Dreyfus
Municipal Income, Inc.
SEMIANNUAL REPORT March 31, 2000
(reg.tm)
The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE FUND
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2 Letter from the President
3 Discussion of Fund Performance
6 Statement of Investments
12 Statement of Assets and Liabilities
13 Statement of Operations
14 Statement of Changes in Net Assets
15 Financial Highlights
17 Notes to Financial Statements
25 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 semiannual report for Dreyfus Municipal Income,
Inc., covering the six-month period from October 1, 1999 through March 31, 2000.
Inside, you' ll find valuable information about how the fund was managed during
the reporting period, including a discussion with the fund's portfolio manager,
Joseph Darcy.
The U.S. economy grew strongly over the past six months in an environment
characterized by high levels of consumer spending and low levels of
unemployment. Concerns that inflationary pressures might re-emerge caused the
Federal Reserve Board to raise short-term interest rates three times during the
reporting period. These rate hikes contributed to a total interest-rate increase
of 125 basis points since late June 1999, before the current reporting period
began. While higher interest rates led to an erosion of municipal bond prices
during the first half of the reporting period, the tax-exempt bond market showed
renewed signs of strength during the first quarter of 2000.
Municipal bonds were also affected by supply-and-demand considerations. These
technical influences have caused the yields of tax-exempt bonds to rise to very
attractive levels compared to the after-tax yields of taxable bonds of
comparable maturity and credit quality. This is especially true for investors in
the higher federal and state income tax brackets.
We appreciate your confidence over the past six months, and we look forward to
your continued participation in Dreyfus Municipal Income, Inc.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
April 12, 2000
DISCUSSION OF FUND PERFORMANCE
Joseph Darcy, Portfolio Manager
How did Dreyfus Municipal Income, Inc. perform during the period?
For the six-month period ended March 31, 2000, the fund produced a total return
of 0.36% .(1) The fund provided income dividends of $0.264 per share, which is
equal to an annualized distribution rate of 7.16% over the same period.(2)
We attribute the fund's performance to a rising interest-rate environment, which
caused most municipal bond prices to decline. However, the extent of that
decline was reduced by the fund' s security selection strategy, which was
designed to maximize income by taking advantage of what we believe are
potentially attractive values created during the municipal market's decline.
What is the fund's investment approach?
The fund seeks high current federally tax-exempt income from a portfolio of
municipal bonds. 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 select the bonds that we believe are most likely to provide high
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. 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
The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
time 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?
Although the portfolio' s performance was hurt by a difficult investment
environment during the first half of the reporting period, the second half
provided better market conditions and a market rally.
When the reporting period began on October 1, 1999, investors had become
concerned that strong economic growth might rekindle long-dormant inflationary
pressures. In fact, in an attempt to forestall a reacceleration of inflation,
the Federal Reserve Board raised short-term interest rates three times during
the reporting period, causing most bond prices to fall. These interest-rate
hikes followed two previous increases implemented before the current reporting
period began, for a total increase of 125 basis points since last summer.
Municipal bond prices also fell during the fourth quarter of 1999 because of
adverse supply-and-demand influences. For a variety of reasons, institutional
investors participated less in the tax-exempt market, which reduced overall
demand and drove municipal bond prices down. During the first quarter of 2000,
however, issuance of municipal bonds declined approximately 40% compared to the
same period one year ago. This supply reduction, combined with robust demand
from individual investors, helped support a rebound of municipal bond prices,
especially among longer term bonds.
The fund's performance was also positively influenced by the issuance of auction
preferred shares in September 1999. Leveraging the portfolio in this manner was
designed to enable the fund to purchase additional securities in an effort to
support the fund' s income stream and provide protection from early bond
redemptions.
What is the fund's current strategy?
We have recently attempted to take advantage of the growing disparity between
yields of high quality municipal bonds and lower rated securities. Accordingly,
we have purchased some lower rated issues that we believe offer highly
competitive yields and good relative credit quality. This is in contrast to our
strategy during the fourth quarter of 1999, when yield differences were narrow
and we focused on the greater liquidity provided by higher quality bonds from
well-known issuers.
