees--Note 3(b) 14,474
Commission fees--Note 1 7,534
Registration fees 3,955
Interest expense--Note 2 377
Miscellaneous 13,671
TOTAL EXPENSES 1,642,429
INVESTMENT INCOME--NET 10,991,791
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (540,505)
Net unrealized appreciation (depreciation) on investments (14,626,753)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (15,167,258)
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (4,175,467)
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF CHANGES IN NET ASSETS
Year Ended September 30,
--------------------------------
1999 1998
- --------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 10,991,791 11,259,548
Net realized gain (loss) on investments (540,505) 112,944
Net unrealized appreciation (depreciation)
on investments (14,626,753) 4,039,493
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (4,175,467) 15,411,985
- --------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net:
Common Stock (11,084,592) (12,192,007)
Preferred Stock (102,466) --
TOTAL DIVIDENDS (11,187,058) (12,192,007)
- --------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS ($):
Proceeds from issuance of Preferred Stock 100,000,000 --
Dividends reinvested--Note 1(c) 372,814 706,813
Offering costs charged to paid-in capital resulting
from the issuance of Preferred Stock (1,200,000) --
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL STOCK TRANSACTIONS 99,172,814 706,813
TOTAL INCREASE (DECREASE) IN NET ASSETS 83,810,289 3,926,791
- --------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 197,504,604 193,577,813
END OF PERIOD 281,314,893 197,504,604
Undistributed investment income and
distributions in excess of investment income--net (158,171) 37,096
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (COMMON SHARES):
INCREASE IN COMMON SHARES OUTSTANDING AS A RESULT OF
DIVIDENDS REINVESTED 38,754 71,263
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 data for the fund's shares.
<TABLE>
Year Ended September 30,
------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA ($):
Net asset value, beginning of period 9.71 9.55 9.60 9.74 9.41
Investment Operations:
Investment income--net .53 .55 .61 .64 .65
Net realized and unrealized
gain (loss) on investments (.73) .21 (.02) (.16) .35
Total from Investment Operations (.20) .76 .59 .48 1.00
Distributions:
Dividends from investment
income--net-common stock (.54) (.60) (.64) (.62) (.67)
Dividends from investment
income--net-preferred stock (.01) -- -- -- --
Total Distributions (.55) (.60) (.64) (.62) (.67)
Capital Stock transaction--net
effect of Preferred Stock offering (.06) -- -- -- --
Net asset value, end of period 8.90 9.71 9.55 9.60 9.74
Market value, end of period 7 5/8 9 11/16 10 3/8 9 9/16 9 3/8
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (A) (16.35) (.69) 15.90 8.83 13.48
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets
applicable to Common Stock .84(b) .82 .82 .83 .85
Ratio of net investment income to average
net assets applicable to Common Stock 5.63(b) 5.75 6.36 6.61 6.86
Portfolio Turnover Rate 35.55 8.84 10.67 8.56 36.09
Net Assets, net of Preferred Stock,
end of period ($ x 1,000) 181,315 197,505 193,578 193,165 195,517
Preferred Stock outstanding,
end of period ($ x 1,000) 100,000 -- -- -- --
Asset coverage of Preferred Stock,
end of period (%) 281 -- -- -- --
(A) CALCULATED BASED ON MARKET VALUE.
(B) DOES NOT REFLECT THE EFFECT OF DIVIDENDS TO PREFERRED STOCK SHAREHOLDERS.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
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").
In connection with the offering of Auction Preferred Stock ("APS"), the Board of
Directors on September 10, 1999 reclassified 4,000 shares of unissued capital
stock as APS. The fund issued 2,000 shares of Series A and 2,000 shares of
Series B APS, with a liquidation preference of $25,000 per share (plus an amount
equal to accumulated but unpaid dividends upon liquidation) . The initial
dividend rate on the APS was 3.40% per annum. Subsequent dividend rates will be
determined pursuant to periodic auctions. Banker's 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.
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(a) Portfolio valuation: Investments in municipal debt securities (excluding
options and financial futures on municipal and U.S. treasury securities) are
valued daily 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 each business day. Investments not listed on an
exchange or the national securities market, or securities for which there were
no transactions, are valued at the average of the most recent bid and asked
prices. Bid price is used when no asked price is available.
(b) Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
(c) Dividends to shareholders of Common Stock (" Common Shareholder(s)"):
Dividends are recorded on the ex-dividend date. Dividends from investment
income-net are declared and paid monthly. Dividends from net realized capital
gain are 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 Common Shareholders who elect to receive their distributions in additional
shares of the fund, in lieu of cash, such distributions will be reinvested at
the lower of the market price or net asset value per share (but not less than
95% of the market price) as defined in the dividend reinvestment plan.
On September 30, 1999, the Board of Directors declared a cash dividend to Common
Shareholders of $.044 per share from investment income-net, payable on October
28, 1999 to Common Shareholders of record as of the close of business on October
14, 1999.
