Dreyfus
Municipal Income, Inc.
ANNUAL REPORT September 30, 2000
(reg.tm)
The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE FUND
--------------------------------------------------
2 Letter from the President
3 Discussion of Fund Performance
6 Selected Information
7 Statement of Investments
14 Statement of Assets and Liabilities
15 Statement of Operations
16 Statement of Changes in Net Assets
17 Financial Highlights
18 Notes to Financial Statements
23 Report of Independent Auditors
24 Dividend Reinvestment Plan
26 Important Tax Information
27 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, 1999 through September 30, 2000.
Inside, you' ll find valuable information about how the fund was managed during
the reporting period, including a discussion with the fund's portfolio manager,
Joseph Darcy.
Despite some fluctuations because of changing economic conditions, municipal
bond prices have risen modestly over the past 12 months. Most of those gains,
however, were achieved after January 2000, when positive supply-and-demand
influences helped support a municipal bond market rally.
More recently, most sectors of the municipal bond market have also benefited
from slowing economic growth. In addition to the moderating effects of the
Federal Reserve Board's (the "Fed") interest-rate hikes during the first half of
2000, the U.S. economy has slowed in response to several factors that include
higher energy prices and a weak euro. While some inflation concerns remain, the
Fed has apparently achieved its goal of a "soft landing" for the U.S. economy.
For more information about the economy and financial markets, we encourage you
to visit the Market Commentary section of our web site at www.dreyfus.com
Thank you for investing in Dreyfus Municipal Income, Inc.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
October 16, 2000
DISCUSSION OF FUND PERFORMANCE
Joseph Darcy, Portfolio Manager
How did Dreyfus Municipal Income, Inc. perform during the period?
The fund produced a 6.23% total return over the 12-month reporting period ended
September 30, 2000.(1) In addition, the fund provided income dividends of
$0.5280 per share, which is equal to a distribution rate of 6.70% over the same
period.(2)
We believe that the fund' s yield performance provided competitive levels of
current income. We are also pleased that our second-half performance offset much
of the fund' s lackluster total return during the first half of the reporting
period.
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 can
help the fund in seeking high current income.
We generally 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 look for bonds that we believe can potentially provide high then
current levels of income. 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. For example, 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 when we anticipate little
issuance, we may increase the fund's average duration to maintain then current
yields for as long as we think practical.
The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
When bonds within the fund mature or are redeemed by their issuers, we generally
attempt to replace them with new comparable securities. 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?
When the reporting period began on October 1, 1999, the U.S. economy was growing
strongly, raising concerns that inflationary pressures might reemerge. In
response, the Federal Reserve Board (the "Fed") raised short-term interest rates
four times for a total increase of 1.25 percentage points during the reporting
period. Higher interest rates and inflation fears eroded the prices of some
municipal bonds, especially deep discount bonds.
However, the municipal bond market and the fund recovered strongly during the
second half of the reporting period when signs of an economic slowdown emerged,
suggesting that the Fed's restrictive monetary policies could be near an end. In
addition, many states and municipalities have enjoyed healthy tax revenues and
budget surpluses over the past 12 months, curtailing their need to borrow and
resulting in a reduced supply of securities. At the same time, demand for
municipal bonds has been strong from individuals seeking to protect their
wealth. These factors helped keep municipal bond yields relatively low, and
prices high, compared to taxable bonds.
In addition, we put to work the proceeds of our issuance of auction preferred
shares, which occurred in September 1999, just before the 12-month reporting
period began. We primarily invested this new money in income-oriented bonds from
the housing and hospital sectors, both of which offered a reasonable supply of
newly issued bonds. We also invested in high quality bonds from states with
relatively high income tax revenues because they tend to have the more
liquidity, potentially making them relatively easy to buy and sell. And because
the differences in yields between high quality and lower quality bonds were
relatively narrow when these investments were made, we gave up little income
potential by focusing on high quality securities.
What is the fund's current strategy?
In our view, slower economic growth and dissipating inflation concerns can
benefit the municipal bond market overall. However, should the economy slow,
some issuers may have more difficulty meeting their revenue projections, which
could adversely affect their credit ratings. Accordingly, we have continued to
look for high quality bonds that will not be subject to early redemption by
their issuers over the next several years.
