| 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 811-05652 |
| 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 area code: (212) 922-6000 |
| Date of fiscal year end: | 9/30 | |
| Date of reporting period: | 3/31/06 |
| FORM N-CSR |
| Item 1. | Reports to Stockholders. |
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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 | ||
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| 2 | Letter from the Chairman | |
| 3 | Discussion of Fund Performance | |
| 6 | Statement of Investments | |
| 17 | Statement of Assets and Liabilities | |
| 18 | Statement of Operations | |
| 19 | Statement of Changes in Net Assets | |
| 20 | Financial Highlights | |
| 22 | Notes to Financial Statements | |
| 29 | Officers and Directors | |
| FOR MORE INFORMATION | ||
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| Back Cover | ||
| Dreyfus |
| Municipal Income, Inc. |
The Fund
LETTER FROM THE CHAIRMAN
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Municipal Income, Inc., covering the six-month period from October 1, 2005, through March 31, 2006.
Although short-term interest rates continued to rise steadily over the past six months, municipal bonds prices declined only slightly, primarily due to robust investor demand for a more limited supply of newly issued securities. However, longer-maturity bonds generally held more of their value than short- and intermediate-term securities.As a result, yield differences between two-year and 30-year high-grade municipal bonds narrowed to slightly more than half a percentage point as of the end of the reporting period, which was steeper than the U.S.Treasury yield curve but still considerably narrower than historical norms.
Recent economic data have been mixed and inflation appeared to remain contained at the end of the first quarter, conditions that could continue to support longer-term bond prices. In addition, our chief economist, Richard Hoey, currently expects continued economic growth, with any slack in consumer spending likely to be taken up by corporate capital investment, exports and non-residential construction. However, if yield differences among tax-exempt bonds widen and move closer to historical averages, shorter maturities may begin to fare better than longer maturities.As always, we encourage you to talk with your financial advisor to discuss investment options and portfolio allocations that may be suitable for you in this environment.
For more information about how the fund performed, as well as information on market perspectives, we have provided a Discussion of Fund Performance given by the fund’s portfolio manager.
Thank you for your continued confidence and support.
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Stephen E. Canter Chairman and Chief Executive Officer The Dreyfus Corporation |
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April 17, 2006 |
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2 |
DISCUSSION OF FUND PERFORMANCE
Joseph P. Darcy, Senior Portfolio Manager
How did Dreyfus Municipal Income, Inc. perform during the reporting period?
For the six-month period ended March 31,2006,the fund achieved a total return of 1.75% .1 During the same period,the fund provided income dividends of $0.27 per share, which is equal to a distribution rate of 6.06% .2
Despite rising interest rates throughout the reporting period, longer-term municipal bond prices continued to hold up relatively well due to persistently low inflation and robust investor demand.Although the fund fared well in this environment due to strong income from its seasoned, core holdings, the fund reduced its dividend declared in January due to lower levels of investment income from newly purchased securities and higher borrowing costs associated with rising short-term interest rates on the fund’s auction preferred stock.
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 have constructed a portfolio by looking for income opportunities through analysis of each bond’s structure, including paying close attention to a bond’s yield, maturity and early redemption features.
Over time, many of the fund’s relatively higher yielding bonds mature or are redeemed by their issuers, and we generally attempt to replace
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The Fund 3 |
|
DISCUSSION OF FUND PERFORMANCE (continued) |
those bonds with investments consistent with the fund’s investment policies, albeit with yields that reflect the then-current interest-rate environment.When we believe that an opportunity presents itself, we seek to upgrade the portfolio’s investments with bonds that, in our opinion, have better structural or income characteristics than existing holdings. When such opportunities arise, we usually will look to sell bonds that are close to redemption or maturity.
What other factors influenced the fund’s performance?
The reporting period generally continued to be characterized by rising short-term interest rates and surprisingly stable longer-term rates. The Federal Reserve Board (the “Fed”) implemented four more increases in the overnight federal funds rate, driving it to 4.75% by the reporting period’s end. Short-term municipal bond yields rose along with the Fed’s interest-rate target.While longer-term bond yields also climbed somewhat, they rose less than short-term yields, contributing to a further narrowing of yield differences (known as “spreads”) between the short and long ends of the market’s maturity range. However, market volatility increased during the reporting period when the retirement of Fed Chairman Alan Greenspan and the appointment of his successor, Ben Bernanke, added a degree of uncertainty to the outlook for interest rates.
In addition, the fund’s results were influenced by supply-and-demand factors within the municipal bond market.The steadily growing U.S. economy benefited the fiscal conditions of most states and municipalities, helping to reduce unemployment and boost corporate and personal incomes. Consequently, many states enjoyed higher tax revenues, reducing their borrowing needs. However, investor demand generally remained robust, putting downward pressure on bond yields and supporting their prices.
In this environment, the fund continued to receive strong income contributions from its core holding of seasoned bonds, which were purchased with significantly higher yields than are available today. Some of those holdings were redeemed early, or “called,” by their
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4 |
issuers during the reporting period. Because we were unable to find securities with comparable yields and prices in today’s marketplace, the fund generated incrementally less income, contributing to an adjustment in the fund’s dividend distribution rate in January.
When making new purchases, we generally maintained our strategy of emphasizing bonds with maturities toward the longer end of the maturity range.We focused mainly on premium-priced bonds that are subject to redemption prior to maturity. In our view, bonds with these characteristics are likely to retain their value should interest rates continue to rise.
What is the fund’s current strategy?
Although some analysts recently have forecast the impending end of the Fed’s credit tightening campaign, recent strong economic data suggest to us that some additional rate-hikes may be expected over the months ahead. Therefore, we generally have maintained the fund’s investment posture, emphasizing longer-term securities bearing premium dollar price structures over shorter-term ones. In addition, we have adopted a relatively defensive “average duration” in order to manage effectively the fund’s overall sensitivity to changing interest rates. However, we are watching the economy and municipal bond market carefully, and we are prepared to adjust our strategies when we see more definite evidence that short-term interest rates have peaked.
