Dreyfus
Municipal Income, Inc.
SEMIANNUAL REPORT
March 31, 2001
(reg.tm)
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 herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE FUND
--------------------------------------------------
2 Letter from the President
3 Discussion of Fund Performance
6 Statement of Investments
13 Statement of Assets and Liabilities
14 Statement of Operations
15 Statement of Changes in Net Assets
16 Financial Highlights
18 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 present this semiannual report for Dreyfus Municipal Income, Inc., covering
the six-month period from October 1, 2000 through March 31, 2001. 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.
Municipal bonds generally provided attractive returns over the six-month
reporting period. Slowing economic growth and lower short-term interest rates
helped boost the value of tax-exempt bonds, as did robust demand from investors
fleeing the uncertainty of a falling stock market. In fact, the overall stock
market, as measured by the Standard & Poor's 500 Composite Stock Price Index,
declined more than 18%, approaching bear market territory.
In our view, these divergent results indicate that investors who diversified
their portfolios fared well compared to those who focused solely on one type of
investment, such as equities. We believe that a diversified investment approach
can continue to serve investors well, which is why we continually stress the
importance of diversification, a basic tenet of investing.
We encourage you to contact your financial advisor for more information about
ways to refine your investment strategies in the current environment.
Thank you for your continued confidence and support.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
April 16, 2001
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, 2001, the fund produced a 9.61% total
return.(1) In addition, the fund provided income dividends of $0.2640 per share,
which is equal to an annualized distribution rate of 5.97% over the same
period.(2)
We attribute the fund's total return to a favorable investment environment that
was characterized by declining interest rates and robust demand for municipal
bonds.
What is the fund's investment approach?
The fund seeks high current federally tax-exempt income from a portfolio of
municipal bonds. In so doing, we strive to identify bonds that we believe can
help the fund in seeking high current income.
We generally employ two primary strategies. First, we attempt to add value by
evaluating interest-rate trends and supply-and-demand factors. Based on that
assessment, we look for bonds that we believe can potentially provide high then
current levels of income. We look at such criteria as the bond's yield, price,
age, the creditworthiness of its issuer, and any provisions for early
redemption.
Second, we actively manage the fund' s average duration -- a measure of
sensitivity to changes in interest rates -- in anticipation of temporary
supply-and-demand changes. For example, if we expect the supply of newly issued
bonds to increase temporarily, we may reduce the fund's average duration to make
cash available for the purchase of 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 think
practical.
The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
When bonds held by the fund mature or are redeemed by their issuers, we
generally attempt to replace them with new comparable securities. We also may
look to upgrade the fund, 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?
When the reporting period began on October 1, 2000, evidence had emerged that
the previous rate hikes implemented by the Federal Reserve Board (the "Fed")
were having the desired effect of slowing the economy. As time went on, the
economic slowdown became more pronounced. As a result, municipal bond yields
declined modestly, even though the Fed did not change interest rates at its
meetings in October, November and December.
In January 2001, however, the Fed moved aggressively to stimulate economic
growth by cutting interest rates by one-half of a percentage point at the start
of the month. As further evidence of its resolve to prevent a recession, the Fed
cut interest rates by another half-point at its scheduled meetings at the end of
January and again in March. Yields of tax-exempt bonds continued to move lower
in this new environment.
Part of the municipal bond market's strong price performance during the period
was the result of investors fleeing a declining stock market. During the first
quarter of 2001, however, the supply of new municipal bond issues began to build
after an anemic year of new issuance in 2000. States and municipalities have
issued more bonds because of lower borrowing costs and, in some cases, because
economic weakness has threatened to reduce tax revenues. These supply-and-demand
influences generally caused municipal bond yields to decline less than those of
comparable taxable securities. We also generally maintained a long maturity
structure, helping to lock in then prevailing yields as interest rates fell.
From a securities selection perspective, we replaced maturing or called bonds
with new securities that we considered good values, such as bonds from South
Carolina, Washington, D.C. and New York that are backed by litigation
settlements with the nation's tobacco companies.
In addition, declining interest rates benefited the fund because of
commensurately lower yields on the fund's auction-rate preferred notes, which
were issued in September 1999. Lower interest rates reduced the fund's borrowing
costs, leaving more assets available for investment.
What is the fund's current strategy?
