Dreyfus
Strategic Municipal
Bond Fund, Inc.
SEMIANNUAL REPORT
May 31, 2001
(reg.tm)
The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE FUND
--------------------------------------------------
2 Letter from the Chairman
3 Discussion of Fund Performance
6 Statement of Investments
14 Statement of Assets and Liabilities
15 Statement of Operations
16 Statement of Changes in Net Assets
17 Financial Highlights
19 Notes to Financial Statements
25 Officers and Directors
FOR MORE INFORMATION
---------------------------------------------------------------------------
Back Cover
The Fund
Dreyfus Strategic Municipal Bond Fund, Inc.
LETTER FROM THE CHAIRMAN
Dear Shareholder:
We present this semiannual report for Dreyfus Strategic Municipal Bond Fund,
Inc., covering the six-month period from December 1, 2000 through May 31, 2001.
Inside, you' ll find valuable information about how the fund was managed during
the reporting period, including a discussion with the fund's portfolio manager,
Paul Disdier.
While the past six months have been difficult for the U.S. economy, we have
recently seen signs that improvement may be in sight. The Federal Reserve
Board's aggressive easing of monetary policy produced a 2.5 percentage-point
drop in short-term interest rates, a move designed to stimulate economic growth
by reducing borrowing costs for corporations and consumers. Passage of a $1.3
trillion federal tax cut should further stimulate economic growth, as should
reduced inventories of products on manufacturers' shelves. Based on these and
other factors, we believe that the current economic slowdown should give way to
renewed economic growth later this year.
In our view, the implications of this economic scenario could be positive for
the tax-exempt bond market. Although bond prices generally tend to fall when
interest rates rise, better economic times should support the fiscal health of
the states, cities, towns and other municipalities that issue tax-exempt bonds.
Because municipal bonds often respond more to supply-and-demand forces than to
interest-rate trends, a stronger economy may benefit the municipal marketplace.
Of course, our economic perspectives may change as new information becomes
available. We encourage you to contact your financial advisor for information
about ways to refine your investment strategies in the current environment
Thank you for your continued confidence and support.
Sincerely,
Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
June 15, 2001
DISCUSSION OF FUND PERFORMANCE
Paul Disdier, Portfolio Manager
How did Dreyfus Strategic Municipal Bond Fund, Inc. perform during the period?
For the six-month reporting period ended May 31, 2001, Dreyfus Strategic
Municipal Bond Fund, Inc. provided a total return of 6.32%.(1) The fund produced
aggregate income dividends of $0.2802 per share, which is equal to an annualized
distribution rate of 6.33% over the same period.(2)
We attribute the market and fund's performance to a generally favorable
environment for municipal bonds as interest rates fell in a weakening economy.
In addition, the fund's performance was enhanced by our security selection
strategy, which was designed to maximize current income.
What is the fund's investment approach?
The fund seeks high current income exempt from federal income taxes by investing
in long-term, tax-exempt municipal bonds.
In so doing, we look for bonds that we believe can provide high current income.
We strive to find such opportunities through analysis of individual bonds'
structures. Within the context of our bond structure analyses, we pay
particularly close attention to each bond's maturity and early redemption
features.
Over time, many of the fund's older, higher yielding bonds have matured or were
redeemed by their issuers. We have generally attempted to replace those bonds
with new securities that offered currently higher than average income payments.
We have also sought to upgrade the fund with newly issued bonds that, in our
opinion, have better structural or income characteristics than existing
holdings. When such opportunities arise, we usually sell bonds that are close to
The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
their optimal redemption date or maturity. In addition, we conduct credit
analysis of our holdings in an attempt to avoid potential defaults on interest
and principal payments.
What other factors influenced the fund's performance?
Falling interest rates in a weakening economy represented an important driver of
the fund's performance. When the six-month reporting period began, ongoing
economic deterioration caused tax-exempt yields to decline modestly. The Federal
Reserve Board began to take steps to stimulate economic growth in early January
2001, when it implemented the first of the reporting period's five short-term
interest-rate cuts for a total reduction of 250 basis points. In this declining
interest-rate environment, yields on newly issued municipal bonds fell.
In addition, the municipal bond market was strongly influenced by
supply-and-demand factors. Because of strong tax revenues in 1999 and 2000, many
municipalities had little need to borrow. As a result, the supply of municipal
bonds was generally lower than the same period one year earlier. At the same
time, however, demand for high quality, tax-exempt securities surged from
investors seeking a safe haven from a declining stock market. These technical
factors put additional downward pressure on municipal bond yields.
In this declining interest-rate environment, we strove to maximize the fund's
current income. We attempted to do so by using the proceeds of maturing and
redeemed bonds to purchase tax-exempt securities with competitive yields,
including bonds issued to finance health care and airport facilities. We also
purchased bonds backed by certain states' settlements with tobacco companies, as
well as bonds issued to pay for the construction of convention centers. On the
other hand, we sold bonds that we believed might be adversely affected by
deteriorating credit quality in a weakening economy. These sales included a
small number of bonds that had been favorably affected by the successful
resolution of credit concerns.