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April 17, 2006 |
| 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. |
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The Fund 5 |
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STATEMENT OF INVESTMENTS March 31, 2006 (Unaudited) |
| Long-Term Municipal | Coupon | Maturity | Principal | |||||
| Investments—146.5% | Rate (%) | Date | Amount ($) | Value ($) | ||||
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| Alabama—8.8% | ||||||||
| Jefferson County, | ||||||||
| Limited Obligation School | ||||||||
| Warrants | 5.50 | 1/1/21 | 4,000,000 | 4,302,320 | ||||
| Jefferson County, | ||||||||
| Sewer Revenue, Capital | ||||||||
| Improvement (Insured; FGIC) | 5.75 | 2/1/09 | 7,500,000 a | 7,991,325 | ||||
| The Board of Trustees of the | ||||||||
| University of Alabama, HR | ||||||||
| (University of Alabama at | ||||||||
| Birmingham) (Insured; MBIA) | 5.88 | 9/1/31 | 4,620,000 | 5,011,406 | ||||
| Alaska—3.6% | ||||||||
| Alaska Housing Finance Corp., | ||||||||
| General Mortgage Revenue | ||||||||
| (Insured; MBIA) | 6.05 | 6/1/39 | 6,845,000 | 7,061,234 | ||||
| Arkansas—1.5% | ||||||||
| Independence County, | ||||||||
| PCR (Entergy Arkansas Inc. | ||||||||
| Project) | 5.00 | 1/1/21 | 3,000,000 | 3,037,560 | ||||
| California—13.0% | ||||||||
| ABAG Financial Authority for | ||||||||
| Nonprofit Corps., Insured | ||||||||
| Revenue, COP (Odd Fellows Home | ||||||||
| of California) | 6.00 | 8/15/24 | 5,000,000 | 5,169,750 | ||||
| California Department of Veteran | ||||||||
| Affairs, Home Purchase Revenue | 5.20 | 12/1/28 | 5,000,000 | 5,002,450 | ||||
| California Health Facilities | ||||||||
| Financing Authority, Revenue | ||||||||
| (Sutter Health) | 6.25 | 8/15/35 | 2,500,000 | 2,767,275 | ||||
| California Statewide Communities | ||||||||
| Development Authority, COP | ||||||||
| (Catholic Healthcare West) | 6.50 | 7/1/10 | 3,545,000 a | 3,965,862 | ||||
| California Statewide Communities | ||||||||
| Development Authority, COP | ||||||||
| (Catholic Healthcare West) | 6.50 | 7/1/20 | 1,455,000 | 1,598,187 | ||||
| Golden State Tobacco | ||||||||
| Securitization Corp., Enhanced | ||||||||
| Tobacco Settlement | ||||||||
| Asset-Backed Bonds | 5.00 | 6/1/45 | 3,500,000 | 3,560,270 | ||||
|
6 |
| Long-Term Municipal | Coupon | Maturity | Principal | |||||
| Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
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| California (continued) | ||||||||
| Golden State Tobacco | ||||||||
| Securitization Corp., Tobacco | ||||||||
| Settlement Asset-Backed Bonds | 7.80 | 6/1/42 | 3,000,000 | 3,583,230 | ||||
| Colorado—4.5% | ||||||||
| Colorado Springs, | ||||||||
| HR | 6.38 | 12/15/10 | 2,835,000 a | 3,167,149 | ||||
| Colorado Springs, | ||||||||
| HR | 6.38 | 12/15/30 | 2,890,000 | 3,129,841 | ||||
| Denver City and County, | ||||||||
| Special Facilities Airport | ||||||||
| Revenue (United Airlines | ||||||||
| Project) | 6.88 | 10/1/32 | 2,480,000 b | 2,526,500 | ||||
| District of Columbia—2.0% | ||||||||
| District of Columbia, | ||||||||
| Revenue (Catholic University | ||||||||
| America Project) (Insured; | ||||||||
| AMBAC) | 5.63 | 10/1/29 | 2,080,000 | 2,209,938 | ||||
| District of Columbia Housing | ||||||||
| Finance Agency, SFMR | ||||||||
| (Collateralized: FHA, FNMA, | ||||||||
| GNMA and GIC; Trinity Funding) | 7.45 | 12/1/30 | 1,650,000 | 1,689,187 | ||||
| Florida—1.4% | ||||||||
| Orange County Health Facilities | ||||||||
| Authority, HR (Orlando | ||||||||
| Regional Healthcare System) | 6.00 | 10/1/26 | 1,500,000 | 1,584,705 | ||||
| South Lake County Hospital | ||||||||
| District, Revenue (South Lake | ||||||||
| Hospital Inc.) | 5.80 | 10/1/34 | 1,095,000 | 1,136,117 | ||||
| Georgia—.5% | ||||||||
| Milledgeville-Baldwin County | ||||||||
| Development Authority, | ||||||||
| Revenue (Georgia College and | ||||||||
| State University Foundation | ||||||||
| Property III, LLC Student | ||||||||
| Housing System Project) | 5.25 | 9/1/19 | 1,000,000 | 1,031,950 | ||||
| Illinois—10.5% | ||||||||
| Chicago | ||||||||
| (Insured; FGIC) | 6.13 | 7/1/10 | 3,685,000 a | 4,066,250 |
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The Fund 7 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| Long-Term Municipal | Coupon | Maturity | Principal | |||||
| Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
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| Illinois (continued) | ||||||||
| Chicago | ||||||||
| (Insured; FGIC) | 6.13 | 7/1/10 | 315,000 a | 347,590 | ||||
| Illinois Development Finance | ||||||||
| Authority, Revenue (Community | ||||||||
| Rehabilitation Providers | ||||||||
| Facilities Acquisition Program) | 8.75 | 3/1/10 | 65,000 | 65,614 | ||||
| Illinois Health Facilities | ||||||||
| Authority, Revenue (Advocate | ||||||||
| Health Care Network) | 6.13 | 11/15/10 | 5,800,000 a | 6,381,914 | ||||
| Illinois Health Facilities | ||||||||
| Authority, Revenue (OSF | ||||||||
| Healthcare System) | 6.25 | 11/15/09 | 7,000,000 a | 7,654,640 | ||||
| Illinois Health Facilities | ||||||||
| Authority, Revenue (Swedish | ||||||||
