Dreyfus Strategic
Municipals, Inc.
SEMIANNUAL REPORT March 31, 2003
DREYFUS STRATEGIC MUNICIPALS, INC.
PROTECTING YOUR PRIVACY
OUR PLEDGE TO YOU
THE FUND IS COMMITTED TO YOUR PRIVACY. On this page, you will find the
Fund's policies and practices for collecting, disclosing, and safeguarding
"nonpublic personal information," which may include financial or other customer
information. These policies apply to individuals who purchase Fund shares for
personal, family, or household purposes, or have done so in the past. This
notification replaces all previous statements of the Fund's consumer privacy
policy, and may be amended at any time. We'll keep you informed of changes as
required by law.
YOUR ACCOUNT IS PROVIDED IN A SECURE ENVIRONMENT. The Fund maintains
physical, electronic and procedural safeguards that comply with federal
regulations to guard nonpublic personal information. The Fund's agents and
service providers have limited access to customer information based on their
role in servicing your account.
THE FUND COLLECTS INFORMATION IN ORDER TO SERVICE AND ADMINISTER YOUR
ACCOUNT. The Fund collects a variety of nonpublic personal information, which
may include:
* Information we receive from you, such as your name, address, and social
security number.
* Information about your transactions with us, such as the purchase or sale
of Fund shares.
* Information we receive from agents and service providers, such as proxy
voting information.
THE FUND DOES NOT SHARE NONPUBLIC PERSONAL INFORMATION WITH ANYONE, EXCEPT AS
PERMITTED BY LAW.
THANK YOU FOR THIS OPPORTUNITY TO SERVE YOU.
The views expressed in this report reflect those of the portfolio manager only
through the end of the period covered and do not necessarily represent the views
of Dreyfus or any other person in the Dreyfus organization. Any such views are
subject to change at any time based upon market or other conditions and Dreyfus
disclaims any responsibility to update such views. These views may not be relied
on as investment advice and, because investment decisions for a Dreyfus fund are
based on numerous factors, may not be relied on as an indication of trading
intent on behalf of any Dreyfus fund.
Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE FUND
--------------------------------------------------
2 Letter from the Chairman
3 Discussion of Fund Performance
6 Statement of Investments
17 Statement of Assets and Liabilities
18 Statement of Operations
19 Statement of Changes in Net Assets
20 Financial Highlights
22 Notes to Financial Statements
29 Officers and Directors
FOR MORE INFORMATION
---------------------------------------------------------------------------
Back Cover
The Fund
Dreyfus Strategic Municipals, Inc.
LETTER FROM THE CHAIRMAN
Dear Shareholder:
This semiannual report for Dreyfus Strategic Municipals, Inc. covers the
six-month period from October 1, 2002, through March 31, 2003. 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, W. Michael
Petty.
A number of economic and political factors continued to support higher municipal
bond prices during the reporting period. Faced with escalating tensions leading
to the start of the war in Iraq, many investors preferred fixed-income
securities over stocks. We believe that rising geopolitical tensions also
contributed to the ongoing sluggishness of the U.S. economy, as many
corporations apparently decided to wait until the situation in Iraq is resolved
before committing to new capital spending. For its part, the Federal Reserve
Board contributed to the municipal bond market's strength by further reducing
short-term interest rates in November 2002.
The result of these influences has been generally attractive total returns from
high-quality, tax-exempt bonds. While history suggests that bond prices should
moderate if the economy strengthens, we believe that the economy is unlikely to
make significant gains until current uncertainties are resolved.
In the meantime, we believe it is more important than ever to follow a
disciplined approach to investing. While it may be tempting to shift assets
between stocks and bonds in response to near-term economic and market forces,
adherence to your longstanding asset allocation strategy may be the most prudent
course for the long term. Your financial advisor can help you to ensure that
your portfolio reflects your investment needs, long-term goals and attitudes
toward risk.
Thank you for your continued confidence and support.
Sincerely,
/s/Stephen E. Canter
Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
April 15, 2003
DISCUSSION OF FUND PERFORMANCE
W. Michael Petty, Portfolio Manager
How did Dreyfus Strategic Municipals, Inc. perform during the period?
For the six-month period ended March 31, 2003, the fund achieved a total return
of 0.11%.(1) Over the same period, the fund provided income dividends of $0.3600
per share, which is equal to a distribution rate of 7.53%.(2)
The municipal bond market exhibited generally strong performance, primarily due
to the effects of declining interest rates and heightened demand from investors
seeking stable alternatives to a declining stock market. However, the positive
effects of these factors on the fund were largely offset by heightened
volatility among some of its corporate-backed holdings.
