Dreyfus
Strategic Municipal
Bond Fund, Inc.
ANNUAL REPORT
November 30, 2001
DREYFUS STRATEGIC MUNICIPAL BOND FUND, INC.
PROTECTING YOUR PRIVACY
OUR PLEDGE TO YOU
THE FUND IS COMMITTED TO YOUR PRIVACY. On this page, you will find the
Fund's policies and practices for collecting, disclosing, and safeguarding
"nonpublic personal information," which may include financial or other
customer information. These policies apply to individuals who purchase Fund
shares for personal, family, or household purposes, or have done so in the
past. This notification replaces all previous statements of the Fund's
consumer privacy policy, and may be amended at any time. We'll keep you
informed of changes as required by law.
YOUR ACCOUNT IS PROVIDED IN A SECURE ENVIRONMENT. The Fund maintains
physical, electronic and procedural safeguards that comply with federal
regulations to guard nonpublic personal information. The Fund's agents and
service providers have limited access to customer information based on their
role in servicing your account.
THE FUND COLLECTS INFORMATION IN ORDER TO SERVICE AND ADMINISTER YOUR
ACCOUNT. The Fund collects a variety of nonpublic personal information,
which may include:
* Information we receive from you, such as your name, address, and
social security number.
* Information about your transactions with us, such as the purchase or
sale of Fund shares.
* Information we receive from agents and service providers, such as
proxy voting information.
THE FUND DOES NOT SHARE NONPUBLIC PERSONAL INFORMATION WITH ANYONE, EXCEPT AS
PERMITTED BY LAW.
THANK YOU FOR THIS OPPORTUNITY TO SERVE YOU.
The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE FUND
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2 Letter from the Chairman
3 Discussion of Fund Performance
6 Selected Information
7 Statement of Investments
15 Statement of Assets and Liabilities
16 Statement of Operations
17 Statement of Changes in Net Assets
18 Financial Highlights
19 Notes to Financial Statements
24 Report of Independent Auditors
25 Important Tax Information
26 Additional Information
29 Proxy Results
33 Officers and Directors
FOR MORE INFORMATION
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Back Cover
The Fund
Dreyfus Strategic Municipal Bond Fund, Inc.
LETTER FROM THE CHAIRMAN
Dear Shareholder:
We present this annual report for Dreyfus Strategic Municipal Bond Fund, Inc.,
covering the 12-month period from December 1, 2000 through November 30, 2001.
Inside, you' ll find valuable information about how the fund was managed during
the reporting period, including a discussion with the fund's primary portfolio
manager during the reporting period, Paul Disdier. On November 1, 2001 James
Welch became the fund's primary portfolio manager.
Even before the devastating terrorist attacks of September 11, a slowing economy
had prompted the Federal Reserve Board (the "Fed") to reduce short-term interest
rates aggressively. After the attacks, the Fed reduced rates even further in an
attempt to offset the adverse economic effects of the disruption in business
activity and consumer spending. Recent events have prolonged existing economic
weakness, but we believe that the U.S. may begin to see signs of economic
recovery in the months ahead.
In the meantime, there is little doubt that municipal bond yields will remain
relatively low and that the investment environment will continue to be
challenging. At times like these, emotions should be set aside in favor of an
objective, rational view of prevailing risks and opportunities. It is important
during any time of market uncertainty to seek professional management and
professional advice, both of which are cornerstones of our investment approach.
We encourage you to contact your financial advisor for information about ways to
refine your investment strategies.
For additional market perspectives, we have created "Investing In Uncertain
Markets," a publication designed to help you weather the storm through the
long-term application of four fundamental principles of successful investing.
Visit www.dreyfus.com to order or download a copy.
Thank you for your continued confidence and support.
Sincerely,
Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
December 14, 2001
DISCUSSION OF FUND PERFORMANCE
Paul Disdier, Portfolio Manager
How did Dreyfus Strategic Municipal Bond Fund, Inc. perform during the period?
For the 12-month period ended November 30, 2001, the fund achieved a total
return of 8.31% .(1) During the same period, the fund produced an aggregate
income dividend of $0.5604 per share, which is equal to an annualized
distribution rate of 6.63% .(2)
We attribute the fund's positive performance to a favorable environment for
municipal bonds during the reporting period. Tax-exempt securities provided
strong returns because of falling short-term interest rates and high levels of
demand from investors seeking investment alternatives to a declining stock
market. However, the fund was adversely affected late in the period by the
September 11 terrorist attacks, offsetting some of its earlier gains.
What is the fund's investment approach?
The fund seeks high current income exempt from federal income tax 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 a primary driver of
the fund' s performance during the reporting period. The economy was already
showing signs of deterioration when the reporting period began, and the Federal
Reserve Board (the "Fed") took its first steps to stimulate economic growth by
reducing short-term interest rates on the first business day of January 2001.
The Fed eased short-term interest rates a total of 10 times during the reporting
period, reducing the benchmark federal funds rate by 4.50 percentage points.