We have maintained our emphasis on seeking high current income. While we have
focused primarily on higher quality investment-grade bonds, recent widening of
the yield differences between higher quality and lower quality investment-grade
bonds makes the latter's income characteristics more attractive. Of course, we
intend to remain diligent in our independent credit analyses of any bonds we may
consider.
April 16, 2001
(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
STATEMENT OF INVESTMENTS
March 31, 2001 (Unaudited)
Principal
LONG-TERM MUNICIPAL INVESTMENTS--98.3% Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
ALABAMA--5.3%
Courtland Industrial Development Board, SWDR
(Champion International Corp. Project) 6.50%, 9/1/2025 2,500,000 2,557,625
Jefferson County, Sewer Revenue, Capital Improvement
5.75%, 2/1/2038 (Insured; FGIC) 7,500,000 7,869,075
The Board of Trustees of the University of Alabama, HR
(University of Alabama at Birmingham)
5.875%, 9/1/2031 (Insured; MBIA) 4,620,000 4,890,316
ALASKA--3.9%
Alaska Housing Finance Corp., General Mortgage Revenue
6.05%, 6/1/2039 (Insured; MBIA) 7,000,000 7,285,040
Valdez, Marine Terminal Revenue
(British Petroleum Pipeline Inc. Project) 5.50%, 10/1/2028 4,090,000 4,102,924
CALIFORNIA--5.8%
Abag Financial Authority For Nonprofit Corporations:
Insured Revenue, COP
(Odd Fellows Home of California) 6%, 8/15/2024 5,000,000 5,316,100
MFHR (Civic Center Drive Apartments)
5.875%, 9/1/2032 (Insured; FSA) 3,750,000 3,866,475
California Health Facilities Financing Authority,
Revenue (Sutter Health)
6.25%, 8/15/2035 2,500,000 2,653,650
California Statewide Communties Development Authority, COP
(Catholic Healthcare West) 6.50%, 7/1/2020 5,000,000 5,131,000
COLORADO--1.9%
Colorado Springs, HR 6.375%, 12/15/2030 3,000,000 3,087,600
City and County of Denver, Airport Revenue
(Special Facilities-United Airlines Inc. Project)
6.875%, 10/1/2032 2,480,000 2,482,282
DISTRICT OF COLUMBIA--2.5%
District of Columbia, Revenue
(Catholic University America Project)
5.625%, 10/1/2029 (Insured; AMBAC) 2,080,000 2,161,952
District of Columbia Tobacco Settlement Financing Corp.,
Tobacco Settlement Asset-Backed Bonds 6.75%, 5/15/2040 5,000,000 5,115,300
FLORIDA--5.2%
Orange County Health Facilities Authority, Revenue
(Orlando Regional Healthcare System) 6%, 10/1/2026 1,500,000 1,518,060
Palm Beach County, Solid Waste IDR:
(Okeelanta Power Limited Partnership Project)
6.85%, 2/15/2021 6,950,000 (a) 4,587,000
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
FLORIDA (CONTINUED)
Palm Beach County, Solid Waste IDR (continued):
(Osceola Power Limited Partnership Project)
6.95%, 1/1/2022 2,700,000 (a) 1,782,000
Pinellas County Housing Finance Authority,
SFMR (Multi-County Program)
6.70%, 2/1/2028 3,990,000 4,200,951
South Lake County Hospital District, Revenue
(South Lake Hospital Inc.) 5.80%, 10/1/2034 3,000,000 2,928,600
GEORGIA--2.3%
Private Colleges and Universities Facilities Authority, Revenue
(Clark Atlanta University Project)
8.25%, 1/1/2015 (Prerefunded 1/1/2003) 5,895,000 (b) 6,648,794
ILLINOIS--7.6%
Chicago 6.125%, 1/1/2028 (Insured; FGIC) 4,000,000 4,370,600
Chicago-O'Hare International Airport, Special Facility Revenue
(American Airlines Inc. Project) 8.20%, 12/1/2024 1,000,000 1,118,180
Illinois Development Finance Authority, Revenue
(Community Rehabilitation Providers Facilities
Acquisition Program):
8.75%, 3/1/2010 105,000 105,943
5.50%, 7/1/2012 1,405,000 1,310,711
Illinois Health Facilities Authority, Revenue:
(Advocate Health Care Network) 6.125%, 11/15/2022 5,800,000 5,982,410
(OSF Healthcare System) 6.25%, 11/15/2029 7,000,000 7,110,670
(Swedish American Hospital) 6.875%, 11/15/2030 2,000,000 2,121,820
INDIANA--1.0%
Franklin Township School Building Corp.