We are currently finding some of the most attractive income opportunities among
30-year municipal bonds. Because of unusual supply-and-demand factors in the
U.S. Treasury securities market, some 30-year municipal bonds -- such as housing
bonds -- at times provided higher yields than 30-year U.S. Treasury bonds. We
also found compelling values in bonds issued by states with relatively high
income tax rates.
Finally, we have maintained the fund's average duration at approximately 10
years. This position is slightly longer than the average for our peer group, and
reflects our income-oriented investment objective.
April 12, 2000
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID,
BASED UPON NET ASSET VALUE PER SHARE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS. INCOME MAY BE SUBJECT TO STATE AND LOCAL TAXES, AND SOME INCOME MAY BE
SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT) FOR CERTAIN INVESTORS.
CAPITAL GAINS, IF ANY, ARE FULLY TAXABLE.
(2) DISTRIBUTION RATE PER SHARE IS BASED UPON DIVIDENDS PER SHARE PAID FROM NET
INVESTMENT INCOME DURING THE PERIOD ANNUALIZED, DIVIDED BY THE MARKET PRICE PER
SHARE AT THE END OF THE PERIOD.
The Fund
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STATEMENT OF INVESTMENTS
March 31, 2000 (Unaudited)
Principal
LONG-TERM MUNICIPAL INVESTMENTS--97.9% Amount ($) Value ($)
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ALABAMA--3.6%
Courtland Industrial Development Board, SWDR
(Champion International Corp. Project) 6.50%, 9/1/2025 2,500,000 2,463,150
Jefferson County, Sewer Revenue, Capital Improvement
5.75%, 2/1/2038 (Insured; FGIC) 7,500,000 7,357,575
ALASKA--6.8%
Alaska Housing Finance Corp., General Mortgage Revenue
6.05%, 6/1/2039 (Insured; MBIA) 7,000,000 7,041,370
Valdez, Marine Terminal Revenue:
(British Petroleum Pipeline Inc. Project) 5.50%, 10/1/2028 5,000,000 4,613,350
(Mobil Alaska Pipeline) 5.75%, 11/1/2028 7,500,000 7,171,800
ARIZONA--.9%
Tucson Airport Authority, Special Facility Revenue
(Lockheed Aeromod Center Inc.) 8.70%, 9/1/2019 2,500,000 2,586,300
CALIFORNIA--5.7%
Abag Financial Authority For Nonprofit Corporations:
Insured Revenue, COP
(Odd Fellows Home of California) 6%, 8/15/2024 5,000,000 5,047,750
MFHR
(Civic Center Drive Apartments) 5.875%, 9/1/2032
(Insured FSA) 4,000,000 3,906,840
California Statewide Communties Development Authority, COP:
(Catholic Healthcare West) 6.50%, 7/1/2020 5,000,000 4,993,750
(The Internext Group) 5.375%, 4/1/2030 2,000,000 1,609,360
COLORADO--3.4%
City and County of Denver, Airport Revenue:
8.25%, 11/15/2012 (Prerefunded 11/15/2000) 560,000 (a) 584,595
8.25%, 11/15/2012 5,940,000 6,161,800
(Special Facilities-United Airlines Inc. Project)
6.875%, 10/1/2032 2,480,000 2,488,630
DISTRICT OF COLUMBIA--.7%
District of Columbia, Revenue
(Catholic University America Project)
5.625%, 10/1/2029 (Insured; AMBAC) 2,080,000 2,010,362
FLORIDA--7.3%
Highlands County Health Facilities Authority, HR
(Adventist Health System) 5.25%, 11/15/2028 2,600,000 1,977,196
Orange County Health Facilities Authority, Revenue:
(Health Facility-Mental Health Services)
9.25%, 7/1/2020 (Prerefunded 7/1/2000) 4,590,000 (a) 4,735,365
(Orlando Regional Healthcare System) 6%, 10/1/2026 1,500,000 1,447,050
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
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FLORIDA (CONTINUED)
Palm Beach County, Solid Waste IDR:
(Okeelanta Power Limited Partnership Project)
6.85%, 2/15/2021 6,950,000 (b) 3,770,375
(Osceola Power Limited Partnership Project)
6.95%, 1/1/2022 2,700,000 (b) 1,437,750
Pinellas County Housing Finance Authority, SFMR