We are also encouraged by certain secular trends, such as the aging of the baby
boomer generation. As these individuals move closer to retirement, we currently
expect them to become more averse to both risk and taxation and perhaps,
maintain demand for high quality, tax-exempt fixed-income securities even as the
supply of new municipal bonds continues to fall.
October 16, 2000
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID,
BASED UPON NET ASSET VALUE PER SHARE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS. INCOME MAY BE SUBJECT TO STATE AND LOCAL TAXES, AND SOME INCOME MAY BE
SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT) FOR CERTAIN INVESTORS.
CAPITAL GAINS, IF ANY, ARE FULLY TAXABLE.
(2) DISTRIBUTION RATE PER SHARE IS BASED UPON DIVIDENDS PER SHARE PAID FROM NET
INVESTMENT INCOME DURING THE PERIOD, DIVIDED BY THE MARKET PRICE PER SHARE AT
THE END OF THE PERIOD.
The Fund
SELECTED INFORMATION
September 30, 2000 (Unaudited)
Market Price per share September 30, 2000 $77_8
Shares Outstanding September 30, 2000 20,382,927
American Stock Exchange Ticker Symbol DMF
MARKET PRICE (AMERICAN STOCK EXCHANGE)
<TABLE>
<CAPTION>
Fiscal Year Ended September 30, 2000
---------------------------------------------------------------------------------------------------------------
QUARTER QUARTER QUARTER QUARTER
ENDED ENDED ENDED ENDED
DECEMBER 31, 1999 MARCH 31, 2000 JUNE 30, 2000 SEPTEMBER 30, 2000
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
High $ 713_16 $ 71_2 $ 81_8 $ 81_8
Low 7 615_16 71_8 71_2
Close 71_16 73_8 79_16 77_8
PERCENTAGE GAIN based on change in Market Price*
October 24, 1988 (commencement of operations)
through September 30, 2000 80.74%
October 1, 1990 through September 30, 2000 71.66
October 1, 1995 through September 30, 2000 16.01
October 1, 1999 through September 30, 2000 10.71
January 1, 2000 through September 30, 2000 17.41
April 1, 2000 through September 30, 2000 10.46
July 1, 2000 through September 30, 2000 5.86
NET ASSET VALUE PER SHARE
October 24, 1988 (commencement of operations) $ 9.26
September 30, 1999 8.90
December 31, 1999 8.39
March 31, 2000 8.62
June 30, 2000 8.58
September 30, 2000 8.82
PERCENTAGE GAIN based on change in Net Asset Value*
October 24, 1988 (commencement of operations)
through September 30, 2000 118.61%
October 1, 1990 through September 30, 2000 90.40
October 1, 1995 through September 30, 2000 25.19
October 1, 1999 through September 30, 2000 6.23
January 1, 2000 through September 30, 2000 10.69
April 1, 2000 through September 30, 2000 5.84
July 1, 2000 through September 30, 2000 4.50
* WITH DIVIDENDS REINVESTED.
</TABLE>
STATEMENT OF INVESTMENTS
September 30, 2000
<TABLE>
<CAPTION>
Principal
LONG-TERM MUNICIPAL INVESTMENTS--97.1% Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
ALABAMA--5.2%
Courtland Industrial Development Board, SWDR
<S> <C> <C>
(Champion International Corp. Project) 6.50%, 9/1/2025 2,500,000 2,516,400
Jefferson County, Sewer Revenue, Capital Improvement
5.75%, 2/1/2038 (Insured; FGIC) 7,500,000 7,402,800
The Board of Trustees of the University of Alabama, HR
(University of Alabama at Birmingham)
5.875%, 9/1/2031 (Insured; MBIA) 4,620,000 4,650,446
ALASKA--6.0%
Alaska Housing Finance Corp., General Mortgage Revenue
6.05%, 6/1/2039 (Insured; MBIA) 7,000,000 7,095,410
Valdez, Marine Terminal Revenue:
(British Petroleum Pipeline Inc. Project) 5.50%, 10/1/2028 5,000,000 4,693,750
(Mobil Alaska Pipeline) 5.75%, 11/1/2028 5,000,000 4,882,000
ARIZONA--.9%
Tucson Airport Authority, Special Facility Revenue
(Lockheed Aeromod Center Inc.)