(Marion County) First Mortgage
6.125%, 1/15/2022 (Prerefunded 7/15/2010) 2,500,000 (b) 2,901,925
KENTUCKY--1.3%
Perry County, SWDR (TJ International Project) 7%, 6/1/2024 3,500,000 3,663,450
MARYLAND--2.6%
Maryland Health and Higher Educational
Facilities Authority, Revenue
(The John Hopkins University Issue) 6%, 7/1/2039 7,000,000 7,646,100
MASSACHUSETTS--2.0%
Massachusetts Industrial Finance Agency, Revenue
(Water Treatment-American Hingham) 6.95%, 12/1/2035 5,640,000 5,813,881
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
MICHIGAN--5.6%
Hancock Hospital Finance Authority, Mortgage Revenue
(Portgage Health) 5.45%, 8/1/2047 (Insured; MBIA) 2,200,000 2,209,856
Michigan Hospital Finance Authority, HR
(Genesys Health System Obligated Group)
8.125%, 10/1/2021 (Prerefunded 10/1/2005) 7,670,000 (b) 9,197,711
Michigan Strategic Fund, SWDR
(Genesee Power Station Project)
7.50%, 1/1/2021 5,000,000 4,874,250
MINNESOTA--.9%
Minnesota Agricultural and Economic Development Board,
Health Care System Revenue
(Fairview Health Services) 6.375%, 11/15/2029 2,500,000 2,622,750
MISSISSIPPI--1.6%
Mississippi Business Finance Corp., PCR
(System Energy Resource Inc. Project) 5.875%, 4/1/2022 5,000,000 4,743,200
MISSOURI--3.2%
Health and Educational Facilities Autthoriity of the State of Missouri,
Health Facilities Revenue (Saint Anthony's Medical Center)
6.25%, 12/1/2030 2,500,000 2,573,300
The Industrial Development Authority of the City of Saint Louis,
Senior Lien Revenue
(Saint Louis Convention Center Headquarters Hotel Project):
7.20%, 12/15/2028 1,500,000 1,576,140
7.25%, 12/15/2035 3,000,000 3,139,440
Missouri Housing Development Commission, Mortgage Revenue
(Single Family- Homeownersip Loan) 6.30%, 9/1/2025 2,000,000 2,104,640
NEVADA--5.6%
Clark County, IDR:
(Nevada Power Co. Project) 5.90%, 10/1/2030 4,000,000 3,595,440
(Southwest Gas Corp.):
7.50%, 9/1/2032 3,000,000 3,107,010
6.50%, 12/1/2033 5,300,000 5,304,664
6.10%, 12/1/2038 (Insured; AMBAC) 4,000,000 4,290,960
NEW HAMPSHIRE--2.6%
New Hampshire Industrial Development Authority, PCR
(Public Service Co. Project) 7.65%, 5/1/2021 7,500,000 7,661,175
NEW MEXICO--1.0%
Farmington, PCR (Public Service Co. San Juan)
6.30%, 12/1/2016 3,000,000 3,013,050
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
NEW YORK--2.0%
Monroe Tobacco Asset Securitization Corp.,
Tobacco Settlement Revenue
6.375%, 6/1/2035 2,500,000 2,592,500
New York City 8.25%, 11/15/2010
(Prerefunded 11/15/2001) 3,000,000 (b) 3,139,860
NORTH CAROLINA--.9%
North Carolina Housing Finance Agency (Home Ownership)
6.25%, 1/1/2029 2,500,000 2,624,475
NORTH DAKOTA--.1%
North Dakota Housing Finance Agency,
SFMR 8.30%, 1/1/2012 319,400 324,622
OHIO--2.1%
Cuyahoga County, Hospital Improvement Revenue
(The Metrohealth System Project) 6.125%, 2/15/2024 5,000,000 5,049,350
Ohio Housing Finance Agency, Residential Mortgage Revenue
5.75%, 9/1/2030 1,000,000 1,022,970
OKLAHOMA--.9%
Oklahoma Development Finance Authority, Revenue
(Saint John Health System) 6%, 2/15/2029 2,500,000 2,648,775
PENNSYLVANIA--2.1%
Pennsylvania Economic Development Financing Authority:
Exempt Facilities Revenue (Amtrak Project)
6.375%, 11/1/2041 2,500,000 2,524,550