Because we consistently maintained the fund's average duration -- a measure of
sensitivity to interest-rate changes -- near the long end of its range, the fund
generally benefited from these changes in Fed policy.
In this environment, many of the fund's income-oriented holdings benefited from
a narrowing of the yield differences among highly rated securities and lower
rated securities. That's because investors seeking investment alternatives to a
declining stock market developed an increased appetite for income-oriented
bonds. As high yielding bonds were sold, redeemed or matured, we generally
reinvested the proceeds in higher quality securities.
Toward the end of the reporting period, the fund was influenced by a major
economic shock: the September 11 terrorist attacks. This unexpected disaster
sent an already faltering U.S. economy into recession. Investors concerned about
a declining stock market, a weak economy and an unstable international political
situation flocked to high quality securities, including tax-exempt bonds.
While the "flight to quality" generally supported municipal bond prices, it had
a negative influence on the prices of tax-exempt bonds issued by airlines.
Because the fund held airline bonds as well as other corporate credits, the
fund's net asset value was directly affected.
What is the fund's current strategy?
For some time now, low interest rates have presented a challenge to the fund
because we have been unable to replace maturing bonds with new securities
offering comparable yields. We took steps to meet this challenge several years
ago by leveraging the fund through the issuance of auction-preferred stock. This
strategy has continued to benefit the fund as interest rates have fallen,
causing our borrowing costs to decline and improving our ability to maintain the
fund's target dividend. With interest rates currently at such low levels, we
have recently begun to lock in prevailing borrowing costs by substantially
extending the maturities of our auction-preferred stock.
In addition, as we believe the fund's target dividend is currently secure, we
have recently increased our investments in highly rated tax-exempt bonds. In our
view, these high quality bonds should help the fund weather this time of
uncertainty until the economy recovers and the fund's corporate-backed holdings
rebound.
December 14, 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
SELECTED INFORMATION
November 30, 2001 (Unaudited)
Market Price per share November 30, 2001 $8.45
Shares Outstanding November 30, 2001 47,992,267
New York Stock Exchange Ticker Symbol DSM
MARKET PRICE (NEW YORK STOCK EXCHANGE)
Fiscal Year Ended November 30, 2001
-------------------------------------------------------------------------------------------------------------------------------
QUARTER QUARTER QUARTER QUARTER
ENDED ENDED ENDED ENDED
FEBRUARY 28, 2001 MAY 31, 2001 AUGUST 31, 2001 NOVEMBER 30, 2001
-------------------------------------------------------------------------------------------------------------------------------
High $9.22 $9.20 $9.36 $9.33
Low 8.00 8.60 8.62 8.26
Close 9.07 8.85 9.33 8.45
PERCENTAGE GAIN (LOSS) based on change in Market Price*
November 22, 1989 (commencement of operations)
through November 30, 2001 93.20%
December 1, 1991 through November 30, 2001 70.57
December 1, 1996 through November 30, 2001 20.58
December 1, 2000 through November 30, 2001 10.72
March 1, 2001 through November 30, 2001 (2.37)
June 1, 2001 through November 30, 2001 (1.50)
September 1, 2001 through November 30, 2001 (8.00)
NET ASSET VALUE PER SHARE
November 22, 1989 (commencement of operations) $9.32
November 30, 2000 8.60
February 28, 2001 8.82
May 31, 2001 8.86
August 31, 2001 9.24
November 30, 2001 8.75
PERCENTAGE GAIN (LOSS) based on change in Net Asset Value*
November 22, 1989 (commencement of operations)
through November 30, 2001 114.67%
December 1, 1991 through November 30, 2001 81.49
December 1, 1996 through November 30, 2001 27.61
December 1, 2000 through November 30, 2001 8.31
March 1, 2001 through November 30, 2001 3.96
June 1, 2001 through November 30, 2001 1.88
September 1, 2001 through November 30, 2001 (3.80)
(*)WITH DIVIDENDS REINVESTED.