8.70%, 9/1/2019 2,500,000 2,555,500
CALIFORNIA--5.9%
Abag Financial Authority For Nonprofit Corporations:
Insured Revenue, COP
(Odd Fellows Home of California) 6%, 8/15/2024 5,000,000 5,168,050
MFHR (Civic Center Drive Apartments) 5.875%,
9/1/2032 (Insured; FSA) 3,750,000 3,731,137
California Health Facilities Financing Authority,
Revenue (Sutter Health)
6.25%, 8/15/2035 2,500,000 2,568,300
California Statewide Communties Development Authority, COP
(Catholic Healthcare West) 6.50%, 7/1/2020 5,000,000 5,041,700
COLORADO--4.4%
Colorado Springs, HR 6.375%, 12/15/2030 3,000,000 2,991,660
City and County of Denver, Airport Revenue:
8.25%, 11/15/2012 (Prerefunded 11/15/2000) 560,000 (a) 573,787
8.25%, 11/15/2012 (Prerefunded 11/15/2000) 5,940,000 (a) 6,085,946
(Special Facilities-United Airlines Inc. Project)
6.875%, 10/1/2032 2,480,000 2,517,894
DISTRICT OF COLUMBIA--.7%
District of Columbia, Revenue
(Catholic University America Project)
5.625%, 10/1/2029 (Insured; AMBAC) 2,080,000 2,047,843
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
FLORIDA--5.7%
Highlands County Health Facilities Authority, HR
(Adventist Health System) 5.25%, 11/15/2028 2,600,000 2,059,564
Orange County Health Facilities Authority, Revenue
(Orlando Regional Healthcare System) 6%, 10/1/2026 1,500,000 1,483,455
Palm Beach County, Solid Waste IDR:
(Okeelanta Power Limited Partnership Project)
6.85%, 2/15/2021 6,950,000 (b) 3,968,450
(Osceola Power Limited Partnership Project)
6.95%, 1/1/2022 2,700,000 (b) 1,541,700
Pinellas County Housing Finance Authority, SFMR
(Multi-County Program)
6.70%, 2/1/2028 3,990,000 4,147,805
South Lake County Hospital District, Revenue
(South Lake Hospital Inc.) 5.80%, 10/1/2034 3,000,000 2,805,450
GEORGIA--2.5%
Private Colleges and Universities Facilities Authority, Revenue,
(Clark Atlanta University Project)
8.25%, 1/1/2015 (Prerefunded 1/1/2003) 6,110,000 (a) 6,854,137
ILLINOIS--6.9%
Chicago 6.125%, 1/1/2028 (Insured; FGIC) 4,000,000 4,167,560
Chicago-O'Hare International Airport, Special Facility Revenue
(American Airlines Inc. Project):
8.20%, 12/1/2024 1,000,000 1,116,460
7.875%, 11/1/2025 2,000,000 2,042,420
Illinois Development Finance Authority, Revenue
(Community Rehabilitation Providers Facilities
Acquisition Program):
8.75%, 3/1/2010 115,000 115,987
8.50%, 9/1/2010 1,650,000 1,691,399
5.50%, 7/1/2012 1,405,000 1,289,832
Illinois Health Facilities Authority, Revenue:
(OSF Healthcare System) 6.25%, 11/15/2029 7,000,000 6,785,170
(Swedish American Hospital) 6.875%, 11/15/2030 2,000,000 2,028,360
INDIANA--.9%
Franklin Township School Building Corporation
(Marion County) First Mortgage
6.125%, 1/15/2022 2,500,000 2,626,275
KENTUCKY--1.3%
Perry County, SWDR (TJ International Project) 7%, 6/1/2024 3,500,000 3,584,805
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
MARYLAND--2.6%
Maryland Health and Higher Educational
Facilities Authority, Revenue
(The John Hopkins University Issue) 6%, 7/1/2039 7,000,000 7,320,740
MASSACHUSETTS--2.1%
Massachusetts Industrial Finance Agency, Revenue
(Water Treatment-American Hingham) 6.95%, 12/1/2035 5,640,000 5,839,092
MICHIGAN--5.8%
Hancock Hospital Finance Authority, Mortgage Revenue