What is the fund's investment approach?
The fund' s investment objective is to maximize current income exempt from
federal income tax to the extent consistent with the preservation of capital.
Under normal market conditions, the fund invests at least 80% of its net assets
in municipal obligations. Generally, the fund invests at least 50% of its net
assets in municipal bonds considered investment-grade or the unrated equivalent
as determined by Dreyfus.
To this end, we have constructed the portfolio by seeking income opportunities
through analysis of each bond's structure, including paying close attention to
each bond's yield, maturity and early redemption features.
Over time, many of the fund's relatively higher-yielding bonds mature or are
redeemed by their issuers, and we generally attempt to replace those bonds with
what we believe are comparable securities at then-prevailing yields. When we
believe an opportunity exists, we also may seek to upgrade the portfolio's
investments with newly issued bonds that, in our opinion, have better structural
or income characteristics than existing holdings.
The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
What other factors influenced the fund's performance?
The fund was positively influenced by favorable market conditions, which were
generally the result of a weak economy, falling interest rates and robust
investor demand for high-quality, fixed-income securities. Widespread
allegations of corporate malfeasance and heightened international tensions
further supported investors' preferences for high-quality municipal bonds.
At the same time, investors generally shunned securities they considered risky,
such as stocks and bonds issued by or on behalf of corporations. Unfortunately,
the fund held a number of corporate-backed municipal bonds, including some
issued on behalf of airlines. We attempted throughout the reporting period to
reduce the fund' s exposure to corporate-backed bonds and improve its overall
credit quality. We believe that we were successful in doing so. For example, the
fund' s exposure to the troubled airline sector was trimmed from 7.5% of assets
at the start of the reporting period to 3.7% by the reporting period's end.
Similarly, to protect our shareholders from the potentially adverse tax
consequences of certain holdings, we reduced the fund's position in bonds whose
income is subject to the federal alternative minimum tax (AMT) from 37.2% at the
start of the reporting period to 26.8% by the reporting period's end.
When opportunities arose, we looked to replace the fund's corporate-backed and
AMT holdings with higher-quality securities. As a result, the fund's overall
credit quality improved. When the reporting period began, 59% of the fund's
holdings was rated single-A or better. By the end of the reporting period, 68%
of its holdings was rated single-A or better. At the top end of the rating
scale, the percentage of the fund's assets rated triple-A rose from 28.5% at the
start of the reporting period to 37% at the reporting period's end.
When making new purchases, we generally avoided states' general obligation bonds
in favor of essential-services revenue bonds and tax-exempt securities enhanced
with insurance.(3) In addition, we focused the fund's high-quality purchases on
income-oriented securities selling at a modest premium. Historically, these
types of bonds have offered greater defensive characteristics than others
Finally, the fund benefited from our leveraging strategy. Taking advantage of
the reporting period' s low interest rates, we locked in low borrowing costs
until 2005 on one of the fund' s issues of auction-rate preferred notes
What is the fund's current strategy?
Because of ongoing uncertainty related to prevailing geopolitical and economic
factors, we continue to maintain a generally conservative posture. Accordingly,
we have maintained the fund' s average duration at points we consider to be
neutral. This strategy is designed to provide flexibility to participate in new
opportunities for tax-exempt income while seeking to provide some protection
from potential price erosion if economic growth accelerates. In addition, we
recently have taken advantage of what we believe to be opportunities in bonds
from certain states with relatively high income taxes. Known as "specialty state
bonds," these securities have recently been available at prices we consider
attractive relative to non-specialty state bonds. In our view, these are prudent
strategies in today's uncertain economic and geopolitical environments.
April 15, 2003
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID,
BASED UPON NET ASSET VALUE PER SHARE. PAST PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS. MARKET PRICE PER SHARE, NET ASSET VALUE PER SHARE AND
INVESTMENT RETURN FLUCTUATE. INCOME MAY BE SUBJECT TO STATE AND LOCAL
TAXES, AND SOME INCOME MAY BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM
TAX (AMT) FOR CERTAIN INVESTORS. CAPITAL GAINS, IF ANY, ARE FULLY TAXABLE.
(2) DISTRIBUTION RATE PER SHARE IS BASED UPON DIVIDENDS PER SHARE PAID FROM NET
INVESTMENT INCOME DURING THE PERIOD, ANNUALIZED, DIVIDED BY THE MARKET
PRICE PER SHARE AT THE END OF THE PERIOD.