STATEMENT OF INVESTMENTS
November 30, 2001
Principal
LONG-TERM MUNICIPAL INVESTMENTS--97.0% Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------
ALABAMA--.5%
Alabama Industrial Development Authority, SWDR
(Pine City Fiber Co.) 6.45%, 12/1/2023 3,000,000 2,949,840
ALASKA--3.5%
Alaska Housing Finance Corporation:
6.25%, 6/1/2035 (Insured; MBIA) 7,825,000 8,213,902
6.05%, 6/1/2039 (Insured; MBIA) 12,185,000 12,641,694
ARIZONA--1.3%
Apache County Industrial Development Authority, PCR
(Tuscon Electric Power Co.) 5.85%, 3/1/2028 8,500,000 7,918,515
ARKANSAS--.9%
Arkansas Development Finance Authority, SFMR
6.25%, 1/1/2032 5,000,000 5,271,100
CALIFORNIA--1.8%
California Health Facilities Financing Authority,
Health Facility Financing Revenue
(Cedars-Sinai Medical Center) 6.25%, 12/1/2034 3,750,000 4,051,687
California Statewide Communities
Development Authority, COP
(The Internext Group) 5.375%, 4/1/2030 5,000,000 4,611,300
Los Angeles Regional Airports Improvement Corporation, LR
(International Airport--Delta) 6.35%, 11/1/2025 2,750,000 2,375,863
COLORADO--.3%
Colorado Health Facilities Authority, Revenue
(American Housing Foundation 1, Inc.) 10.25%, 12/1/2020 5,600,000 (a) 1,937,600
CONNECTICUT--2.4%
Connecticut Development Authority, PCR
(Connecticut Light and Power) 5.95%, 9/1/2028 14,000,000 14,199,640
DELAWARE--1.0%
Delaware Health Facilities Authority, Revenue
(Beebe Medical Center) 6.80%, 6/1/2024 5,905,000 6,030,776
DISTRICT OF COLUMBIA--2.4%
District of Columbia Tobacco Settlement Financing Authority
6.75%, 5/15/2040 7,000,000 7,591,290
Metropolitan Washington Airports Authority,
Special Facilities Revenue
(Caterair International Corp.) 10.125%, 9/1/2011 6,720,000 6,727,661
FLORIDA--5.5%
Florida Housing Finance Corporation, Housing Revenue
(Seminole Ridge Apartments)
6%, 4/1/2041 (Collateralized; GNMA) 6,415,000 6,600,137
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------
FLORIDA (CONTINUED)
Florida Board of Education, Capital Outlay
10.123%, 6/1/2019 15,000,000 (b,c) 15,841,050
Lee County Industrial Development Authority,
Health Care Facilities Revenue
(Shell Point Village) 5.50%, 11/15/2029 1,500,000 1,334,130
Orange County Health Facilities Authority, Revenue
(Orlando Regional Healthcare System) 6%, 10/1/2026 3,500,000 3,619,175
South Lake County Hospital District, Revenue
(South Lake Hospital, Inc.) 5.80%, 10/1/2034 6,000,000 6,050,220
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) 10,336,435
IDAHO--.4%
Idaho Housing and Finance Association, SFMR
6.35%, 1/1/2030 (Collateralized; FNMA) 2,500,000 2,627,400
ILLINOIS--4.5%
Chicago-O'Hare International Airport, Special Facility
Revenue (United Air Lines) 6.30%, 5/1/2016 4,500,000 2,641,815
Illinois Development Finance Authority, Revenue:
(Community Rehabilitation Providers Facilities
Acquisition Program) 6.05%, 7/1/2019 5,290,000 5,204,302
HR (Adventist Health Systems / Sunbelt)
5.50%, 11/15/2029 2,675,000 2,510,166
Illinois Health Facilities Authority, Revenue:
(OSF Healthcare Systems) 6.25%, 11/15/2029 12,000,000 12,463,560
(Advocate Network Health Care) 6.125%, 11/15/2022 4,000,000 4,199,360
INDIANA--4.1%
Burns Harbor Industrial Solid Waste Disposal Facilities,
Revenue (Bethlehem Steel Corp.) 8%, 4/1/2024 6,000,000 (a) 558,000
Franklin Township School Building Corporation
6.125%, 1/15/2022 6,000,000 6,938,040
Indianapolis Airport Authority, Revenue
(United Air Lines) 6.50%, 11/15/2031 17,350,000 11,187,280
Jasper County, EDR (Georgia Pacific Corp.)
5.60%, 4/1/2029 7,000,000 6,415,220
KENTUCKY--.4%
Kenton County Airport Board, Airport Revenue
(Special Facilities--Delta Airlines) 6.125%, 2/1/2022 3,000,000 2,516,970
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------
LOUISIANA--4.2%
Lake Charles Harbor and Terminal, District Port Facilities
Revenue (Trunkline LNG Co.) 7.75%, 8/15/2022 15,000,000 15,914,400
Parish of De Soto, Environmental Improvement Revenue
(International Paper Co.) 6.55%, 4/1/2019 2,900,000 2,986,101
West Feliciana Parish, PCR:
(Entergy Gulf States) 6.60%, 9/1/2028 4,000,000 4,071,080
(Gulf States) 5.80%, 12/1/2015 2,500,000 2,483,450
MARYLAND--.5%
Baltimore County, PCR (Bethlehem Steel Corp.)