(Portgage Health) 5.45%, 8/1/2047 (Insured; MBIA) 2,200,000 2,049,916
Michigan Hospital Finance Authority, HR
(Genesys Health System Obligated Group)
8.125%, 10/1/2021 (Prerefunded 10/1/2005) 7,670,000 (a) 8,983,104
Michigan Strategic Fund, SWDR
(Genesee Power Station Project)
7.50%, 1/1/2021 5,000,000 5,152,600
MINNESOTA--.9%
Minnesota Agricultural and Economic Development Board,
Health Care System Revenue
(Fairview Health Services) 6.375%, 11/15/2029 2,500,000 2,539,575
MISSISSIPPI--1.7%
Mississippi Business Finance Corp., PCR
(System Energy Resource Inc. Project) 5.875%, 4/1/2022 5,000,000 4,653,250
MISSOURI--.7%
Missouri Housing Development Commission, Mortgage Revenue
(Single Family- Homeownersip Loan) 6.30%, 9/1/2025 2,000,000 2,045,020
MONTANA--.7%
Montana Health Facility Authority, Health Care Revenue
(Sidney Health Center) 5.75%, 9/1/2019 (Insured; ACA) 1,995,000 1,918,212
NEVADA--4.7%
Clark County, IDR:
(Nevada Power Co. Project) 5.90%, 10/1/2030 4,000,000 3,565,000
(Southwest Gas Corp.):
7.50%, 9/1/2032 3,000,000 3,115,050
6.50%, 12/1/2033 2,300,000 2,250,757
6.10%, 12/1/2038 (Insured; AMBAC) 4,000,000 4,084,400
NEW HAMPSHIRE--2.7%
New Hampshire Industrial Development Authority, PCR
(Public Service Co. Project) 7.65%, 5/1/2021 7,500,000 7,676,175
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
NEW MEXICO--1.1%
Farmington , PCR (Public Service Co. San Juan)
6.30%, 12/1/2016 3,000,000 2,951,940
NEW YORK--2.0%
Monroe Tobacco Asset Securitization Corp.,
Tobacco Settlement Revenue
6.375, 6/1/2035 2,500,000 2,522,825
New York City 8.25%, 11/15/2010
(Prerefunded 11/15/2001) 3,000,000 (a) 3,171,390
NORTH CAROLINA--.9%
North Carolina Housing Finance Agency ( Home Ownership)
6.25%, 1/1/2029 2,500,000 2,550,325
NORTH DAKOTA--.1%
North Dakota Housing Finance Agency, SFMR 8.30%, 1/1/2012 387,400 394,114
OHIO--2.1%
Cuyahoga County, Hospital Improvement Revenue
(The Metrohealth System Project) 6.125%, 2/15/2024 5,000,000 4,914,250
Ohio Housing Finance Agency,Residential Mortgage Revenue
5.75%, 9/1/2030 1,000,000 981,460
OKLAHOMA--.9%
Oklahoma Development Finance Authority, Revenue
(Saint John Health System) 6%, 2/15/2029 2,500,000 2,547,350
PENNSYLVANIA--1.2%
Pennsylvania Economic Development Financing Authority, RRR
(Northampton Generating Project) 6.60%, 1/1/2019 3,500,000 3,412,675
SOUTH CAROLINA--2.1%
Medical University, Hospital Facilities Revenue
6%, 7/1/2019 2,500,000 2,520,850
Piedmont Municipal Power Agency, Electric Revenue:
6.55%, 1/1/2016 880,000 879,921
5.25%, 1/1/2021 3,000,000 2,550,750
TEXAS--6.5%
Alliance Airport Authority Inc., Special Facilities Revenue
(American Airlines Inc. Project) 7.50%, 12/1/2029 2,375,000 2,427,487
Dallas-Fort Worth International Airport Facility
Improvement Corp., Revenue
(American Airlines, Inc.) 6.375%, 5/1/2035 2,500,000 2,433,550
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------------------------
TEXAS (CONTINUED)
Gregg County Health Facilities Development Corp., HR
(Good Shepherd Medical Center Project)
6.375%, 10/1/2025 2,500,000 2,567,550
Port of Corpus Christi Authority, Nueces County,
General Revenue (Union Pacific)
5.65%, 12/1/2022 4,000,000 3,511,840