(Multi-County Program) 6.70%, 2/1/2028 3,990,000 4,151,076
South Lake County Hospital District, Revenue
(South Lake Hospital Inc.) 5.80%, 10/1/2034 3,000,000 2,714,370
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) 6,895,624
ILLINOIS--8.2%
Chicago 6.125%, 1/1/2028 (Insured; FGIC) 4,000,000 4,086,000
Chicago-O'Hare International Airport, Special Facility Revenue:
(American Airlines Inc. Project):
7.875%, 11/1/2025 2,000,000 2,053,280
8.20%, 12/1/2024 1,000,000 1,094,880
(United Airlines Inc. Project) 8.50%, 5/1/2018 2,000,000 2,043,060
Illinois Development Finance Authority, Revenue
(Community Rehabilitation Providers Facilities
Acquisition Program):
8.75%, 3/1/2010 115,000 117,142
8.50%, 9/1/2010 (Prerefunded 9/1/2000) 3,290,000 (a) 3,408,341
8.50%, 9/1/2010 1,710,000 1,753,383
5.50%, 7/1/2012 1,405,000 1,244,479
Illinois Health Facilities Authority, Revenue
(OSF Healthcare System) 6.25%, 11/15/2029 7,000,000 6,775,090
KENTUCKY--1.3%
Perry County, SWDR (TJ International Project) 7%, 6/1/2024 3,500,000 3,580,18
MARYLAND--2.6%
Maryland Health and Higher Educational
Facilities Authority, Revenue
(The John Hopkins University Issue) 6%, 7/1/2039 7,000,000 7,110,880
MASSACHUSETTS--2.1%
Massachusetts Industrial Finance Agency, Revenue
(Water Treatment-American Hingham) 6.95%, 12/1/2035 5,640,000 5,829,109
MICHIGAN--5.8%
Hancock Hospital Finance Authority, Mortgage Revenue
(Portgage Health) 5.45%, 8/1/2047 (Insured; MBIA) 2,200,000 2,008,512
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
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MICHIGAN (CONTINUED)
Michigan Hospital Finance Authority, HR
(Genesys Health System Obligated Group)
8.125%, 10/1/2021 (Prerefunded 10/1/2005) 7,670,000 (a) 8,955,799
Michigan Strategic Fund, SWDR (Genesee Power Station Project)
7.50%, 1/1/2021 5,000,000 5,150,100
MISSISSIPPI--1.6%
Mississippi Business Finance Corp., PCR
(System Energy Resource Inc. Project) 5.875%, 4/1/2022 5,000,000 4,450,050
MISSOURI--.7%
Missouri Housing Development Commission, Mortgage Revenue
(Single Family- Homeownersip Loan) 6.30%, 9/1/2025 2,000,000 2,033,940
MONTANA--.9%
Montana Health Facility Authority, Health Care Revenue
(Sidney Health Center) 5.75%, 9/1/2019 (Insured; ACA) 2,725,000 2,559,729
NEVADA--4.7%
Clark County, IDR:
(Nevada Power Co. Project) 5.90%, 10/1/2030 4,000,000 3,507,200
(Southwest Gas Corp.):
7.50%, 9/1/2032 3,000,000 3,127,170
6.50%, 12/1/2033 2,300,000 2,217,752
6.10%, 12/1/2038 (Insured; AMBAC) 4,000,000 4,007,880
NEW HAMPSHIRE--2.8%
New Hampshire Industrial Development Authority, PCR
(Public Service Co. Project) 7.65%, 5/1/2021 7,500,000 7,698,000
NEW YORK--3.3%
New York City 8.25%, 11/15/2010 (Prerefunded 11/15/2001) 3,000,000 (a) 3,213,570
New York City Municipal Water Finance Authority, Water
and Sewer System Revenue
5.75%, 6/15/2031 (Insured; FGIC) 6,000,000 5,947,800
NORTH CAROLINA--.9%
North Carolina Housing Finance Agency ( Home Ownership)
6.25%, 1/1/2029 2,500,000 (c) 2,532,975
NORTH DAKOTA--.2%
North Dakota Housing Finance Agency, SFMR 8.30%, 1/1/2012 407,400 415,976
OHIO--2.4%
Cuyahoga County, Hospital Improvement Revenue
(The Metrohealth System Project) 6.125%, 2/15/2024 5,000,000 4,730,350
Ohio Housing Finance Agency,Residential Mortgage Revenue
5.75%, 9/1/2030 1,950,000 1,873,677
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
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OKLAHOMA--.9%
Oklahoma Development Finance Authority, Revenue
(Saint John Health System) 6%, 2/15/2029 2,500,000 2,534,175
PENNSYLVANIA--1.2%
Pennsylvania Economic Development Financing Authority, RRR
