UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811- 5652
DREYFUS MUNICIPAL INCOME, INC.
(Exact name of Registrant as specified in charter)
c/o The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
(Address of principal executive offices) (Zip code)
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and address of agent for service)
Registrant's telephone number, including (212) 922-6000
area code:
Date of fiscal year end: 9/30
Date of reporting period: 9/30/03
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS.
Dreyfus Municipal Income, Inc.
ANNUAL REPORT September 30, 2003
DREYFUS MUNICIPAL INCOME, INC.
PROTECTING YOUR PRIVACY
OUR PLEDGE TO YOU
THE FUND IS COMMITTED TO YOUR PRIVACY. On this page, you will find the Fund's
policies and practices for collecting, disclosing, and safeguarding "nonpublic
personal information," which may include financial or other customer
information. These policies apply to individuals who purchase Fund shares for
personal, family, or household purposes, or have done so in the past. This
notification replaces all previous statements of the Fund's consumer privacy
policy, and may be amended at any time. We'll keep you informed of changes as
required by law.
YOUR ACCOUNT IS PROVIDED IN A SECURE ENVIRONMENT. The Fund maintains physical,
electronic and procedural safeguards that comply with federal regulations to
guard nonpublic personal information. The Fund's agents and service providers
have limited access to customer information based on their role in servicing
your account.
THE FUND COLLECTS INFORMATION IN ORDER TO SERVICE AND ADMINISTER YOUR ACCOUNT.
The Fund collects a variety of nonpublic personal information, which may
include:
* Information we receive from you, such as your name, address, and social
security number.
* Information about your transactions with us, such as the purchase or sale
of Fund shares.
* Information we receive from agents and service providers, such as proxy voting
information.
THE FUND DOES NOT SHARE NONPUBLIC PERSONAL INFORMATION WITH ANYONE, EXCEPT AS
PERMITTED BY LAW.
Thank you for this opportunity to serve you.
The views expressed in this report reflect those of the portfolio manager only
through the end of the period covered and do not necessarily represent the views
of Dreyfus or any other person in the Dreyfus organization. Any such views are
subject to change at any time based upon market or other conditions and Dreyfus
disclaims any responsibility to update such views. These views may not be relied
on as investment advice and, because investment decisions for a Dreyfus fund are
based on numerous factors, may not be relied on as an indication of trading
intent on behalf of any Dreyfus fund.
Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE FUND
--------------------------------------------------
2 Letter from the Chairman
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
19 Notes to Financial Statements
24 Report of Independent Auditors
25 Additional Information
28 Important Tax Information
29 Proxy Results
30 Board Members Information
32 Officers of the Fund
37 Officers and Directors
FOR MORE INFORMATION
---------------------------------------------------------------------------
Back Cover
The Fund
Dreyfus
Municipal Income, Inc.
LETTER FROM THE CHAIRMAN
Dear Shareholder:
This annual report for Dreyfus Municipal Income, Inc. covers the 12-month period
from October 1, 2002, through September 30, 2003. 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.
After a prolonged period of sluggish growth, the U.S. economy has shown signs of
sustainable improvement. However, investor uncertainty regarding the strength of
the recovery has produced heightened volatility in the tax-exempt fixed-income
market. After most areas of the municipal bond market experienced sharp declines
during the summer, prices generally bounced back in September.
Despite recent reductions in federal tax rates, we believe that municipal bonds
may become more attractive to certain investors if states and municipalities
continue to raise taxes to balance their budgets. As always, we encourage you to
talk with your financial advisor about ways to enjoy the benefits of tax-exempt
municipal bonds as market conditions evolve.
Thank you for your continued confidence and support.
Sincerely,
Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
October 15, 2003
DISCUSSION OF FUND PERFORMANCE
Joseph Darcy, Portfolio Manager
How did Dreyfus Municipal Income, Inc. perform during the period?
For the 12-month period ended September 30, 2003, the fund achieved a total
return of 4.50%.(1) Over the same period, the fund provided income dividends of
$0.6800 per share, which is equal to a distribution rate of 7.02%.(2)
The fund's performance was primarily influenced by falling interest rates early
in the reporting period and heightened volatility in the municipal bond market,
particularly in July, as the outlook for the U.S. economy improved. The fund
successfully avoided the full brunt of the market's volatility by emphasizing
high-quality, income-oriented securities.
What is the fund's investment approach?
The fund seeks to maximize current income exempt from federal income tax to the
extent consistent with the preservation of capital from a portfolio that, under
normal market conditions, invests at least 80% of the value of its net assets in
municipal obligations. Under normal market conditions, the fund invests in
municipal obligations which, at the time of purchase, are rated investment-grade
or the unrated equivalent as determined by Dreyfus in the case of bonds, and
rated in the two highest rating categories or the unrated equivalent as
determined by Dreyfus in the case of short-term obligations having, or deemed to
have, maturities of less than one year.
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
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
The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
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 what we believe can potentially be
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 deem
appropriate.
Over time, many of the fund's relatively higher-yielding bonds mature or are
redeemed by their issuers, and we generally attempt to replace them with
securities at then-prevailing yields, which may be lower than the rates of the
securities which mature or are redeemed. We also may look to upgrade the
portfolio investments, when we deem appropriate, 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?
Economic weakness during much of the reporting period proved to be beneficial
for municipal bonds as the Federal Reserve Board (the "Fed") reduced short-term
interest rates in November 2002 and June 2003 to 1%, a 45-year low. Longer-term
bond yields declined in this environment, producing attractive levels of capital
appreciation. However, signs of greater economic strength in July 2003 led
investors to believe that the Fed's most recent rate cut may have been the last
of the current cycle, and many sold bonds. As a result, bond prices fell sharply
in July and early August, erasing most of the reporting period's previous gains,
before rising again more moderately in late August and September.
The weak economy also adversely affected the fiscal condition of many states and
municipalities. Because tax revenues failed to meet budgeted projections, many
states faced widening deficits and credit-rating downgrades. To fund their
budget shortfalls, many municipalities issued a higher volume of municipal
bonds. Although a larger supply
of municipal bonds historically has tended to drive yields higher, the increase
in supply during the reporting period generally was met by robust investor
demand, and bond yields generally remained low.