7.50%, 6/1/2015 5,000,000 (a) 465,000
Maryland Industrial Development Financing Authority, EDR
(Medical Waste Associates Limited Partnership)
8.75%, 11/15/2010 4,135,000 2,791,125
MASSACHUSETTS--.7%
Massachusetts Health and Educational Facilities
Authority, Revenue (Beth Israel Hospital)
9.647%, 7/1/2025 (Insured; AMBAC) 3,250,000 (b) 3,445,000
Pittsfield, SWDR (Vicon Recovery Associates)
7.95%, 11/1/2004 865,000 868,252
MICHIGAN--1.7%
Michigan Hospital Finance Authority, HR
(Genesys Health System Obligated Group)
8.125%, 10/1/2021 (Prerefunded 10/1/2005) 5,000,000 (d) 5,956,450
Michigan Strategic Fund, SWDR
(Genesee Power Station) 7.50%, 1/1/2021 4,000,000 3,922,600
MISSISSIPPI--1.8%
Mississippi Business Finance Corporation, PCR
(Systems Energy Resources, Inc.) 5.90%, 5/1/2022 11,070,000 10,888,895
MISSOURI--1.6%
Jackson County Industrial Development Authority,
Health Facilities Revenue
(Carondelet Health Corp.) 9%, 7/1/2020 6,485,000 6,501,018
Saint Louis Industrial Development Authority
(Saint Louis Convention) 7.25%, 12/15/2035 3,250,000 3,421,470
NEVADA--3.4%
Clark County, IDR:
(Nevada Power Company)
5.50%, 10/1/2030 7,000,000 6,336,260
(Southwest Gas Corporation)
6.50%, 12/1/2033 5,000,000 5,032,250
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------
NEVADA (CONTINUED)
Washoe County (Reno-Sparks Convention)
6.40%, 7/1/2029 (Insured; FSA) 8,000,000 9,258,160
NEW HAMPSHIRE--1.9%
New Hampshire Business Finance Authority, PCR
(Public Service Co.) 6%, 5/1/2021 6,000,000 6,036,600
New Hampshire Industrial Development Authority, PCR
(Connecticut Light) 5.90%, 11/1/2016 5,400,000 5,403,078
NEW JERSEY--2.8%
New Jersey Economic Development Authority:
First Mortgage Revenue
(The Evergreens) 9.25%, 10/1/2022 4,925,000 5,306,934
Special Facilities Revenue (Continental Airlines, Inc.):
6.40%, 9/15/2023 7,000,000 5,627,300
7.20%, 11/15/2030 7,000,000 6,180,580
NEW YORK--1.6%
New York State Dormitory Authority, Revenue:
Judicial Facility Lease (Suffolk County) 9.50%, 4/15/2014 605,000 694,734
(Marymount Manhattan College) 6.25%, 7/1/2029 4,000,000 4,370,200
TSASC, Inc. 6.375%, 7/15/2039 4,500,000 4,803,795
NORTH CAROLINA--.4%
North Carolina Eastern Municipal Power Agency,
Power Systems Revenue 6.70%, 1/1/2019 2,500,000 2,674,850
OHIO--2.8%
Cuyahoga County, HR (Metrohealth Systems)
6.15%, 2/15/2029 10,000,000 10,279,700
Ohio Air Quality Development Authority, PCR
6.10%, 8/1/2020 2,400,000 2,443,824
Ohio Water Development Authority, PCR
(Cleveland Electric) 6.10%, 8/1/2020 4,000,000 4,073,040
OKLAHOMA--2.4%
Oklahoma Development Finance Authority, Revenue
(St. John Health System) 6%, 2/15/2029 9,000,000 9,583,470
Oklahoma Industries Authority, Health System Revenue
(Obligation Group) 5.75%, 8/15/2029 (Insured; MBIA) 5,000,000 5,214,150
PENNSYLVANIA--4.2%
Allegheny County Port Authority,
Special Transportation Revenue
6.125%, 3/1/2029 (Insured; MBIA) 4,750,000 5,420,130
Beaver County Industrial Development Authority, PCR
(Cleveland Electric) 7.625%, 5/1/2025 8,800,000 9,491,856
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA (CONTINUED)
Pennsylvania Economic Development Financing Authority
RRR (Northhampton Generating Project)
6.60%, 1/1/2019 4,200,000 4,235,448
Pennsylvania Housing Finance Agency,
Multi-Family Development Revenue
8.25%, 12/15/2019 287,000 290,972
Washington County Authority, Capital Funding Revenue
(Capital Projects & Equipment Program)
6.15%, 12/1/2029 (Insured; AMBAC) 5,000,000 5,798,800
RHODE ISLAND--1.0%
Rhode Island Health & Educational Building Corporation
Higher Educational Facilities
(University of Rhode Island)
5.875%, 9/15/2029 (Insured; MBIA) 5,910,000 6,289,895
SOUTH CAROLINA--2.5%
South Carolina Medical Facilities, Hospital Facilities
Revenue 6%, 7/1/2019 5,000,000 5,261,550
Tobacco Settlement Revenue Management Authority,
Tobbacco Settlement Revenue 6.375%, 5/15/2028 9,500,000 10,011,195
TENNESSEE--2.7%
Memphis Center City Revenue Finance Corp.