In addition, we took steps to improve the fund's credit profile during the
reporting period by increasing the diversity of the fund's holdings and focusing
on bonds that are highly rated by independent credit-rating agencies. In an
environment with reduced differences in yields between high quality and lower
quality bonds, it made little sense to assume the risks that lower rated bonds
typically entail.
What is the fund's current strategy?
We have continued to manage the fund with a defensive bias, emphasizing high
levels of tax-exempt income. While this has been a particularly challenging task
in a declining interest-rate environment, we successfully maintained the fund's
dividend through our attempts during the reporting period to protect the fund
from the effects of early redemptions, maintained a relatively modest average
duration, and took advantage of widening yield differences among bonds of
various maturities. In addition, the investments we made with the proceeds of
the fund's issuance of auction-rate preferred stock in January 2000 continued to
support our efforts to maximize income. Of course, we are prepared to modify our
strategy if and when economic and market conditions change.
June 15, 2001
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID,
BASED UPON NET ASSET VALUE PER SHARE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS. INCOME MAY BE SUBJECT TO STATE AND LOCAL TAXES AND SOME INCOME MAY BE
SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX (AMT) FOR CERTAIN INVESTORS.
CAPITAL GAINS, IF ANY, ARE FULLY TAXABLE.
(2) DISTRIBUTION RATE PER SHARE IS BASED UPON DIVIDENDS PER SHARE PAID FROM NET
INVESTMENT INCOME DURING THE PERIOD ANNUALIZED, DIVIDED BY THE MARKET PRICE PER
SHARE AT THE END OF THE PERIOD.
The Fund
May 31, 2001 (Unaudited)
STATEMENT OF INVESTMENTS
Principal
LONG-TERM MUNICIPAL INVESTMENTS--98.2% Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
ALABAMA--.5%
Alabama Industrial Development Authority, SWDR
(Pine City Fiber Co.) 6.45%, 12/1/2023 3,000,000 2,954,550
ALASKA--3.4%
Alaska Housing Finance Corporation:
6.25%, 6/1/2035 (Insured; MBIA) 7,825,000 8,186,358
6.05%, 6/1/2039 (Insured; MBIA) 12,185,000 12,602,093
ARIZONA--1.3%
Apache County Industrial Development Authority, PCR
(Tuscon Electric Power Co.) 5.85%, 3/1/2028 8,500,000 7,683,490
ARKANSAS--.9%
Arkansas Development Finance Authority, SFMR
6.25%, 1/1/2032 5,000,000 5,254,050
CALIFORNIA--1.4%
California Health Facilities Financing Authority,
Health Facility Financing Revenue
(Cedars-Sinai Medical Center) 6.25%, 12/1/2034 3,750,000 3,943,200
California Statewide Communities Development Authority, COP
(The Internext Group) 5.375%, 4/1/2030 5,000,000 4,507,250
COLORADO--.3%
Colorado Health Facilities Authority, Revenue
(American Housing Foundation 1, Inc.) 10.25%, 12/1/2020 5,600,000 (a) 1,957,200
CONNECTICUT--2.3%
Connecticut Development Authority, PCR
(Connecticut Light and Power) 5.95%, 9/1/2028 14,000,000 13,812,680
DELAWARE--1.0%
Delaware Health Facilities Authority, Revenue
(Beebe Medical Center) 6.80%, 6/1/2024 5,905,000 5,857,583
DISTRICT OF COLUMBIA--2.3%
District of Columbia Tobacco Settlement Financing Authority
6.75%, 5/15/2040 7,000,000 7,254,660
Metropolitan Washington Airports Authority,
Special Facilities Revenue
(Caterair International Corp.) 10.125%, 9/1/2011 6,820,000 6,820,818
FLORIDA--5.5%
Florida Housing Finance Corporation, Housing Revenue
(Seminole Ridge Apartments) 6%, 4/1/2041 (Insured; GNMA) 6,415,000 6,566,651
Florida Board of Education, Capital Outlay 8.921%, 6/1/2019 15,000,000 (b,c) 16,157,100
Lee County Industrial Development Authority,
Health Care Facilities Revenue
(Shell Point Village) 5.50%, 11/15/2029 1,500,000 1,252,680
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
FLORIDA (CONTINUED)
Orange County Health Facilities Authority, Revenue
(Orlando Regional Healthcare System) 6%, 10/1/2026 3,500,000 3,511,690
South Lake County Hospital District, Revenue
(South Lake Hospital, Inc.) 5.80%, 10/1/2034 6,000,000 5,814,720
GEORGIA--1.7%
Private Colleges and Universities Facilities Authority, Revenue
(Clark Atlanta University)
8.25%, 1/1/2015 (Prerefunded 1/1/2003) 9,280,000 (d) 10,422,368
IDAHO--.4%
Idaho Housing and Finance Association, SFMR
6.35%, 1/1/2030 (Insured; FNMA) 2,500,000 2,619,650
ILLINOIS--5.3%
Chicago-O'Hare International Airport, Special Facility Revenue:
(Delta Airlines) 6.45%, 5/1/2018 2,790,000 2,790,530
(United Air Lines) 6.30%, 5/1/2016 4,500,000 4,534,380
Illinois Development Finance Authority, Revenue:
(Community Rehabilitation Providers Facilities
Acquisition Program)
6.05%, 7/1/2019 5,290,000 4,858,706
HR (Adventist Health Systems/Sunbelt)
5.50%, 11/15/2029 4,175,000 3,725,394
Illinois Health Facilities Authority, Revenue:
(OSF Healthcare Systems) 6.25%, 11/15/2029 12,000,000 12,095,640
(Advocate Network Health Care) 6.125%, 11/15/2022 4,000,000 4,073,080
INDIANA--5.2%
Burns Harbor Industrial Solid Waste Disposal Facilities, Revenue
(Bethlehem Steel Corp.) 8%, 4/1/2024 6,000,000 3,548,220
Franklin Township School Building Corp.