Finally, the reporting period' s low interest rates benefited the fund's
leveraged investment strategy. Because the fund was able to lock in prevailing
low interest rates for a longer period to buy additional securities, we were
able to raise its dividend distribution rate in January 2003.
What is the fund's current strategy?
When making new purchases, we generally have emphasized higher-quality
securities, including insured securities and bonds from highly rated issuers
that we believe have strong liquidity characteristics.(3) This focus helped the
fund avoid weakness among lower-rated bonds as fiscal pressures intensified
At the same time, the fund's long average duration and its core holdings helped
it avoid the full brunt of the market's volatility in July. More recently, as a
result of sales of some lower-quality securities, we have increased the fund's
cash holdings. We will look to deploy those assets to securities as new
opportunities arise.
October 15, 2003
(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. MARKET PRICE PER SHARE, NET ASSET VALUE PER SHARE AND INVESTMENT RETURN
FLUCTUATE. 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.
(3) INSURANCE ON INDIVIDUAL SECURITIES EXTENDS TO THE REPAYMENT OF PRINCIPAL
AND THE PAYMENT OF INTEREST IN THE EVENT OF DEFAULT. IT DOES NOT EXTEND TO THE
MARKET VALUE OF THE PORTFOLIO SECURITIES OR THE VALUE OF THE FUND'S SHARES.
The Fund
SELECTED INFORMATION
September 30, 2003 (Unaudited)
STATEMENT OF INVESTMENTS
Market Price per share September 30, 2003 $9.69
Shares Outstanding September 30, 2003 20,436,297
American Stock Exchange Ticker Symbol DMF
MARKET PRICE (AMERICAN STOCK EXCHANGE)
Fiscal Year Ended September 30, 2003
-----------------------------------------------------------------
QUARTER QUARTER QUARTER QUARTER
ENDED ENDED ENDED ENDED
DECEMBER 31, 2002 MARCH 31, 2003 JUNE 30, 2003 SEPTEMBER 30, 2003
-----------------------------------------------------------------------------------------------------------
High $9.55 $9.61 $10.35 $9.92
Low 8.56 8.61 9.31 9.17
Close 8.89 9.51 9.92 9.69
PERCENTAGE GAIN (LOSS) based on change in Market Price*
October 24, 1988 (commencement of operations)
through September 30, 2003 170.31%
October 1, 1993 through September 30, 2003 75.70
October 1, 1998 through September 30, 2003 38.50
October 1, 2002 through September 30, 2003 8.48
January 1, 2003 through September 30, 2003 15.19
April 1, 2003 through September 30, 2003 5.79
July 1, 2003 through September 30, 2003 (0.41)
NET ASSET VALUE PER SHARE
October 24, 1988 (commencement of operations) $9.26
September 30, 2002 9.78
December 31, 2002 9.61
March 31, 2003 9.51
June 30, 2003 9.70
September 30, 2003 9.51
PERCENTAGE GAIN (LOSS) based on change in Net Asset Value*
October 24, 1988 (commencement of operations)
through September 30, 2003 186.49%
October 1, 1993 through September 30, 2003 77.39
October 1, 1998 through September 30, 2003 35.61
October 1, 2002 through September 30, 2003 4.50
January 1, 2003 through September 30, 2003 4.58
April 1, 2003 through September 30, 2003 3.82
July 1, 2003 through September 30, 2003 (0.04)
* WITH DIVIDENDS REINVESTED.
STATEMENT OF INVESTMENTS
September 30, 2003
Principal
LONG-TERM MUNICIPAL INVESTMENTS--147.3% Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
ALABAMA--8.4%
Courtland Industrial Development Board, SWDR
(Champion International Corp. Project)
6.50%, 9/1/2025 2,500,000 2,578,050
Jefferson County, Sewer Revenue, Capital Improvement
5.75%, 2/1/2038 (Insured; FGIC)
(Prerefunded 2/1/2009) 7,500,000 (a) 8,780,475
The Board of Trustees of the University of Alabama, HR
(University of Alabama at Birmingham)
5.875%, 9/1/2031 (Insured; MBIA) 4,620,000 5,017,551
ALASKA--4.9%
Alaska Housing Finance Corp., General Mortgage Revenue
6.05%, 6/1/2039 (Insured; MBIA) 6,845,000 7,138,171
Valdez, Marine Terminal Revenue
(British Petroleum Pipeline Inc. Project)
5.50%, 10/1/2028 2,375,000 2,422,809
CALIFORNIA--12.4%
ABAG Financial Authority For Nonprofit Corporations:
Insured Revenue, COP
(Odd Fellows Home of California) 6%, 8/15/2024 5,000,000 5,241,400
MFHR
(Civic Center Drive Apartments)
5.875%, 9/1/2032 (Insured; FSA) 3,750,000 3,898,650
California 5%, 2/1/2032 4,000,000 3,867,400
California Health Facilities Financing Authority, Revenue
(Sutter Health) 6.25%, 8/15/2035 2,500,000 2,701,950
California Statewide Communities Development Authority,
COP (Catholic Healthcare West) 6.50%, 7/1/2020 5,000,000 5,402,500
Golden State Tobacco Securitization Corp., Revenue
(Tobacco Settlement Asset-Backed Bonds)
7.80%, 6/1/2042 3,000,000 3,014,640