RRR (Northampton Generating Project) 6.60%, 1/1/2019 3,500,000 3,477,845
SOUTH CAROLINA--3.1%
Medical University, Hospital Facilities Revenue
6%, 7/1/2019 2,500,000 2,625,525
Piedmont Municipal Power Agency, Electric Revenue:
6.55%, 1/1/2016 880,000 879,938
5.25%, 1/1/2021 3,000,000 2,672,940
Tobacco Settlement Revenue Management Authority,
Tobacco Settlement Asset--Backed Bonds
6.375%, 5/15/2028 2,900,000 2,883,441
TEXAS--6.4%
Alliance Airport Authority Inc., Special Facilities Revenue
(American Airlines Inc. Project) 7.50%, 12/1/2029 2,375,000 2,427,084
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
TEXAS (CONTINUED)
Dallas-Fort Worth International Airport Facility
Improvement Corp., Revenue
(American Airlines, Inc.) 6.375%, 5/1/2035 2,500,000 2,513,200
Gregg County Health Facilities Development Corp., HR
(Good Shepherd Medical Center Project)
6.375%, 10/1/2025 2,500,000 2,681,875
Port of Corpus Christi Authority, Nueces County,
General Revenue (Union Pacific) 5.65%, 12/1/2022 4,000,000 3,583,840
Texas, Veterans Housing Assistance Program
6.10%, 6/1/2031 7,000,000 7,382,620
UTAH--2.2%
Carbon County, SWDR (Sunnyside Cogeneration):
7.10%, 8/15/2023 3,485,000 3,535,567
Zero Coupon, 8/15/2024 1,080,000 208,116
Utah Housing Finance Agency, Single Family Mortgage
6%, 1/1/2031 2,490,000 2,598,240
VERMONT--1.1%
Vermont Housing Finance Agency, Single Family Housing
6.40%, 11/1/2030 (Insured; FSA) 3,000,000 3,175,890
WASHINGTON--2.5%
Public Utility District No. 1 of Pend Orielle County,
Electric Revenue 6.375%, 1/1/2015 2,000,000 2,111,800
Washington Higher Education Facilities Authority, Revenue
(Whitman College Project) 5.875%, 10/1/2029 5,000,000 5,234,800
WEST VIRGINIA--4.3%
Braxton County, SWDR (Weyerhaeuser Co. Project):
6.50%, 4/1/2025 5,000,000 5,113,100
5.80%, 6/1/2027 7,450,000 7,502,821
WISCONSIN--3.1%
Wisconsin Health and Educational Facilities Authority, Revenue
(Aurora Health Care, Inc.) 5.60%, 2/15/2029 5,750,000 4,951,325
Wisconsin Housing and Economic Development Authority,
Home Ownership Revenue 5.75%, 9/1/2028 4,000,000 4,055,720
WYOMING--1.1%
Sweetwater County, SWDR (FMC Corp. Project)
7%, 6/1/2024 3,000,000 3,060,660
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
U.S. RELATED--4.5%
Puerto Rico Highway and Transportation Authority,
Transportation Revenue:
6.87%, 7/1/2038 (Insured; MBIA) 4,000,000 (c,d) 3,846,960
6.87%, 7/1/2038 5,000,000 (c,d) 4,808,700
Puerto Rico Infrastructure Financing Authority,
Special Tax Revenue, Residual Certficates
6.975%, 7/1/2015 4,000,000 (c,d) 4,271,560
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TOTAL INVESTMENTS (cost $277,663,080) 98.3% 285,874,689
CASH AND RECEIVABLES (NET) 1.7% 5,050,097
NET ASSETS 100.0% 290,924,786
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
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
Summary of Combined Ratings (Unaudited)
Fitch or Moody's or Standard & Poor's Value (%)
------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa AAA 24.7
AA Aa AA 17.8
A A A 24.0
BBB Baa BBB 26.5
Not Rated (e) Not Rated (e) Not Rated (e) 7.0
100.0
(A) NON-INCOME PRODUCING SECURITY; INTEREST PAYMENT IN DEFAULT.