(Northampton Generating Project) 6.60%, 1/1/2019 3,500,000 3,422,335
SOUTH CAROLINA--3.0%
Medical University, Hospital Facilities Revenue
6%, 7/1/2019 5,000,000 4,820,000
Piedmont Municipal Power Agency, Electric Revenue:
6.55%, 1/1/2016 880,000 873,066
5.25%, 1/1/2021 3,000,000 2,472,150
TEXAS--6.4%
Alliance Airport Authority Inc., Special Facilities Revenue
(American Airlines Inc. Project) 7.50%, 12/1/2029 2,375,000 2,426,751
Dallas-Fort Worth International Airport Facility
Improvement Corp., Revenue
(American Airlines, Inc.) 6.375%, 5/1/2035 2,500,000 (c) 2,406,850
Gregg County Health Facilities Development Corp., HR
(Good Shepherd Medical Center Project)
6.375%, 10/1/2025 2,500,000 2,532,250
Port of Corpus Christi Authority, Nueces County, General Revenue
(Union Pacific) 5.65%, 12/1/2022 4,000,000 3,490,400
Texas, Veterans Housing Assistance Program
6.10%, 6/1/2031 7,000,000 6,827,800
UTAH--2.2%
Carbon County, SWDR (Sunnyside Cogeneration):
7.10%, 8/15/2023 3,550,000 3,451,949
Zero Coupon, 8/15/2024 1,080,000 177,001
Utah Housing Finance Agency, Single Family Mortgage
6%, 1/1/2031 2,500,000 2,487,900
VERMONT--1.1%
Vermont Housing Finance Agency, Single Family Housing
6.40%, 11/1/2030 (Insured; FSA) 3,000,000 3,065,910
WASHINGTON--2.6%
Public Utility District No. 1 of Pend Orielle County,
Electric Revenue
6.375%, 1/1/2015 2,000,000 2,066,340
Washington Higher Education Facilities Authority, Revenue
(Whitman College Project) 5.875%, 10/1/2029 5,000,000 4,944,750
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
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WEST VIRGINIA--4.4%
Braxton County, SWDR (Weyerhaeuser Co. Project):
6.50%, 4/1/2025 5,000,000 5,002,800
5.80%, 6/1/2027 7,450,000 7,038,685
WISCONSIN--2.8%
Wiconsin Health and Educational Facilities Authority, Revenue
(Aurora Health Care, Inc.) 5.60%, 2/15/2029 4,750,000 3,823,703
Wisconsin Housing and Economic Development Authority,
Home Ownership Revenue
5.75%, 9/1/2028 4,000,000 3,796,400
WYOMING--1.1%
Sweetwater County, SWDR (FMC Corp. Project) 7%, 6/1/2024 3,000,000 3,023,130
U.S. RELATED--3.8%
Puerto Rico Highway and Transportation Authority,
Transportation Revenue:
6.26%, 7/1/2038 (Insured; MBIA) 4,000,000 (d,e) 3,036,240
6.26%, 7/1/2038 5,000,000 (e) 3,795,300
Puerto Rico Infrastructure Financing Authority,
Special Tax Revenue, Residual Certficates
6.285%, 7/1/2015 4,000,000 (d,e) 3,673,680
TOTAL LONG-TERM INVESTMENTS (cost $276,411,291) 269,881,312
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SHORT-TERM INVESTMENTS--1.4%
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ALABAMA--.6%
Stevenson Industrial Development Board, EIR, VRDN
(The Mead Corp.) 4.10% (LOC; Bank Austria AG) 1,700,000 (f) 1,700,000
IOWA--.4%
Iowa Finance Authority, SWDR, VRDN
(Cedar River Paper Co. Project) 4.15%
(LOC; Union Bank of Switzerland) 1,100,000 (f) 1,100,000
TEXAS--.4%
Gulf Coast Waste Disposal Authority, SWDR, VRDN
(Amoco Oil Co. Project) 4.05% 1,000,000 (f) 1,000,000
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $3,800,000) 3,800,000
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TOTAL INVESTMENTS (cost $280,211,291) 99.3% 273,681,312
CASH AND RECEIVABLES (NET) .7% 2,011,459
NET ASSETS 100.0% 275,692,771
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Summary of Abbreviations
ACA American Capital Access LOC Letter of Credit
AMBAC American Municipal Bond Assurance MBIA Municipal Bond Investors Assurance
Corporation Insurance Corporation
COP Certificate of Participation MFHR Multi-Family Housing Revenue
EIR Environment Improvement Revenue PCR Pollution Control Revenue
