We are pleased to present this semiannual report for Dreyfus Municipal Income, Inc., covering the six-month period from October 1, 2018 through March 31, 2019. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.
The U.S. and many other developed economies continued their pattern of moderate growth during the six months. In October, equity markets experienced a sharp sell-off, stimulated in part by interest-rate increases, trade tensions and slowing global growth. The sell-off partially reduced prior gains on U.S. indices, while losses deepened in international developed and emerging markets. Global equities continued their general decline throughout the end of the calendar year. However, comments made in January by the U.S. Federal Reserve (the “Fed”) that it might slow the pace of interest-rate increases in 2019 helped trigger a rebound across equity markets. In a similar vein, other central banks pledged to continue policies that support economic growth, helping to further ease investor concerns. Talk of a potential trade agreement between the U.S. and China also helped buoy equity markets, which continued their upward trajectory through the end of the period.
Equity volatility and global growth concerns triggered a flight to quality in many areas of the bond market, raising Treasury prices and flattening the yield curve through the end of 2018. Corporate bonds were also affected by growth and leverage concerns, causing reduced liquidity, increased spreads, and falling prices through the end of the calendar year. Bond markets rebounded in January after encouraging comments by the Fed, and many indices continued to experience positive returns throughout February and March.
We remain positive on the near-term economic outlook for the U.S. but will monitor relevant data for any signs of change.
Thank you for your continued confidence and support.
DISCUSSION OF FUND PERFORMANCE(Unaudited)
For the period from October 1, 2018 through March 31, 2019, as provided by Daniel Rabasco and Jeffrey Burger, Primary Portfolio Managers
Market and Fund Performance Overview
For the six-month period ended March 31, 2019, Dreyfus Municipal Income, Inc. produced a total return of 4.77% on a net-asset-value basis and 10.30% on a market-price basis.1 Over the same period, the fund provided aggregate income dividends of $0.21 per share, which reflects a distribution rate of 4.99%.2
Municipal bonds declined during the first half of the reporting period as interest rates rose and the Federal Reserve (the “Fed”) maintained a hawkish stance on monetary policy. But the market rallied in the second half in response to positive supply-and-demand dynamics and a shift by the Fed to a more dovish stance. The municipal market also benefited as investors grew more concerned about the global economy, resulting in a “flight to quality.” The fund’s performance was hindered by yield curve positioning and security selection.
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. Under normal market conditions, the fund invests at least 80% of the value of its net assets in municipal obligations and invests in municipal obligations which, at the time of purchase, are rated investment grade or the unrated equivalent as determined by The Dreyfus Corporation (“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.
To this end, we have constructed a portfolio derived from seeking income opportunities through analysis of each bond’s structure, including paying close attention to each 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 those bonds with investments consistent with the fund’s investment policies, albeit with yields that reflect the then-current interest-rate environment. When making new investments, we focus on identifying undervalued sectors and securities, and we minimize the use of interest-rate forecasting. We use fundamental analysis to estimate the relative value and attractiveness of various sectors and securities and to exploit pricing inefficiencies in the municipal bond market.
Supply-and-Demand Dynamics and a Flight to Quality Drove Municipal Bonds
The municipal bond market experienced weakness early in the reporting period, but a variety of factors contributed to a subsequent rebound, including slowing economic momentum and a relaxing of what had been a hawkish stance by the Fed. A flight to quality driven by concerns about global growth was also advantageous.
3
DISCUSSION OF FUND PERFORMANCE(Unaudited) (continued)
Municipal bonds benefited from favorable supply-and-demand dynamics as well. Fund flows were relatively weak during the first half of the reporting period, but this reversed in the second half as investors became concerned about the new cap on the federal deductibility of state and local taxes. This resulted in record-strong inflows to municipal bond mutual funds as investors began to seek tax-exempt income. Although new issuance was positive, a large number of bonds reached maturity during the period, resulting in a decline in net supply.
Demand at the longer end of the municipal bond curve was mixed. Insurance companies continued to add marginally to holdings, but banks, which tend to focus on longer bonds, reduced their holdings. Accounting rule changes and the tax-reform legislation of December 2017, which reduced corporate tax rates, have reduced the appeal of tax-exempt bonds for corporate buyers, especially banks.
On balance, however, the municipal bond market outperformed Treasuries. This caused the ratio of municipal yields to Treasury yields to decline all across the curve, reflecting that relative outperformance. The municipal bond curve flattened in the 2- to 10-year range and in the 2- to 30-year range, as investors reached for yield.
Credit spreads widened modestly early in the reporting period due to mutual fund redemptions but tightened subsequently when flows strengthened as investors continued their demand for yield. In the lower-rated segment of the market, valuations for tobacco bonds, backed by certain states’ settlement of litigation with U.S. tobacco companies, were hurt by a proposal by the Food and Drug Administration to ban menthol cigarettes. Valuations did improve, however, as the quarter ended. In addition, Puerto Rico bonds benefited from greater clarity regarding fiscal conditions and the restructuring of certain issuing authorities.
Generally, fundamentals in the municipal bond market remained healthy. Steady economic growth has boosted tax revenues, fiscal balances and “rainy-day” funds, though some of this improvement came from a one-time acceleration of tax payments after the tax-reform law was enacted. Pension funding has also improved.
Yield Curve Positioning and Security Selection Detracted From Fund Results
The fund’s performance was hindered during the reporting period by its yield curve positioning. An underweight to 10-year maturities detracted from performance given that this was where rates fell most. However, an underweight to 2-year maturities partially offset that loss. Other disappointments during the reporting period included security selection in tobacco-backed bonds and special tax bonds. Asset allocation, specifically an overweight to revenue bonds and an underweight to general obligation bonds, also detracted somewhat from performance.
On a positive note, the fund benefited from its longer duration. This added to performance as the Fed shifted from a hawkish stance on rates to a dovish stance midway through the reporting period.
A Constructive Investment Posture
We remain constructive on the prospects for municipal bonds over the foreseeable future. We anticipate that with likely gains in employment and a subsequent pickup in inflation, the
4
Fed will respond with one rate hike in 2019; however, we do not expect interest rates to rise dramatically. We will continue to position the duration of the fund to be longer than that of the benchmark, since the municipal curve is steeper than the Treasury curve and given our positive outlook for tax-exempt bond supply-and-demand dynamics. We anticipate that credit fundamentals will remain stable, but we will monitor budget and revenue developments as the year progresses. We have trimmed our weaker holdings in the tobacco-backed segment, but are adding to revenue bonds, especially in the following areas: education, retirement centers and utilities.
April 15, 2019
1 Total return includes reinvestment of dividends and any capital gains paid, based upon net asset value per share or market price per share, as applicable. 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, adjusted for any capital gain distributions.
Bonds are subject generally to interest-rate, credit, liquidity, and market risks, to varying degrees. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines. High yield bonds are subject to increased credit risk and are considered speculative in terms of the issuer’s perceived ability to continue making interest payments on a timely basis and to repay principal upon maturity. The use of leverage may magnify the fund’s gains or losses. For derivatives with a leveraging component, adverse changes in the value or level of the underlying asset can result in a loss that is much greater than the original investment in the derivative.