Sports Facility Revenue
(Memphis Redbirds) 6.50%, 9/1/2028 6,000,000 5,880,780
Tennessee Housing Development Agency
(Homeownership Program):
6%, 1/1/2028 5,330,000 5,509,887
6.40%, 7/1/2031 4,885,000 5,208,143
TEXAS--12.3%
Austin (Convent Station) 6.70%, 1/1/2032 4,250,000 4,330,665
Gregg County Health Facilities Development
Corporation, HR (Good Shepherd Medical Center)
6.375%, 10/1/2025 2,500,000 2,685,800
Harris County Health Facilities Development Corporation, HR:
(Memorial Hermann Healthcare) 6.375%, 6/1/2029 7,000,000 7,355,460
(St. Luke's Episcopal Hospital) 5.375%, 2/15/2026 5,000,000 4,893,550
Houston Airport System, Special Facilities Revenue,
(Airport Improvement Continental Airlines)
6.125%, 7/15/2017 2,875,000 2,174,564
Katy Independent School District
6.125%, 2/15/2032 11,360,000 12,226,995
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
-------------------------------------------------------------------------------------------------------------------------------
TEXAS (CONTINUED)
Sabine River Authority, PCR (TXU Electric):
6.45%, 6/1/2021 3,000,000 3,074,880
5.50%, 5/1/2022 6,000,000 6,022,440
Springhill Courtland Heights Public Facility Corp. MFHR
5.85%, 12/1/2028 6,030,000 6,035,427
Texas:
(Veterans ) 6%, 12/1/2030 3,935,000 4,137,377
(Veterans Housing Assistance Program) 6.10%, 6/1/2031 8,510,000 8,960,690
Texas Department of Housing and Community Affairs,
Collateralized Home Mortgage Revenue
11.457%, 7/2/2024 6,600,000 (b) 7,713,750
Tyler Health Facilities Development Corp., HR
(East Texas Medical Center Regional Health
Care System) 6.75%, 11/1/2025 5,850,000 4,689,594
UTAH--1.7%
Carbon County, SWDR (Sunnyside Cogeneration):
7.10%, 8/15/2023 4,775,000 4,930,140
Zero Coupon, 8/15/2024 1,545,000 395,288
Tooele County, Hazardous Waste Treatment Revenue
(Union Pacific) 5.70%, 11/1/2026 5,000,000 4,702,600
VIRGINIA--5.7%
Fairfax County Water Authority, Revenue
9.370%, 4/1/2029 4,000,000 (b,c) 4,051,920
Henrico County Industrial Development Authority, Revenue
(Bon Secours Health Care System) 9.394%, 8/23/2027 7,500,000 (b) 9,084,375
Virginia Housing Development Authority:
MFHR 7.05%, 5/1/2018 12,000,000 12,313,920
Rental Housing 6.20%, 8/1/2024 8,520,000 8,821,523
WASHINGTON--2.0%
Washington Higher Education Facilities Authority,
Revenue (Whitman College) 5.875%, 10/1/2029 10,000,000 10,491,400
Energy Northwest, Revenue
(Wind Project) 6%, 7/1/2023 1,500,000 1,473,210
WISCONSIN--6.0%
Wisconsin Housing and Economic Development Authority
Homeownership Revenue:
9.97%, 7/1/2025 10,600,000 (b,c) 11,273,206
6.25%, 9/1/2027 13,300,000 13,808,060
Wisconsin Health and Educational Facilities Authority,
Revenue (Aurora Health Care, Inc.) 5.60%, 2/15/2029 12,175,000 11,294,382
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------
WYOMING--2.4%
Sweetwater County, SWDR (FMC Corp.):
7%, 6/1/2024 2,200,000 2,271,698
6.90%, 9/1/2024 2,000,000 2,059,920
Wyoming Student Loan Corporation,
Student Loan Revenue:
6.20%, 6/1/2024 5,000,000 5,242,800
6.25%, 6/1/2029 5,000,000 5,244,500
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $594,211,649) 587,756,684
------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL INVESTMENTS--1.4%
------------------------------------------------------------------------------------------------------------------------------------
CONNECTICUT--.2%
Connecticut Health and Educational Facilities Authority,
VRDN (Yale University) 1.55% 1,000,000 (e) 1,000,000
PENNSYLVANIA--.4%
Pennsylvania Higher Education Facilities Authority, VRDN
(Carnegie Mellon University) 1.55% 1,000,000 (e) 1,000,000
Philadelphia Hospital and Higher Education
Facilities Authority,VRDN
(Childrens Hospital Project) 1.60% 1,600,000 (e) 1,600,000
TEXAS--.6%
Harris County Health Facilities Development
Corporation, VRDN (Young Mens Christian
Association) 1.60% (LOC; Bank One) 3,700,000 (e) 3,700,000
VIRGINIA --.1%
Roanoke Industrial Development, HR, VRDN
(Carilion Health Systems) 1.60% 1,000,000 (e) 1,000,000
WYOMING--.1%
Uinta County, PCR, VRDN
(Amoco Project) 1.55% 500,000 (e) 500,000
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $8,800,000) 8,800,000
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $603,011,649) 98.4% 596,556,684
CASH AND RECEIVABLES (NET) 1.6% 9,452,104
NET ASSETS 100.0% 606,008,788
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
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
LR Lease Revenue
LOC Letter of Credit
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 19.3
AA Aa AA 24.2
A A A 21.5
BBB Baa BBB 20.0
BB Ba BB 7.5
B B B 1.2
F-1+, F-1 VMIG1,MIG1,P1 SP1,A1 1.5
Not Rated (f) Not Rated (f) Not Rated (f) 4.8
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
NOVEMBER 30, 2001, THESE SECURITIES AMOUNTED TO $31,166,176 OR 5.1% OF
NET ASSETS.