FGIC Financial Guaranty Insurance Company RRR Resources Recovery Revenue
FSA Financial Security Assurance SFMR Single Family Mortgage Revenue
HR Hospital Revenue SWDR Solid Waste Disposal Revenue
IDR Industrial Development Revenue VRDN Variable Rate Demand Notes
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Summary of Combined Ratings (Unaudited)
Fitch or Moody's or Standard & Poor's Value (%)
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AAA Aaa AAA 28.0
AA Aa AA 14.7
A A A 18.4
BBB Baa BBB 27.8
F1 MIG1/P1 SP1/A1 1.4
Not Rated(g) Not Rated(g) Not Rated(g) 9.7
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 PAYMENT IN DEFAULT.
(C) PURCHASED ON A DELAYED DELIVERY BASIS.
(D) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT
OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT MARCH 31, 2000,
THESE SECURITIES AMOUNTED TO $6,709,920 OR 2.4% OF NET ASSETS.
(E) INVERSE FLOATER SECURITY--THE INTEREST RATE IS SUBJECT TO CHANGE
PERIODICALLY.
(F) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC
CHANGE.
(G) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S
HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE RATED
SECURITIES IN WHICH THE FUND MAY INVEST.
SEE NOTES TO FINANCIAL STATEMENTS.
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The Fund
STATEMENT OF ASSETS AND LIABILITIES March 31, 2000 (Unaudited)
Cost Value
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ASSETS ($):
Investments in securities--See Statement of
Investments 280,211,291 273,681,312
Cash 18,820
Interest receivable 5,439,263
Receivable for investment securities sold 1,868,787
Prepaid expenses 13,386
281,021,568
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LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 177,258
Payable for investment securities purchased 4,989,186
Dividends payable 20,917
Commissions payable 7,394
Accrued expenses and other liabilities 134,042
5,328,797
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NET ASSETS ($) 275,692,771
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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, $.001 per share (20,382,927 shares issued
and outstanding) 20,383
Paid-in capital 188,610,337
Accumulated undistributed investment income--net 203,585
Accumulated net realized gain (loss) on investments (6,611,555)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 (6,529,979)
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 175,692,771
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NET ASSETS ($) 275,692,771
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SHARES OUTSTANDING
(110 million shares of $.001 par value Capital Stock authorized) 20,382,927
NET ASSET VALUE, per common stock, offering and
redemption price per share ($) 8.62
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2000 (Unaudited)
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INVESTMENT INCOME ($):
INTEREST INCOME 8,874,122
EXPENSES:
Management fee--Note 3(a) 955,165
Commission fees--Note 1 133,460
Professional fees 53,178
Shareholder servicing costs--Note 3(b) 30,872
Shareholders' reports 29,235
Directors' fees and expenses--Note 3(c) 22,080
Custodian fees--Note 3(b) 11,854
Registration fees 1,208
Miscellaneous 10,010
TOTAL EXPENSES 1,247,062
INVESTMENT INCOME--NET 7,627,060
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (888,180)
Net unrealized appreciation (depreciation) on investments (5,015,195)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (5,903,375)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 1,723,685
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
March 31, 2000 Year Ended