5
STATEMENT OF INVESTMENTS
March 31, 2019 (Unaudited)
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 152.9% | | | | | |
Alabama - 3.6% | | | | | |
Jefferson County,
Sewer Revenue Bonds Warrants | | 0/7.75 | | 10/1/2046 | | 4,000,000 | a | 3,678,400 | |
Lower Alabama Gas District,
Gas Project Revenue Bonds, Ser. A | | 5.00 | | 9/1/2046 | | 2,500,000 | | 3,106,950 | |
| | 6,785,350 | |
Arizona - 2.3% | | | | | |
La Paz County Industrial Development Authority,
Education Facility LR (Charter Schools Solutions-Harmony Public Schools Project) Ser. A | | 5.00 | | 2/15/2046 | | 1,500,000 | b | 1,598,400 | |
Salt Verde Financial Corporation,
Senior Gas Revenue Bonds | | 5.00 | | 12/1/2037 | | 2,190,000 | | 2,741,289 | |
| | 4,339,689 | |
California - 17.1% | | | | | |
California,
GO (Various Purpose) | | 5.75 | | 4/1/2031 | | 3,950,000 | | 3,952,883 | |
California,
GO (Various Purpose) | | 6.00 | | 3/1/2033 | | 1,250,000 | | 1,302,362 | |
California,
GO (Various Purpose) | | 6.00 | | 11/1/2035 | | 2,500,000 | | 2,566,225 | |
California,
GO (Various Purpose) | | 6.50 | | 4/1/2033 | | 1,375,000 | | 1,376,169 | |
California,
GO (Various Purpose) | | 6.50 | | 4/1/2019 | | 750,000 | c | 750,000 | |
Santa Ana Community Redevelopment Agency,
Tax Allocation Revenue Bonds (Merged Project Area) Ser. A | | 6.75 | | 3/1/2021 | | 3,000,000 | c | 3,304,410 | |
Tender Option Bond Trust Receipts (Series 2016-XM0371),
(Los Angeles Department of Airports, Senior Revenue Bonds (Los Angeles International Airport)) Non-recourse | | 5.25 | | 5/15/2029 | | 10,000,000 | b,d,e | 10,439,050 | |
Tender Option Bond Trust Receipts (Series 2016-XM0387),
(Los Angeles Department of Airports, Senior Revenue Bonds (Los Angeles International Airport)) Non-recourse | | 5.00 | | 5/15/2038 | | 4,000,000 | b,d,e | 4,409,220 | |
Tender Option Bond Trust Receipts (Series 2016-XM0390),
(The Regents of the University of California, General Revenue Bonds) Non-recourse | | 5.00 | | 5/15/2036 | | 3,750,000 | b,d,e | 4,198,903 | |
| | 32,299,222 | |
6
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 152.9% (continued) | | | | | |
Colorado - 7.6% | | | | | |
Colorado Educational & Cultural Facilities Authority,
Revenue Bonds (Johnson & Wales University) Ser. B | | 5.00 | | 4/1/2031 | | 1,680,000 | | 1,787,806 | |
Colorado High Performance Transportation Enterprise,
Revenue Bonds (C-470 Express Lanes) | | 5.00 | | 12/31/2051 | | 1,500,000 | | 1,625,070 | |
E-470 Public Highway Authority,
Senior Revenue Bonds, Ser. C | | 5.25 | | 9/1/2025 | | 1,000,000 | | 1,043,350 | |
E-470 Public Highway Authority,
Senior Revenue Bonds, Ser. C | | 5.38 | | 9/1/2026 | | 1,000,000 | | 1,044,370 | |
Tender Option Bond Trust Receipts (Series 2016-XM0385),
(Board of Governors of the Colorado State University, System Enterprise Revenue Bonds) Non-recourse | | 5.00 | | 3/1/2038 | | 2,550,000 | b,d,e | 2,796,488 | |
Tender Option Bond Trust Receipts (Series 2016-XM0433),
(Colorado Springs, Utilities System Improvement Revenue Bonds) Recourse | | 5.00 | | 11/15/2043 | | 3,997,093 | b,d,e | 4,447,503 | |
University of Colorado,
University Enterprise Revenue Bonds, Ser. A | | 5.38 | | 6/1/2019 | | 1,500,000 | c | 1,509,465 | |
| | 14,254,052 | |
Connecticut - 1.5% | | | | | |
Connecticut Health and Educational Facilities Authority,
Revenue Bonds (Trinity Health Credit Group) | | 5.00 | | 12/1/2045 | | 2,500,000 | | 2,834,125 | |
District of Columbia - 4.1% | | | | | |
Tender Option Bond Trust Receipts (Series 2016-XM0437),
(District of Columbia, Income Tax Secured Revenue Bonds) Recourse | | 5.00 | | 12/1/2035 | | 6,997,490 | b,d,e | 7,698,575 | |
Florida - 7.3% | | | | | |
Atlantic Beach City,
Revenue Bonds (Fleet Landing Project) Ser. A | | 5.00 | | 11/15/2053 | | 1,500,000 | | 1,640,535 | |
Davie,
Educational Facilities Revenue Bonds (Nova Southeastern University Project) Ser. A | | 5.63 | | 4/1/2043 | | 1,000,000 | | 1,107,960 | |
Greater Orlando Aviation Authority,
Airport Facilities Revenue Bonds, Ser. A | | 6.25 | | 10/1/2020 | | 3,980,000 | | 4,067,679 | |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 152.9% (continued) | | | | | |
Florida - 7.3% (continued) | | | | | |
Halifax Hospital Medical Center,
Revenue Bonds, Refunding | | 4.00 | | 6/1/2041 | | 1,000,000 | | 1,023,190 | |
Mid-Bay Bridge Authority,
Springing Lien Revenue Bonds, Ser. A | | 7.25 | | 10/1/2021 | | 2,500,000 | c | 2,842,450 | |
Saint Johns County Industrial Development Authority,
Revenue Bonds (Presbyterian Retirement Communities Project) Ser. A | | 5.88 | | 8/1/2020 | | 2,000,000 | c | 2,111,800 | |
South Lake County Hospital District,
Revenue Bonds (South Lake Hospital, Inc.) Ser. A | | 6.25 | | 4/1/2039 | | 1,000,000 | | 1,002,700 | |
| | 13,796,314 | |
Georgia - 3.7% | | | | | |
Atlanta,
Water and Wastewater Revenue Bonds, Ser. A | | 6.00 | | 11/1/2019 | | 3,000,000 | c | 3,078,600 | |
Atlanta Development Authority,
Senior Lien Revenue Bonds (New Downtown Atlanta Stadium Project) Ser. A1 | | 5.25 | | 7/1/2040 | | 1,500,000 | | 1,725,600 | |
Burke County Development Authority,
Pollution Control Revenue Bonds, Refunding (Oglethorpe Power Corp-Vogtle) Ser. D | | 4.13 | | 11/1/2045 | | 1,000,000 | | 1,019,080 | |
Gainesville and Hall County Development Authority,
Educational Facilities Revenue Bonds, Refunding (Riverside Military Academy) | | 5.00 | | 3/1/2037 | | 1,000,000 | | 1,060,960 | |
| | 6,884,240 | |
Hawaii - 1.3% | | | | | |
Hawaii Department of Budget and Finance,
Special Purpose Revenue Bonds (Hawaiian Electric Company, Inc. and Subsidiary Projects) | | 6.50 | | 7/1/2039 | | 2,400,000 | | 2,431,536 | |
Illinois - 18.6% | | | | | |
Chicago,
GO, Refunding, Ser. A | | 6.00 | | 1/1/2038 | | 2,000,000 | | 2,284,460 | |
Chicago,
Second Lien Wastewater Transmission Revenue Bonds, Refunding, Ser. C | | 5.00 | | 1/1/2039 | | 1,100,000 | | 1,191,685 | |
Chicago,
Second Lien Water Revenue Bonds | | 5.00 | | 11/1/2028 | | 1,000,000 | | 1,119,030 | |
Chicago Board of Education,
Special Tax Revenue Bonds | | 5.00 | | 4/1/2046 | | 1,725,000 | | 1,866,605 | |