(D) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT
SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND
INTEREST ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE
EARLIEST REFUNDING DATE.
(E) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE SUBJECT TO
PERIODIC CHANGE.
(F) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD &
POOR'S, HAVE BEEN DETERMINED BY THE INVESTMENT ADVISOR TO BE OF
COMPARABLE QUALITY TO THOSE RATED SECURITIES IN WHICH THE FUND MAY
INVEST.
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES
November 30, 2001
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 603,011,649 596,556,684
Cash 35,131
Interest receivable 10,892,986
Receivable for investment securities sold 473,505
Prepaid expenses 8,762
607,967,068
--------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 374,938
Payable for investment securities purchased 1,281,761
Dividends payable to preferred shareholders 33,724
Commissions payable 31,836
Accrued expenses 236,021
1,958,280
--------------------------------------------------------------------------------
NET ASSETS ($) 606,008,788
--------------------------------------------------------------------------------
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, $.001 per share
(47,992,267 shares issued and outstanding) 47,992
Paid-in capital 447,480,727
Accumulated undistributed investment income--net 2,887,833
Accumulated net realized gain (loss) on investments (23,952,799)
Accumulated net unrealized appreciation
(depreciation) on investments--Note 4 (6,454,965)
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 420,008,788
--------------------------------------------------------------------------------
NET ASSETS ($) 606,008,788
--------------------------------------------------------------------------------
COMMON SHARES OUTSTANDING
(110 million shares of $.001 par value Common Stock authorized) 47,992,267
NET ASSET VALUE PER SHARE OF COMMON STOCK ($) 8.75
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF OPERATIONS
Year Ended November 30, 2001
--------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INTEREST INCOME 39,915,827
EXPENSES:
Management fee--Note 3(a) 3,058,211
Administration fee--Note 3(a) 1,529,106
Commission fees--Note 1 491,092
Professional fees 124,731
Shareholders' reports 61,669
Registration fees 45,138
Directors' fees and expenses--Note 3(b) 43,121
Shareholder servicing costs 34,003
Custodian fees 1,334
Miscellaneous 37,615
TOTAL EXPENSES 5,426,020
INVESTMENT INCOME--NET 34,489,807
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (634,617)
Net unrealized appreciation (depreciation) on investments 5,593,035
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 4,958,418
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 39,448,225
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF CHANGES IN NET ASSETS
Year Ended November 30,
-----------------------------------
2001 2000
--------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 34,489,807 33,291,425
Net realized gain (loss) on investments (634,617) (4,672,749)
Net unrealized appreciation
(depreciation) on investments 5,593,035 8,042,876
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 39,448,225 36,661,552
--------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net:
Common Stock (26,833,810) (26,778,113)
Preferred Stock (5,551,745) (7,597,500)
TOTAL DIVIDENDS (32,385,555) (34,375,613)
--------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS ($):
Dividends reinvested--Note 1(c) 1,865,059 --
Offering costs charged to paid-in capital
resulting from issuance of Preferred Stock -- (163,370)
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL STOCK TRANSACTIONS 1,865,059 (163,370)
TOTAL INCREASE (DECREASE) IN NET ASSETS 8,927,729 2,122,569
--------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 597,081,059 594,958,490
END OF PERIOD 606,008,788 597,081,059
Undistributed investment income--net 2,887,833 783,581
--------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (COMMON SHARES):
INCREASE IN COMMON SHARES OUTSTANDING
AS A RESULT OF DIVIDENDS REINVESTED 208,342 --
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements and market price data for the fund's shares.