COLORADO--3.7%
Colorado Springs, HR 6.375%, 12/15/2030 5,725,000 6,133,765
City and County of Denver, Airport Revenue
(Special Facilities-United Airlines Inc. Project)
6.875%, 10/1/2032 2,480,000 (b) 1,004,400
DISTRICT OF COLUMBIA--1.1%
District of Columbia, Revenue
(Catholic University America Project)
5.625%, 10/1/2029 (Insured; AMBAC) 2,080,000 2,216,802
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
FLORIDA--2.5%
Orange County Health Facilities Authority, Revenue
(Orlando Regional Healthcare System) 6%, 10/1/2026 1,500,000 1,563,165
Pinellas County Housing Finance Authority, SFMR
(Multi-County Program) 6.70%, 2/1/2028 2,205,000 2,270,643
South Lake County Hospital District, Revenue
(South Lake Hospital Inc.) 5.80%, 10/1/2034 1,095,000 1,120,065
GEORGIA--1.4%
Private Colleges and Universities Facilities Authority,
Revenue (Clark Atlanta University Project)
8.25%, 1/1/2015 2,630,000 2,781,093
ILLINOIS--10.6%
Chicago 6.125%, 1/1/2028 (Insured; FGIC) 4,000,000 4,523,400
Illinois Development Finance Authority, Revenue
(Community Rehabilitation Providers Facilities
Acquisition Program) 8.75%, 3/1/2010 85,000 85,749
Illinois Health Facilities Authority, Revenue:
(Advocate Health Care Network) 6.125%, 11/15/2022 5,800,000 6,404,070
(OSF Healthcare System) 6.25%, 11/15/2029 7,000,000 7,399,910
(Swedish American Hospital) 6.875%, 11/15/2030 2,000,000 2,186,880
INDIANA--1.6%
Franklin Township School Building Corp. (Marion County)
First Mortgage 6.125%, 1/15/2022
(Prerefunded 7/15/2010) 2,500,000 (a) 3,041,550
KENTUCKY--1.9%
Perry County, SWDR (TJ International Project)
7%, 6/1/2024 3,500,000 3,632,790
MARYLAND--5.3%
Maryland Economic Development Corp.,
Student Housing Revenue (University of Maryland,
College Park Project) 5.625%, 6/1/2035 2,000,000 1,987,820
Maryland Health and Higher Educational Facilities
Authority, Revenue (The John Hopkins University Issue)
6%, 7/1/2039 (Prerefunded 7/1/2009) 7,000,000 (a) 8,365,560
MASSACHUSETTS--4.4%
Massachusetts Health and Educational Facilities Authority,
Revenue, Healthcare System (Covenant Health)
6%, 7/1/2031 2,500,000 2,622,350
Massachusetts Industrial Finance Agency, Revenue
(Water Treatment-American Hingham)
6.95%, 12/1/2035 5,640,000 5,935,649
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
MICHIGAN--8.2%
Hancock Hospital Finance Authority, Mortgage Revenue
(Portgage Health) 5.45%, 8/1/2047 (Insured; MBIA) 2,200,000 2,306,634
Michigan Hospital Finance Authority, HR
(Genesys Health System Obligated Group)
8.125%, 10/1/2021 (Prerefunded 10/1/2005) 7,670,000 (a) 8,874,420
Michigan Strategic Fund, SWDR
(Genesee Power Station Project) 7.50%, 1/1/2021 4,900,000 4,729,578
MINNESOTA--1.4%
Minnesota Agricultural and Economic Development Board,
Health Care System Revenue (Fairview Health Services)
6.375%, 11/15/2029 2,500,000 2,697,175
MISSISSIPPI--3.1%
Mississippi Business Finance Corp., PCR
(System Energy Resource Inc. Project)
5.875%, 4/1/2022 6,000,000 5,996,640
MISSOURI--5.4%
Health and Educational Facilities Authority of the State
of Missouri, Health Facilities Revenue:
(BJC Health System) 5.25%, 5/15/2032 2,500,000 2,585,375
(Saint Anthony's Medical Center)
6.25%, 12/1/2030 2,500,000 2,641,175
The Industrial Development Authority of the City of
Saint Louis, Senior Lien Revenue (Saint Louis
Convention Center Headquarters Hotel Project):
7.20%, 12/15/2028 1,500,000 1,475,640
7.25%, 12/15/2035 3,000,000 3,005,700
Missouri Housing Development Commission,
Mortgage Revenue
(Single Family--Homeownersip Loan)
6.30%, 9/1/2025 810,000 849,228
NEVADA--5.1%
Clark County, IDR (Southwest Gas Corp.):
6.50%, 12/1/2033 5,300,000 5,335,510
6.10%, 12/1/2038 (Insured; AMBAC) 4,000,000 4,505,200
NEW MEXICO--1.6%
Farmington, PCR (Public Service Co. San Juan)
6.30%, 12/1/2016 3,000,000 3,072,600
NEW YORK--2.6%
Long Island Power Authority, Electric System Revenue
5%, 9/1/2027 2,500,000 2,493,675
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
NEW YORK (CONTINUED)
New York City Municipal Water Finance Authority,
Water and Sewer System Revenue
5.125%, 6/15/2034 (Insured; FGIC) 2,500,000 2,553,875
NORTH CAROLINA--5.8%
North Carolina Capital Facilities Finance Agency,
Revenue (Duke University Project)
5.25%, 7/1/2042 5,000,000 5,175,500
North Carolina Eastern Municipal Power Agency,
Power System Revenue 5.125%, 1/1/2026 3,680,000 3,577,402
North Carolina Housing Finance Agency
(Home Ownership) 6.25%, 1/1/2029 2,375,000 2,487,789
OHIO--5.2%
Cuyahoga County, Hospital Improvement Revenue
(The Metrohealth System Project)
6.125%, 2/15/2024 5,000,000 5,229,300
Ohio Housing Finance Agency, Residential Mortgage