8
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 152.9% (continued) | | | | | |
Illinois - 18.6% (continued) | | | | | |
Chicago O'Hare International Airport,
Revenue Bonds (General Airport Third Lien) | | 5.63 | | 1/1/2035 | | 270,000 | | 287,588 | |
Chicago O'Hare International Airport,
Revenue Bonds (General Airport Third Lien) | | 5.63 | | 1/1/2021 | | 730,000 | c | 782,246 | |
Chicago O'Hare International Airport,
Senior Lien Revenue Bonds, Refunding, Ser. A | | 5.00 | | 1/1/2048 | | 2,000,000 | | 2,290,500 | |
Illinois,
GO, Ser. A | | 5.00 | | 5/1/2038 | | 1,250,000 | | 1,335,037 | |
Illinois,
GO, Ser. C | | 5.00 | | 11/1/2029 | | 2,800,000 | | 3,071,852 | |
Illinois Finance Authority,
Revenue Bonds, Refunding (Rosalind Franklin University of Medicine & Science) | | 5.00 | | 8/1/2047 | | 1,350,000 | | 1,477,534 | |
Metropolitan Pier and Exposition Authority,
Dedicated Tax Revenue Bonds (Capital Appreciation-McCormick Place Expansion Project) (Insured; National Public Finance Guarantee Corporation) Ser. A | | 0.00 | | 12/15/2036 | | 2,500,000 | f | 1,238,950 | |
Metropolitan Pier and Exposition Authority,
Revenue Bonds (McCormick Place Expansion Project) Ser. A | | 5.00 | | 6/15/2053 | | 2,500,000 | | 2,633,550 | |
Metropolitan Pier and Exposition Authority,
Revenue Bonds, Refunding (McCormick Place Expansion Project) Ser. B | | 5.00 | | 12/15/2028 | | 1,500,000 | | 1,577,445 | |
Railsplitter Tobacco Settlement Authority,
Revenue Bonds | | 6.00 | | 6/1/2021 | | 2,000,000 | c | 2,187,280 | |
Tender Option Bond Trust Receipts (Series 2016-XM0378),
(Greater Chicago Metropolitan Water Reclamation District, GO Capital Improvement Bonds) Non-recourse | | 5.00 | | 12/1/2032 | | 2,500,000 | b,d,e | 2,672,650 | |
Tender Option Bond Trust Receipts (Series 2017-XM0492),
(Illinois Finance Authority, Revenue Bonds (The University of Chicago)) Non-recourse | | 5.00 | | 10/1/2040 | | 7,000,000 | b,d,e | 7,916,755 | |
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 152.9% (continued) | | | | | |
Illinois - 18.6% (continued) | | | | | |
University of Illinois,
Revenue Bonds (Auxiliary Facilities System) Ser. A | | 5.13 | | 4/1/2036 | | 1,000,000 | | 1,044,830 | |
| | 34,977,997 | |
Indiana - .6% | | | | | |
Indiana Finance Authority,
Revenue Bonds (Parkview Health System Group) Ser. A | | 5.00 | | 11/1/2043 | | 1,000,000 | | 1,148,060 | |
Iowa - .4% | | | | | |
Iowa Student Loan Liquidity Corporation,
Student Loan Revenue Bonds, Ser. A2 | | 5.75 | | 12/1/2028 | | 645,000 | | 673,374 | |
Kentucky - .6% | | | | | |
Kentucky Economic Development Finance Authority,
Revenue Bonds, Refunding (Louisville Arena Project) (Insured; Assured Guaranty Municipal Corporation) | | 5.00 | | 12/1/2045 | | 1,000,000 | | 1,125,670 | |
Louisiana - 4.8% | | | | | |
Louisiana Local Government Environmental Facilities and Community Development Authority,
Revenue Bonds, Refunding (Westlake Chemical Corporation Project) | | 3.50 | | 11/1/2032 | | 1,000,000 | | 1,007,410 | |
Louisiana Public Facilities Authority,
Revenue Bonds, Refunding (CHRISTUS Health Obligated Group) Ser. A | | 6.13 | | 7/1/2029 | | 1,000,000 | | 1,010,830 | |
Tender Option Bond Trust Receipts (Series 2018-XF2584),
(Louisiana Public Facilities Authority, Hospital Revenue Bonds (Franciscan Missionaries of Our Lady Health System Project)) Recourse | | 5.00 | | 7/1/2047 | | 6,320,000 | b,d,e | 7,021,836 | |
| | 9,040,076 | |
Maine - .7% | | | | | |
Maine Health and Higher Educational Facilities Authority,
Revenue Bonds (Maine General Medical Center Issue) | | 7.50 | | 7/1/2032 | | 1,250,000 | | 1,387,300 | |
Maryland - 3.4% | | | | | |
Maryland Economic Development Corporation,
PCR, Refunding (Potomac Electric Project) | | 6.20 | | 9/1/2022 | | 2,500,000 | | 2,508,325 | |
10
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 152.9% (continued) | | | | | |
Maryland - 3.4% (continued) | | | | | |
Maryland Health and Higher Educational Facilities Authority,
Revenue Bonds (Adventist HealthCare Obligated Group) | | 5.50 | | 1/1/2046 | | 1,500,000 | | 1,708,545 | |
Tender Option Bond Trust Receipts (Series 2016-XM0391),
(Mayor and City Council of Baltimore, Project Revenue Bonds (Water Projects)) Non-recourse | | 5.00 | | 7/1/2042 | | 2,000,000 | b,d,e | 2,225,555 | |
| | 6,442,425 | |
Massachusetts - 5.4% | | | | | |
Massachusetts Development Finance Agency,
Revenue Bonds (Tufts Medical Center) Ser. I | | 7.25 | | 1/1/2021 | | 600,000 | c | 657,504 | |
Massachusetts Development Finance Agency,
Revenue Bonds, Refunding (Suffolk University Issue) Ser. A | | 6.25 | | 7/1/2030 | | 705,000 | | 713,115 | |
Massachusetts Development Finance Agency,
Revenue Bonds, Refunding (Suffolk University Issue) Ser. A | | 6.25 | | 7/1/2019 | | 1,295,000 | c | 1,310,242 | |
Massachusetts Development Finance Agency,
Revenue Bonds, Refunding (Tufts Medical Center) Ser. I | | 7.25 | | 1/1/2021 | | 900,000 | c | 986,256 | |
Massachusetts Development Finance Agency,
Revenue Bonds, Refunding, Ser. A | | 5.00 | | 7/1/2026 | | 950,000 | | 1,117,324 | |
Massachusetts Educational Financing Authority,
Education Loan Revenue Bonds (Issue K) | | 5.25 | | 7/1/2029 | | 1,315,000 | | 1,412,652 | |
Tender Option Bond Trust Receipts (Series 2016-XM0386),
(University of Massachusetts Building Authority, Project and Refunding Revenue Bonds) Non-recourse | | 5.00 | | 5/1/2043 | | 3,695,009 | b,d,e | 4,065,823 | |
| | 10,262,916 | |
Michigan - 3.3% | | | | | |
Detroit,
Water Supply System Senior Lien Revenue Bonds, Ser. A | | 5.00 | | 7/1/2036 | | 3,000,000 | | 3,148,620 | |
Detroit,
Water Supply System Senior Lien Revenue Bonds, Ser. A | | 5.00 | | 7/1/2031 | | 1,500,000 | | 1,581,990 | |
11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 152.9% (continued) | | | | | |
Michigan - 3.3% (continued) | | | | | |
Michigan Finance Authority,
Local Government Loan Program Revenue Bonds (Detroit Water and Sewerage Department, Water Supply System Revenue Bonds Senior Lien Local Project Bonds) (Insured; National Public Finance Guarantee Corp.) | | 5.00 | | 7/1/2036 | | 500,000 | | 553,810 | |