| American Hospital) | 6.88 | 5/15/10 | 2,000,000 a | 2,227,340 | ||||
| Indiana—1.4% | ||||||||
| Franklin Township School Building | ||||||||
| Corp., First Mortgage | 6.13 | 7/15/10 | 2,500,000 a | 2,776,725 | ||||
| Kansas—1.3% | ||||||||
| Unified Government of Wyandotte | ||||||||
| County/Kansas City, Tax-Exempt | ||||||||
| Sales Tax Special Tax | ||||||||
| Obligation Revenue | ||||||||
| (Redevelopment Project Area B) | 5.00 | 12/1/20 | 2,500,000 | 2,566,375 | ||||
| Maryland—5.0% | ||||||||
| Maryland Economic Development | ||||||||
| Corp., Student Housing Revenue | ||||||||
| (University of Maryland, | ||||||||
| College Park Project) | 5.63 | 6/1/13 | 2,000,000 a | 2,201,300 | ||||
| Maryland Health and Higher | ||||||||
| Educational Facilities | ||||||||
| Authority, Revenue (The John | ||||||||
| Hopkins University Issue) | 6.00 | 7/1/09 | 7,000,000 a | 7,569,450 | ||||
| Massachusetts—7.8% | ||||||||
| Massachusetts Bay Transportation | ||||||||
| Authority, Assessment | 5.00 | 7/1/14 | 5,000,000 a | 5,353,550 | ||||
| Massachusetts Development Finance | ||||||||
| Agency, SWDR (Dominion Energy | ||||||||
| Brayton Point Issue) | 5.00 | 2/1/36 | 2,000,000 | 2,021,600 | ||||
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8 |
| Long-Term Municipal | Coupon | Maturity | Principal | |||||
| Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
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| Massachusetts (continued) | ||||||||
| Massachusetts Health and | ||||||||
| Educational Facilities | ||||||||
| Authority, Healthcare System | ||||||||
| Revenue (Covenant Health) | 6.00 | 7/1/31 | 2,500,000 | 2,653,125 | ||||
| Massachusetts Industrial Finance | ||||||||
| Agency, Water Treatment | ||||||||
| Revenue | ||||||||
| (Massachusetts-American | ||||||||
| Hingham Project) | 6.95 | 12/1/35 | 5,235,000 | 5,349,437 | ||||
| Michigan—3.6% | ||||||||
| Hancock Hospital Finance | ||||||||
| Authority, Mortgage Revenue | ||||||||
| (Portgage Health) (Insured; | ||||||||
| MBIA) | 5.45 | 8/1/47 | 2,200,000 | 2,270,862 | ||||
| Michigan Strategic Fund, | ||||||||
| SWDR (Genesee Power Station | ||||||||
| Project) | 7.50 | 1/1/21 | 4,785,000 | 4,724,661 | ||||
| Minnesota—1.4% | ||||||||
| Minnesota Agricultural and | ||||||||
| Economic Development Board, | ||||||||
| Health Care System Revenue | ||||||||
| (Fairview Health Care Systems) | 6.38 | 11/15/10 | 2,420,000 a | 2,702,632 | ||||
| Minnesota Agricultural and | ||||||||
| Economic Development Board, | ||||||||
| Health Care System Revenue | ||||||||
| (Fairview Health Services) | 6.38 | 11/15/29 | 80,000 | 86,166 | ||||
| Mississippi—3.1% | ||||||||
| Mississippi Business Finance | ||||||||
| Corp., PCR (System Energy | ||||||||
| Resource Inc. Project) | 5.88 | 4/1/22 | 6,000,000 | 6,060,000 | ||||
| Missouri—4.1% | ||||||||
| Missouri Development Finance | ||||||||
| Board, Infrastructure | ||||||||
| Facilities Revenue (Branson | ||||||||
| Landing Project) | 5.00 | 6/1/35 | 2,500,000 | 2,516,275 | ||||
| Missouri Health and Educational | ||||||||
| Facilities Authority, Health | ||||||||
| Facilities Revenue (BJC Health | ||||||||
| System) | 5.25 | 5/15/32 | 2,500,000 | 2,605,150 |
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The Fund 9 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| Long-Term Municipal | Coupon | Maturity | Principal | |||||
| Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
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| Missouri (continued) | ||||||||
| Missouri Health and Educational | ||||||||
| Facilities Authority, Health | ||||||||
| Facilities Revenue (Saint | ||||||||
| Anthony’s Medical Center) | 6.25 | 12/1/10 | 2,500,000 a | 2,781,050 | ||||
| Missouri Housing Development | ||||||||
| Commission, SFMR | ||||||||
| (Homeownership Loan Program) | ||||||||
| (Collateralized: FNMA and GNMA) | 6.30 | 9/1/25 | 195,000 | 196,652 | ||||
| Nevada—2.2% | ||||||||
| Clark County, | ||||||||
| IDR (Southwest Gas Corp.) | ||||||||
| (Insured; AMBAC) | 6.10 | 12/1/38 | 4,000,000 | 4,364,960 | ||||
| New Jersey—.8% | ||||||||
| New Jersey Economic Development | ||||||||
| Authority, Cigarette Tax | ||||||||
| Revenue | 5.50 | 6/15/31 | 1,610,000 | 1,656,416 | ||||
| New Mexico—2.5% | ||||||||
| Farmington, | ||||||||
| PCR (Public Service Co. San | ||||||||
| Juan) | 6.30 | 12/1/16 | 3,000,000 | 3,101,310 | ||||
| New Mexico Mortgage Finance | ||||||||
| Authority, Single Family | ||||||||
| Mortgage Program | ||||||||
| (Collateralized: FHLMC and | ||||||||
| GNMA) | 6.85 | 9/1/31 | 1,790,000 | 1,827,751 | ||||
| New York—2.3% | ||||||||
| Long Island Power Authority, | ||||||||
| Electric System Revenue | 5.00 | 9/1/27 | 1,500,000 | 1,541,550 | ||||
| New York State Dormitory | ||||||||
| Authority, Catholic Health | ||||||||
| Services of Long Island | ||||||||
| Obligated Group Revenue (Saint | ||||||||
| Francis Hospital Project) | 5.00 | 7/1/27 | 2,930,000 | 2,946,496 | ||||
| North Carolina—6.0% | ||||||||
| Gaston County Industrial | ||||||||
| Facilities and Pollution | ||||||||
| Control Financing Authority, | ||||||||
| Exempt Facilities Revenue | ||||||||
| (National Gypsum Co. Project) | 5.75 | 8/1/35 | 1,500,000 | 1,573,425 |