Revenue 5.75%, 9/1/2030 980,000 1,010,341
Rickenbacker Port Authority, Capital Funding Revenue
(OASBO Expanded Asset Pooled) 5.375%, 1/1/2032 3,590,000 3,775,423
OKLAHOMA--1.4%
Oklahoma Development Finance Authority, Revenue
(Saint John Health System) 6%, 2/15/2029 2,500,000 2,715,500
PENNSYLVANIA--5.9%
Pennsylvania Economic Development Financing Authority,
RRR (Northampton Generating Project)
6.60%, 1/1/2019 3,500,000 3,541,020
Sayre Health Care Facilities Authority, Revenue
(Guthrie Health) 5.875%, 12/1/2031 7,750,000 7,987,382
SOUTH CAROLINA--6.7%
Medical University, Hospital Facilities Revenue
6%, 7/1/2019 (Prerefunded 7/1/2009) 2,500,000 (a) 2,971,400
Piedmont Municipal Power Agency, Electric Revenue:
6.55%, 1/1/2016 880,000 881,109
5.25%, 1/1/2021 3,500,000 3,367,175
Tobacco Settlement Revenue Management Authority,
Tobacco Settlement Asset--Backed Bonds:
6.375%, 5/15/2028 2,900,000 2,525,465
6.375%, 5/15/2030 3,750,000 3,233,775
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
TEXAS--10.4%
Austin Convention Enterprises Inc.,
Convention Center Hotel First Tier Revenue
6.70%, 1/1/2032 2,000,000 2,054,280
Gregg County Health Facilities Development Corp., HR
(Good Shepherd Medical Center Project)
6.375%, 10/1/2025 2,500,000 2,842,850
Harris County Health Facilities Development Corp., HR
(Memorial Hermann Healthcare) 6.375%, 6/1/2029 3,565,000 3,842,678
Port of Corpus Christi Authority, Nueces County,
General Revenue (Union Pacific) 5.65%, 12/1/2022 4,000,000 3,935,320
Texas, Veterans Housing Assistance Program
6.10%, 6/1/2031 7,000,000 7,452,760
UTAH--2.1%
Carbon County, SWDR (Sunnyside Cogeneration)
7.10%, 8/15/2023 2,971,000 2,825,094
Utah Housing Finance Agency, Single Family Mortgage
6%, 1/1/2031 1,170,000 1,222,158
VERMONT--2.2%
Vermont Educational and Health Buildings
Financing Agency, Revenue
(Saint Michael's College Project)
6%, 10/1/2028 1,500,000 1,660,005
Vermont Housing Finance Agency, Single Family Housing
6.40%, 11/1/2030 (Insured; FSA) 2,570,000 2,698,680
WASHINGTON--3.8%
Public Utility District Number 1 of Pend Orielle County,
Electric Revenue 6.375%, 1/1/2015 2,000,000 2,114,400
Washington Higher Education
Facilities Authority, Revenue
(Whitman College Project) 5.875%, 10/1/2029 5,000,000 5,337,850
WEST VIRGINIA--6.5%
Braxton County, SWDR (Weyerhaeuser Co. Project):
6.50%, 4/1/2025 5,000,000 5,123,800
5.80%, 6/1/2027 7,450,000 7,467,880
WISCONSIN--3.5%
Badger Tobacco Asset Securitization Corp.,
Tobacco Settlement Asset-Backed Bonds
7%, 6/1/2028 2,500,000 2,377,525
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
WISCONSIN (CONTINUED)
Wisconsin Health and Educational Facilities Authority,
Revenue (Aurora Health Care, Inc.)
5.60%, 2/15/2029 4,750,000 4,439,255
WYOMING--1.0%
Sweetwater County, SWDR (FMC Corp. Project)
7%, 6/1/2024 2,000,000 2,002,620
U.S. RELATED--7.2%
Puerto Rico Highway and Transportation Authority,
Transportation Revenue:
8.74%, 7/1/2038 (Insured; MBIA) 4,000,000 (c,d) 4,134,600
8.74%, 7/1/2038 5,000,000 (c,d) 5,168,250
Puerto Rico Infrastructure Financing Authority,
Special Tax Revenue, Residual Certificates
8.615%, 7/1/2015 4,000,000 (c,d) 4,734,960
TOTAL LONG--TERM MUNICIPAL INVESTMENTS
(cost $272,080,574) 286,375,228
------------------------------------------------------------------------------------------------------------------------------------
SHORT--TERM MUNICIPAL INVESTMENTS--1.5%
--------------------------------------------------------------------------------
TEXAS;
Bell County Health Facilities Development Corp., HR, VRDN
(Scott and White) 1.25% (Insured; MBIA) 1,100,000 (e) 1,100,000
Harris County Health Facilities Development Corp.,
Revenue, VRDN (Methodist Hospital) 1.25% 1,900,000 (e) 1,900,000
TOTAL SHORT--TERM MUNICIPAL INVESTMENTS
(cost $3,000,000) 3,000,000
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $275,080,574) 148.8% 289,375,228
CASH AND RECEIVABLES (NET) 2.6% 5,015,110
PREFERRED STOCK, AT REDEMPTION VALUE (51.4%) (100,000,000)
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 100.0% 194,390,338
Summary of Abbreviations
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)
Fitch or Moody's or Standard & Poor's Value (%)
------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa AAA 25.2
AA Aa AA 16.9
A A A 26.1
BBB Baa BBB 27.4
BB Ba BB .7
CC Ca CC .4
F1 MIG1/P1 SP1/A1 .7
Not Rated(f) Not Rated(f) Not Rated(f) 2.6
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) 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, 2003,
THESE SECURITIES AMOUNTED TO $14,037,810 OR 7.2% OF NET ASSETS APPLICABLE TO
COMMON SHAREHOLDERS.