Michigan Strategic Fund,
SWDR, Refunding (Genesee Power Station Project) | | 7.50 | | 1/1/2021 | | 1,000,000 | | 990,060 | |
| | 6,274,480 | |
Minnesota - 1.3% | | | | | |
Duluth Economic Development Authority,
Revenue Bonds, Refunding (Essentia Health Group) Ser. A | | 5.00 | | 2/15/2058 | | 1,000,000 | | 1,110,650 | |
Saint Paul Housing and Redevelopment Authority,
Hospital Facility Revenue Bonds (HealthEast Care System Project) | | 5.00 | | 11/15/2025 | | 1,200,000 | c | 1,436,940 | |
| | 2,547,590 | |
Mississippi - 1.1% | | | | | |
Warren County,
Gulf Opportunity Zone Revenue Bonds (International Paper Company Project) Ser. A | | 5.38 | | 12/1/2035 | | 2,000,000 | | 2,162,740 | |
Missouri - 1.7% | | | | | |
Missouri Health and Educational Facilities Authority,
Revenue Bonds, Refunding (Lutheran Senior Services Projects) Ser. B | | 5.00 | | 2/1/2046 | | 2,000,000 | | 2,130,600 | |
Missouri Health and Educational Facilities Authority,
Revenue Bonds, Refunding (Lutheran Senior Services Projects) Ser. B | | 2.88 | | 2/1/2034 | | 1,000,000 | | 1,004,660 | |
| | 3,135,260 | |
Nebraska - .6% | | | | | |
Douglas County Hospital Authority,
Revenue Bonds (Childrens Hospital Obligation Group) | | 5.00 | | 11/15/2036 | | 1,000,000 | | 1,159,480 | |
Nevada - 1.4% | | | | | |
Reno,
Sales Tax Revenue Bonds, Refunding (Reno Transportation Rail Access Project) (Insured; Assured Guaranty Municipal Corporation) Ser. A | | 4.00 | | 6/1/2058 | | 1,250,000 | | 1,283,138 | |
12
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 152.9% (continued) | | | | | |
Nevada - 1.4% (continued) | | | | | |
Reno,
Sales Tax Revenue Bonds, Refunding (Reno Transportation Rail Access Project) (Insured; Assured Guaranty Municipal Corporation) Ser. B | | 4.13 | | 6/1/2058 | | 1,250,000 | | 1,290,612 | |
| | 2,573,750 | |
New Jersey - 5.5% | | | | | |
New Jersey Economic Development Authority,
Revenue Bonds, Refunding, Ser. XX | | 5.25 | | 6/15/2027 | | 1,000,000 | | 1,127,410 | |
New Jersey Economic Development Authority,
School Facilities Construction Revenue Bonds, Refunding, Ser. WW | | 5.25 | | 6/15/2040 | | 1,250,000 | | 1,354,837 | |
New Jersey Economic Development Authority,
Water Facilities Revenue Bonds, Refunding (American Water Company, Inc. Project) Ser. A | | 5.70 | | 10/1/2039 | | 2,000,000 | | 2,035,940 | |
New Jersey Transportation Trust Fund Authority,
Transportation Program Revenue Bonds, Ser. AA | | 5.25 | | 6/15/2033 | | 1,000,000 | | 1,105,050 | |
New Jersey Transportation Trust Fund Authority,
Transportation Program Revenue Bonds, Ser. S | | 5.00 | | 6/15/2046 | | 1,250,000 | | 1,359,475 | |
New Jersey Transportation Trust Fund Authority,
Transportation Program Revenue Bonds, Ser. S | | 5.25 | | 6/15/2043 | | 2,000,000 | | 2,231,300 | |
South Jersey Port Corporation,
Revenue Bonds (Subordinated Marine Terminal) Ser. B | | 5.00 | | 1/1/2048 | | 1,000,000 | | 1,098,000 | |
| | 10,312,012 | |
New Mexico - 1.7% | | | | | |
Farmington,
PCR, Refunding (Public Service Company of New Mexico San Juan Project) Ser. D | | 5.90 | | 6/1/2040 | | 3,000,000 | | 3,127,470 | |
New York - 8.5% | | | | | |
New York City Educational Construction Fund,
Revenue Bonds, Ser. A | | 6.50 | | 4/1/2028 | | 1,500,000 | | 1,639,830 | |
13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 152.9% (continued) | | | | | |
New York - 8.5% (continued) | | | | | |
New York City Industrial Development Agency,
PILOT Revenue Bonds (Yankee Stadium Project) (Insured; Assured Guaranty Corp.) | | 7.00 | | 3/1/2049 | | 1,435,000 | | 1,441,759 | |
New York Convention Center Development Corporation,
Revenue Bonds (Insured; Assured Guaranty Municipal Corp.) | | 0.00 | | 11/15/2049 | | 5,600,000 | f | 1,779,792 | |
New York Transportation Development Corporation,
Special Facility Revenue Bonds (LaGuardia Airport Terminal B Redevelopment Project) Ser. A | | 5.00 | | 7/1/2046 | | 1,500,000 | | 1,624,365 | |
Port Authority of New York and New Jersey,
Special Project Revenue Bonds (JFK International Air Terminal LLC Project) | | 6.00 | | 12/1/2036 | | 1,500,000 | | 1,591,980 | |
Tender Option Bond Trust Receipts (Series 2016-XM0436),
(New York City Municipal Water Finance Authority, Water and Sewer System Second General Resolution Revenue Bonds) Recourse | | 5.00 | | 6/15/2044 | | 7,400,000 | b,d,e | 7,959,532 | |
| | 16,037,258 | |
North Carolina - 2.8% | | | | | |
Tender Option Bond Trust Receipts (Series 2016-XM0444),
(North Carolina Medical Care Commission, Health Care Facilities Revenue Bonds (Duke University Health System)) Recourse | | 5.00 | | 6/1/2042 | | 5,000,000 | b,d,e | 5,188,540 | |
Ohio - 1.7% | | | | | |
Butler County,
Hospital Facilities Revenue Bonds (UC Health) | | 5.50 | | 11/1/2020 | | 1,050,000 | c | 1,113,473 | |
Butler County,
Hospital Facilities Revenue Bonds (UC Health) | | 5.50 | | 11/1/2020 | | 450,000 | c | 477,203 | |
Cuyahoga County,
Revenue Bonds, Refunding (The Metrohealth System) | | 5.00 | | 2/15/2057 | | 1,000,000 | | 1,072,160 | |
Ohio Air Quality Development Authority,
Revenue Bonds (Ohio Valley Electric Corporation Project) Ser. E | | 5.63 | | 10/1/2019 | | 600,000 | | 606,408 | |
| | 3,269,244 | |
14
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 152.9% (continued) | | | | | |
Pennsylvania - 6.8% | | | | | |
Clairton Municipal Authority,
Sewer Revenue Bonds, Ser. B | | 5.00 | | 12/1/2042 | | 1,000,000 | | 1,065,170 | |
Montgomery County Industrial Development Authority,
Revenue Bonds, Refunding (Adult Communities Total Services, Inc. Retirement - Life Communities, Inc. Obligated Group) | | 5.00 | | 11/15/2036 | | 1,000,000 | | 1,113,610 | |
Pennsylvania Housing Finance Agency,
Revenue Bonds (Single-Family Housing) Ser. 114A | | 3.35 | | 10/1/2026 | | 1,500,000 | | 1,524,150 | |
Pennsylvania Turnpike Commission,
Oil Franchise Tax Revenue Bonds, Ser. B | | 5.25 | | 12/1/2048 | | 1,000,000 | | 1,170,850 | |
Pennsylvania Turnpike Commission,
Revenue Bonds, Ser. A1 | | 5.00 | | 12/1/2046 | | 1,000,000 | | 1,129,890 | |
Philadelphia,
GO | | 6.50 | | 8/1/2020 | | 1,750,000 | c | 1,863,120 | |