(B) 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.
(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 MARCH 31,
2001, THESE SECURITIES AMOUNTED TO $12,927,220 OR 4.4% OF NET ASSETS.
(D) INVERSE FLOATER SECURITY--THE INTEREST RATE IS SUBJECT TO CHANGE
PERIODICALLY.
(E) 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.
(F) AT MARCH 31, 2001, THE FUND HAD $76,717,346 (26.4%) OF NET ASSETS INVESTED
IN SECURITIES WHOSE PAYMENT OF PRINCIPAL AND INTEREST IS DEPENDENT UPON
REVENUES GENERATED FROM HEALTH CARE PROJECTS.
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2001 (Unaudited)
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 277,663,080 285,874,689
Cash 230,535
Interest receivable 5,165,783
Prepaid expenses 23,199
291,294,206
--------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 185,681
Dividend payable to Preferred Shareholders 27,669
Commissions payable 8,091
Accrued expenses and other liabilities 147,979
369,420
--------------------------------------------------------------------------------
NET ASSETS ($) 290,924,786
--------------------------------------------------------------------------------
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, $.001 per share
(20,382,927 shares issued and outstanding) 20,383
Paid-in capital 188,610,337
Accumulated undistributed investment income--net 187,160
Accumulated net realized gain (loss) on investments (6,104,703)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 8,211,609
Net assets applicable to common shareholders 190,924,786
--------------------------------------------------------------------------------
NET ASSETS ($) 290,924,786
--------------------------------------------------------------------------------
SHARES OUTSTANDING
(110 million shares of $.001 par value Capital Stock authorized) 20,382,927
NET ASSET VALUE, per share of Common Stock 9.37
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2000 (Unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INTEREST INCOME 8,711,006
EXPENSES:
Management fee--Note 3(a) 995,547
Commission fees--Note 1 132,880
Legal fees 88,821
Shareholder servicing costs--Note 3(b) 25,465
Prospectus and shareholders' reports 22,513
Auditing fees 20,083
Registration fees 14,500
Custodian fees--Note 3(b) 10,508
Directors' fees and expenses--Note 3(c) 5,197
Interest expense--Note 2 214
Miscellaneous 21,760
TOTAL EXPENSES 1,337,488
INVESTMENT INCOME--NET 7,373,518
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments 673,185
Net unrealized appreciation (depreciation) on investments 10,389,065
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 11,062,250
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 18,435,768
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
March 31, 2001 Year Ended
(Unaudited) September 30, 2000
--------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 7,373,518 15,074,014
Net realized gain (loss) on investments 673,185 (1,054,513)
Net unrealized appreciation (depreciation)
on investments 10,389,065 (662,672)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 18,435,768 13,356,829
--------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net:
Common Stock (5,381,093) (10,762,185)
Preferred Stock (1,951,677) (4,007,246)
TOTAL DIVIDENDS (7,332,770) (14,769,431)
--------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS ($):
Offering cost to paid-in capital resulting
from the issuance of Preferred Stock 30,000 (110,503)
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL STOCK TRANSACTIONS 30,000 (110,503)
TOTAL INCREASE (DECREASE) IN NET ASSETS 11,132,998 (1,523,105)
--------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 279,791,788 281,314,893
END OF PERIOD 290,924,786 279,791,788
Undistributed investment income--net 187,160 146,412
--------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (COMMON SHARES):
INCREASE IN COMMON SHARES OUTSTANDING AS A
RESULT OF DIVIDENDS REINVESTED -- --
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements and, with respect to common stock, market price data for the fund's
common shares.