(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, 2003, THE FUND HAD $86,166,678 OR 44.3% OF NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS INVESTED IN SECURITIES WHOSE PAYMENT OF
PRINCIPAL AND INTEREST IS DEPENDENT UPON REVENUES GENERATED FROM HEALTH CARE
PROJECTS.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2003
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 275,080,574 289,375,228
Cash 112,747
Interest receivable 5,133,768
Prepaid expenses 182,714
294,804,457
--------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 180,441
Dividend payable to Preferred Shareholders 71,317
Commssions payable 14,440
Accrued expenses 147,921
414,119
--------------------------------------------------------------------------------
AUCTION PREFERRED STOCK, Series A and B,
par value $.001 per share (4,000 shares issued
and outstanding at $25,000 per share
liquidation preference)--Note 1 100,000,000
--------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS ($) 194,390,338
--------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Common Stock, par value, $.001 per share
(20,436,297 shares issued and outstanding) 20,436
Paid-in capital 189,176,602
Accumulated undistributed investment income--net 2,835,379
Accumulated net realized gain (loss) on investments (11,936,733)
Accumulated net unrealized appreciation
(depreciation) on investments 14,294,654
--------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 194,390,338
--------------------------------------------------------------------------------
SHARES OUTSTANDING
(110 million shares of $.001 par value Common Stock authorized) 20,436,297
NET ASSET VALUE, per share of Common Stock ($) 9.51
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
Year Ended September 30, 2003
--------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INTEREST INCOME 17,341,143
EXPENSES:
Management fee--Note 3(a) 2,059,312
Commission fees--Note 1 265,945
Professional fees 81,349
Shareholder servicing costs--Note 3(b) 51,881
Shareholders' reports 39,682
Custodian fees--Note 3(b) 22,620
Registration fees 17,265
Directors' fees and expenses--Note 3(c) 11,310
Miscellaneous 27,116
TOTAL EXPENSES 2,576,480
INVESTMENT INCOME--NET 14,764,663
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (3,307,865)
Net unrealized appreciation (depreciation) on investments (1,668,884)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (4,976,749)
DIVIDENDS ON PREFERRED STOCK (1,391,588)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 8,396,326
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF CHANGES IN NET ASSETS
Year Ended September 30,
-----------------------------------
2003 2002
--------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 14,764,663 15,394,701
Net realized gain (loss) on investments (3,307,865) (446,764)
Net unrealized appreciation (depreciation)
on investments (1,668,884) 600,180
Dividends on Preferred Stock (1,391,588) (1,643,057)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 8,396,326 13,905,060
--------------------------------------------------------------------------------
DIVIDENDS TO COMMON SHAREHOLDERS FROM ($):
INVESTMENT INCOME--NET (13,870,604) (11,495,971)
--------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS ($):
DIVIDENDS REINVESTED 503,937 --
TOTAL INCREASE (DECREASE) IN NET ASSETS (4,970,341) 2,409,089
--------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 199,360,679 196,951,590
END OF PERIOD 194,390,338 199,360,679
Undistributed investment income--net 2,835,379 3,342,621
--------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (SHARES):
INCREASE IN SHARES OUTSTANDING AS A
RESULT OF DIVIDENDS REINVESTED 53,370 --
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.
Year Ended September 30,
----------------------------------------------------------------------
2003 2002(a) 2001 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value, beginning of period 9.78 9.66 8.82 8.90 9.71
Investment Operations:
Investment income--net .72(b) .76(b) .74 .74 .53
Net realized and unrealized
gain (loss) on investments (.24) .00(c) .79 (.08) (.73)
Dividends on Preferred Stock
from investment income--net (.07) (.08) (.16) (.20) (.01)
Total from Investment Operations .41 .68 1.37 .46 (.21)
Distributions to Common Shareholders:
Dividends from investment income--net (.68) (.56) (.53) (.53) (.54)
Capital Stock transaction--net
effect of Preferred Stock offering -- -- .00(c) (.01) (.06)
Net asset value, end of period 9.51 9.78 9.66 8.82 8.90
Market value, end of period 9.69 9.60 8.71 7 7/8 7 5/8
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%)(D) 8.48 17.28 17.55 10.71 (16.35)
The Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
Year Ended September 30,
----------------------------------------------------------------------
2003 2002(a) 2001 2000 1999
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average
net assets applicable
to Common Stock 1.33(e,f) 1.33(e,f) 1.39(e,f) 1.48(e,f) .85(e,f)
Ratio of net investment income
to average net assets applicable
to Common Stock 7.60(e,f) 7.93(e,f) 7.97(e,f) 8.64(e,f) 5.72(e,f)
Portfolio Turnover Rate 9.88 5.32 15.27 22.47 35.55
Asset coverage of Preferred Stock,
end of period 294 299 297 280 281
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, net of Preferred stock,
end of period ($ x 1,000) 194,390 199,361 196,952 179,792 181,315
Preferred Stock outstanding,
end of period ($ x 1,000) 100,000 100,000 100,000 100,000 100,000
(A) AS REQUIRED, EFFECTIVE OCTOBER 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR
INVESTMENT COMPANIES AND BEGAN AMORTIZING DISCOUNT OR PREMIUM ON A SCIENTIFIC BASIS, FOR DEBT SECURITIES ON A DAILY BASIS. THE
EFFECT OF THIS CHANGE FOR THE PERIOD ENDED SEPTEMBER 30, 2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET
REALIZED AND REALIZED GAIN (LOSS) ON INVESTMENTS PER SHARE BY LESS THAN $.01 AND INCREASE THE RATIO OF NET INVESTMENT INCOME TO
AVERAGE NET ASSETS BY LESS THAN .01%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA PRIOR TO OCTOBER 1, 2001 HAVE NOT BEEN RESTATED TO
REFLECT THIS CHANGE IN PRESENTATION.
(B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(C) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE.
(D) CALCULATED BASED ON MARKET VALUE.
(E) DOES NOT REFLECT THE EFFECT OF DIVIDENDS TO PREFERRED STOCKHOLDERS.
(F) THE RATIO OF EXPENSES TO TOTAL AVERAGE NET ASSETS, INCLUSIVE OF THE
OUTSTANDING AUCTION PREFERRED STOCK, AND THE RATIO OF NET INVESTMENT INCOME TO
TOTAL AVERAGE NET ASSETS WERE .88% AND 5.02%, RESPECTIVELY, FOR THE YEAR ENDED
SEPTEMBER 30, 2003, .87% AND 5.23%, RESPECTIVELY, FOR THE YEAR ENDED SEPTEMBER
30, 2002, .91% AND 5.21%, RESPECTIVELY, FOR THE YEAR ENDED SEPTEMBER 30, 2001,
..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.
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 wholly-owned 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 American Stock Exchange under
the ticker symbol DMF.
The fund has outstanding 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.