Year Ended November 30,
-------------------------------------------------------------------
2001 2000 1999 1998 1997
---------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value, beginning of period 8.60 8.56 9.52 9.49 9.54
Investment Operations:
Investment income--net .72 .70 .58 .60 .62
Net realized and unrealized
gain (loss) on investments .11 .06 (.90) .05 (.01)
Total from Investment Operations .83 .76 (.32) .65 .61
Distributions:
Dividends from investment income--net:
Common Stock (.56) (.56) (.58) (.62) (.66)
Preferred Stock (.12) (.16) (.02) -- --
Total Distributions (.68) (.72) (.60) (.62) (.66)
Capital Stock transactions--net effect
of Preferred Stock offering -- (.00)(a) (.04) -- --
Net asset value, end of period 8.75 8.60 8.56 9.52 9.49
Market value, end of period 8.45 81_8 711_16 103_16 105_8
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%)( B) 10.72 13.30 (19.36) 2.23 16.60
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets
applicable to Common Stock 1.27(c,d) 1.34(c,d) .91(c,d) .81 .81
Ratio of net investment income
to average net assets
applicable to Common Stock 8.10(c,d) 8.25(c,d) 6.64(c,d) 6.26 6.55
Portfolio Turnover Rate 13.36 27.58 32.58 6.33 2.95
Asset coverage of Preferred
Stock, end of period 326 321 320 -- --
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, net of Preferred
Stock, end of period ($ x 1,000) 420,009 411,081 408,958 453,893 446,152
Preferred Stock outstanding,
end of period ($ x 1,000)( e) 186,000 186,000 186,000 -- --
(A) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE.
(B) CALCULATED BASED ON MARKET VALUE.
(C) DOES NOT REFLECT THE EFFECT OF DIVIDENDS TO PREFERRED STOCK SHAREHOLDERS.
(D) THE RATIO OF EXPENSES TO TOTAL AVERAGE NET ASSETS AND THE RATIO OF NET
INVESTMENT INCOME TO TOTAL AVERAGE NET ASSETS WERE .89% AND 5.64%,
RESPECTIVELY, FOR THE YEAR ENDED NOVEMBER 30, 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.
(E) PREFERRED SHARES WERE ISSUED ON SEPTEMBER 22, 1999.
SEE NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
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 (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 discount on municipal securities which the fund does
not currently do. Upon adoption, the fund will be required to record a
cumulative effect adjustment to conform with accounting principles generally
accepted in the United States. The effect of this adjustment, effective December
1, 2001, is 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, if any, 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) as defined in the dividend reinvestment plan.
On November 29, 2001, the Board of Directors declared a cash dividend to Common
Shareholders of $.0467 per share from investment income-net, payable on December
28, 2001 to Common Shareholders of record as of the close of business on
December 13, 2001.
(d) Dividends to Shareholders of APS: For APS, dividends are currently reset
every 7 days for Series A and Series C. The dividend rate on Series B will be in
effect until November 28, 2002. The dividend rates in effect at November 30,
2001 were as follows: Series A - 1.70%, Series B - 2.25% and Series C - 1.70%
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(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 $23,760,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to November 30, 2001. 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, $5,543,000 expires in fiscal
2008 and $442,000 expires in fiscal 2009.
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
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 November 30, 2001, amounted to
$79,741,209 and $80,100,760, respectively.
At November 30, 2001, accumulated net unrealized depreciation on investments was
$6,454,965, consisting of $29,109,479 gross unrealized appreciation and
$35,564,444 gross unrealized depreciation.
At November 30, 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
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors Dreyfus Strategic Municipal Bond Fund, Inc.
We have audited the accompanying statement of assets and liabilities of Dreyfus
Strategic Municipal Bond Fund, Inc., including the statement of investments, as
of November 30, 2001, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund' s management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
verification by examination of securities held by the custodian as of November
30, 2001 and confirmation of securities not held by the custodian by
correspondence with others. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreyfus Strategic Municipal Bond Fund, Inc. at November 30, 2001, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the indicated years, in conformity with accounting principles generally
accepted in the United States.
New York, New York
January 7, 2002
IMPORTANT TAX INFORMATION (Unaudited)
In accordance with Federal tax law, the fund hereby designates all the dividends
paid from investment income-net during the fiscal year ended November 30, 2001
as "exempt-interest dividends" (not generally subject to regular Federal income
tax).
As required by Federal tax law rules, shareholders will receive notification of
their portion of the fund' s taxable ordinary dividends and capital gain
distributions paid for the 2001 calendar year on Form 1099-DIV which will be
mailed by January 31, 2002.
The Fund
ADDITIONAL INFORMATION (Unaudited)
Dividend Reinvestment and Cash Purchase Plan
Under the fund' s Dividend Reinvestment Plan (the "Plan"), a holder of Common
Stock ("Common Shareholder") who has fund shares registered in his name will
have all dividends and distributions reinvested automatically by PFPC Global
Fund Services, as Plan agent (the "Agent"), in additional shares of the fund at
the lower of prevailing market price or net asset value (but not less than 95%
of market value at the time of valuation) unless such Common Shareholder elects
to receive cash as provided below. If market price is equal to or exceeds net
asset value, shares will be issued at net asset value. If net asset value
exceeds market price or if a dividend or other distribution payable only in cash
is declared, the Agent, as agent for the Plan participants, will buy fund shares
in the open market. A Plan participant is not relieved of any income tax that
may be payable on such dividends or distributions.
A Common Shareholder who owns fund shares registered in the name of his
broker/dealer or other nominee (i.e., in "street name") may not participate in
the Plan, but may elect to have cash dividends and distributions reinvested by
his broker/dealer or other nominee in additional shares of the fund if such
service is provided by the broker/dealer or other nominee; otherwise such
dividends and distributions will be treated like any other cash dividend or
distribution.