6.125%, 1/15/2022 6,000,000 6,887,820
Indianapolis Airport Authority, Revenue:
9.159%, 11/15/2031 4,375,000 (b,c) 3,774,750
Special Facilities (United Air Lines) 6.50%, 11/15/2031 12,100,000 11,312,774
Jasper County, EDR (Georgia Pacific Corp.)
5.60%, 4/1/2029 7,000,000 6,120,730
KENTUCKY--.5%
Kenton County Airport Board, Airport Revenue
(Special Facilities--Delta Airlines) 6.125%, 2/1/2022 3,000,000 2,919,210
LOUISIANA--4.1%
Lake Charles Harbor and Terminal,
District Port Facilities Revenue
(Trunkline LNG Co.) 7.75%, 8/15/2022 15,000,000 15,959,550
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
LOUISIANA (CONTINUED)
Parish of De Soto, Environmental Improvement Revenue
(International Paper Co.) 6.55%, 4/1/2019 2,900,000 2,970,586
West Feliciana Parish, PCR:
(Entergy Gulf States) 6.60%, 9/1/2028 4,000,000 4,031,160
(Gulf States) 5.80%, 12/1/2015 2,500,000 2,407,575
MARYLAND--1.0%
Baltimore County, PCR (Bethlehem Steel Corp.)
7.50%, 6/1/2015 5,000,000 2,958,550
Maryland Industrial Development Financing Authority, EDR
(Medical Waste Associates Limited Partnership)
8.75%, 11/15/2010 4,135,000 (e) 2,894,500
MASSACHUSETTS--.7%
Massachusetts Health and Educational Facilities
Authority, Revenue (Beth Israel Hospital)
7.883%, 7/1/2025 (Insured; AMBAC) 3,250,000 (b) 3,392,188
Pittsfield, SWDR (Vicon Recovery Associates)
7.95%, 11/1/2004 1,110,000 1,113,774
MICHIGAN--1.6%
Michigan Hospital Finance Authority, HR
(Genesys Health System Obligated Group)
8.125%, 10/1/2021 (Prerefunded 10/1/2005) 5,000,000 (d) 5,961,950
Michigan Strategic Fund, SWDR
(Genesee Power Station) 7.50%, 1/1/2021 4,000,000 3,894,200
MISSISSIPPI--1.4%
Mississippi Business Finance Corporation, PCR
(Systems Energy Resources, Inc.)
5.90%, 5/1/2022 9,070,000 8,403,083
MISSOURI--1.6%
Jackson County Industrial Development Authority,
Health Facilities Revenue
(Carondelet Health Corp.) 9%, 7/1/2020 6,615,000 6,696,034
Saint Louis Industrial Development Authority
(Saint Louis Convention) 7.25%, 12/15/2035 3,250,000 3,399,923
NEVADA--3.3%
Clark County, IDR:
(Nevada Power Company)
5.50%, 10/1/2030 7,000,000 5,982,340
(Southwest Gas Corporation)
6.50%, 12/1/2033 5,000,000 5,004,800
Washoe County (Reno-Sparks Convention)
6.40%, 7/1/2029 (Insured; FSA) 8,000,000 9,175,680
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
NEW HAMPSHIRE--1.8%
New Hampshire Industrial Development Authority, PCR
(Connecticut Light) 5.90%, 11/1/2016 5,400,000 5,335,146
New Hampshire Business Finance Authority, PCR
(Public Service Co.) 6%, 5/1/2021 6,000,000 5,927,580
NEW JERSEY--3.2%
New Jersey Economic Development Authority:
First Mortgage Revenue
(The Evergreens) 9.25%, 10/1/2022 4,925,000 5,423,115
Special Facilities Revenue (Continental Airlines, Inc.):
6.40%, 9/15/2023 7,000,000 6,722,660
7.20%, 11/15/2030 7,000,000 7,260,330
NEW YORK--2.3%
New York City
8%, 8/15/2018 (Prerefunded 8/15/2001) 1,485,000 (d) 1,522,689
New York City Industrial Development Agency,
Civic Facility Revenue
(YMCA of Greater New York)
8%, 8/1/2016 (Prerefunded 8/1/2001) 2,910,000 (d) 2,991,218
New York State Dormitory Authority, Revenue:
Judicial Facility Lease (Suffolk County) 9.50%, 4/15/2014 605,000 692,852
(Marymount Manhattan College) 6.25%, 7/1/2029 4,000,000 4,293,680
Tsasc, Inc. 6.375%, 7/15/2039 4,500,000 4,711,770
NORTH CAROLINA--.4%
North Carolina Eastern Municipal Power Agency,
Power Systems Revenue 6.70%, 1/1/2019 2,500,000 2,660,825
OHIO--2.7%
Cuyahoga County, HR (Metrohealth Systems)