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10 |
| Long-Term Municipal | Coupon | Maturity | Principal | |||||
| Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
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| North Carolina (continued) | ||||||||
| North Carolina Capital Facilities | ||||||||
| Finance Agency, Revenue | ||||||||
| (Duke University Project) | 5.25 | 7/1/42 | 5,000,000 | 5,225,950 | ||||
| North Carolina Eastern Municipal | ||||||||
| Power Agency, Power System | ||||||||
| Revenue | 5.13 | 1/1/26 | 3,000,000 | 3,092,910 | ||||
| North Carolina Housing | ||||||||
| Finance Agency | ||||||||
| (Home Ownership) | 6.25 | 1/1/29 | 1,860,000 | 1,926,793 | ||||
| Ohio—4.8% | ||||||||
| Cuyahoga County, | ||||||||
| Hospital Improvement Revenue | ||||||||
| (The Metrohealth System | ||||||||
| Project) | 6.13 | 2/15/09 | 5,000,000 a | 5,373,700 | ||||
| Ohio Housing Finance Agency, | ||||||||
| Residential Mortgage Revenue | ||||||||
| (Collateralized; GNMA) | 5.75 | 9/1/30 | 180,000 | 181,136 | ||||
| Rickenbacker Port Authority, | ||||||||
| Capital Funding Revenue | ||||||||
| (OASBO Expanded Asset Pooled) | 5.38 | 1/1/32 | 3,590,000 | 3,845,895 | ||||
| Oklahoma—1.4% | ||||||||
| Oklahoma Development Finance | ||||||||
| Authority, Revenue (Saint John | ||||||||
| Health System) | 6.00 | 2/15/29 | 2,500,000 | 2,658,325 | ||||
| Pennsylvania—7.7% | ||||||||
| Delaware County Industrial | ||||||||
| Development Authority, Water | ||||||||
| Facilities Revenue (Aqua | ||||||||
| Pennsylvania, Inc. Project) | ||||||||
| (Insured; FGIC) | 5.00 | 11/1/38 | 3,375,000 | 3,458,801 | ||||
| Pennsylvania Economic | ||||||||
| Development Financing | ||||||||
| Authority, RRR | ||||||||
| (Northampton Generating | ||||||||
| Project) | 6.60 | 1/1/19 | 3,500,000 | 3,518,375 | ||||
| Sayre Health Care Facilities | ||||||||
| Authority, Revenue | ||||||||
| (Guthrie Health) | 5.88 | 12/1/31 | 7,750,000 | 8,249,487 |
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The Fund 11 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| Long-Term Municipal | Coupon | Maturity | Principal | |||||
| Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
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| South Carolina—9.4% | ||||||||
| Lancaster Educational Assistance | ||||||||
| Program, Inc., Installment | ||||||||
| Purchase Revenue (The School | ||||||||
| District of Lancaster County, | ||||||||
| South Carolina, Project) | 5.00 | 12/1/26 | 5,000,000 | 5,042,350 | ||||
| Medical University of South | ||||||||
| Carolina, Hospital Facilities | ||||||||
| Revenue | 6.00 | 7/1/09 | 2,500,000 a | 2,695,375 | ||||
| Piedmont Municipal Power Agency, | ||||||||
| Electric Revenue | 5.25 | 1/1/21 | 3,500,000 | 3,533,355 | ||||
| Tobacco Settlement Revenue | ||||||||
| Management Authority, Tobacco | ||||||||
| Settlement Asset-Backed Bonds | 6.38 | 5/15/28 | 2,900,000 | 3,109,380 | ||||
| Tobacco Settlement Revenue | ||||||||
| Management Authority, Tobacco | ||||||||
| Settlement Asset-Backed Bonds | 6.38 | 5/15/30 | 3,750,000 | 4,182,450 | ||||
| Texas—13.6% | ||||||||
| Cities of Dallas and Fort Worth, | ||||||||
| Dallas/Fort Worth | ||||||||
| International Airport, Joint | ||||||||
| Revenue Improvement (Insured; | ||||||||
| FSA) | 5.00 | 11/1/35 | 2,500,000 | 2,514,125 | ||||
| Gregg County Health Facilities | ||||||||
| Development Corp., HR (Good | ||||||||
| Shephard Medical Center | ||||||||
| Project) (Insured; Radian) | 6.38 | 10/1/25 | 2,500,000 | 2,747,525 | ||||
| Harris County Health Facilities | ||||||||
| Development Corp., HR | ||||||||
| (Memorial Hermann Healthcare) | 6.38 | 6/1/11 | 3,565,000 a | 4,010,732 | ||||
| Industrial Development Corp. of | ||||||||
| Port of Corpus Christi, | ||||||||
| Revenue (Valero Refining and | ||||||||
| Marketing Co. Project) | 5.40 | 4/1/18 | 2,350,000 | 2,449,899 | ||||
| Port of Corpus Christi Authority | ||||||||
| of Nueces County, Revenue | ||||||||
| (Union Pacific Corp. Project) | 5.65 | 12/1/22 | 4,500,000 | 4,734,090 | ||||
| Sabine River Authority, | ||||||||
| PCR (TXU Energy Co. LLC | ||||||||
| Project) | 6.15 | 8/1/22 | 2,500,000 | 2,732,125 | ||||
|
12 |
| Long-Term Municipal | Coupon | Maturity | Principal | |||||
| Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
|
|
|
|
|
|
||||
| Texas (continued) | ||||||||
| Texas | ||||||||
| (Veterans Housing Assistance | ||||||||
| Program) | 6.10 | 6/1/31 | 7,000,000 | 7,372,470 | ||||
| Utah—1.6% | ||||||||
| Carbon County, | ||||||||
| SWDR (Sunnyside Cogeneration) | 7.10 | 8/15/23 | 2,765,000 | 2,949,370 | ||||
| Utah Housing Finance Agency, | ||||||||
| Single Family Mortgage | ||||||||
| (Collateralized; FHA) | 6.00 | 1/1/31 | 290,000 | 291,183 | ||||
| Vermont—1.2% | ||||||||
| Vermont Educational and Health | ||||||||
| Buildings Financing Agency, | ||||||||
| Revenue (Saint Michael’s | ||||||||
| College Project) | 6.00 | 10/1/28 | 1,500,000 | 1,669,320 | ||||
| Vermont Housing Finance Agency, | ||||||||
| Single Family Housing | ||||||||
| (Insured; FSA) | 6.40 | 11/1/30 | 645,000 | 646,548 | ||||
| Washington—2.7% | ||||||||