Tender Option Bond Trust Receipts (Series 2016-XM0373),
(Geisinger Authority, Health System Revenue Bonds (Geisinger Health System)) Non-recourse | | 5.13 | | 6/1/2041 | | 2,000,000 | b,d,e | 2,123,055 | |
Tender Option Bond Trust Receipts (Series 2018-XM0594),
(Berks County Industrial Development Authority, Health System Revenue Bonds, Refunding (Tower Health Project)) Recourse | | 5.00 | | 11/1/2050 | | 2,460,000 | b,d,e | 2,758,552 | |
| | 12,748,397 | |
South Carolina - 5.5% | | | | | |
Tender Option Bond Trust Receipts (Series 2016-XM0384),
(South Carolina Public Service Authority, Revenue Bonds Obligations (Santee Cooper)) Non-recourse | | 5.13 | | 12/1/2043 | | 4,800,000 | b,d,e | 5,199,808 | |
Tobacco Settlement Revenue Management Authority ,
Revenue Bonds (Escrowed to Maturity) Ser. B | | 6.38 | | 5/15/2030 | | 3,750,000 | | 5,175,825 | |
| | 10,375,633 | |
Tennessee - 1.2% | | | | | |
Tender Option Bond Trust Receipts (Series 2016-XM0388),
(Metropolitan Government of Nashville and Davidson County, Water and Sewer Revenue Bonds) Non-recourse | | 5.00 | | 7/1/2040 | | 2,000,000 | b,d,e | 2,210,555 | |
15
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 152.9% (continued) | | | | | |
Texas - 11.8% | | | | | |
Clifton Higher Education Finance Corporation,
Revenue Bonds (Uplift Education) Ser. A | | 4.25 | | 12/1/2034 | | 1,000,000 | | 1,019,630 | |
Harris County-Houston Sports Authority,
Senior Lien Revenue Bonds (Insured; Assured Guaranty Municipal Corp.) Ser. A | | 0.00 | | 11/15/2052 | | 4,000,000 | f | 911,080 | |
Houston,
Airport System Subordinate Lien Revenue Bonds, Refunding, Ser. A | | 5.00 | | 7/1/2025 | | 1,300,000 | | 1,389,791 | |
La Vernia Higher Education Finance Corporation,
Revenue Bonds (Knowledge is Power Program, Inc.) Ser. A | | 6.25 | | 8/15/2019 | | 2,250,000 | c | 2,288,497 | |
North Texas Education Finance Corporation,
Revenue Bonds (Uplift Education) Ser. A | | 5.13 | | 12/1/2042 | | 2,000,000 | | 2,093,380 | |
Tender Option Bond Trust Receipts (Series 2016-XM0377),
(San Antonio, Electric and Gas Systems Junior Lien Revenue Bonds) Non-recourse | | 5.00 | | 2/1/2043 | | 6,300,000 | b,d,e | 6,888,121 | |
Tender Option Bond Trust Receipts (Series 2016-XM0443),
(Texas A&M University System Board of Regents, Financing System Revenue Bonds) Recourse | | 5.00 | | 5/15/2039 | | 5,002,755 | b,d,e | 5,190,745 | |
Texas Private Activity Bond Surface Transportation Corporation,
Senior Lien Revenue Bonds (Blueridge Transportation Group, LLC State Highway 288 Toll Lanes Project) | | 5.00 | | 12/31/2055 | | 1,000,000 | | 1,082,430 | |
Texas Private Activity Bond Surface Transportation Corporation,
Senior Lien Revenue Bonds (Blueridge Transportation Group, State Highway 288 Toll Lanes Project) | | 5.00 | | 12/31/2050 | | 1,200,000 | | 1,302,684 | |
| | 22,166,358 | |
U.S. Related - 2.1% | | | | | |
Guam,
LOR (Section 30), Ser. A | | 5.75 | | 12/1/2019 | | 1,500,000 | c | 1,542,735 | |
16
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 152.9% (continued) | | | | | |
U.S. Related - 2.1% (continued) | | | | | |
Puerto Rico Commonwealth,
Public Improvement GO, Refunding (Insured; Assured Guaranty Municipal Corp.) Ser. A | | 5.00 | | 7/1/2035 | | 1,250,000 | | 1,321,625 | |
Puerto Rico Highway & Transportation Authority,
Highway Revenue Bonds, Refunding (Insured; Assured Guaranty Municipal Corporation) Ser. CC | | 5.25 | | 7/1/2034 | | 1,000,000 | | 1,121,620 | |
| | 3,985,980 | |
Utah - .8% | | | | | |
Utah Infrastructure Agency,
Telecommunication Revenue Bonds, Refunding (Special Limited Obligations) Ser. A | | 5.00 | | 10/15/2040 | | 1,500,000 | | 1,585,470 | |
Virginia - 1.2% | | | | | |
Virginia Small Business Financing Authority,
Private Activity Revenue Bonds (Transform 66 P3 Project) | | 5.00 | | 12/31/2056 | | 2,000,000 | | 2,181,700 | |
Washington - 10.3% | | | | | |
Tender Option Bond Trust Receipts (Series 2017-XF2423),
(King County, Server Revenue Bonds) Recourse | | 5.00 | | 1/1/2029 | | 3,000,000 | b,d,e | 3,176,445 | |
Tender Option Bond Trust Receipts (Series 2018-XM0680),
(Washington Convention Center Public Facilities District, Revenue Bonds) Recourse | | 5.00 | | 7/1/2058 | | 13,000,000 | b,d,e | 14,707,680 | |
Washington Health Care Facilities Authority,
Revenue Bonds (Catholic Health Initiatives) Ser. D | | 6.38 | | 10/1/2036 | | 1,500,000 | | 1,505,265 | |
| | 19,389,390 | |
17
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 152.9% (continued) | | | | | |
Wisconsin - .6% | | | | | |
Public Finance Authority,
Revenue Bonds (Denver International Airport Great Hall Project) | | 5.00 | | 9/30/2037 | | 1,000,000 | | 1,128,090 | |
Total Investments(cost $271,711,689) | | 152.9% | 287,940,318 | |
Liabilities, Less Cash and Receivables | | (36.9%) | (69,358,011) | |
Preferred Stock, at redemption value | | (16.0%) | (30,225,000) | |
Net Assets Applicable to Common Shareholders | | 100.0% | 188,357,307 | |
a Zero coupon until a specified date at which time the stated coupon rate becomes effective until maturity.
b Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2019, these securities were valued at $40,211,444 or 21.35% of net assets.
c 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.
d The Variable Rate shall be determined by the Remarketing Agent in its sole discretion based on prevailing market conditions and may, but need not, be established by reference to one or more financial indices.
e Collateral for floating rate borrowings.
f Security issued with a zero coupon. Income is recognized through the accretion of discount.
| | |
Portfolio Summary (Unaudited)† | Value (%) |
Education | 20.9 |
Transportation | 20.6 |
Medical | 17.1 |
Prerefunded | 15.0 |
Utilities | 15.5 |
General | 14.2 |
Water | 14.2 |
General Obligation | 9.9 |
Special Tax | 8.5 |
Development | 4.2 |
Pollution | 3.5 |
Nursing Homes | 3.1 |
Tobacco Settlement | 2.7 |
Airport | 1.2 |
Higher Education | 1.0 |
Single Family Housing | .8 |
Facilities | .5 |
| | 152.9 |
† Based on net assets.
See notes to financial statements.