(Unaudited) September 30, 1999
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OPERATIONS ($):
Investment income--net 7,627,060 10,991,791
Net realized gain (loss) on investments (888,180) (540,505)
Net unrealized appreciation (depreciation)
on investments (5,015,195) (14,626,753)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 1,723,685 (4,175,467)
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DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net
Common Stock (5,381,093) (11,084,592)
Preferred Stock (1,884,211) (102,466)
TOTAL DIVIDENDS (7,265,304) (11,187,058)
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CAPITAL STOCK TRANSACTIONS ($):
Proceeds from issuance of Preferred Stock -- 100,000,000
Dividends reinvested--Note 1(c) -- 372,814
Offering costs charged to paid-in capital resulting
from the issuance of Preferred Stock (80,503) (1,200,000)
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL STOCK TRANSACTIONS (80,503) 99,172,814
TOTAL INCREASE (DECREASE) IN NET ASSETS (5,622,122) 83,810,289
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NET ASSETS ($):
Beginning of Period 281,314,893 197,504,604
END OF PERIOD 275,692,771 281,314,893
Accumulated undistributed
(distributions in excess of)
investment income--net 203,585 (158,171)
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CAPITAL SHARE TRANSACTIONS ( COMMON SHARES):
INCREASE IN COMMON SHARES OUTSTANDING AS A
RESULT OF DIVIDENDS REINVESTED -- 38,754
SEE NOTES TO FINANCIAL STATEMENTS.
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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.
Six Months Ended
March 31, 2000 Year Ended September 30,
-----------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
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PER SHARE DATA ($):
Net asset value,
beginning of period 8.90 9.71 9.55 9.60 9.74 9.41
Investment Operations:
Investment income--net .37 .53 .55 .61 .64 .65
Net realized and unrealized
gain (loss) on investments (.30) (.73) .21 (.02) (.16) .35
Total from Investment
Operations .07 (.20) .76 .59 .48 1.00
Distributions:
Dividends from investment
income--net, common stock (.26) (.54) (.60) (.64) (.62) (.67)
Dividends from investment
income--net, preferred stock (.09) (.01) -- -- -- --
Total Distributions (.35) (.55) (.60) (.64) (.62) (.67)
Capital Stock transaction--net
effect of Preferred Stock
offering .00(a) (.06) -- -- -- --
Net asset value, end of period 8.62 8.90 9.71 9.55 9.60 9.74
Market value, end of period 7 3/8 7 5/8 9 11/16 10 3/8 9 9/16 9 3/8
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (b) .46(c) (16.35) (.69) 15.90 8.83 13.48
The Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
Six Months Ended
March 31, 2000 Year Ended September 30,
-----------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
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RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average
net assets applicable to
Common Stock .91(c,d) .84(d) .82 .82 .83 .85
Ratio of net investment
income to average
net assets applicable to
Common stock 5.57(c,d) 5.63(d) 5.75 6.36 6.61 6.86
Portfolio Turnover Rate 13.44(e) 35.55 8.84 10.67 8.56 36.09
Net Assets, net of
Preferred Stock,
end of period ($ x 1,000) 175,693 181,315 197,505 193,578 193,165 195,517
Preferred Stock outstanding,
end of period ($ x 1,000) 100,000 100,000 -- -- -- --
Asset coverage of
Preferred Stock,
end of period (%) 276 281 -- -- -- --
(A) AMOUNT REPRESENTS LESS THAN .01%.
(B) CALCULATED BASED ON MARKET VALUE.
(C) ANNUALIZED.
(D) DOES NOT REFLECT THE EFFECT OF DIVIDENDS TO PREFERRED STOCK SHAREHOLDERS.