(3) INSURANCE ON INDIVIDUAL BONDS EXTENDS TO THE REPAYMENT OF PRINCIPAL AND THE
PAYMENT OF INTEREST IN THE EVENT OF DEFAULT. IT DOES NOT EXTEND TO THE
MARKET VALUE OF THE PORTFOLIO SECURITIES OR THE VALUE OF THE FUND'S SHARES.
The Fund
STATEMENT OF INVESTMENTS
March 31, 2003 (Unaudited)
Principal
LONG-TERM MUNICIPAL INVESTMENTS--146.3% Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
ALABAMA--3.5%
Alabama Industrial Development Authority, SWDR
(Pine City Fiber Co.) 6.45%, 12/1/2023 4,725,000 4,555,467
Houston County Health Care Authority
6.25%, 10/1/2030 (Insured; AMBAC) 8,000,000 9,180,160
Jefferson County, Sewer Revenue
5.25%, 2/1/2023 (Insured; FGIC) 5,000,000 5,253,750
ALASKA--1.5%
Alaska Housing Finance Corp.:
6%, 12/1/2040 455,000 480,826
6%, 6/1/2049 (Insured; MBIA) 4,000,000 4,225,080
Valdez, Marine Terminal Revenue
(BP Pipelines Inc. Project) 5.65%, 12/1/2028 3,200,000 3,254,272
ARKANSAS--3.5%
Arkansas Development Finance Authority, SFMR
(Mortgage Backed Securities Program):
6.45%, 7/1/2031 (Guaranteed; GNMA, FNMA) 7,060,000 7,542,198
6.25%, 1/1/2032 (Guaranteed; GNMA) 4,945,000 5,276,315
Little Rock School District
5.25%, 2/1/2030 (Insured; FSA) 6,000,000 6,206,520
ARIZONA--7.9%
Apache County Industrial Development Authority, PCR
(Tucson Electric Power Co. Project):
5.85%, 3/1/2028 3,800,000 3,462,180
5.875%, 3/1/2033 1,325,000 1,210,639
Maricopa Pollution Control Corp., PCR
(Public Service Co.) 5.75%, 11/1/2022 6,000,000 5,933,700
Pima County Industrial Development Authority, Industrial
Revenue (Tucson Electric Power Co. Project)
6%, 9/1/2029 14,265,000 13,335,207
Scottsdale Industrial Development Authority, HR
(Scottsdale Healthcare) 5.80%, 12/1/2031 6,000,000 6,127,200
Tempe Industrial Development Authority, IDR
(California Micro Devices Corp. Project)
10.50%, 3/1/2018 6,535,000 6,556,500
Tucson, Water System Revenue
5%, 7/1/2021 (Insured; FGIC) 3,500,000 3,637,690
University of Arkansas, University Revenue (Fayetteville
Campus) 5%, 12/1/2027 (Insured; FGIC) 2,000,000 2,049,340
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA--5.3%
California Pollution Control Financing Authority, PCR
(Southern California Edison Co.) 7%, 2/28/2008 5,000,000 5,089,200
State of California 9.55%, 12/1/2018 (Insured; FSA) 10,000,000 (a,b) 10,372,700
Los Angeles Unified School District
5.25%, 7/1/2020 (Insured; FSA) 4,000,000 4,313,760
Orange County Water District, Revenue, COP
5%, 8/15/2028 (Insured; MBIA) 8,840,000 9,015,209
COLORADO--1.4%
Denver City and County, Special Facilities Airport
Revenue (United Airlines Project)
6.875%, 10/1/2032 6,950,000 (d) 1,807,000
El Paso County School District No. 2 (Harrison)
5%, 12/1/2027 (Insured; MBIA) 2,000,000 2,047,780
Northwest Parkway Public Highway Authority,
Revenue 7.125%, 6/15/2041 3,500,000 3,659,530
DELAWARE--1.4%
Delaware Transportation Authority,
Transportation System Revenue
5%, 7/1/2019 (Insured; AMBAC) 6,865,000 7,273,811
FLORIDA--5.0%
Florida Housing Finance Corp., Housing Revenue
(Nelson Park Apartments)
6.40%, 3/1/2040 (Insured; FSA) 12,380,000 13,321,499
Orange County Health Facility Authority, HR
(Regional Healthcare Systems) 6%, 10/1/2026 2,000,000 2,070,600
Pasco County, Sales Tax Revenue
(Half-Cent) 5.125%, 12/1/2028 (Insured; AMBAC) 10,150,000 10,504,540
South Miami Health Facilities Authority, HR
(Baptist Health of South Florida Group)
5.25%, 11/15/2033 950,000 942,077
GEORGIA--1.9%
Georgia Housing Finance Authority, SFMR
6.45%, 12/1/2030 5,365,000 5,764,961
Private Colleges and Universities Facilities Authority,
Revenue (Clark Atlanta University Project)
8.25%, 1/1/2015 (Prerefunded 1/1/2003) 4,127,500 (c) 4,364,831
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
HAWAII--1.3%
Hawaii Department of Transportation,
Special Facility Revenue:
(Caterair International Corp. Project)
10.125%, 12/1/2010 3,600,000 3,606,948
(Continental Airlines, Inc.)