Six Months Ended
March 31, 2001 Year Ended September 30,
----------------------------------------------------------------
(Unaudited) 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value, beginning of period 8.82 8.90 9.71 9.55 9.60 9.74
Investment Operations:
Investment income--net .36 .74 .53 .55 .61 .64
Net realized and unrealized
gain (loss) on investments .55 (.08) (.73) .21 (.02) (.16)
Total from Investment Operations .91 .66 (.20) .76 .59 .48
Distributions:
Dividends from
investment income--net:
Common Stock (.26) (.53) (.54) (.60) (.64) (.62)
Preferred Stock (.10) (.20) (.01) -- -- --
Total Distributions (.36) (.73) (.55) (.60) (.64) (.62)
Capital Stock transaction--net
effect of Preffered Stock offering .00(a) (.01) (.06) -- -- --
Net asset value, end of period 9.37 8.82 8.90 9.71 9.55 9.60
Market value, end of period 8.85 7 7/8 7 5/8 9 11/16 10 3/8 9 9/16
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (b) 32.25(c) 10.71 (16.35) (.69) 15.90 8.83
Six Months Ended
March 31, 2001 Year Ended September 30,
------------------------------------------------------------------
(Unaudited) 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average
net assets applicable to
Common Stock 1.45(c,d,e) 1.48(d,e) .85(d,e) .82 .82 .83
Ratio of net investment
income to average
net assets applicable to
Common Stock 7.98(c,d,e) 8.64(d,e) 5.72 5.75 6.36 6.61
Portfolio Turnover Rate 8.41(f) 22.47 35.55 8.84 10.67 8.56
Asset coverage of Preferred Stock,
end of period 291 280 281 -- -- --
Net Assets, net of Preferred stock,
end of period ($ x 1,000) 190,925 179,792 181,315 197,505 193,578 193,165
Preferred Stock outstanding,
end of period ($ x 1,000) 100,000 100,000 100,000 -- -- --
(A) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE.
(B) CALCULATED BASED ON MARKET VALUE.
(C) ANNUALIZED.
(D) DOES NOT REFLECT THE EFFECT OF DIVIDENDS TO PREFERRED STOCK SHAREHOLDERS.
(E) THE RATIO OF EXPENSES TO TOTAL AVERAGE NET ASSETS AND THE RATIO OF NET
INVESTMENT INCOME TO TOTAL AVERAGE NET ASSETS WERE .94% AND 5.18%,
RESPECTIVELY, FOR THE SIX MONTHS ENDED MARCH 31, 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.
(F) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
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. The fund's Common Stock trades on the New York Stock Exchange under
the ticker symbol DMF.
The fund issued 2,000 shares of Series A and 2,000 shares of Series B Auction
Preferred Stock ("APS"), with a liquidation preference of $25,000 per share
(plus an amount equal to accumulated but unpaid dividends upon liquidation). APS
dividend rates are determined pursuant to periodic auctions. Bankers Trust, 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 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.
(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
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
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.
In November 2000 the American Institute of Certified Public Accountants
("AICPA") issued a revised version of the AICPA Audit and Accounting Guide for
Investment Companies (the "Guide"). The revised version of the Guide is
effective for financial statements issued for fiscal years beginning after
December 15, 2000. One of the new provisions in the Guide requires investment
companies to amortize market discount on municipal securities which the fund
does not currently do. Upon adoption, the fund will be required to record a
cumulative effect adjustment to conform with accounting principles generally
accepted in the United States. The effect of this adjustment will be to increase
accumulated net investment income with an offsetting decrease to accumulated
unrealized appreciation (depreciation) on securities. This adjustment will
therefore, have no effect on the net assets of the fund.
(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 29, 2001, the Board of Directors declared a cash dividend to Common
Shareholders of $.044 per share from investment income-net, payable on April 27,
2001 to Common Shareholders of record as of the close of business on April 12,
2001.
(d) Dividends to shareholders of APS: For APS, dividends are currently reset
every 7 days. The dividend rates in effect at March 31, 2001 were as follows:
Series A 3.35% and Series B 3.40%.
(e) Federal income taxes: It is the policy of the fund to continue to qualify as
a regulated investment company, which can distribute tax exempt dividends, by
complying with the applicable provisions of the Internal Revenue Code of 1986,
as amended and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes
The fund has an unused capital loss carryover of approximately $6,148,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to September 30, 2000. The
amount is calculated based on Federal income tax regulations which may differ
from financial reporting in accordance with accounting principles generally
accepted in the United States. If not applied, $5,000,000 of the carryover
expires in fiscal 2004 and $1,148,000 expires in fiscal 2008.
NOTE 2--Bank Line of Credit:
The fund participates with other Dreyfus-managed funds in a $100 million
unsecured line of credit primarily to be utilized for temporary or emergency
purposes. Interest is charged to the fund based on prevailing market rates in
effect at the time of borrowings.