6.15%, 2/15/2029 10,000,000 10,002,500
Ohio Air Quality Development Authority, PCR
6.10%, 8/1/2020 2,400,000 2,410,320
Ohio Water Development Authority, PCR
(Cleveland Electric) 6.10%, 8/1/2020 4,000,000 4,011,320
OKLAHOMA--2.4%
Oklahoma Development Finance Authority, Revenue
(St. John Health System) 6%, 2/15/2029 9,000,000 9,405,270
Oklahoma Industries Authority, Health System Revenue
(Obligation Group) 5.75%, 8/15/2029 (Insured; MBIA) 5,000,000 5,109,900
PENNSYLVANIA--4.6%
Allegheny County Port Authority,
Special Transportation Revenue
6.125%, 3/1/2029 (Insured; MBIA) 4,750,000 5,385,265
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA (CONTINUED)
Beaver County Industrial Development Authority, PCR
(Cleveland Electric) 7.625%, 5/1/2025 8,800,000 9,379,128
Pennsylvania Economic Development Financing Authority:
Exempt Facilities Revenue (National Gypsum Company)
6.125%, 11/1/2027 5,000,000 3,146,800
RRR (Northhampton Generating Project)
6.60%, 1/1/2019 4,200,000 4,173,792
Pennsylvania Housing Finance Agency,
Multi-Family Development Revenue
8.25%, 12/15/2019 289,000 295,852
Washington County Authority, Capital Funding Revenue
(Capital Projects and Equipment Program)
6.15%, 12/1/2029 (Insured; AMBAC) 5,000,000 5,649,350
RHODE ISLAND--1.0%
Rhode Island Health and Educational Building Corporation
Higher Educational Facilities (University of Rhode Island)
5.875%, 9/15/2029 (Insured; MBIA) 5,910,000 6,179,378
SOUTH CAROLINA--2.4%
South Carolina Medical Facilities, Hospital Facilities Revenue
6%, 7/1/2019 5,000,000 5,178,400
Tobacco Settlement Revenue Management Authority,
Tobbacco Settlement Revenue 6.375%, 5/15/2028 9,500,000 9,606,305
TENNESSEE--2.8%
Memphis Center City Revenue Finance Corp.
Sports Facility Revenue
(Memphis Redbirds) 6.50%, 9/1/2028 6,000,000 5,650,200
Tennessee Housing Development Agency
(Homeownership Program):
6%, 1/1/2028 5,910,000 6,088,778
6.40%, 7/1/2031 5,000,000 5,311,850
TEXAS--12.0%
Austin (Convent Station) 6.70%, 1/1/2032 4,250,000 4,222,418
Brazo River Authority, PCR 5.55%, 6/1/2030 5,000,000 4,546,350
Gregg County Health Facilities Development Corporation, HR
(Good Shepherd Medical Center) 6.375%, 10/1/2025 2,500,000 2,641,900
Harris County Health Facilities Development Corporation, HR
(Memorial Hermann Healthcare) 6.375%, 6/1/2029 7,000,000 7,124,600
Houston Airport System, Special Facilities Revenue,
Airport Improvement (Continental Airlines)
6.125%, 7/15/2017 2,875,000 2,658,656
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
TEXAS (CONTINUED)
Katy Independent School District
6.125%, 2/15/2032 11,360,000 12,020,584
Sabine River Authority, PCR
(TXU Electric) 6.45%, 6/1/2021 3,000,000 3,041,910
Springhill Courtland Heights Public Facility Corp. MFHR:
5.85%, 12/1/2028 6,030,000 5,964,936
(Veterans ) 6.00%, 12/1/2030 3,935,000 4,068,790
(Veterans Housing Assistance Program)
6.10%, 6/1/2031 8,510,000 8,841,294
Texas Department of Housing and Community Affairs,
Collateralized Home Mortgage Revenue
9.729%, 7/2/2024 6,850,000 (b) 8,040,187
Texas Public Property Finance Corp., Revenue
(Mental Health and Retardation):
8.625%, 9/1/2001 340,000 344,746
8.875%, 9/1/2011 (Prerefunded 9/1/2001) 5,100,000 (d) 5,273,859
Tyler Health Facilities Development Corp., HR
(East Texas Medical Center Regional
Health Care System)
6.75%, 11/1/2025 5,850,000 4,653,032
UTAH--1.6%
Carbon County, SWDR (Sunnyside Cogeneration):
7.10%, 8/15/2023 4,975,000 5,046,789
Zero Coupon 8/15/2024 1,545,000 301,290