5.625%, 11/15/2027 6,820,000 3,316,566
IDAHO--.8%
Power County Industrial Development Corp, SWDR
(FMC Corp. Project) 6.45%, 8/1/2032 5,450,000 4,454,885
ILLINOIS--8.0%
Chicago:
6.125%, 1/1/2028 (Insured; FGIC) 15,815,000 17,978,176
(Wastewater Transmission Revenue)
6%, 1/1/2030 (Insured; MBIA) 3,000,000 3,539,370
Chicago-O'Hare International Airport,
Special Facility Revenue:
(Delta Airlines Project) 6.45%, 5/1/2018 4,855,000 2,239,272
(United Airlines, Inc. Project):
6.75%, 11/1/2011 2,000,000 (d) 240,000
6.30%, 5/1/2016 13,450,000 (d) 1,176,875
Illinois Health Facilities Authority, Revenue:
(Advocate Network Health Care) 6.125%, 11/15/2022 4,020,000 4,331,148
(OSF Healthcare System) 6.25%, 11/15/2029 7,730,000 8,112,480
(Swedish American Hospital) 6.875%, 11/15/2030 4,990,000 5,380,517
INDIANA--2.1%
Franklin Township Independent School Building Corp.,
First Mortgage 6.125%, 1/15/2022 6,500,000 7,843,355
Indiana Housing Finance Authority, SFMR
5.95%, 1/1/2029 3,420,000 3,548,592
KANSAS--3.6%
Kansas Development Finance Authority, Revenue:
(Board of Regents-Scientific Resource)
5%, 10/1/2021 (Insured; AMBAC) 5,290,000 5,571,005
Health Facility (Sisters of Charity) 6.25%, 12/1/2028 3,000,000 3,232,140
Wichita, HR (Christian Health System Inc.)
6.25%, 11/15/2024 10,000,000 10,713,300
KENTUCKY--1.1%
Kenton County Airport Board, Airport Revenue
(Special Facilities-Delta Airlines Project)
6.125%, 2/1/2022 9,200,000 5,661,680
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
LOUISIANA--2.4%
Greater New Orleans Expressway Commission, Revenue
5%, 11/1/2027 (Insured; AMBAC) 3,000,000 3,062,190
Parish of Saint James, SWDR (Freeport-McMoRan
Partnership Project) 7.70%, 10/1/2022 10,000,000 9,674,700
MAINE--.8%
Maine Housing Authority, Mortgage
5.30%, 11/15/2023 4,000,000 4,151,360
MARYLAND--1.0%
Baltimore County, PCR
(Bethlehem Steel Corp. Project) 7.50%, 6/1/2015 2,500,000 (d) 93,750
Maryland Economic Development Corp., Student
Housing Revenue (University of Maryland)
5.75%, 10/1/2033 5,000,000 5,031,350
MASSACHUSETTS--4.3%
Massachusetts Industrial Finance Agency, Revenue
(Ogden Haverhill Project) 5.60%, 12/1/2019 6,000,000 5,491,800
Massachusetts Health and Educational Facilities Authority,
Revenue:
(Beth Israel Hospital Issue)
9.942%, 7/1/2025 (Insured; AMBAC) 3,000,000 (a) 3,137,850
(Partners Healthcare System) 5.75%, 7/1/2032 5,000,000 5,250,000
(Harvard University Issue) 6%, 7/1/2035 8,000,000 9,530,880
MICHIGAN--4.4%
Michigan Hospital Finance Authority, HR:
(Ascension Health Credit) 6.125%, 11/15/2026 5,000,000 6,017,750
(Crittenton Hospital) 5.625%, 3/1/2027 2,000,000 2,048,760
(Genesys Health System Obligated Group)
8.125%, 10/1/2021 (Prerefunded 10/1/2005) 5,000,000 (c) 5,913,000
Michigan Strategic Fund, Resource Recovery Limited
Obligation Revenue (Detroit Edison Co.)