18
| | | | |
| |
Summary of Abbreviations(Unaudited) |
| |
ABAG | Association of Bay Area Governments | ACA | American Capital Access |
AGC | ACE Guaranty Corporation | AGIC | Asset Guaranty Insurance Company |
AMBAC | American Municipal Bond Assurance Corporation | ARRN | Adjustable Rate Receipt Notes |
BAN | Bond Anticipation Notes | BPA | Bond Purchase Agreement |
CIFG | CDC Ixis Financial Guaranty | COP | Certificate of Participation |
CP | Commercial Paper | DRIVERS | Derivative Inverse Tax-Exempt Receipts |
EDR | Economic Development Revenue | EIR | Environmental Improvement Revenue |
EURIBOR | Euro Interbank Offered Rate | 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 |
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 |
LIBOR | London Interbank Offered Rate | LIFERS | Long Inverse Floating Exempt Receipts |
LOC | Letter of Credit | LOR | Limited Obligation Revenue |
LR | Lease Revenue | MERLOTS | Municipal Exempt Receipts Liquidity Option Tender |
MFHR | Multi-Family Housing Revenue | MFMR | Multi-Family Mortgage Revenue |
MUNIPSA | Securities Industry and Financial Markets Association Municipal Swap Index Yield | PCR | Pollution Control Revenue |
PILOT | Payment in Lieu of Taxes | P-FLOATS | Puttable Floating Option Tax-Exempt Receipts |
PUTTERS | Puttable Tax-Exempt Receipts | RAC | Revenue Anticipation Certificates |
RAN | Revenue Anticipation Notes | RAW | Revenue Anticipation Warrants |
RIB | Residual Interest Bonds | ROCS | Reset Options Certificates |
RRR | Resources Recovery Revenue | SAAN | State Aid Anticipation Notes |
SBPA | Standby Bond Purchase Agreement | SFHR | Single Family Housing Revenue |
SFMR | Single Family Mortgage Revenue | SOFRRATE | Secured Overnight Financing Rate |
SONYMA | State of New York Mortgage Agency | SPEARS | Short Puttable Exempt Adjustable Receipts |
SWDR | Solid Waste Disposal Revenue | TAN | Tax Anticipation Notes |
TAW | Tax Anticipation Warrants | TRAN | Tax and Revenue Anticipation Notes |
XLCA | XL Capital Assurance | | |
See notes to financial statements.
19
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2019 (Unaudited)
| | | | | | | | | | | |
| | | | | | |
| | | Cost | | Value | |
Assets ($): | | | | |
Investments in securities—See Statement of Investments | 271,711,689 | | 287,940,318 | |
Cash | | | | | 1,883,983 | |
Interest receivable | | 4,208,331 | |
Prepaid expenses | | | | | 19,451 | |
| | | | | 294,052,083 | |
Liabilities ($): | | | | |
Due to The Dreyfus Corporation and affiliates—Note 2(b) | | 134,839 | |
Payable for floating rate notes issued—Note 3 | | 74,682,347 | |
Interest and expense payable related to
floating rate notes issued—Note 3 | | 514,425 | |
Commissions payable—Note 1 | | 18,315 | |
Directors fees and expenses payable | | 4,548 | |
Dividends payable to Preferred Shareholders | | 4,492 | |
Accrued expenses | | | | | 110,810 | |
| | | | | 75,469,776 | |
Auction Preferred Stock, Series A and B, par value $.001 per share (1,209 shares issued and outstanding at $25,000 per share liquidation preference)—Note 1 | | 30,225,000 | |
Net Assets Applicable to Common Shareholders ($) | | | 188,357,307 | |
Composition of Net Assets ($): | | | | |
Common Stock, par value, $.001 per share
(20,746,281 shares issued and outstanding) | | | | | 20,746 | |
Paid-in capital | | | | | 179,256,211 | |
Total distributable earnings (loss) | | | | | 9,080,350 | |
Net Assets Applicable to Common Shareholders ($) | | | 188,357,307 | |
Shares Outstanding | | |
|
|
(110 million shares authorized) | | | 20,746,281 |
|
Net Asset Value Per Share of Common Stock ($) | | | 9.08 |
|
| | | | | |
See notes to financial statements. | | | | |
20
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2019 (Unaudited)
| | | | | | | |
| | | | | | | |
| | | | | | |
| | | | | | |
Investment Income ($): | | | | |
Interest Income | | | 6,562,202 | |
Expenses: | | | | |
Management fee—Note 2(a) | | | 746,824 | |
Interest and expense related to floating rate notes issued—Note 3 | | | 831,373 | |
Custodian fees—Note 2(b) | | | 23,189 | |
Directors’ fees and expenses—Note 2(c) | | | 19,947 | |
Professional fees | | | 13,228 | |
Shareholder servicing costs | | | 12,801 | |
Commission fees—Note 1 | | | 12,333 | |
Shareholders’ reports | | | 12,165 | |
Registration fees | | | 8,333 | |
Miscellaneous | | | 35,473 | |
Total Expenses | | | 1,715,666 | |
Investment Income—Net | | | 4,846,536 | |
Realized and Unrealized Gain (Loss) on Investments—Note 3 ($): | | |
Net realized gain (loss) on investments | 206,651 | |
Net unrealized appreciation (depreciation) on investments | | | 3,465,587 | |
Net Realized and Unrealized Gain (Loss) on Investments | | | 3,672,238 | |
Dividends to Preferred Shareholders | | | (391,728) | |
Net Increase in Net Assets Applicable to Common
Shareholders Resulting from Operations | | 8,127,046 | |
| | | | | | | |
See notes to financial statements. | | | | | |
21
STATEMENT OF CASH FLOWS
Six Months Ended March 31, 2019 (Unaudited)
| | | | | | | |
| | | | | |
| | | | | | |
Cash Flows from Operating Activities ($): | | | | | |
Purchases of portfolio securities | | (22,678,775) | | | |
Proceeds from sales of portfolio securities | 24,045,617 | | | |
Dividends paid to Preferred Shareholders | (395,080) | | | |
Interest received | | 6,986,280 | | | |
Paid to The Dreyfus Corporation | | (739,869) | | | |
Operating expenses paid | | (218,803) | | | |
Net Cash Provided by Operating Activities | | | | 6,999,370 | |
Cash Flows from Financing Activities ($): | | | | | |
Dividends paid to Common Shareholders | | (4,356,719) | | | |
Interest and expense related to floating | | | | | |
| rate notes issued paid | | (815,855) | | | |
Net Cash Provided in Financing Activities | | (5,172,574) | |
Net Increase (Decrease) in cash | | 1,826,796 | |
Cash at beginning of period | | 57,187 | |
Cash at end of period | | 1,883,983 | |
Reconciliation of Net Increase (Decrease) in Net Assets Applicable to | | | |
| Common Shareholders Resulting from Operations to | | | |
| Net Cash Provided by Operating Activities ($): | | | |
Net Increase in Net Assets Resulting From Operations | | 8,127,046 | |
Adjustments to reconcile net increase in net assets | | | |
| applicable to Common Shareholder resulting from | | | |
| operations to net cash provided by operating activities ($): | | | |
Decrease in investments in securities at cost | | 1,396,163 | |
Decrease in interest receivable | | 124,840 | |
Increase in prepaid expenses | | (12,341) | |
Increase in Due to The Dreyfus Corporation and affiliates | | 6,955 | |
Interest and expense related to floating rate notes issued | | 831,373 | |
Decrease in dividends payable to Preferred Shareholders | | (3,352) | |
Decrease in Directors fees and expense payable | | (16,766) | |
Decrease in commissions payable and accrued expenses | | (52,227) | |
Net unrealized appreciation on investments | | (3,465,587) | |
Net amortization of premiums on investments | | 63,266 | |
Net Cash Provided by Operating Activities | | 6,999,370 | |
| | | | | | | |
See notes to financial statements. | | | | | |
22
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | | | |
| | | | | | | | | | |
| | | | Six Months Ended
March 31, 2019 (Unaudited) | | Year Ended
September 30, 2018 | |
Operations ($): | | | | | | | | |
Investment income—net | | | 4,846,536 | | | | 10,299,364 | |
Net realized gain (loss) on investments | | 206,651 | | | | 595,292 | |
Net unrealized appreciation (depreciation)
on investments | | 3,465,587 | | | | (11,380,825) | |
Dividends to Preferred Shareholders | | | (391,728) | | | | (767,544) | |
Net Increase (Decrease) in Net Assets Applicable
to Common Shareholders Resulting from
Operations | 8,127,046 | | | | (1,253,713) | |
Distributions ($): | |
Distributions to Common Shareholders | | | (4,356,719) | | | | (9,211,349) | |
Capital Stock Transactions ($): | |
Proceeds from Auction Preferred Stock
to Common Shareholders | - | | | | 988,750 | |
Increase (Decrease) in Net Assets
from Capital Stock Transactions | - | | | | 988,750 | |
Total Increase (Decrease) in Net Assets
Applicable to Common Shareholders | 3,770,327 | | | | (9,476,312) | |
Net Assets Applicable to Common Shareholders ($): | |
Beginning of Period | | | 184,586,980 | | | | 194,063,292 | |
End of Period | | | 188,357,307 | | | | 184,586,980 | |
| | | | | | | | | | |
See notes to financial statements. | | | | | | | | |
23
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements and, with respect to common stock, market price data for the fund’s common shares.