For APS, dividends are currently reset every 28 days. The dividend rates for the
period ended September 30, 1999 were 3.40% for Series A payable on October 13,
1999 and 3.40% for Series B payable on October 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 $5,000,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to September 30, 1999. The
amount is calculated based on Federal income tax regulations which may differ
from financial reporting in accordance with generally accepted accounting
principles. 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.
The average daily amount of borrowings outstanding during the period ended
September 30, 1999 was approximately $10,700 with a related weighted average
annualized interest rate of 3.53%.
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 September 30, 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 September 30, 1999, the fund was charged $78,442
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 September 30, 1999, the fund was
charged $14,474 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.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities, during the period ended September 30, 1999 amounted to
$161,527,759 and $69,575,207, respectively.
At September 30, 1999, accumulated net unrealized depreciation on investments
was $1,514,784, consisting of $7,692,013 gross unrealized appreciation and
$9,206,797 gross unrealized depreciation.
At September 30, 1999, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
REPORT OF 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, 1999, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and financial highlights for each of the years indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund' s management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included verification by
examination of securities held by the custodian as of September 30, 1999 and
confirmation of securities not held by the custodian by correspondence with
others. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreyfus Municipal Income, Inc. at September 30, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the indicated years, in conformity with generally accepted accounting
principles.
/s/Ernst & Young LLP
New York, New York
November 1, 1999
The Fund
DIVIDEND REINVESTMENT PLAN (Unaudited)
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, as Plan agent (the "Agent"),
in additional shares of the fund at the lower of prevailing market price or net
asset value (but not less than 95% of market value at the time of valuation)
unless such Common Shareholder elects to receive cash as provided below. If
market price is equal to or exceeds net asset value, shares will be issued at
net asset value. If net asset value exceeds market price or if a cash dividend
only is declared, the Agent, as agent for the Plan participants, will buy fund
shares in the open market. A Plan participant is not relieved of any income tax
that may be payable on such dividends or distributions.
A Common Shareholder who owns fund shares registered in nominee name through his
broker/dealer (i.e., in "street name") may not participate in the Plan, but may
elect to have cash 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, c/o ChaseMellon Shareholder Services, Shareholder
Investment Plan, P.O. Box 3338, South Hackensack, New Jersey 07606, 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 Common Shareholder accounts in the Plan and furnishes
written confirmations of all transactions in the account. Shares in the account
of each Plan participant will be held by the Agent in non-certificated form in
the name of the participant, and each such participant's proxy will include
those shares purchased pursuant to the Plan.
The fund pays the Agent's fee for reinvestment of dividends and distributions.
Plan participants pay a pro rata share of brokerage commissions incurred with
respect to the Agent's open market purchases 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.
The Fund
IMPORTANT TAX INFORMATION (Unaudited)
In accordance with Federal tax law, the fund hereby designates all the dividends
paid from investment income-net during the fiscal year ended September 30, 1999
as "exempt-interest dividends" (not generally subject to regular Federal income
tax).
As required by Federal tax law rules, shareholders will receive notification of
their portion of the fund's taxable ordinary dividends (if any) and capital gain
distributions (if any) paid for the 1999 calendar year on Form 1099-DIV which
will be mailed by January 31, 2000.
PROXY RESULTS (Unaudited)
During the fiscal year ended September 30, 1999, shareholders of common
stockvoted on the following proposals presented at the annual shareholders'
meeting held on May 21, 1999. The description of each proposal and the number of
shares voted are as follows:
<TABLE>
Shares
-------------------------------------------
For Authority Withheld
-------------------------------------------
To elect three Class III Directors:*
<S> <C> <C>
Joseph S. DiMartino 16,680,365 278,368
George L. Perry 16,715,225 243,508
Paul Wolfowitz 16,718,505 240,228
Shares
---------------------------------------------------------------------------------
For Against Abstained
---------------------------------------------------------------------------------
To ratify the selection of
Ernst & Young LLP as
independent auditors for
the fund 16,718,058 69,078 171,597
* THE TERMS OF THESE CLASS III DIRECTORS EXPIRE IN 2002.
</TABLE>
The Fund
NOTES
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
* DESIGNATED DIRECTORS FOR AUCTION PREFERRED STOCK
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
Douglas J. Gaylor
Stephen C. Kris
Richard J. Moynihan
W. Michael Petty
Jill C. Schaffro
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. (Common Stock)
Banker's Trust (Auction Preferred Stock)
AUCTION AGENT,
Banker's Trust (Auction Preferred Stock)
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.
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
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 Disbursing Agent
and Registrar
Mellon Bank, N.A.
85 Challenger Road
Ridgefield Park, NJ 07660
(c) 1999 Dreyfus Service Corporation 424AR999