Tooele County, Hazardous Waste Treatment Revenue
(Union Pacific) 5.70%, 11/1/2026 5,000,000 4,528,350
VIRGINIA--5.6%
Fairfax County Water Authority, Revenue
8.045%, 4/1/2029 4,000,000 (b,c) 4,098,440
Henrico County Industrial Development Authority,
Revenue (Bon Secours Health Care System)
7.924%, 8/23/2027 7,500,000 (b) 8,737,500
Virginia Housing Development Authority:
MFHR 7.05%, 5/1/2018 12,000,000 12,424,440
Rental Housing 6.20%, 8/1/2024 8,520,000 8,813,940
WASHINGTON--1.7%
Washington Higher Education Facilities
Authority, Revenue (Whitman College)
5.875%, 10/1/2029 10,000,000 10,324,700
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
WISCONSIN--5.6%
Wisconsin Housing and Economic Development Authority
Homeownership Revenue:
9.127%, 7/1/2025 10,600,000 (b,c) 11,286,562
6.25%, 9/1/2027 13,300,000 13,768,559
Wisconsin Health and Educational Facilities
Authority, Revenue
(Aurora Health Care, Inc.) 5.60%, 2/15/2029 10,800,000 9,359,712
WYOMING--2.4%
Sweetwater County, SWDR (FMC Corp.):
7%, 6/1/2024 2,200,000 2,243,516
6.90%, 9/1/2024 2,000,000 2,032,180
Wyoming Student Loan Corporation, Student Loan Revenue:
6.20%, 6/1/2024 5,000,000 5,205,600
6.25%, 6/1/2029 5,000,000 5,207,450
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $599,709,689) 599,414,481
------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL INVESTMENTS--.2%
------------------------------------------------------------------------------------------------------------------------------------
MISSISSIPPI--.1%
Harrison County, PCR, VRDN
(Du Pont de Memours) 3% 800,000 (f) 800,000
VIRGINIA--.1%
Roanoke Industrial Development, HR, VRDN
(Carilion Health Systems) 3% 700,000 (f) 700,000
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $1,500,000) 1,500,000
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $601,209,689) 98.4% 600,914,481
CASH AND RECEIVABLES (NET) 1.6% 9,797,569
NET ASSETS 100.0% 610,712,050
Summary of Abbreviations
AMBAC American Municipal Bond Assurance
Corporation
COP Certificate of Participation
EDR Economic Development Revenue
FNMA Federal National Mortgage Association
FSA Financial Security Assurance
GNMA Government National Mortgage
Association
HR Hospital Revenue
IDR Industrial Development Revenue
MBIA Municipal Bond Investors Assurance
Insurance Corporation
MFHR Multi-Family Housing Revenue
PCR Pollution Control Revenue
RRR Resources Recovery Revenue
SFMR Single Family Mortgage Revenue
SWDR Solid Waste Disposal Revenue
VRDN Variable Rate Demand Notes
Summary of Combined Ratings (Unaudited)
Fitch or Moody's or Standard & Poor's Value (%)
------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa AAA 19.8
AA Aa AA 23.3
A A A 16.6
BBB Baa BBB 26.5
BB Ba BB 5.1
B B B .7
F-1+, F-1 VMIG1, MIG1, P1 SP1, A1 .2
Not Rated (g) Not Rated (g) Not Rated (g) 7.8
100.0
(A) NON-INCOME PRODUCING SECURITY, INTEREST PAYMENTS IN DEFAULT.
(B) INVERSE FLOATER SECURITY--THE INTEREST RATE IS SUBJECT TO CHANGE
PERIODICALLY.
(C) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT
OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT MAY 31, 2001,
THESE SECURITIES AMOUNTED TO $35,316,852 OR 5.8% OF NET ASSETS.
(D) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT
SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND
INTEREST ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE
EARLIEST REFUNDING DATE.
(E) NON-INCOME PRODUCING SECURITY.
(F) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE SUBJECT TO PERIODIC
CHANGE.