Texas, Veterans Housing Assistance Program
6.10%, 6/1/2031 7,000,000 7,135,590
UTAH--2.1%
Carbon County, SWDR (Sunnyside Cogeneration):
7.10%, 8/15/2023 3,485,000 3,318,626
Zero Coupon, 8/15/2024 1,080,000 176,170
Utah Housing Finance Agency, Single Family Mortgage
6%, 1/1/2031 2,500,000 2,514,875
VERMONT--1.1%
Vermont Housing Finance Agency, Single Family Housing
6.40%, 11/1/2030 (Insured; FSA) 3,000,000 3,086,730
WASHINGTON--2.5%
Public Utility District No. 1 of Pend Orielle County,
Electric Revenue
6.375%, 1/1/2015 2,000,000 2,070,080
Washington Higher Education Facilities Authority, Revenue
(Whitman College Project) 5.875%, 10/1/2029 5,000,000 5,017,300
WEST VIRGINIA--4.3%
Braxton County, SWDR (Weyerhaeuser Co. Project):
6.50%, 4/1/2025 5,000,000 5,047,400
5.80%, 6/1/2027 7,450,000 7,008,513
WISCONSIN--2.8%
Wisconsin Health and Educational Facilities Authority, Revenue
(Aurora Health Care, Inc.) 5.60%, 2/15/2029 4,750,000 3,972,425
Wisconsin Housing and Economic Development Authority,
Home Ownership Revenue
5.75%, 9/1/2028 4,000,000 3,854,600
WYOMING--1.1%
Sweetwater County, SWDR (FMC Corp. Project)
7%, 6/1/2024 3,000,000 3,045,750
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
U.S. RELATED--4.0%
Puerto Rico Highway and Transportation Authority,
Transportation Revenue:
5.06%, 7/1/2038 (Insured; MBIA) 4,000,000 (c,d) 3,197,000
5.06%, 7/1/2038 5,000,000 (d) 3,996,250
Puerto Rico Infrastructure Financing Authority,
Special Tax Revenue, Residual Certficates
4.875%, 7/1/2015 4,000,000 (c,d) 3,896,720
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $273,878,105) 271,700,649
------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL INVESTMENTS--1.1%
------------------------------------------------------------------------------------------------------------------------------------
WYOMING;
Lincoln County, PCR, VRDN (Exxon Project) 5.60%
(cost $3,000,000) 3,000,000 (e) 3,000,000
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $276,878,105) 98.2% 274,700,649
CASH AND RECEIVABLES (NET) 1.8% 5,091,139
NET ASSETS 100.0% 279,791,788
</TABLE>
Summary of Abbreviations
ACA American Capital Access
AMBAC American Municipal Bond
Assurance Corporation
COP Certificate of Participation
FGIC Financial Guaranty
Insurance Company
FSA Financial Security Assurance
HR Hospital Revenue
IDR Industrial Development Revenue
MBIA Municipal Bond Investors Assurance
Insurance Corporation
MFHR Multi-Family Housing Revenue
PCR Pollution Control Revenue
RRR Resources Recovery Revenue
SFMR Single Family Mortgage Revenue
SWDR Solid Waste Disposal Revenue
VRDN Variable Rate Demand Notes
Summary of Combined Ratings (Unaudited)
<TABLE>
<CAPTION>
Fitch or Moody's or Standard & Poor's Value (%)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AAA Aaa AAA 26.4
AA Aa AA 16.0
A A A 21.1
BBB Baa BBB 26.8
F1 MIG1/P1 SP1/A1 1.1
Not Rated (f) Not Rated (f) Not Rated( f) 8.6
100.0
</TABLE>
(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) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT
OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT SEPTEMBER 30, 2000,
THESE SECURITIES AMOUNTED TO $7,093,720 OR 2.5% 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.