5.25%, 12/15/2032 3,000,000 3,062,670
Michigan Strategic Fund, SWDR
(Genesee Power Station Project) 7.50%, 1/1/2021 7,140,000 6,827,982
MINNESOTA--1.8%
Duluth Economic Development Authority, Health
Care Facilities Revenue (Saint Luke's
Hospital) 7.25%, 6/15/2032 5,000,000 5,005,300
Minnesota Housing Finance Agency, Residential
Housing Finance 5%, 1/1/2020 4,525,000 4,661,881
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
MISSISSIPPI--3.5%
Claiborne County, PCR (Middle South Energy, Inc.)
(System Energy Resources, Inc.) 6.20%, 2/1/2026 4,545,000 4,530,774
Mississippi Business Finance Corp., PCR (System Energy
Resource Inc. Project) 5.875%, 4/1/2022 14,810,000 14,536,015
MISSOURI--3.3%
Missouri Health and Educational Facilities Authority,
Health Facilities Revenue (Saint Anthony's
Medical Center) 6.25%, 12/1/2030 6,750,000 7,059,150
Missouri Development Finance Board, Infrastructure
Facilities Revenue (Branson):
5.375%, 12/1/2027 2,000,000 2,010,320
5.50%, 12/1/2032 4,500,000 4,541,625
Saint Louis Industrial Development Authority, Revenue
(Saint Louis Convention Center) 7.25%, 12/15/2035 4,250,000 4,202,655
MONTANA--4.1%
Forsyth, PCR (Puget Sound Energy)
5%, 3/1/2031 (Insured; AMBAC) 14,225,000 14,518,604
Montana Board of Housing, Single Family Mortgage
6.45%, 6/1/2029 7,340,000 7,832,000
NEVADA--2.7%
Washoe County (Reno-Sparks Convention Center)
6.40%, 7/1/2029 (Insured; FSA) 12,000,000 14,342,040
NEW HAMPSHIRE--2.8%
New Hampshire Business Finance Authority, PCR
(Public Service Co. of New Hampshire)
6%, 5/1/2021 (Insured; AMBAC) 7,000,000 7,753,760
New Hampshire Health and Educational Facilities
Authority, Revenue (Exeter Project):
6%, 10/1/2024 1,000,000 1,058,390
5.75%, 10/1/2031 1,000,000 1,032,220
New Hampshire Industrial Development Authority, PCR
(Connecticut Light and Power) 5.90%, 11/1/2016 5,000,000 5,129,750
NEW JERSEY--4.6%
New Jersey Economic Development Authority, Special
Facility Revenue (Continental Airlines Inc. Project)
6.40%, 9/15/2023 2,000,000 1,253,480
New Jersey Environmental Infrastructure Trust
5%, 9/1/2020 6,330,000 6,665,047
New Jersey Health Facilities Financing Authority,
Revenue (Christian Health Care Center)
8.75%, 7/1/2018 14,180,000 17,035,994
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
NEW MEXICO--1.8%
Farmington, PCR:
(El Paso Electric Co. Project)
6.375%, 6/1/2032 5,370,000 5,439,434
(Tucson Electric Power Co., San Juan)
6.95%, 10/1/2020 4,000,000 4,138,880
NEW YORK--4.0%
Long Island Power Authority, New York
Electric System Revenue
8.404% 12/1/2016 10,000,000 (a,b) 11,363,200
New York Transitional Finance Authority, Revenue
(Future Tax Secured) 5%, 2/1/2031 10,000,000 10,103,900
NORTH DAKOTA--2.3%
North Dakota Housing Finance Agency,
Home Mortgage Revenue
(Housing Finance Program):
6.50%, 1/1/2031 8,395,000 8,968,043
6.15%, 7/1/2031 3,150,000 3,318,431
OHIO--5.6%
Cuyahoga County , Revenue 6%, 1/1/2032 2,000,000 2,086,120
Mahoning County, Hospital Facilities Revenue
(Forum Health Obligation Group) 6%, 11/15/2032 7,000,000 7,246,890
Ohio Air Quality Development Authority, PCR
(Cleveland Electric Illuminating)
6.10%, 8/1/2020 (Insured; ACA) 3,000,000 3,149,640
Ohio Higher Educational Facility Revenue
(Kenyon College Project) 4.95%, 7/1/2037 5,000,000 5,205,050
Ohio Housing Finance Agency,
Residential Mortgage Revenue:
6.25%, 9/1/2020 (Collateralized; GNMA) 3,730,000 3,991,510
6.35%, 9/1/2031 (Collateralized; GNMA) 3,730,000 3,988,116
Ohio Water Development Authority, Pollution Control
Facilities Revenue (Cleveland Electric
Illuminating) 6.10%, 8/1/2020 (Insured; ACA) 4,350,000 4,566,978