(G) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S,
HAVE BEEN DETERMINED BY THE INVESTMENT ADVISER TO BE OF COMPARABLE QUALITY
TO THOSE RATED SECURITIES IN WHICH THE FUND MAY INVEST.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2001 (Unaudited)
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 601,209,689 600,914,481
Cash 407,184
Interest receivable 10,915,101
Receivable for investment securities sold 3,392,074
Prepaid expenses 32,181
615,661,021
--------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 387,533
Payable for investment securities purchased 4,222,418
Dividends payable to preferred shareholders 39,576
Commissions payable 30,539
Accrued expenses 268,905
4,948,971
--------------------------------------------------------------------------------
NET ASSETS ($) 610,712,050
--------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Auction Preferred Stock, Series A, B and C, par value $.001 per share
(7,440 shares issued and outstanding at
$25,000 per share liquidation preference)--Note 1 186,000,000
Common Stock, par value, $.001 per share
(47,913,561 shares issued and outstanding) 47,914
Paid-in capital 446,759,134
Accumulated undistributed investment income--net 1,216,310
Accumulated net realized gain (loss) on investments (23,016,100)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 (295,208)
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 424,712,050
--------------------------------------------------------------------------------
NET ASSETS ($) 610,712,050
--------------------------------------------------------------------------------
COMMON SHARES OUTSTANDING
(110 million shares of $.001 par value Common Stock authorized) 47,913,561
NET ASSET VALUE PER COMMON STOCK,
offering and redemption price per share ($) 8.86
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
Six Months Ended May 31, 2001 (Unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INTEREST INCOME 19,979,969
EXPENSES:
Management fee--Note 3(a) 1,513,269
Administration fee-Note 3(a) 756,634
Commission fees--Note 1 244,898
Professional fees 87,231
Shareholders' reports 34,999
Directors' fees and expenses--Note 3(b) 27,007
Registration fees 24,488
Shareholder servicing costs 22,904
Interest expense--Note 2 1,724
Custodian fees 716
Miscellaneous 17,040
TOTAL EXPENSES 2,730,910
INVESTMENT INCOME--NET 17,249,059
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments 302,082
Net unrealized appreciation (depreciation) on investments 11,752,792
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 12,054,874
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 29,303,933
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
May 31, 2001 Year Ended
(Unaudited) November 30, 2000
--------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 17,249,059 33,291,425
Net realized gain (loss) on investments 302,082 (4,672,749)
Net unrealized appreciation (depreciation)
on investments 11,752,792 8,042,876
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 29,303,933 36,661,552
--------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net:
Common Stock (13,399,369) (26,778,113)
Preferred Stock (3,416,961) (7,597,500)
TOTAL DIVIDENDS (16,816,330) (34,375,613)
--------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS ($):
Dividends reinvested--Note 1(c) 1,143,388 --
Offering costs charged to paid-in capital resulting
from issuance of Preferred Stock -- (163,370)
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL STOCK TRANSACTIONS 1,143,388 (163,370)
TOTAL INCREASE (DECREASE) IN NET ASSETS 13,630,991 2,122,569
--------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 597,081,059 594,958,490
END OF PERIOD 610,712,050 597,081,059
Undistributed investment income--net 1,216,310 783,581
--------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (COMMON SHARES):
INCREASE IN COMMON SHARES OUTSTANDING
AS A RESULT OF DIVIDENDS REINVESTED 129,636 --
SEE NOTES TO FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements and market price data for the fund's shares.
Six Months Ended
May 31, 2001 Year Ended November 30,
----------------------------------------------------------------
(Unaudited) 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value,
beginning of period 8.60 8.56 9.52 9.49 9.54 9.60
Investment Operations:
Investment income--net .36 .70 .58 .60 .62 .64
Net realized and unrealized
gain (loss) on investments .25 .06 (.90) .05 (.01) (.08)
Total from Investment Operations .61 .76 (.32) .65 .61 .56
Distributions:
Dividends from investment income--net:
Common Stock (.28) (.56) (.58) (.62) (.66) (.62)
Preferred Stock (.07) (.16) (.02) -- -- --
Total Distributions (.35) (.72) (.60) (.62) (.66) (.62)
Capital Stock transactions-net effect
of Preferred Stock offering -- (.00)(a) (.04) -- -- --
Net asset value, end of period 8.86 8.60 8.56 9.52 9.49 9.54
Market value, end of period 8.85 81_8 711_16 103_16 105_8 93_4
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (B) 24.89(c,d,e) 13.30 (19.36) 2.23 16.60 12.61
The Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
Six Months Ended
May 31, 2001 Year Ended November 30,
-----------------------------------------------------------------
(Unaudited) 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to
average net assets
applicable to Common Stock 1.30(c,d,e) 1.34(d,e) .91(d,e) .81 .81 .82
Ratio of net investment
income to average net assets
applicable to Common Stock 8.22(c,d,e) 8.25(d,e) 6.64(d,e) 6.26 6.55 6.82
Portfolio Turnover Rate 8.34(f) 27.58 32.58 6.33 2.95 13.47
Asset coverage of
Preferred Stock,
end of period 328 321 320 -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, net of
Preferred Stock,
end of period ($ x 1,000) 424,712 411,081 408,958 453,893 446,152 440,681
Preferred Stock outstanding,
end of period ($ x 1,000)( g) 186,000 186,000 186,000 -- -- --
(A) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE.
(B) CALCULATED BASED ON MARKET VALUE.
(C) ANNUALIZED.
(D) DOES NOT REFLECT THE EFFECT OF DIVIDENDS TO PREFERRED STOCK SHAREHOLDERS.