(G) AT SEPTEMBER 30, 2000, THE FUND HAD $70,692,604 (25.3%) OF NET ASSETS
INVESTED IN SECURITIES WHOSE PAYMENT OF PRINCIPAL AND INTEREST IS DEPENDENT
UPON REVENUES GENERATED FROM HEALTH CARE PROJECTS.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2000
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 276,878,105 274,700,649
Cash 25,921
Interest receivable 5,198,296
Receivable for investment securities sold 196,022
Prepaid expenses 6,047
280,126,935
--------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 170,787
Dividend payable to Preferred Shareholders 35,211
Commissions payable 44,092
Accrued expenses and other liabilities 85,057
335,147
--------------------------------------------------------------------------------
NET ASSETS ($) 279,791,788
--------------------------------------------------------------------------------
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, $.001 per share
(20,382,927 shares issued and outstanding) 20,383
Paid-in capital 188,580,337
Accumulated undistributed investment income--net 146,412
Accumulated net realized gain (loss) on investments (6,777,888)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 (2,177,456)
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 179,791,788
--------------------------------------------------------------------------------
NET ASSETS ($) 279,791,788
--------------------------------------------------------------------------------
SHARES OUTSTANDING
(110 million shares of $.001 par value Capital Stock authorized) 20,382,927
NET ASSET VALUE, per share of Common Stock 8.82
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
Year Ended September 30, 2000
-------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INTEREST INCOME 17,659,584
EXPENSES:
Management fee--Note 3(a) 1,920,668
Commission fees--Note 1 297,017
Professional fees 163,290
Shareholders' reports 60,770
Shareholder servicing costs--Note 3(b) 60,674
Directors' fees and expenses--Note 3(c) 36,630
Custodian fees--Note 3(b) 22,373
Registration fees 8,458
Miscellaneous 15,690
TOTAL EXPENSES 2,585,570
INVESTMENT INCOME--NET 15,074,014
-------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (1,054,513)
Net unrealized appreciation (depreciation) on investments (662,672)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (1,717,185)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 13,356,829
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF CHANGES IN NET ASSETS
Year Ended September 30,
-----------------------------------
2000 1999
--------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 15,074,014 10,991,791
Net realized gain (loss) on investments (1,054,513) (540,505)
Net unrealized appreciation (depreciation)
on investments (662,672) (14,626,753)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 13,356,829 (4,175,467)
--------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net:
Common Stock (10,762,185) (11,084,592)
Preferred Stock (4,007,246) (102,466)
TOTAL DIVIDENDS (14,769,431) (11,187,058)
--------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS ($):
Proceeds from issuance of Preferred Stock -- 100,000,000
Dividends reinvested--Note 1(c) -- 372,814
Offering cost charged to paid-in capital resulting
from the issuance of Preferred Stock (110,503) (1,200,000)
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL STOCK TRANSACTIONS (110,503) 99,172,814
TOTAL INCREASE (DECREASE) IN NET ASSETS (1,523,105) 83,810,289
--------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 281,314,893 197,504,604
END OF PERIOD 279,791,788 281,314,893
Undistributed investment income--net 146,412 (158,171)
-------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (COMMON SHARES):
INCREASE IN COMMON SHARES OUTSTANDING AS A
RESULT OF DIVIDENDS REINVESTED -- 38,754
SEE NOTES TO FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements and, with respect to common stock, market price data for the fund's
common shares.