| | | | | | | | | | | | | | |
| | | | | | |
Six Months Ended
March 31, 2019 | Year Ended September 30, |
| (Unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | 8.90 | 9.35 | 9.84 | 9.54 | 9.68 | 9.00 |
Investment Operations: | | | | | | |
Investment income-neta | .23 | .50 | .52 | .52 | .55 | .59 |
Net realized and unrealized gain
(loss) on investments | .18 | (.52) | (.49) | .33 | (.06) | .72 |
Dividends to Preferred Shareholders
from investment income—net | (.02) | (.04) | (.03) | (.01) | (.00)b | (.00)b |
Total from Investment Operations | .39 | (.06) | - | .84 | .49 | 1.31 |
Distributions to Common Shareholders: | | | | | | |
Dividends from investment
income-net | (.21) | (.44) | (.49) | (.54) | (.63) | (.63) |
Net asset value resulting from
Auction Preferred Stock
tendered as a discount | - | .05 | - | - | - | - |
Net asset value, end of period | 9.08 | 8.90 | 9.35 | 9.84 | 9.54 | 9.68 |
Market value, end of period | 8.41 | 7.83 | 9.13 | 9.60 | 9.45 | 9.09 |
Total Return (%)c | 10.30d | (9.55) | .44 | 7.39 | 11.15 | 12.46 |
24
| | | | | | | | | | | | |
| | | | | | |
Six Months Ended
March 31, 2019 | Year Ended September 30, |
(Unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses to average
net assets applicable to
Common Stocke | 1.87f | 1.75 | 1.48 | 1.33 | 1.25 | 1.28 |
Ratio of interest and expense related
to floating rate notes issued to
average net assets applicable to
Common Stocke | .91f | .60 | .37 | .20 | .16 | .16 |
Ratio of net investment income
to average net assets applicable to
Common Stocke | 5.29f | 5.46 | 5.57 | 5.35 | 5.70 | 6.33 |
Ratio of total expenses to
total average net assets | 1.61f | 1.45 | 1.18 | 1.07 | 1.00 | 1.00 |
Ratio of interest and expense related
to floating rate notes issued to total
average net assets | .78f | .50 | .29 | .16 | .13 | .13 |
Ratio of net investment income to
total average net assets | 4.54f | 4.52 | 4.43 | 4.29 | 4.56 | 4.95 |
Portfolio Turnover Rate | 10.75d | 17.70 | 12.49 | 11.66 | 11.17 | 10.97 |
Asset Coverage of Preferred Stock,
end of period | 723 | 711 | 488 | 508 | 495 | 501 |
Net Assets applicable to
Common Shareholders,
end of period ($ x 1,000) | 188,357 | 184,587 | 194,063 | 204,069 | 197,727 | 200,598 |
Preferred Stock Outstanding,
end of period ($ x 1,000) | 30,225 | 30,225 | 50,000 | 50,000 | 50,000 | 50,000 |
Floating Rate Notes Outstanding,
end of period ($ x 1,000) | 74,682 | 74,682 | 51,742 | 46,492 | 51,492 | 51,492 |
a Based on average common shares outstanding.
b Amount represents less than $.01 per share.
c Calculated based on market value.
d Not annualized.
e Does not reflect the effect of dividends to Preferred Shareholders.
f Annualized.
See notes to financial statements.
25
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 “Adviser” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. The fund’s Common Stock trades on the New York Stock Exchange (the “NYSE American”) under the ticker symbol DMF.
The fund has outstanding 616 Series A shares and 593 Series B shares, 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 or by reference to a market rate. 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 .15%-.25% of the purchase price of shares of APS.
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 shareholders of Common Stock (“Common Shareholders”) or repurchasing shares of Common Stock and/or could trigger the mandatory redemption of APS at liquidation value. Thus, redemptions of APS may be deemed to be outside of the control of the fund.
The holders of APS, voting as a separate class, have the right to elect at least two directors. The holders of APS will vote as a separate class on certain other matters, as required by law. The fund’s Board of Directors (the “Board”) has designated Nathan Leventhal and Benaree Pratt Wiley as directors to be elected by the holders of APS.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with
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GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The fundenters 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: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in securities are valued each business day by an independent pricing service (the “Service”) approved by the Board. 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
27
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
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 the following: yields or prices of municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. All of the preceding securities are generally categorized within Level 2 of the fair value hierarchy.
The Service is engaged under the general supervision of the Board.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of March 31, 2019in valuing the fund’s investments:
| | | | | |
| | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 -Significant Unobservable Inputs | Total |
Assets ($) | | | | |
Investments in Securities: | | | | |
Municipal Bonds† | - | 287,940,318 | - | 287,940,318 |
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| | | | | |
| | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 -Significant Unobservable Inputs | Total |
Other Financial Instruments: | | | | |
Liabilities ($) | | | | |
Floating Rate Notes†† | - | (74,682,347) | - | (74,682,347) |
† See Statement of Investments for additional detailed categorizations.
†† Certain of the fund’s liabilities are held at carrying amount, which approximates fair value for financial reporting purposes.
At March 31, 2019, there were no transfers between levels of the fair value hierarchy. It is the fund’s policy to recognize transfers between levels at the end of the reporting period.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses 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 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 and distributions to Common Shareholders: Dividends and distributions are recorded on the ex-dividend date. Dividends from investment income-net are normally declared and paid monthly. Dividends from net realized capital gains, 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 gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
Common Shareholders will have their distributions reinvested in additional shares of the fund, unless such Common Shareholders elect to receive cash, at the lower of the market price or net asset value per share (but not less than 95% of the market price). If market price is equal to or exceeds net asset value, shares will be issued at net asset value. If net asset value exceeds market price, Computershare Inc., the transfer agent for the fund’s Common Stock, will buy fund shares in the open market and reinvest those shares accordingly.
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NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
On March 28, 2019, the Board declared a cash dividend of $.035 per share from investment income-net, payable on April 30, 2019 to Common Shareholders of record as of the close of business on April 12, 2019. The ex-dividend date was April 11, 2019.
(d) Dividends and distributions to shareholders of APS: Dividends, which are cumulative, are generally reset every 7 days for each Series of APS pursuant to a process specified in related fund charter documents. Dividend rates as of March 31, 2019, for each Series of APS were as follows: Series A–2.668% and Series B–2.746%. These rates reflect the “maximum rates” under the governing instruments as a result of “failed auctions” in which sufficient clearing bids are not received. The average dividend rates for the period ended March 31, 2019 for each Series of APS were as follows: Series A–2.604% and Series B–2.594%.
(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.
As of and during the period ended March 31, 2019, the fund did not have any liabilities for any uncertain tax positions. The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended March 31, 2019, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended September 30, 2018 remains subject to examination by the Internal Revenue Service and state taxing authorities.
Under the Regulated Investment Company Modernization Act of 2010 (the “2010 Act”), the fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 (“post-enactment losses”) for an unlimited period. Furthermore, post-enactment capital loss carryovers retain their character as either short-term or long-term capital losses rather than short-term as they were under previous statute. The 2010 Act requires post-enactment losses to be utilized before the utilization of losses incurred in taxable years prior to the effective date of the 2010 Act (“pre-enactment losses”). As a result of this ordering rule, pre-enactment losses may be more likely to expire unused.