Deutsche Bank Trust Company America, 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 Whitney I.
Gerard and George L. Perry to represent holders of APS on the fund's Board of
Directors.
The fund' s financial statements are prepared in accordance with accounting
principles generally accepted in the United States, 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 (the "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.
(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 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, if any, are normally declared and paid annually, but the fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code of 1986, as amended (the "Code"). 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. Income
and capital gain distributions are determined in accordance with income tax
regulations, which may differ from accounting principles generally accepted in
the United States.
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, 2003, the Board of Directors declared a cash dividend of $.06
per share from investment income-net, payable on October 29, 2003 to Common
Shareholders of record as of the close of business on October 15, 2003.
(D) DIVIDENDS TO SHAREHOLDERS OF APS: For APS, dividends are currently reset
every 7 days for Series A. The dividend rate for Series B will be in effect
until February 17, 2005. The dividend rates in effect at September 30, 2003 were
as follows: Series A .90% and Series B 1.58%.
(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 Code, and to make distributions
of income and net realized capital gain sufficient to relieve it from
substantially all federal income and excise taxes.
At September 30, 2003, the components of accumulated earnings on a tax basis
were as follows: undistributed tax exempt income $2,912,062, accumulated capital
losses $8,542,403 and unrealized appreciation $14,351,669. In addition, the fund
had $3,394,320 of capital losses realized after October 31, 2002, which are
deferred for tax purposes to the first day of the following fiscal year.
The accumulated capital loss is available to be applied against future net
securities profits, if any, realized subsequent to September 30, 2003. If not
applied, $4,999,899 of the carryover expires in fiscal 2004,
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
$1,148,413 expires in fiscal 2008, $619,742 expires in fiscal 2009, $1,413,550
expires in fiscal 2010 and $360,799 expires in fiscal 2011.
The tax character of distributions paid to shareholders during the fiscal
periods ended September 30, 2003 and September 30, 2002, were as follows: tax
exempt income $15,262,192 and $13,139,028, respectively.
During the period ended September 30, 2003, as a result of permanent book to tax
differences, the fund decreased accumulated undistributed investment income-net
by $9,713 and increased paid-in capital by the same amount. Net assets were not
affected by this reclassification
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 based on prevailing market rates in
effect at the time of borrowings. During the period ended September 30, 2003,
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, inclusive of the oustanding auction preferred
stock, 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. During the period ended
September 30, 2003, there was no expense reimbursement pursuant to the
Agreement.
(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, 2003, the fund was
charged $50,914 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, 2003, the fund was
charged $22,620 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"). Through December 31, 2002,
each Board member who is not an "affiliated person" as defined in the Act
received an annual fee of $45,000, an attendance fee of $5,000 for each
in-person meeting and $500 for telephone meetings. Effective January 1, 2003,
the number of funds in the Fund Group, comprising the fund increased and the
annual fee was increased to $60,000 while the attendance fee was increased to
$7,500 for each in-person meeting. As a result of this change in the
compensation arrangement aggregate fees paid to each Board member for the period
ended September 30, 2003 were $1,250 as compared to $1,910 (normally the fees
would have been $1,410 except for a fund specific telephone meeting) for the
period ended September 30, 2002. The Chairman of the Board receives an
additional 25% of such compensation. Subject to the fund's Emeritus Program
Guidelines, Emeritus Board members, if any, receive 50% of the annual retainer
fee and per meeting fee paid at the time the Board member achieves emeritus
status. These fees are allocated among the funds in the Fund Group in proportion
to each fund's relative net assets.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities, during the period ended September 30, 2003, amounted to
$28,397,870 and $27,988,003, respectively.
At September 30, 2003, the cost of investments for federal income tax purposes
was $275,023,559; accordingly, accumulated net unrealized appreciation on
investments was $14,351,669, consisting of $17,790,570 gross unrealized
appreciation and $3,438,901 gross unrealized depreciation.
The Fund
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, 2003, 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, 2003 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, 2003, 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 10, 2003
ADDITIONAL INFORMATION (Unaudited)
DIVIDEND REINVESTMENT PLAN
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
ADDITIONAL INFORMATION (Unaudited) (CONTINUED)
The fund pays the Agent's fee for reinvestment of dividends and distributions.
Plan participants pay a pro rata share of brokerage commissions incurred with
respect to the Agent's open market purchases in connection with the reinvestment
of dividends or distributions.
The fund reserves the right to amend or terminate the Plan as applied to any
dividend or distribution paid subsequent to notice of the change sent to Plan
participants at least 90 days before the record date for such dividend or
distribution. The Plan also may be amended or terminated by the Agent on at
least 90 days' written notice to Plan participants.
MANAGED DIVIDEND POLICY
The fund' s dividend policy is to distribute substantially all of its net
investment income to its shareholders on a monthly basis. In order to provide
shareholders with a more consistent yield to the current trading price of shares
of Common Stock of the fund, the fund may at times pay out less than the entire
amount of net investment income earned in any particular month and may at times
in any month pay out such accumulated but undistributed income in addition to
net investment income earned in that month. As a result, the dividends paid by
the fund for any particular month may be more or less than the amount of net
investment income earned by the fund during such month. The fund's current
accumulated but undistributed net investment income, if any, is disclosed in the
Statement of Assets and Liabilities, which comprises part of the Financial
Information included in this report.
BENEFITS AND RISKS OF LEVERAGING
The fund utilizes leverage to seek to enhance the yield and net asset value of
its Common Stock. These objects cannot be achieved in all interest rate
environments. To leverage, the fund issues Preferred Stock, which pays dividends
at prevailing short-term interest rates, and invests the proceeds in long-term
municipal bonds. The interest earned on these investments is paid to Common
Shareholders in the form of dividends, and the value of these portfolio holdings
is reflected in the per
share net asset value of the fund's Common Stock. In order to benefit Common
Shareholders, the yield curve must be positively sloped: that is, short-term
interest rates must be lower than long-term interest rates. At the same time, a
period of generally declining interest rates will benefit Common Shareholders.