| Washington Higher Educational | ||||||||
| Facilities Authority, Revenue | ||||||||
| (Whitman College) | 5.88 | 10/1/09 | 5,000,000 a | 5,359,900 | ||||
| West Virginia—3.9% | ||||||||
| Braxton County, | ||||||||
| SWDR | ||||||||
| (Weyerhaeuser Co. Project) | 5.80 | 6/1/27 | 7,450,000 | 7,643,253 | ||||
| Wisconsin—5.1% | ||||||||
| Badger Tobacco Asset | ||||||||
| Securitization Corp., Tobacco | ||||||||
| Settlement Asset-Backed Bonds | 7.00 | 6/1/28 | 2,500,000 | 2,799,550 | ||||
| Wisconsin Health and Educational | ||||||||
| Facilities Authority, Revenue | ||||||||
| (Aurora Health Care, Inc,) | 5.60 | 2/15/29 | 4,975,000 | 5,096,689 | ||||
| Wisconsin Health and Educational | ||||||||
| Facilities Authority, Revenue | ||||||||
| (Marshfield Clinic) | 5.38 | 2/15/34 | 2,000,000 | 2,074,160 | ||||
| Wyoming—.8% | ||||||||
| Sweetwater County, | ||||||||
| SWDR (FMC Corp. Project) | 5.60 | 12/1/35 | 1,500,000 | 1,558,890 |
|
The Fund 13 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| Long-Term Municipal | Coupon | Maturity | Principal | |||||
| Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
|
|
|
|
|
|
||||
| U.S. Related—7.0% | ||||||||
| Puerto Rico Highway and | ||||||||
| Transportation Authority, | ||||||||
| Transportation Revenue | ||||||||
| (Insured; MBIA) | 6.67 | 7/1/38 | 4,000,000 c,d | 4,234,480 | ||||
| Puerto Rico Highway and | ||||||||
| Transportation Authority, | ||||||||
| Transportation Revenue | ||||||||
| (Insured; MBIA) | 6.67 | 7/1/38 | 5,000,000 c,d | 5,293,100 | ||||
| Puerto Rico Infrastructure | ||||||||
| Financing Authority, Special | ||||||||
| Tax Revenue (Insured; AMBAC) | 6.52 | 7/1/15 | 4,000,000 c,d | 4,267,840 | ||||
| Total Long-Term Municipal Investments | ||||||||
| (cost $270,948,766) | 288,256,053 | |||||||
|
|
|
|
|
|
||||
| Short-Term Municipal Investment—2.0% | ||||||||
|
|
|
|
|
|||||
| Louisiana; | ||||||||
| New Orleans, | ||||||||
| Sewerage Service, BAN | ||||||||
| (cost $3,954,000) | 2.97 | 7/26/06 | 4,000,000 | 3,952,760 | ||||
|
|
|
|
|
|
||||
| Total Investments (cost $274,902,766) | 148.5% | 292,208,813 | ||||||
| Cash And Receivables (Net) | 2.3% | 4,602,988 | ||||||
| Preferred Stock, at redemption value | (50.8%) | (100,000,000) | ||||||
| Net Assets Applicable to | ||||||||
| Common Shareholders | 100.0% | 196,811,801 | ||||||
| a These securities are prerefunded; the date shown represents the prerefunded date. Bonds which are prerefunded are |
| collateralized by U.S. Government securities which are held in escrow and are used to pay principal and interest on |
| the municipal issue and to retire the bonds in full at the earliest refunding date. |
| b Non-income producing security; interest payment in default. |
| c Inverse floater security—the interest rate is subject to periodic change periodically. |
| d Securities exempt from registration under Rule 144A of the Securities Act of 1933.These securities may be resold in |
| transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2006, these securities |
| amounted to $13,795,420 or 7.0% of net assets applicable to common shareholders. |
| e At March 31, 2006, the fund had $51,850,880 or 26.3% 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. |
|
14 |
| Summary of Abbreviations | ||||||
| ACA | American Capital Access | AGC | ACE Guaranty Corporation | |||
| AGIC | Asset Guaranty Insurance | AMBAC | American Municipal Bond | |||
| Company | Assurance Corporation | |||||
| ARRN | Adjustable Rate Receipt Notes | BAN | Bond Anticipation Notes | |||
| BIGI | Bond Investors Guaranty Insurance | BPA | Bond Purchase Agreement | |||
| CGIC | Capital Guaranty Insurance | CIC | Continental Insurance | |||
| Company | Company | |||||
| CIFG | CDC Ixis Financial Guaranty | CMAC | Capital Market Assurance | |||
| Corporation | ||||||
| COP | Certificate of Participation | CP | Commercial Paper | |||
| EDR | Economic Development Revenue | EIR | Environmental Improvement | |||
| Revenue | ||||||
| FGIC | Financial Guaranty Insurance | |||||
| Company | FHA | Federal Housing Administration | ||||
| FHLB | Federal Home Loan Bank | FHLMC | Federal Home Loan Mortgage | |||
| Corporation | ||||||
| FNMA | Federal National | |||||
| Mortgage Association | FSA | Financial Security Assurance | ||||
| GAN | Grant Anticipation Notes | GIC | Guaranteed Investment Contract | |||
| GNMA | Government National | |||||
| Mortgage Association | GO | General Obligation | ||||
| HR | Hospital Revenue | IDB | Industrial Development Board | |||
| IDC | Industrial Development Corporation | IDR | Industrial Development Revenue | |||
| LOC | Letter of Credit | LOR | Limited Obligation Revenue | |||
| LR | Lease Revenue | MBIA | Municipal Bond Investors | |||
| Assurance Insurance | ||||||
| Corporation | ||||||
| MFHR | Multi-Family Housing Revenue | MFMR | Multi-Family Mortgage Revenue | |||
| PCR | Pollution Control Revenue | RAC | Revenue Anticipation | |||
| Certificates | ||||||
| RAN | Revenue Anticipation Notes | RAW | Revenue Anticipation Warrants | |||
| RRR | Resources Recovery Revenue | SAAN | State Aid Anticipation Notes | |||
| SBPA | Standby Bond Purchase Agreement | SFHR | Single Family Housing Revenue | |||