OKLAHOMA--2.4%
Oklahoma Industries Authority
(Health System Obligated Group) 5.75%, 8/15/2029 12,230,000 13,147,495
OREGON--1.6%
Port of Portland, International Airport Revenue
(Portland International Airport)
5.50%, 7/1/2024 (Insured; AMBAC) 5,000,000 5,294,900
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
OREGON (CONTINUED)
Tigard--Tualatin School District No. 23
5.375%, 6/15/2019 (Insured; MBIA) 3,000,000 3,275,010
PENNSYLVANIA--1.9%
Pennsylvania Housing Financing Authority
10.544%, 4/1/2025 6,000,000 (a) 6,245,280
York County Hospital Authority, Revenue
(Health Center--Lutheran Social Services)
6.50%, 4/1/2022 4,250,000 4,117,781
SOUTH CAROLINA--2.7%
Greenville Hospital System, Hospital Facilities Revenue
5.50%, 5/1/2026 (Insured; AMBAC) 5,000,000 5,283,300
Piedmont Municipal Power Agency, Electric Revenue
6.55%, 1/1/2016 1,690,000 1,691,724
Tobacco Settlement Revenue Management Authority,
Tobacco Settlement Revenue:
6.375%, 5/15/2028 305,000 265,335
6.375%, 5/15/2030 8,400,000 7,279,860
TENNESSEE--5.4%
Knox County Health Educational and Housing Facilities
Board, Hospital Facilities Revenue
(Baptist Health System of Eastern Tennessee)
6.50%, 4/15/2031 4,910,000 5,057,496
Memphis Center City Revenue Finance Corp.,
Tennessee Sports Facility Revenue
(Memphis Redbirds) 6.50%, 9/1/2028 10,000,000 10,028,800
Tennessee Housing Development Agency
(Homeownership Program) 6.40%, 7/1/2031 12,770,000 13,870,774
TEXAS--13.5%
Austin Convention Enterprises Inc., Convention Center
Hotel Revenue:
5.75%, 1/1/2016 5,200,000 5,629,780
6.70%, 1/1/2028 4,000,000 4,169,520
5.75%, 1/1/2032 6,500,000 6,798,870
6.70%, 1/1/2032 3,500,000 3,634,295
Harris County Health Facilities Development Corp., HR
(Memorial Hermann Hospital System Project)
6.375%, 6/1/2029 8,500,000 9,082,760
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
TEXAS (CONTINUED)
Houston Airport System, Special Facilities Revenue,
Airport Improvement (Continental Airlines):
6.125%, 7/15/2027 6,375,000 3,099,844
6.75%, 7/1/2029 8,250,000 4,383,060
5.70%, 7/15/2029 3,750,000 1,748,250
Sabine River Authority, PCR (TXU Electric Co. Project)
6.45%, 6/1/2021 8,300,000 8,089,678
Sam Rayburn Municipal Power Agency, Power Supply
System Revenue 5.75%, 10/1/2021 6,000,000 6,418,980
Texas Department of Housing and Community Affairs,
Collateralized Home Mortgage Revenue
12.35%, 7/2/2024 3,950,000 (a) 4,847,638
Texas Turnpike Authority, Central Texas Turnpike System
Revenue 5.75%, 8/15/2038 (Insured; AMBAC) 7,100,000 7,752,277
Tomball Hospital Authority, HR
(Tomball Regional Hospital)
6%, 7/1/2025 4,000,000 4,039,680
Tyler Health Facilities Development Corp., HR
(East Texas Medical Center Regional Health Care
System Project) 6.75%, 11/1/2025 3,000,000 2,888,970
UTAH--.8%
Carbon County, SWDR (Sunnyside Cogeneration)
7.10%, 8/15/2023 4,536,000 4,432,534
VERMONT--1.1%
Vermont Housing Finance Agency, Single Family Housing
6.40%, 11/1/2030 (Insured; FSA) 5,540,000 5,894,283
VIRGINIA--2.2%
Greater Richmond Convention Center Authority,
Hotel Tax Revenue (Convention Center
Expansion Project) 6.25%, 6/15/2032 10,500,000 11,712,645
WASHINGTON--5.7%
Energy Northwest:
Electric Revenue 10.20%, 7/1/2018 (Insured; MBIA) 10,000,000 (a,b) 12,444,100
Wind Project Revenue 5.875%, 7/1/2020 3,000,000 3,064,110
Public Utility District No. 1 of Pend Orielle County,
Electric Revenue 6.375%, 1/1/2015 3,755,000 3,996,784
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
WASHINGTON (CONTINUED)
Seattle, Water System Revenue
6%, 7/1/2029 (Insured; FGIC) 10,000,000 11,320,700
WEST VIRGINIA--3.2%
Braxton County, SWDR (Weyerhaeuser Co. Project):