If either of these conditions change, then the risk of leveraging will begin to
outweigh the benefits.
SUPPLEMENTAL INFORMATION
During the period ended September 30, 2003, shareholders approved changes in the
fund' s fundamental investment policies to permit the fund to engage in swap
transactions and to invest in other investment companies. Otherwise, during the
period ended September 30, 2003, there were: (i) no material changes in the
fund' s investment objective or policies, (ii) no changes in the fund's charter
or by-laws that would delay or prevent a change of control of the fund, (iii) no
material changes in the principal risk factors associated with investment in the
fund, and (iv) no change in the person primarily responsible for the day-to-day
management of the fund's portfolio.
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, 2003
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 2003 calendar year on Form 1099-DIV which
will be mailed by January 31, 2004.
PROXY RESULTS (Unaudited)
Holders of Common Stock and holders of Auction Preferred Stock ("APS") voted
together as a single class on three proposals presented at the annual
shareholders' meeting held on May 23, 2003 as follows:
Shares
----------------------------------------------------
For Authority Withheld
----------------------------------------------------
To elect three Class I Directors:((+))
Lucy Wilson Benson 13,133,424 506,447
David W. Burke 13,120,369 519,502
Clifford L. Alexander, Jr. 13,144,946 494,925
((+)) THE TERMS OF THESE CLASS I DIRECTORS EXPIRE ON 2006.
Shares
--------------------------------------------------------------------
For Against Abstained
--------------------------------------------------------------------
To approve a change to the fundamental
investment policies and investment
restrictions to:
* Engage in swap transactions 9,442,687 1,049,020 380,680
* Expand investment in other
investment companies 9,388,615 1,089,386 394,385
The Fund
BOARD MEMBERS INFORMATION (Unaudited)
JOSEPH S. DIMARTINO (60)
CHAIRMAN OF THE BOARD (1995)
Current term expires in 2005
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* Corporate Director and Trustee
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* The Muscular Dystrophy Association, Director
* Levcor International, Inc., an apparel fabric processor, Director
* Century Business Services, Inc., a provider of outsourcing functions for small
and medium size companies, Director
* The Newark Group, a provider of a national market of paper recovery
facilities, paperboard mills and paperboard converting plants, Director
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 191
--------------
CLIFFORD L. ALEXANDER, JR. (70)
BOARD MEMBER (2003)
Current term expires in 2006
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* President of Alexander & Associates, Inc., a management consulting firm
(January 1981-present)
* Chairman of the Board of Moody's Corporation (October 2000-October 2003)
* Chairman of the Board and Chief Executive Officer of The Dun and Bradstreet
Corporation (October 1999-September 2000)
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* Wyeth (formerly, American Home Products Corporation), a global leader in
pharmaceuticals, consumer healthcare products and animal health products,
Director
* Mutual of America Life Insurance Company, Director
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 70
--------------
LUCY WILSON BENSON (76)
BOARD MEMBER (1988)
Current term expires in 2006
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* President of Benson and Associates, consultants to business and government
(1980-present)
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* The International Executive Services Corps., Director
* Citizens Network for Foreign Affairs, Vice Chairperson
* Council on Foreign Relations, Member
* Lafayette College Board of Trustees, Vice Chairperson
* Atlantic Council of the U.S., Director
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 44
DAVID W. BURKE (67)
BOARD MEMBER (1994)
Current term expires in 2006
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* Corporate Director and Trustee
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* John F. Kennedy Library Foundation, Director
* U.S.S. Constitution Museum; Director
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 87
--------------
WHITNEY I. GERARD (68)
BOARD MEMBER (1988)
Current term expires in 2004
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* Partner of Chadbourne & Parke LLP, Partner
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42
--------------
ARTHUR A. HARTMAN (77)
BOARD MEMBER (1989)
Current term expires in 2004
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* Chairman of First NIS Regional Fund (ING/Barings Management) and New Russia
Fund
* Advisory Council Member to Barings Vostok
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* APCO Associates, Inc., Senior Consultant
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42
--------------
GEORGE L. PERRY (69)
BOARD MEMBER (1989)
Current term expires in 2005
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* Economist and Senior Fellow at Brookings Institution
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* State Farm Mutual Automobile Association, Director
* State Farm Life Insurance Company, Director
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 42
--------------
THE ADDRESS OF EACH BOARD MEMBER IS C/O THE DREYFUS CORPORATION, 200 PARK
AVENUE, NEW YORK, NY 10166.
The Fund
OFFICERS OF THE FUND (Unaudited)
STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000.
Chairman of the Board, Chief Executive Officer and Chief Operating Officer
of the Manager, and an officer of 95 investment companies (comprised of 188
portfolios) managed by the Manager. Mr. Canter also is a Board member and, where
applicable, an Executive Committee Member of the other investment management
subsidiaries of Mellon Financial Corporation, each of which is an affiliate of
the Manager. He is 58 years old and has been an employee of the Manager since
May 1995.
STEPHEN R. BYERS, EXECUTIVE VICE PRESIDENT SINCE NOVEMBER 2002.
Chief Investment Officer, Vice Chairman and a Director of the Manager, and
an officer of 95 investment companies (comprised of 188 portfolios) managed by
the Manager. Mr. Byers also is an officer, director or an Executive Committee
Member of certain other investment management subsidiaries of Mellon Financial
Corporation, each of which is an affiliate of the Manager. He is 50 years old
and has been an employee of the Manager since January 2000. Prior to joining the
Manager, he served as an Executive Vice President-Capital Markets, Chief
Financial Officer and Treasurer at Gruntal & Co., L.L.C.
JOSEPH P. DARCY, EXECUTIVE VICE PRESIDENT SINCE MARCH 2000.
Executive Vice President of the Fund, Senior Portfolio Manager - Dreyfus
Municipal Securities, and an officer of 1 other investment company (comprised of
1 portfolio) managed by the Manager. He is 46 years old and has been an employee
of the Manager since May 1994.
MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000.