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 8.90 9.71 9.55 9.60 9.74
Investment Operations:
Investment income--net .74 .53 .55 .61 .64
Net realized and unrealized
gain (loss) on investments (.08) (.73) .21 (.02) (.16)
Total from Investment Operations .66 (.20) .76 .59 .48
Distributions:
Dividends from
investment income--net:
Common Stock (.53) (.54) (.60) (.64) (.62)
Preferred Stock (.20) (.01) -- -- --
Total Distributions (.73) (.55) (.60) (.64) (.62)
Capital Stock transaction--net
effect of Preferred Stock offering (.01) (.06) -- -- --
Net asset value, end of period 8.82 8.90 9.71 9.55 9.60
Market value, end of period 77_8 75_8 911_16 103_8 99_16
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (A) 10.71 (16.35) (.69) 15.90 8.83
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average
net assets applicable to Common Stock 1.48(b,c) .85(b,c) .82 .82 .83
Ratio of net investment income to average
net assets applicable to Common Stock 8.64(b,c) 5.72(b,c) 5.75 6.36 6.61
Portfolio Turnover Rate 22.47 35.55 8.84 10.67 8.56
Asset coverage of Preferred Stock,
end of period 280 281 -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, net of Preferred Stock,
end of period ($ x 1,000) 179,792 181,315 197,505 193,578 193,165
Preferred Stock outstanding,
end of period ($ x 1,000) 100,000 100,000 -- -- --
</TABLE>
(A) CALCULATED BASED ON MARKET VALUE.
(B) DOES NOT REFLECT THE EFFECT OF DIVIDENDS TO PREFERRED STOCK SHAREHOLDERS.
(C) THE RATIO OF EXPENSES TO TOTAL AVERAGE NET ASSETS AND THE RATIO OF NET
INVESTMENT INCOME TO TOTAL AVERAGE NET ASSETS WERE .94% AND 5.49%, RESPECTIVELY,
FOR THE YEAR ENDED SEPTEMBER 30, 2000 AND .84% AND 5.63%, RESPECTIVELY, FOR THE
YEAR ENDED SEPTEMBER 30, 1999.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
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" ), which is a wholly-owned subsidiary of Mellon Financial
Corporation. The fund's Common Stock trades on the New York Stock Exchange under
the ticker symbol DMF.
The fund issued 2,000 shares of Series A and 2,000 shares of Series B Auction
Preferred Stock (" APS" ), with a liquidation preference of $25,000 per share
(plus an amount equal to accumulated but unpaid dividends upon liquidation). APS
dividend rates are determined pursuant to periodic auctions. Bankers Trust
Company, as Auction Agent, receives a fee from the fund for its services in
connection with such auctions. The fund also compensates broker-dealers
generally at an annual rate of .25% of the purchase price of the shares of APS
placed by the broker-dealer in an auction.
The fund is subject to certain restrictions relating to the APS. Failure to
comply with these restrictions could preclude the fund from declaring any
distributions to common shareholders or repurchasing common shares and/or could
trigger the mandatory redemption of APS at liquidation value.
The holders of the APS, voting as a separate class, have the right to elect at
least two directors. The holders of the APS will vote as a separate class on
certain other matters, as required by law. The fund has designated Martin D.
Fife and Whitney I. Gerard to represent holders of APS on the fund's Board of
Directors.
The fund' s financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of
management estimates and assumptions. Actual results could differ from those
estimates.
(a) Portfolio valuation: Investments in municipal debt securities (excluding
options and financial futures on municipal and U.S. treasury securities) are
valued 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.
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(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, 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 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 29, 2000, the Board of Directors declared a cash dividend to Common
Shareholders of $.044 per share from investment income-net, payable on October
27, 2000 to Common Shareholders of record as of the close of business on October
13, 2000.
(d) Dividends to shareholders of APS: For APS, dividends are currently reset
every 7 days. Prior to February 29, 2000, dividends were reset every 28 days.
The dividend rates in effect at September 30, 2000 were as follows: Series A
4.30% and Series B 4.25%.
(e) Federal income taxes: It is the policy of the fund to continue to qualify as
a regulated investment company, which can distribute tax exempt dividends, by
complying with the applicable provisions of the Internal Revenue Code of 1986,
as amended and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes.
The fund has an unused capital loss carryover of approximately $6,148,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to September 30, 2000. 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, $5,000,000 of the carryover expires in fiscal 2004 and $1,148,000
expires in fiscal 2008.
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
September 30, 2000, the fund did not borrow under the line of credit.