| SFMR | Single Family Mortgage Revenue | SONYMA | State of New York Mortgage | |||
| Agency | ||||||
| SWDR | Solid Waste Disposal Revenue | TAN | Tax Anticipation Notes | |||
| TAW | Tax Anticipation Warrants | TRAN | Tax and Revenue | |||
| Anticipation Notes | ||||||
| XLCA | XL Capital Assurance | |||||
|
The Fund 15 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| Summary of Combined Ratings (Unaudited) | ||||||||||
| Fitch | or Moody’s | or | Standard & Poor’s | Value (%)† | ||||||
|
|
|
|
|
|
||||||
| AAA | Aaa | AAA | 21.6 | |||||||
| AA | Aa | AA | 18.0 | |||||||
| A | A | A | 28.7 | |||||||
| BBB | Baa | BBB | 25.1 | |||||||
| B | B | B | 1.2 | |||||||
| F1 | MIG1/P1 | SP1/A1 | 1.4 | |||||||
| Not Rated f | Not Rated f | Not Rated f | 4.0 | |||||||
| 100.0 | ||||||||||
| † | Based on total investments. | |||||||||
| 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. | ||||||||||
| See notes to financial statements. | ||||||||||
|
16 |
|
STATEMENT OF ASSETS AND LIABILITIES March 31, 2006 (Unaudited) |
| Cost | Value | |||
|
|
|
|
||
| Assets ($): | ||||
| Investments in securities—See Statement of Investments | 274,902,766 | 292,208,813 | ||
| Cash | 4,941 | |||
| Interest receivable | 4,891,508 | |||
| Prepaid expenses | 3,924 | |||
| 297,109,186 | ||||
|
|
|
|
||
| Liabilities ($): | ||||
| Due to The Dreyfus Corporation and affiliates—Note 3(b) | 186,930 | |||
| Dividends payable to Preferred Shareholders | 16,640 | |||
| Commissions payable | 7,413 | |||
| Accrued expenses | 86,402 | |||
| 297,385 | ||||
|
|
|
|
||
| Auction Preferred Stock, Series A and B, | ||||
| par value $.001 per share (4000 shares | ||||
| issued and outstanding at $25,000 per share | ||||
| liquidation preference)—Note 1 | 100,000,000 | |||
|
|
|
|
||
| Net Assets applicable to Common Shareholders ($) | 196,811,801 | |||
|
|
|
|
||
| Composition of Net Assets ($): | ||||
| Common Stock, par value, $.001 per share | ||||
| (20,589,320 shares issued and outstanding) | 20,589 | |||
| Paid-in capital | 185,575,995 | |||
| Accumulated distributions in excess of investment income—net | (68,419) | |||
| Accumulated net realized gain (loss) on investments | (6,022,411) | |||
| Accumulated net unrealized appreciation | ||||
| (depreciation) on investments | 17,306,047 | |||
|
|
|
|
||
| Net Assets applicable to Common Shareholders ($) | 196,811,801 | |||
|
|
|
|
||
| Shares Outstanding | ||||
| (110 million shares authorized) | 20,589,320 | |||
| Net Asset Value, per share of Common Stock ($) | 9.56 | |||
|
See notes to financial statements. |
|
The Fund 17 |
|
STATEMENT OF OPERATIONS Six Months Ended March 31, 2006 (Unaudited) |
| Investment Income ($): | ||
| Interest Income | 8,038,264 | |
| Expenses: | ||
| Management fee—Note 3(a) | 1,038,944 | |
| Commission fees—Note 1 | 132,880 | |
| Prospectus and shareholders’ reports | 32,447 | |
| Professional fees | 31,197 | |
| Custodian fees—Note 3(b) | 26,428 | |
| Shareholder servicing costs—Note 3(b) | 23,024 | |
| Registration fees | 8,333 | |
| Directors’ fees and expenses—Note 3(c) | 4,548 | |
| Interest expense—Note 2 | 776 | |
| Miscellaneous | 19,015 | |
| Total Expenses | 1,317,592 | |
| Investment Income—Net | 6,720,672 | |
|
|
|
|
| Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
| Net realized gain (loss) on investments | 273,347 | |
| Net unrealized appreciation (depreciation) on investments | (2,611,513) | |
| Net Realized and Unrealized Gain (Loss) on Investments | (2,338,166) | |
| Dividends on Preferred Stock | (1,399,503) | |
| Net Increase in Net Assets Resulting from Operations | 2,983,003 | |
|
See notes to financial statements. |
|
18 |
STATEMENT OF CHANGES IN NET ASSETS
| Six Months Ended | ||||
| March 31, 2006 | Year Ended | |||
| (Unaudited) | September 30, 2005 | |||
|
|
|
|
||
| Operations ($): | ||||
| Investment income—net | 6,720,672 | 13,930,895 | ||
| Net realized gain (loss) on investments | 273,347 | 238,665 | ||
| Net unrealized appreciation | ||||
| (depreciation) on investments | (2,611,513) | 4,113,220 | ||
| Dividends on Preferred Stock | (1,399,503) | (1,996,049) | ||
| Net Increase (Decrease) in Net Assets | ||||
| Resulting from Operations | 2,983,003 | 16,286,731 | ||
|
|
|
|
||
| Dividends to Common Shareholders from ($): | ||||
| Investment income—net | (5,559,116) | (12,677,010) | ||
|
|
|
|
||
| Capital Stock Transactions ($): | ||||
| Dividends reinvested | — | 383,217 | ||
| Total Increase (Decrease) in Net Assets | (2,576,113) | 3,992,938 | ||
|
|
|
|
||
| Net Assets ($): | ||||
| Beginning of Period | 199,387,914 | 195,394,976 | ||
| End of Period | 196,811,801 | 199,387,914 | ||
| Undistributed (distribution in excess of) | ||||
| investment income—net | (68,419) | 169,528 | ||
|
|
|
|
||
| Capital Share Transactions (Shares): | ||||
| Increase in Shares Outstanding as a | ||||
| Result of Dividends Reinvested | — | 40,170 | ||
|
See notes to financial statements. |
|
The Fund 19 |
|
FINANCIAL HIGHLIGHTS |
The following table describes the performance for the fiscal periods indicated.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements, and with respect to common stock, market price data for the fund’s common shares.