(E) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Municipal Income, Inc. (the "fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a non-diversified closed-end
management investment company. The fund's investment objective is to maximize
current income exempt from Federal income tax to the extent consistent with the
preservation of capital. The Dreyfus Corporation (the "Manager") serves as the
fund' s investment adviser. The Manager is a direct subsidiary of Mellon Bank,
N.A. (" Mellon" ), which is a wholly-owned subsidiary of Mellon Financial
Corporation.
On September 15, 1999, 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.
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (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) based on the record date's respective prices. If the
net asset value per share on the record date is lower than the market price per
share, shares will be issued by the fund at the record date's net asset value on
the payable date of the distribution. If the net asset value per share is less
than 95% of the market value, shares will be issued by the fund at 95% of the
market value. If the market price is lower than the net asset value per share on
the record date, Mellon will purchase fund shares in the open market commencing
on the payable date and reinvest those shares accordingly. As a result of
purchasing fund shares in the open market, fund shares outstanding will not be
affected by this form of reinvestment.
On March 30, 2000, the Board of Directors declared a cash dividend to Common
Shareholders of $.044 per share from investment income-net, payable on April 28,
2000 to Common Shareholders of record as of the close of business on April 13,
2000.
(d) Dividends to shareholders of APS: For APS, dividends are currently reset
every 7 days. Prior to February 29, 2000, dividends were reset every 28 days.
The most recent auction dates were March 28, 2000 for Series A and March 30,
2000 for Series B. The dividend rate for Series A was 3.80%, payable on April 5,
2000 and for Series B was 3.87% , payable on April 7, 2000.
(e) Federal income taxes: It is the policy of the fund to continue to qualify as
a regulated investment company, which can distribute tax exempt dividends, by
complying with the applicable provisions of the Internal Revenue Code of 1986,
as amended and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
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. During the period ended
March 31, 2000, the fund did not borrow under the line of credit.
NOTE 3--Management Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .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 and extraordinary expenses, exceed the
expense limitation of any state having jurisdiction over the fund, the fund may
deduct from payments to be made to the Manager, or the Manager will bear the
amount of such excess to the extent required by state law. There was no expense
reimbursement for the period ended March 31, 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 March 31, 2000, the fund was charged $32,148 pursuant to
the transfer agency agreement.
The fund compensates Mellon under a custody agreement for providing custodial
services for the fund. During the period ended March 31, 2000, the fund was
charged $11,854 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 March 31, 2000, amounted to
$42,151,559 and $35,894,630, respectively.
At March 31, 2000, accumulated net unrealized depreciation on investments was
$6,529,979, consisting of $5,911,979 gross unrealized appreciation and
$12,441,958 gross unrealized depreciation.
At March 31, 2000, the cost of investments for Federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
The Fund
NOTES
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
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
Joseph A. Irace
Colleen A. Meehan
PORTFOLIO MANAGERS (CONTINUED)
Richard J. Moynihan
W. Michael Petty
Jill C. Shaffro
Scott Sprauer
Samuel J. Weinstock
Monica S. Wieboldt
INVESTMENT ADVISER
The Dreyfus Corporation
CUSTODIAN
Boston Safe Deposit
and Trust Company
COUNSEL
Stroock & Stroock & Lavan LLP
TRANSFER AGENT, DIVIDEND DISTRIBUTION AGENT AND REGISTRAR
The Bank of New York (Common Stock)
Bankers Trust (Auction Preferred Stock)
AUCTION AGENT
Bankers Trust (Auction Preferred Stock)
STOCK EXCHANGE LISTING
NYSE Symbol: LEO
INITIAL SEC EFFECTIVE DATE
9/23/87
THE NET ASSET VALUE APPEARS IN THE FOLLOWING PUBLICATIONS: BARRON'S, CLOSED-END
BOND FUNDS SECTION UNDER THE HEADING "MUNICIPAL BOND FUNDS" EVERY MONDAY; WALL
STREET JOURNAL, MUTUAL FUNDS SECTION UNDER THE HEADING "CLOSED-END FUNDS" EVERY
MONDAY; NEW YORK TIMES, BUSINESS SECTION UNDER THE HEADING "CLOSED-END BOND
FUNDS--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) 2000 Dreyfus Service Corporation 424SA003