The fund has an unused capital loss carryover of $7,881,961 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to September 30, 2018. The fund has $3,147,834 of post-enactment short-term capital losses and $4,734,127 of
30
post-enactment long-term capital losses which can be carried forward for an unlimited period.
The tax character of distributions paid to shareholders during the fiscal year ended September 30, 2018 was as follows: tax-exempt income $9,849,969 and ordinary income $128,924. The tax character of current year distributions will be determined at the end of the current fiscal year.
(f) New Accounting Pronouncements: In March 2017, the FASB issued Accounting Standards Update 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization On Purchased Callable Debt Securities (“ASU 2017-08”). The update shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. ASU 2017-08 will be effective for fiscal years beginning after December 15, 2018.
Also in August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The update provides guidance that modifies certain disclosure requirements for fair value measurements. ASU 2018-13 will be effective for fiscal years beginning after December 15, 2019. Management is currently assessing the potential impact of these changes to future financial statements.
NOTE 2—Management Fee and Other Transactions with Affiliates:
(a)Pursuant to a management agreement (the “Agreement”) with the Adviser, the management fee is computed at the annual rate of .70% of the value of the fund’s average weekly net assets, inclusive of the outstanding APS, and is payable monthly. The Agreement provides that if in any full fiscal year the aggregate expenses of the fund (excluding 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 Adviser, or the Adviser will bear, the amount of such excess to the extent required by state law. During the period ended March 31, 2019, there was no expense reimbursement pursuant to the Agreement.
(b)The fund compensates The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets and transaction activity. During the period ended March 31, 2019,the fund was charged $23,189pursuant to the custody agreement.
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NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
The fund has an arrangement with the custodian whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset custody fees. For financial reporting purposes, the fund includes net earnings credits, if any, as an expense offset in the Statement of Operations.
During the period ended March 31, 2019, the fund was charged $3,783 for services performed by the Chief Compliance Officer and his staff. These fees are included in Miscellaneous in the Statement of Operations.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $128,716, custodian fees $2,340 and Chief Compliance Officer fees $3,783.
(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.
NOTE 3—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended March 31, 2019, amounted to $22,678,775 and $24,045,617, respectively.
Inverse Floater Securities: The fund participates in secondary inverse floater structures in which fixed-rate, tax-exempt municipal bonds are transferred to a trust (the “Inverse Floater Trust”). The Inverse Floater Trust typically issues two variable rate securities that are collateralized by the cash flows of the fixed-rate, tax-exempt municipal bonds. One of these variable rate securities pays interest based on a short-term floating rate set by a remarketing agent at predetermined intervals (“Trust Certificates”). A residual interest tax-exempt security is also created by the Inverse Floater Trust, which is transferred to the fund, and is paid interest based on the remaining cash flows of the Inverse Floater Trust, after payment of interest on the other securities and various expenses of the Inverse Floater Trust. An Inverse Floater Trust may be collapsed without the consent of the fund due to certain termination events such as bankruptcy, default or other credit event.
The fund accounts for the transfer of bonds to the Inverse Floater Trust as secured borrowings, with the securities transferred remaining in the fund’s investments, and the Trust Certificates reflected as fund liabilities in the Statement of Assets and Liabilities.
The fund may invest in inverse floater securities on either a non-recourse or recourse basis. These securities are typically supported by a liquidity facility provided by a bank or other financial institution (the “Liquidity
32
Provider”) that allows the holders of the Trust Certificates to tender their certificates in exchange for payment from the Liquidity Provider of par plus accrued interest on any business day prior to a termination event. When the fund invests in inverse floater securities on a non-recourse basis, the Liquidity Provider is required to make a payment under the liquidity facility due to a termination event to the holders of the Trust Certificates. When this occurs, the Liquidity Provider typically liquidates all or a portion of the municipal securities held in the Inverse Floater Trust. A liquidation shortfall occurs if the Trust Certificates exceed the proceeds of the sale of the bonds in the Inverse Floater Trust (“Liquidation Shortfall”). When a fund invests in inverse floater securities on a recourse basis, the fund typically enters into a reimbursement agreement with the Liquidity Provider where the fund is required to repay the Liquidity Provider the amount of any Liquidation Shortfall. As a result, a fund investing in a recourse inverse floater security bears the risk of loss with respect to any Liquidation Shortfall.
The average amount of borrowings outstanding under the inverse floater structure during the period ended March 31, 2019 was approximately $74,682,300, with a related weighted average annualized interest rate of 2.23%.
At March 31, 2019, accumulated net unrealized appreciation on investments was $16,228,629, consisting of $16,302,806 gross unrealized appreciation and $74,177 gross unrealized depreciation.
At March 31, 2019, 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).
NOTE 4—Subsequent Event:
On March 4, 2019, the fund announced that effective on or about June 3, 2019 (the “Effective Date”), the fund will change its name from Dreyfus Municipal Income, Inc. to BNY Mellon Municipal Income, Inc. In addition, on the effective date, Dreyfus, the fund’s investment adviser and administrator, will change its name to “BNY Mellon Investment Adviser, Inc.”
33
NOTES
34
NOTES
35
NOTES
36
OFFICERS AND DIRECTORS
Dreyfus Municipal Income, Inc.
200 Park Avenue
New York, NY 10166
| | | | |
Directors | | Officers (continued) | |
Joseph S. DiMartino, Chairman | | Assistant Treasurers (continued) | |
Francine J. Bovich | | Robert Svagna | |
J. Charles Cardona | | Chief Compliance Officer | |
Gordon J. Davis† | | Joseph W. Connolly | |
Isabel P. Dunst | | | |
Nathan Leventhal†† | | Portfolio Managers | |
Robin A. Melvin | | Daniel A. Rabasco | |
Roslyn M. Watson | | Jeffrey B. Burger | |
Benaree Pratt Wiley†† | | | |
† Interested Board Member | | | |
†† Elected by APS Holders | | Adviser | |
Officers | | The Dreyfus Corporation | |
President | | Custodian | |
Bradley J. Skapyak | | The Bank of New York Mellon | |
Chief Legal Officer | | Counsel | |
Bennett A. MacDougall | | Proskauer Rose LLP | |
Vice President and Secretary | | Transfer Agent, | |
James Bitetto | | Dividend Disbursing Agent | |
Vice Presidents and Assistant Secretaries | | and Registrar | |
Sonalee Cross | | Computershare Inc. | |
Deirdre Cunnane | | (Common Stock) | |
Sarah S. Kelleher | | Deutsche Bank Trust Company America | |
Jeff Prusnofsky | | (Auction Preferred Stock) | |
Peter M. Sullivan | | Stock Exchange Listing | |
Natalya Zelensky | | NYSE American Symbol: DMF | |
Treasurer | | Initial SEC Effective Date | |
James Windels | | 10/21/88 | |
Assistant Treasurers | | Auction Agent | |
Gavin C. Reilly | | Deutsche Bank Trust Company America | |
Robert S. Robol | | (Auction Preferred Stock) | |
Robert Salviolo | | | |
The fund’s net asset value per share appears in the following publications: Barron’s, Closed-End Bond Funds section under the
heading “Municipal Bond Funds” every Monday; The Wall Street Journal, Mutual Funds section under the heading
“Closed-End Funds” every Monday. |
Notice is hereby given in accordance with Section 23(c) of the Act 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. |
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Dreyfus Municipal Income, Inc.
200 Park Avenue
New York, NY 10166
Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Registrar (Common Stock)
Computershare Inc.
480 Washington Boulevard
Jersey City, NJ 07310
Dividend Disbursing Agent (Common Stock)
Computershare Inc.
P.O. Box 30170
College Station, TX 77842
The fund files its complete schedule of portfolio holdings with the 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 atwww.sec.gov.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available atwww.dreyfus.com and on the SEC’s website atwww.sec.gov and without charge, upon request, by calling 1-800-DREYFUS.
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0424SA0319
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