NOTE 3--Management Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .70 of 1% of the value of the
fund' s average daily 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 fees 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, 2000.
(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, 2000, the fund was charged $59,532
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, 2000, the fund was
charged $22,373 pursuant to the custody agreement.
(c) Each Board member also serves as a Board member of other funds within the
Dreyfus complex (collectively, the "Fund Group" ). Effective
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
August 3, 2000, each Board member who is not an "affiliated person" as defined
in the Act receives an annual fee of $45,000 and an attendance fee of $5,000 for
each in person meeting and $500 for telephone meetings. These fees are allocated
among the funds in the Fund Group. The Chairman of the Board receives an
additional 25% of such compensation. Prior to August 3, 2000, each Board member
who was not an "affiliated person" as defined in the Act received from the fund
an annual fee of $2,500 and an attendance fee of $250 per meeting. The Chairman
of the Board received an additional 25% of such compensation. Subject to the
fund' s Emeritus Program Guidelines, Emeritus Board members, if any, receive 50%
of the fund's annual retainer fee and per meeting fee paid at the time the Board
member achieves emeritus status.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities, during the period ended September 30, 2000, amounted to
$64,323,564 and $60,434,018 respectively.
At September 30, 2000, accumulated net unrealized depreciation on investments
was $2,177,456, consisting of $7,377,649 gross unrealized appreciation and
$9,555,105 gross unrealized depreciation.
At September 30, 2000, the cost of investments for Federal income tax purposes
was substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
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, 2000, 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 auditing standards generally accepted
in the United States. 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, 2000 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, 2000, 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 accounting principles generally accepted
in the United States.
New York, New York
November 6, 2000
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, 2000
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 2000 calendar year on Form 1099-DIV which
will be mailed by January 31, 2001.
PROXY RESULTS (Unaudited)
During the fiscal year ended September 30, 2000, holders of common stock and
holders of Auction Preferred Stock ("APS") voted together as a single class
(except as noted below) on the following proposals presented at the annual
shareholders' meeting held on May 19, 2000. The description of each proposal
and the number of shares voted are as follows:
<TABLE>
<CAPTION>
Shares
-----------------------------------------------
For Authority Withheld
-----------------------------------------------
To elect three Class I Directors:*
<S> <C> <C>
Lucy Wilson Benson 16,438,171 332,268
David W. Burke 16,462,516 307,923
Martin D. Fife ** 3,728 1
Shares
-------------------------------------------------------------------------
For Against Abstained
-------------------------------------------------------------------------
To ratify the selection of
Ernst & Young LLP as
independent auditors for
the fund 16,466,788 100,483 203,168
</TABLE>
* THE TERMS OF THESE CLASS I DIRECTORS EXPIRE IN 2003.
**ELECTED SOLELY BY APS HOLDERS. COMMON STOCKHOLDERS WERE NOT ENTITLED TO VOTE.
The Fund
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
* ACTION PREFERRED STOCK DIRECTORS
OFFICERS
President
Stephen E. Canter
Vice President
Mark N. Jacobs
Vice President and Treasurer
Joseph Connolly
Executive Vice President
Joseph P. Darcy
Secretary
Michael A. Rosenberg
Assistant Secretary
Robert R. Mullery
Assistant Secretary
Steven F. Newman
Assistant Treasurer
Gregory S. Gruber
PORTFOLIO MANAGERS
Joseph P. Darcy
A. Paul Disdier
Douglas J. Gaylor
PORTFOLIO MANAGERS (CONTINUED)
Joseph A. Irace
Colleen A. Meehan
Richard J. Moynihan
W. Michael Petty
Scott Sprauer
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)
Bankers Trust (Auction Preferred Stock)
AUCTION AGENT
Bankers Trust (Auction Preferred Stock)
STOCK EXCHANGE LISTING
NYSE 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 FUNDS" EVERY
MONDAY; NEW YORK TIMES, 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
(Common Stock)
Mellon Bank, N.A.
85 Challenger Road
Ridgefield Park, NJ 07660
(c) 2000 Dreyfus Service Corporation 424AR009