During the period ended March 32, 2001, the fund did not borrow under the line
of credit.
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
NOTE 3--Management Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .70 of 1% of the value of the
fund' s average daily net assets and is payable monthly. The Agreement provides
that if in any full fiscal year the aggregate expenses of the fund, exclusive of
taxes, interest on borrowings, brokerage fees and extraordinary expenses, exceed
the expense limitation of any state having jurisdiction over the fund, the fund
may deduct from payments to be made to the Manager, or the Manager will bear the
amount of such excess to the extent required by state law. There was no expense
reimbursement for the period ended March 31, 2001.
(b) The fund compensates Mellon under a transfer agency agreement for providing
personnel and facilities to perform transfer agency services for the fund.
During the period ended September 30, 2000, the fund was charged $25,465
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, 2001, the fund was
charged $10,508 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"). Each Board member who is not
an "affiliated person" as defined in the Act receives an annual fee of $45,000
and an attendance fee of $5000 for each in person meeting and $500 for telephone
meetings. These fees are allocated among the funds in the Fund Group. The
Chairman of the Board receives an additional 25% of such compensation. Subject
to the fund' s Emeritus Program Guidelines, Emeritus Board members, if any,
receive 50% of the fund's annual retainer fee and per meeting fee paid at the
time the Board member achieves emeritus status.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities, during the period ended March 31, 2001, amounted to
$26,532,759 and $23,423,736, respectively.
At March 31, 2001, accumulated net unrealized appreciation on investments was
$8,211,609, consisting of $13,529,563 gross unrealized appreciation and
$5,317,954 gross unrealized depreciation.
At March 31, 2001, 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
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*
Arthur A. Hartman
George L. Perry
* AUCTION PREFERRED STOCK DIRECTORS
OFFICERS
President
Stephen E. Canter
Vice President
Mark N. Jacobs
Vice President and Treasurer
Joseph Connolly
Executive Vice President
Joseph P. Darcy
Secretary
Michael A. Rosenberg
Assistant Secretary
Robert R. Mullery
Assistant Secretary
Steven F. Newman
Assistant Treasurer
Gregory S. Gruber
PORTFOLIO MANAGERS
Joseph P. Darcy
A. Paul Disdier
Douglas J. Gaylor
Joseph A. Irace
PORTFOLIO MANAGERS (CONTINUED)
Colleen A. Meehan
Richard J. Moynihan
W. Michael Petty
Scott Sprauer
Samuel J. Weinstock
Monica S. Wieboldt
INVESTMENT ADVISER
The Dreyfus Corporation
CUSTODIAN
Mellon Bank, N.A.
COUNSEL
Stroock & Stroock & Lavan LLP
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR
Mellon Bank N.A. (Common Stock)
Bankers Trust (Auction Preferred Stock)
AUCTION AGENT
Bankers Trust (Auction Preferred Stock)
STOCK EXCHANGE LISTING
NYSE Symbol: DMF
INITIAL SEC EFFECTIVE DATE
10/21/88
THE NET ASSET VALUE APPEARS IN THE FOLLOWING PUBLICATIONS: BARRON'S, CLOSED-END
BOND FUNDS SECTION UNDER THE HEADING "MUNICIPAL BOND FUNDS" EVERY MONDAY; WALL
STREET JOURNAL, MUTUAL FUNDS SECTION UNDER THE HEADING "CLOSED-END FUNDS" EVERY
MONDAY; NEW YORK TIMES, BUSINESS SECTION UNDER THE HEADING "CLOSED-END BOND
FUNDS--NATIONAL MUNICIPAL BOND FUNDS" EVERY SUNDAY.
NOTICE IS HEREBY GIVEN IN ACCORDANCE WITH SECTION 23(C) OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED, THAT THE FUND MAY PURCHASE SHARES OF ITS COMMON
STOCK IN THE OPEN MARKET WHEN IT CAN DO SO AT PRICES BELOW THE THEN CURRENT NET
ASSET VALUE PER SHARE.
The Fund
For More Information
Dreyfus Municipal Income, Inc.
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent &
Dividend Disbursing Agent
and Registrar
(Common Stock)
Mellon Bank, N.A.
85 Challenger Road
Ridgefield Park, NJ 07660
(c) 2001 Dreyfus Service Corporation 424SA0301