| Six Months Ended | ||||||||||||
| March 31, 2006 | Year Ended September 30, | |||||||||||
|
|
|
|
||||||||||
| (Unaudited) | 2005 | 2004 | 2003 | 2002a | 2001 | |||||||
|
|
|
|
|
|
|
|
||||||
| Per Share Data ($): | ||||||||||||
| Net asset value, | ||||||||||||
| beginning of period | 9.68 | 9.51 | 9.51 | 9.78 | 9.66 | 8.82 | ||||||
| Investment Operations: | ||||||||||||
| Investment income—net | .33b | .68b | .69b | .72b | .76b | .74 | ||||||
| Net realized and unrealized | ||||||||||||
| gain (loss) on investments | (.18) | .21 | .09 | (.24) | .00c | .79 | ||||||
| Dividends on Preferred Stock | ||||||||||||
| from Investment income—net | (.07) | (.10) | (.06) | (.07) | (.08) | (.16) | ||||||
| Total from | ||||||||||||
| Investment Operations | .08 | .79 | .72 | .41 | .68 | 1.37 | ||||||
| Distributions to | ||||||||||||
| Common Shareholders: | ||||||||||||
| Dividends from investment | ||||||||||||
| income—net | (.27) | (.62) | (.72) | (.68) | (.56) | (.53) | ||||||
| Capital Stock transactions, net | ||||||||||||
| of effect of Preferred | ||||||||||||
| Stock Offering | — | — | — | — | — | .00c | ||||||
| Net asset value, end of period | 9.56 | 9.68 | 9.51 | 9.51 | 9.78 | 9.66 | ||||||
| Market value, end of period | 8.91 | 9.35 | 10.25 | 9.69 | 9.60 | 8.71 | ||||||
|
|
|
|
|
|
|
|
||||||
| Total Return (%) d | (1.82)e,f | (2.58) | 14.08 | 8.48 | 17.28 | 17.55 | ||||||
|
20 |
| Six Months Ended | ||||||||||||
| March 31, 2006 | Year Ended September 30, | |||||||||||
|
|
|
|
||||||||||
| (Unaudited) | 2005 | 2004 | 2003 | 2002a | 2001 | |||||||
|
|
|
|
|
|
|
|
||||||
| Ratios/Supplemental Data (%): | ||||||||||||
| Ratio of total expenses to | ||||||||||||
| average net assets | ||||||||||||
| applicable to | ||||||||||||
| Common Stock e | 1.34f | 1.32 | 1.31 | 1.33 | 1.33 | 1.39 | ||||||
| Ratio of net investment | ||||||||||||
| income to average net | ||||||||||||
| assets applicable | ||||||||||||
| to Common Stock e | 6.82f | 7.03 | 7.29 | 7.60 | 7.93 | 7.97 | ||||||
| Ratio of total expenses | ||||||||||||
| to total average | ||||||||||||
| net assets | .89f | .88 | .87 | .88 | .87 | .91 | ||||||
| Ratio of net investment | ||||||||||||
| income to total | ||||||||||||
| average net assets | 4.53f | 4.67 | 4.81 | 5.02 | 5.23 | 5.21 | ||||||
| Portfolio Turnover Rate | 4.30g | 12.62 | 6.72 | 9.88 | 5.32 | 15.27 | ||||||
| Asset coverage of | ||||||||||||
| Preferred Stock | ||||||||||||
| end of period | 297 | 299 | 295 | 294 | 299 | 297 | ||||||
|
|
|
|
|
|
|
|
||||||
| Net Assets, net of Preferred | ||||||||||||
| stock, end of period | ||||||||||||
| ($ x 1,000) | 196,812 | 199,388 | 195,395 | 194,390 | 199,361 | 196,952 | ||||||
| Preferred Stock outstanding, | ||||||||||||
| end of period ($ x 1,000) | 100,000 | 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 accreting discount or amortizing 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 unrealized gain (loss) on investments 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 for periods | ||
| 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 | Annualized. | |
| g | Not annualized. | |
| See notes to financial statements. | ||
The Fund 21
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 cap-ital.The Dreyfus Corporation (the “Manager” or “Dreyfus”) serves as the fund’s investment adviser. The Manager is a wholly-owned subsidiary of Mellon Financial Corporation (“Mellon Financial”). 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.
|
22 |
The fund’s financial statements are prepared in accordance with U.S. generally accepted accounting principles, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The fund enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: Investments in municipal debt securities are valued on the last business day of each week and month 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 on the last business day of each week and month.
(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 accretion of discount and amortization of premium on investments, is earned from settlement date and recognized on the
|
The Fund 23 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 U.S. generally accepted accounting principles.
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, 2006, the Board of Directors declared a cash dividend of $.041 per share from investment income-net, payable on April 27, 2006 to Common Shareholders of record as of the close of business on April 12, 2006.
|
24 |
(d) Dividends to shareholders of APS: For APS,dividends are currently reset every 7 days for Series A and Series B.The dividend rates in effect at March 31, 2006 were as follows: Series A 3.00% and Series B 3.15% .
(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.
The fund has unused capital loss carryover of $6,374,256 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to September 30, 2005. If not applied, $909,749 of the carryover expires in fiscal 2008, $619,742 expires in fiscal 2009, $1,413,550 expires in fiscal 2010, $360,799 expires in fiscal 2011 and $3,070,416 expires in fiscal 2012.
The tax character of distributions paid to shareholders during the fiscal year ended September 30, 2005 was as follows: tax exempt income $14,673,059. The tax character of current year distributions will be determined at the end of the current fiscal year.
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.
The average daily borrowings outstanding under the line of credit during the period ended March 31, 2006, was approximately $18,900 with a related weighted average annualized interest rate of 4.11%
|
The Fund 25 |
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 the value of the fund’s average daily net assets, inclusive of the outstanding 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 March 31, 2006, there was no expense reimbursement pursuant to the Agreement.