A Common Shareholder who has fund shares registered in his name may elect to
withdraw from the Plan at any time for a $5.00 fee and thereby elect to receive
cash in lieu of shares of the fund. Changes in elections must be by direct mail
to PFPC Global Fund Services, Attention: Closed-End funds, Post Office Box 8030,
Boston, Massachusetts 02266, or by telephone at 1-800-331-1710, and should
include the shareholder' s name and address as they appear on the Agent's
records. Elections received by the Agent will be effective only if received
prior to the record date for any distribution.
The Agent maintains all Common Shareholder accounts in the Plan and furnishes
written confirmations of all transactions in the account. Shares in the account
of each Plan participant will be held by the Agent in non-certificated form in
the name of the participant, and each such participant's proxy will include
those shares purchased pursuant to the Plan.
The fund pays the Agent's fee for reinvestment of dividends and distributions.
Plan participants pay a pro rata share of brokerage commissions incurred with
respect to the Agent's open market purchases in connection with the reinvestment
of dividends or distributions.
The fund reserves the right to amend or terminate the Plan as applied to any
dividend or distribution paid subsequent to written notice of the change sent to
Plan participants at least 90 days before the record date for such dividend or
distribution. The Plan also may be amended or terminated by the Agent on at
least 90 days' written notice to Plan participants.
Managed Dividend Policy
The fund' s dividend policy is to distribute substantially all of its net
investment income to its shareholders on a monthly basis. In order to provide
shareholders with a more consistent yield to the current trading price of shares
of Common Stock of the fund, the fund may at times pay out less than the entire
amount of net investment income earned in any particular month and may at times
in any month pay out such accumulated but undistributed income in addition to
net investment income earned in that month. As a result, the dividends paid by
the fund for any particular month may be more or less than the amount of net
investment income earned by the fund during such month. The fund's current
accumulated but undistributed net investment income, if any, is disclosed in the
Statement of Assets and Liabilities, which comprises part of the Financial
Information included in this report.
The Fund
ADDITIONAL INFORMATION (Unaudited) (CONTINUED)
Benefits and Risks of Leveraging
The fund utilizes leverage to seek to enhance the yield and net asset value of
its Common Stock. These objectives cannot be achieved in all interest rate
environments. To leverage, the fund issues Preferred Stock, which pays dividends
at prevailing short-term interest rates, and invests the proceeds in long-term
municipal bonds. The interest earned on these investments is paid to Common
Shareholders in the form of dividends, and the value of these portfolio holdings
is reflected in the per share net asset value of the fund's Common Stock. In
order to benefit Common Shareholders, the yield curve must be positively sloped:
that is, short-term interest rates must be lower than long-term interest rates.
At the same time, a period of generally declining interest rates will benefit
Common Shareholders. If either of these conditions change, then the risk of
leveraging will begin to outweigh the benefits.
Supplemental Information
For the period ended November 30, 2001, there were: (i) no material changes in
the fund's investment objectives or polices, (ii) no changes in the fund's
charter or by-laws that would delay or prevent a change of control of the fund,
and (iii) no material changes in the principal risk factors associated with
investment in the fund. In addition, on November 1, 2001, James Welch was
assigned as the person primarily responsible for the day-to-day management of
the fund's portfolio.
PROXY RESULTS (Unaudited)
During the fiscal year ended November 30, 2001, holders of common stock and
Auction Preferred Stock voted together as a single class (except as noted) on
the following proposal presented at the annual shareholders' meeting held on May
11, 2001. The description of the proposal and the number of shares voted are as
follows:
Shares
-----------------------------------------------------------------------------------------------------------------------
For Authority Withheld
------------------------------------------------------------------------------------------------------------------------
To elect two Class II Directors:((+))
Ehud Houminer 40,188,372 690,523
Robin A. Pringle((+)(+)) 7,326 --
((+)) THE TERMS OF THESE CLASS II DIRECTORS EXPIRE IN 2004.
((+)(+)) ELECTED SOLELY BY APS HOLDERS.
The Fund
NOTES
NOTES
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
Executive Vice President
Paul Disdier
Vice President
Mark N. Jacobs
Secretary
John B. Hammalian
Assistant Secretary
Steven F. Newman
Assistant Secretary
Michael A. Rosenberg
Treasurer
James Windels
Assistant Treasurers
Gregory S. Gruber
Kenneth J. Sandgren
PORTFOLIO MANAGERS
Joseph P. Darcy
A. Paul Disdier
Douglas J. Gaylor
Joseph A. Irace
PORTFOLIO MANAGERS (CONTINUED)
Colleen A. Meehan
W. Michael Petty
Scott Sprauer
James Welch
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 Disbursing Agent
PFPC Global Fund Services
(Common Stock)
101 Federal Street
Boston, MA 02110
(c) 2002 Dreyfus Service Corporation 852AR1101