(E) THE RATIO OF EXPENSES TO TOTAL AVERAGE NET ASSETS AND THE RATIO OF NET
INVESTMENT INCOME TO TOTAL AVERAGE NET ASSETS WERE .90% AND 5.70%,
RESPECTIVELY, FOR THE SIX MONTHS ENDED MAY 31, 2001, .92% AND 5.64%,
RESPECTIVELY, FOR THE YEAR ENDED NOVEMBER 30, 2000 AND .84% AND 6.13%,
RESPECTIVELY, FOR THE YEAR ENDED NOVEMBER 30, 1999.
(F) NOT ANNUALIZED.
(G) PREFERRED SHARES WERE ISSUED ON SEPTEMBER 22, 1999.
SEE NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus Strategic Municipal Bond Fund, Inc. (the "fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified
closed-end management investment company. The fund's investment objective is to
maximize current income exempt from Federal income tax to the extent believed by
the fund's investment adviser to be consistent with the preservation of capital.
The Dreyfus Corporation ("Dreyfus") serves as the fund's investment adviser and
administrator. Dreyfus is a direct subsidiary of Mellon Bank, N.A., which is a
wholly-owned subsidiary of Mellon Financial Corporation ("Mellon"). Boston Safe
Deposit and Trust Company (the "Custodian") acts as the fund's custodian. The
Custodian is a wholly-owned subsidiary of Mellon. PFPC Global Fund Services
("PFPC"), a subsidiary of PNC Bank ("PNC"), serves as the fund's transfer agent,
dividend-paying agent, registrar and plan agent.
The fund has outstanding 2,480 shares of Series A, Series B and Series C for a
total of 7.440 shares of Auction Preferred Stock ("APS"), with a liquidation
preference of $25,000 per share (plus an amount equal to accumulated but unpaid
dividends upon liquidation) . APS dividend rates are determined pursuant to
periodic auctions. Bankers Trust, as Auction Agent, receives a fee from the fund
for its services in connection with such auctions. The fund also compensates
broker-dealers generally at an annual rate of .25% of the purchase price of the
shares of APS placed by the broker-dealer in an auction.
The fund is subject to certain restrictions relating to the APS. Failure to
comply with these restrictions could preclude the fund from declaring any
distributions to common shareholders or repurchasing common shares and/or could
trigger the mandatory redemption of APS at liquidation value.
The holders of the APS, voting as a separate class, have the right to elect at
least two directors. The holders of the APS vote as a separate class on certain
other matters, as required by law. The fund has designated Robin A. Pringle and
John E. Zuccotti to represent holders of APS on the fund's Board of Directors.
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
The fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which may require the use of
management estimates and assumptions. Actual results could differ from those
estimates.
(a) Portfolio valuation: Investments in municipal debt securities (excluding
options and financial futures on municipal and U.S. Treasury securities) are
valued on the last business day of each week and month by an independent pricing
service (" Service" ) approved by the Board of Directors. Investments for which
quoted bid prices are readily available and are representative of the bid side
of the market in the judgment of the Service are valued at the mean between the
quoted bid prices (as obtained by the Service from dealers in such securities)
and asked prices (as calculated by the Service based upon its evaluation of the
market for such securities). Other investments (which constitute a majority of
the portfolio securities) are carried at fair value as determined by the
Service, based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal securities 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 the last business day of each week and month. Investments
not listed on an exchange or the national securities market, or securities for
which there were no transactions, are valued at the average of the most recent
bid and asked prices. Bid price is used when no asked price is available.
(b) Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date.
In November 2000 the American Institute of Certified Public Accountants
("AICPA") issued a revised version of the AICPA Audit and Accounting Guide for
Investment Companies (the "Guide"). The revised version of the Guide is
effective for financial statements issued for fiscal years beginning after
December 15, 2000. One of the new provisions in the Guide requires investment
companies to accrete market discounts on municipal securities which the fund
does not currently do. Upon adoption, the fund will be required to record a
cumulative effect adjustment to conform with accounting principles generally
accepted in the United States. The effect of this adjustment will be to increase
accumulated net investment income with an offsetting decrease to accumulated
unrealized appreciation (depreciation) on securities. This adjustment will
therefore, have no effect on the net assets of the fund.
(c) Dividends to shareholders of Common Stock ("Common Shareholder(s)"):
Dividends are recorded on the ex-dividend date. Dividends from investment
income-net are declared and paid monthly. Dividends from net realized capital
gain are normally declared and paid at least annually. To the extent that net
realized capital gain can be offset by capital loss carryovers, it is the policy
of the fund not to distribute such gain.
For Common Shareholders who elect to receive their distributions in additional
shares of the fund, in lieu of cash, such distributions will be reinvested at
the lower of the market price or net asset value per share (but not less than
95% of the market price) based on the record date's respective prices. If the
net asset value per share on the record date is lower than the market price per
share, shares will be issued by the fund at the record date's net asset value on
the payable date of the distribu
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
tion. 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 assets value per share on the record date, PFPC 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 May 31, 2001, the Board of Directors declared a cash dividend to Common
Shareholders of $.0467 per share from investment income-net, payable on June 28,
2001 to Common Shareholders of record as of the close of business on June 14,
2001.