(b) The fund compensates Mellon Bank, N.A. (“Mellon”), an affiliate of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the fund. During the period ended March 31, 2006, the fund was charged $9,040 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, 2006, the fund was charged $26,428 pursuant to the custody agreement.
During the period ended March 31, 2006, the fund was charged $1,910 for services performed by the Chief Compliance Officer.
The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $176,908, chief compliance officer fees $1,910, custodian fees $3,173 and transfer agency per account fees $4,939.
(c) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
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26 |
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended March 31, 2006, amounted to $12,411,578 and $16,018,340, respectively.
At March 31, 2006, accumulated net unrealized appreciation on investments was $17,306,047, consisting of $17,640,693 gross unrealized appreciation and $334,646 gross unrealized depreciation.
At March 31, 2006, 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).
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The Fund 27 |
NOTES
| OFFICERS AND DIRECTORS | ||
| Dreyfus Municipal Income, Inc. |
| 200 Park Avenue | ||||
| New York, NY 10166 | ||||
| Directors | Portfolio Managers | |||
| Joseph S. DiMartino, Chairman | Joseph P. Darcy | |||
| Clifford L. Alexander, Jr. | A. Paul Disdier | |||
| Lucy Wilson Benson | Douglas J. Gaylor | |||
| David W. Burke | Joseph A. Irace | |||
| Whitney I. Gerard* | Colleen A. Meehan | |||
| Arthur A. Hartman | W. Michael Petty | |||
| George L. Perry* | Scott Sprauer | |||
| * Auction Preferred Stock Directors | Bill Vasiliou | |||
| James Welch | ||||
| Officers | Monica S.Wieboldt | |||
| President | ||||
| Stephen E. Canter | Investment Adviser | |||
| Executive Vice Presidents | The Dreyfus Corporation | |||
| Stephen R. Byers | Custodian | |||
| Joseph P. Darcy | ||||
| Vice President | Mellon Bank, N.A. | |||
| Mark N. Jacobs | Counsel | |||
| Vice President and Secretary | ||||
| Michael A. Rosenberg | Stroock & Stroock & Lavan LLP | |||
| Vice President and Assistant Secretaries | Transfer Agent, | |||
| James Bitetto | Dividend Disbursing Agent | |||
| Joni Lacks Charatan | and Registrar | |||
| Joseph M. Chioffi | ||||
| Janette E. Farragher | Mellon Bank N.A. (Common Stock) | |||
| John B. Hammalian | Deutsche Bank Trust Company America | |||
| Robert R. Mullery | (Auction Preferred Stock) | |||
| Jeff Prusnofsky | ||||
| Auction Agent | ||||
| Treasurer | ||||
| James Windels | Deutsche Bank Trust Company America | |||
| Assistant Treasurers | (Auction Preferred Stock) | |||
| Erik D. Naviloff | Stock Exchange Listing | |||
| Gavin C. Reilly | ||||
| Robert Robol | AMEX Symbol: DMF | |||
| Robert Svagna | Initial SEC Effective Date | |||
| Chief Compliance Officer | ||||
| Joseph W. Connolly | 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 29
| For More | Information | |
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| Dreyfus | Transfer Agent & | |
| Municipal Income, Inc. | Dividend Disbursing Agent | |
| 200 Park Avenue | and Registrar | |
| New York, NY 10166 | (Common Stock) | |
| Manager | Mellon Bank, N.A. | |
| 85 Challenger Road | ||
| The Dreyfus Corporation | ||
| Ridgefield Park, NJ 07660 | ||
| 200 Park Avenue | ||
| New York, NY 10166 | ||
| Custodian | ||
| Mellon Bank, N.A. | ||
| One Mellon Bank Center | ||
| Pittsburgh, PA 15258 | ||
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Information regarding how the fund voted proxies relating to portfolio securities for the 12-month period ended June 30, 2005, is available on the SEC’s website at http://www.sec.gov and without charge, upon request, by calling 1-800-645-6561.
| Item 2. | Code of Ethics. | |
| Not applicable. | ||
| Item 3. | Audit Committee Financial Expert. | |
| Not applicable. | ||
| Item 4. | Principal Accountant Fees and Services. | |
| Not applicable. | ||
| Item 5. | Audit Committee of Listed Registrants. | |
| Not applicable. | ||
| Item 6. | Schedule of Investments. | |
| Not applicable. | ||
| Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management | |
| Investment Companies. | ||
| Not applicable. | ||
| Item 8. | Portfolio Managers of Closed-End Management Investment Companies. | |
| Not applicable. | ||
| Item 9. | Purchases of Equity Securities by Closed-End Management Investment Companies and | |
| Affiliated Purchasers. | ||
| None | ||
| Item 10. | Submission of Matters to a Vote of Security Holders. |
The Registrant has a Nominating Committee (the "Committee"), which is responsible for selecting and nominating persons for election or appointment by the Registrant's Board as Board members. The Committee has adopted a Nominating Committee Charter (the "Charter"). Pursuant to the Charter, the Committee will consider recommendations for nominees from shareholders submitted to the Secretary of the Registrant, c/o The Dreyfus Corporation Legal Department, 200 Park Avenue, 8th Floor East, New York, New York 10166. A nomination submission must include information regarding the recommended nominee as specified in the Charter. This information includes all information relating to a recommended nominee that is required to be disclosed in solicitations or proxy statements for the election of Board members, as well as information sufficient to evaluate the factors to be considered by the Committee, including character and integrity, business and professional experience, and whether the person has the ability to apply sound and independent business judgment and would act in the interests of the Registrant and its shareholders.
Nomination submissions are required to be accompanied by a written consent of the individual to stand for election if nominated by the Board and to serve if elected by the shareholders, and such additional information must be provided regarding the recommended nominee as reasonably requested by the Committee.
Item 11. 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 second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.
Item 12. Exhibits.
| (a)(1) | Not applicable. | |
| (a)(2) | Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) | |
| under the Investment Company Act of 1940. | ||
| (a)(3) | Not applicable. | |
| (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.
| By: | /s/ Stephen E. Canter | |
| Stephen E. Canter | ||
| President | ||
| Date: | May 26, 2006 | |
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: | May 26, 2006 | |
| By: | /s/ James Windels | |
| James Windels | ||
| Chief Financial Officer | ||
| Date: | May 26, 2006 | |
| EXHIBIT INDEX | ||
| (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) | ||