6.125%, 4/1/2026 14,000,000 14,172,200
West Virginia Housing Development Fund,
Housing Finance 6.50%, 5/1/2028 650,000 693,945
West Virginia Water Development Authority, Water
Development Revenue 6.375%, 7/1/2039 2,250,000 2,504,678
WISCONSIN--5.7%
Badger Tobacco Asset Securitization Corp., Tobacco
Settlement Revenue:
7%, 6/1/2028 24,000,000 22,816,080
6.375%, 6/1/2032 2,500,000 2,185,650
Wisconsin Health and Educational Facilities Authority,
Health, Hospital and Nursing Home Revenue
(Aurora Health Care Inc.) 5.60%, 2/15/2029 5,205,000 4,995,395
Wisconsin Housing and Economic Development Authority
9.845%, 7/1/2025 900,000 (a,b) 940,887
WYOMING--.9%
Sweetwater County, SWDR (FMC Corp. Project):
7%, 6/1/2024 3,150,000 2,820,321
6.90%, 9/1/2024 2,000,000 1,769,580
U. S. RELATED--1.5%
Guam Housing Corp., SFMR
5.75%, 9/1/2031 (Collateralized; FHLMC) 965,000 1,050,875
Puerto Rico Highway and Transportation Authority,
Transportation Revenue 6%, 7/1/2039 6,000,000 7,165,380
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $778,867,988) 787,931,594
Principal
SHORT-TERM MUNICIPAL INVESTMENTS--3.4% Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
ALASKA--2.3%
Valdez, Marine Terminal Revenue, VRDN (Exxon Mobil
Pipeline Co. Project) 1.10% 12,600,000 (e) 12,600,000
MASSACHUSETTS--.2%
Massachusetts Health and Educational Facilities Authority,
Revenue, VRDN (Capital Asset Program) 1.15% 1,000,000 (e) 1,000,000
NEW YORK--.2%
New York, VRDN 1.15% (Insured; MBIA) 1,200,000 (e) 1,200,000
TEXAS--.7%
Gulf Coast Waste Disposal Authority, PCR, VRDN
(Amoco Oil Co. Project) 1.10% 3,600,000 (e) 3,600,000
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $18,400,000) 18,400,000
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $797,267,988) 149.7% 806,331,594
CASH AND RECEIVABLES (NET) 3.2% 17,103,175
PREFERRED STOCK, AT REDEMPTION VALUE (52.9%) (285,000,000)
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 100.0% 538,434,769
The Fund
STATEMENT OF INVESTMENTS (Unaudited) (CONTINUED)
Summary of Abbreviations
ACA American Capital Access
AMBAC American Municipal Bond Assurance
Corporation
COP Certificate of Participation
FGIC Financial Guaranty Insurance
Company
FHLMC Federal Home Loan Mortagage
Corporation
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
PCR Pollution Control Revenue
SFMR Single Family Mortgage Revenue
SWDR Solid Waste Development Revenue
VRDN Variable Rate Demand Notes
Summary of Combined Ratings (Unaudited)
Fitch or Moody's or Standard & Poor's Value (%)
------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa AAA 37.0
AA Aa AA 13.6
A A A 17.4
BBB Baa BBB 12.8
BB Ba BB 7.6
B B B 1.7
CCC Caa CCC .2
CC Ca CC .2
F1 Mig1 SP1 2.3
Not Rated( f) Not Rated( f) Not Rated( f) 7.2
100.0
(A) INVERSE FLOATER SECURITY--THE INTEREST RATE IS SUBJECT TO CHANGE
PERIODICALLY.
(B) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT
OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT MARCH 31,
2003, THESE SECURITIES AMOUNTED TO $35,120,891 OR 6.5% OF NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS.
(C) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT
SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND
INTEREST ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE
EARLIEST REFUNDING DATE.
(D) NON-INCOME PRODUCING SECURITY--INTEREST PAYMENTS IN DEFAULT.
(E) SECURITIES PAYABLE ON DEMAND. VARIABLE RATE INTEREST--SUBJECT TO PERIODIC
CHANGE.
(F) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S,
HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE
RATED SECURITIES IN WHICH THE FUND MAY INVEST.