Executive Vice President, Secretary and General Counsel of the Manager, and
an officer of 96 investment companies (comprised of 204 portfolios) managed by
the Manager. He is 57 years old and has been an employee of the Manager since
June 1977.
MICHAEL A. ROSENBERG, SECRETARY SINCE MARCH 2000.
Associate General Counsel of the Manager, and an officer of 93 investment
companies (comprised of 197 portfolios) managed by the Manager. He is 43 years
old and has been an employee of the Manager since October 1991.
ROBERT R. MULLERY, ASSISTANT SECRETARY SINCE MARCH 2000.
Associate General Counsel of the Manager, and an officer of 26 investment
companies (comprised of 61 portfolios) managed by the Manager. He is 51 years
old and has been an employee of the Manager since May 1986.
STEVEN F. NEWMAN, ASSISTANT SECRETARY SINCE MARCH 2000.
Associate General Counsel and Assistant Secretary of the Manager, and an
officer of 96 investment companies (comprised of 204 portfolios) managed by the
Manager. He is 54 years old and has been an employee of the Manager since July
1980.
JEFF PRUSNOFSKY, ASSISTANT SECRETARY SINCE APRIL 2000.
Associate General Counsel of the Manager, and an officer of 24 investment
companies (comprised of 84 portfolios) managed by the Manager. He is 38 years
old and has been an employee of the Manager since October 1990.
JAMES WINDELS, TREASURER SINCE NOVEMBER 2001.
Director - Mutual Fund Accounting of the Manager, and an officer of 96
investment companies (comprised of 204 portfolios) managed by the Manager. He is
45 years old and has been an employee of the Manager since April 1985.
GREGORY S. GRUBER, ASSISTANT TREASURER SINCE MARCH 2000.
Senior Accounting Manager - Municipal Bond Funds of the Manager, and an
officer of 29 investment companies (comprised of 58 portfolios) managed by the
Manager. He is 44 years old and has been an employee of the Manager since August
1981.
KENNETH J. SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001.
Mutual Funds Tax Director of the Manager, and an officer of 96 investment
companies (comprised of 204 portfolios) managed by the Manager. He is 49 years
old and has been an employee of the Manager since June 1993.
The Fund
NOTES
NOTES
OFFICERS AND DIRECTORS
Dreyfus Municipal Income, Inc.
200 Park Avenue
New York, NY 10166
DIRECTORS
Joseph S. DiMartino, Chairman
Clifford L. Alexander, Jr.
Lucy Wilson Benson
David W. Burke
Whitney I. Gerard*
Arthur A. Hartman
George L. Perry*
* AUCTION PREFERRED STOCK DIRECTORS
OFFICERS
President
Stephen E. Canter
Vice President
Mark N. Jacobs
Executive Vice Presidents
Stephen R. Byers
Joseph P. Darcy
Secretary
Michael A. Rosenberg
Assistant Secretaries
Robert R. Mullery
Steven F. Newman
Jeff Prusnofsky
Treasurer
James Windels
Assistant Treasurers
Gregory S. Gruber
Kenneth J. Sandgren
PORTFOLIO MANAGERS
Joseph P. Darcy
A. Paul Disdier
Douglas J. Gaylor
Joseph A. Irace
PORTFOLIO MANAGERS (CONTINUED)
Colleen A. Meehan
W. Michael Petty
Scott Sprauer
Bill Vasiliou
James Welch
Monica S. Wieboldt
INVESTMENT ADVISER
The Dreyfus Corporation
CUSTODIAN
Mellon Bank, N.A.
COUNSEL
Stroock & Stroock & Lavan LLP
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR
Mellon Bank N.A. (Common Stock)
Deutsche Bank Trust Company America (Auction Preferred Stock)
AUCTION AGENT
Deutsche Bank Trust Company America (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) 2003 Dreyfus Service Corporation 424AR0903
ITEM 2. CODE OF ETHICS.
The Registrant has adopted a code of ethics that applies to the
Registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Registrant's Board has determined that Joseph DiMartino, a member
of the Audit Committee of the Board, is an audit committee financial expert
as defined by the Securities and Exchange Commission (the "SEC"). Joseph
DiMartino is "independent" as defined by the SEC for purposes of audit
committee financial expert determinations.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The Registrant's principal executive and principal financial officers
have concluded, based on their evaluation of the Registrant's disclosure
controls and procedures as of a date within 90 days of the filing date of
this report, that the Registrant's disclosure controls and procedures are
reasonably designed to ensure that information required to be disclosed by
the Registrant on Form N-CSR is recorded, processed, summarized and reported
within the required time periods and that information required to be
disclosed by the Registrant in the reports that it files or submits on Form
N-CSR is accumulated and communicated to the Registrant's management,
including its principal executive and principal financial officers, as
appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes to the Registrant's internal control over
financial reporting that occurred during the Registrant's most recently ended
fiscal half-year that has materially affected, or is reasonably likely to
materially affect, the Registrant's internal control over financial
reporting.
ITEM 10. EXHIBITS.
(a)(1) Code of ethics referred to in Item 2.
(a)(2) Certifications of principal executive and principal financial
officers as required by Rule 30a-2(a) under the Investment Company Act of
1940.
(b) Certification of principal executive and principal financial officers
as required by Rule 30a-2(b) under the Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
DREYFUS MUNICIPAL INCOME, INC.
By: /s/Stephen E. Canter
____________________
Stephen E. Canter
President
Date: November 21, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this Report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By: /s/Stephen E. Canter
______________________
Stephen E. Canter
Chief Executive Officer
Date: November 21, 2003
By: /s/James Windels
_______________________
James Windels
Chief Financial Officer
Date: November 21, 2003
EXHIBIT INDEX
(a)(1) Code of ethics referred to in Item 2.
(a)(2) Certifications of principal executive and principal
financial officers as required by Rule 30a-2(a) under the Investment
Company Act of 1940. (EX-99.CERT)
(b) Certification of principal executive and principal financial
officers as required by Rule 30a-2(b) under the Investment Company Act
of 1940. (EX-99.906CERT)