(d) Dividends to Shareholders of APS: For APS, dividends are currently reset
every 7 days. The dividend rate in effect at May 31, 2001 were as follows:
Series A --2.90% , Series B--3.00% and Series C--2.90%.
(e) Federal income taxes: It is the policy of the fund to continue to qualify as
a regulated investment company, which can distribute tax exempt dividends, by
complying with the applicable provisions of the Internal Revenue Code of 1986 as
amended, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes
The fund has an unused capital loss carryover of approximately $23,318,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to November 30, 2000. If not
applied, $4,499,000 of the carryover expires in fiscal 2002, $9,312,000 expires
in fiscal 2003, $3,964,000 expires in fiscal 2007 and $5,543,000 expires in
fiscal 2008.
NOTE 2--Bank Line of Credit:
The fund participates with other Dreyfus-managed funds in a $100 million
unsecured line of credit primarily to be utilized for temporary or emergency
purposes, including the financing of redemptions. Interest is charged to the
fund based on prevailing market rates in effect at the time of borrowings
The average daily amount of borrowings outstanding during the period ended May
31, 2000 was approximately $1,700, with a related weighted average annualized
interest rate of 6.29%.
NOTE 3--Investment Advisory Fee, Administration Fee and Other Transactions With
Affiliates:
(a) The fee payable by the fund, pursuant to the provisions of an Investment
Advisory Agreement with Dreyfus, is payable monthly based on an annual rate of
. 50 of 1% of the value of the fund's average weekly net assets. The fund also
has an Administration Agreement with Dreyfus, a Custody Agreement with the
Custodian and a Transfer Agency and Registrar Agreement with PFPC. The fund pays
in the aggregate for administration, custody and transfer agency services a
monthly fee based on an annual rate of .25 of 1% of the value of the fund's
average weekly net assets; out-of pocket transfer agency and custody expenses
are paid separately by the fund.
(b) Each director who is not an "affiliated person" as defined in the Act
receives from the fund an annual fee of $2,500 and an attendance fee of $500 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation and the Director Emeritus receives 50% of such compensation.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities, during the period ended May 31, 2001, amounted to
$53,747,736 and $49,592,122, respectively.
At May 31, 2001, accumulated net unrealized depreciation on investments was
$295,208, consisting of $23,660,656 gross unrealized appreciation and
$23,955,864 gross unrealized depreciation.
At May 31, 2001, the cost of investments for Federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
The Fund
OFFICERS AND DIRECTORS
Dreyfus Strategic Municipal Bond Fund, Inc.
200 Park Avenue
New York, NY 10166
DIRECTORS
Joseph S. DiMartino
David W. Burke
Hodding Carter, III
Ehud Houminer
Richard C. Leone
Hans C. Mautner
Robin A. Pringle ((+))
John E. Zuccotti ((+)
((+)) AUCTION PREFERRED STOCK DIRECTORS
OFFICERS
President
Stephen E. Canter
Vice President and Treasurer
Joseph Connolly
Executive Vice President
Paul Disdier
Vice President
Mark N. Jacobs
Secretary
John B. Hammalian
Assistant Secretary
Steven F. Newman
Assistant Secretary
Michael A. Rosenberg
Assistant Treasurer
Gregory S. Gruber
PORTFOLIO MANAGERS
Joseph P. Darcy
A. Paul Disdier
Douglas J. Gaylor
Joseph A. Irace
Colleen A. Meehan
PORTFOLIO MANAGERS (CONTINUED)
Richard J. Moynihan
W. Michael Petty
Scott Sprauer
Samuel J. Weinstock
Monica S. Wieboldt
INVESTMENT ADVISER AND ADMINISTRATOR
The Dreyfus Corporation
CUSTODIAN
Boston Safe Deposit and Trust Company
COUNSEL
Stroock & Stroock & Lavan LLP
TRANSFER AGENT, DIVIDEND-PAYING AGENT, REGISTRAR AND PLAN AGENT
PFPC Global Fund Services
(Common Stock)
Bankers Trust (Auction Preferred Stock)
AUCTION AGENT
Bankers Trust (Auction Preferred Stock)
STOCK EXCHANGE LISTING
NYSE Symbol: DSM
INITIAL SEC EFFECTIVE DATE
11/22/89
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--MUNICIPAL BOND FUNDS" EVERY MONDAY.
NOTICE IS HEREBY GIVEN IN ACCORDANCE WITH SECTION 23(C) OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED, THAT THE FUND MAY PURCHASE SHARES OF ITS COMMON
STOCK IN THE OPEN MARKET WHEN IT CAN DO SO AT PRICES BELOW THE THEN CURRENT NET
ASSET VALUE PER SHARE.
The Fund
For More Information
Dreyfus Strategic Municipal
Bond Fund, Inc.
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108
Transfer Agent &
Dividend-Paying Agent,
Registrar and Plan Agent
PFPC Global Fund Services
(Common Stock)
101 Federal Street
Boston, MA 02110
(c) 2001 Dreyfus Service Corporation 852SA0501