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2003 (Unaudited)
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 797,267,988 806,331,594
Cash 68,628
Interest receivable 13,959,313
Receivable for investment securities sold 8,862,540
Prepaid expenses 467,876
829,689,951
--------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 527,558
Payable for investment securities purchased 5,120,730
Dividends payable to preferred shareholders 247,566
Commissions payable 7,062
Accrued expenses 352,266
6,255,182
--------------------------------------------------------------------------------
AUCTION PREFERRED STOCK, Series M, T, W, Th and F
par value $.001 per share (11,400 shares issued
and outstanding a $25,000 per share liquidation
preference)--Note 1 285,000,000
--------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS ($) 538,434,769
--------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Common Stock, par value $.001 per share
(59,703,072 shares issued and outstanding) 59,703
Paid-in capital 562,775,495
Accumulated undistributed investment income--net 9,215,063
Accumulated net realized gain (loss) on investments (42,679,098)
Accumulated net unrealized appreciation
(depreciation) on investments 9,063,606
--------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 538,434,769
--------------------------------------------------------------------------------
SHARES OUTSTANDING
(500 million shares of $.001 par value Common Stock authorized) 59,703,072
NET ASSET VALUE PER SHARE OF COMMON STOCK ($) 9.02
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2003 (Unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INTEREST INCOME 26,117,645
EXPENSES:
Management fee--Note 3(a) 3,086,787
Commission fee--Note 1 374,780
Shareholder servicing costs 72,955
Custodian fees--Note 3(b) 69,922
Shareholders' reports 47,576
Professional fees 42,485
Directors' fees and expenses--Note 3(c) 31,351
Registration fees 25,833
Miscellaneous 24,636
TOTAL EXPENSES 3,776,325
INVESTMENT INCOME--NET 22,341,320
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (13,473,393)
Net unrealized appreciation (depreciation) on investments (5,868,579)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (19,341,972)
DIVIDENDS ON PREFERRED STOCK (2,221,606)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 777,742
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
March 31, 2003 Year Ended
(Unaudited) September 30, 2002
--------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 22,341,320 47,823,496
Net realized gain (loss) on investments (13,473,393) (18,783,774)
Net unrealized appreciation
(depreciation) on investments (5,868,579) (2,508,827)
Dividends on Preferred Stock (2,221,606) (4,821,324)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 777,742 21,709,571
--------------------------------------------------------------------------------
DIVIDENDS TO COMMON SHAREHOLDERS FROM ($):
INVESTMENT INCOME--NET (21,394,278) (39,168,624)
--------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS ($):
DIVIDENDS REINVESTED 4,294,118 6,491,435
TOTAL INCREASE (DECREASE) IN NET ASSETS (16,322,418) (10,967,618)
--------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 554,757,187 565,724,805
END OF PERIOD 538,434,769 554,757,187
Undistributed investment income--net 9,215,063 10,145,155
--------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (SHARES):
SHARES ISSUED FOR DIVIDENDS REINVESTED 468,458 685,471
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 common shares.
Six Months Ended
March 31, 2003 Year Ended September 30,
----------------------------------------------------------------------
(Unaudited) 2002(a) 2001 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value,
beginning of period 9.37 9.66 9.38 9.41 10.22 10.02
Investment Operations:
Investment income--net .38(b) .81(b) .82 .71 .56 .59
Net realized and unrealized
gain (loss) on investments (.33) (.35) .18 .02 (.80) .25
Dividends on Preferred Stock
from net investment income (.04) (.08) (.16) (.13) -- --
Total from
Investment Operations .01 .38 .84 .60 (.24) .84
Distributions to
Common Shareholders:
Dividends from investment
income--net (.36) (.67) (.56) (.55) (.57) (.64)
Dividends from net realized
gain on investments -- -- -- (.02) -- --
Total Distributions to
Common Shareholders (.36) (.67) (.56) (.57) (.57) (.64)
Capital Stock transactions,
net effect of Preferred
Stock offerings -- -- -- (.06) -- --
Net asset value, end of period 9.02 9.37 9.66 9.38 9.41 10.22
Market value, end of period 9.56 10.11 9.69 8 9_16 8 10 5_16
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%)(C) (1.67)(d) 11.89 20.22 14.76 (17.55) 3.35
Six Months Ended
March 31, 2003 Year Ended September 30,
-------------------------------------------------------------------
(Unaudited) 2002(a) 2001 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL
DATA (%):
Ratio of expenses to average
net assets applicable
to Common Stock 1.40(e,f,g) 1.38(f,g) 1.39(f,g) 1.25(f,g) .84 .85
Ratio of net investment
income to average
net assets applicable
to Common Stock 8.29(e,f,g) 8.61(f,g) 8.49(f,g) 7.91(f,g) 5.63 5.78
Portfolio Turnover Rate 22.96(d) 36.81 10.07 19.03 27.05 20.95
Asset coverage of
Preferred Stock,
end of Period 289 294 299 295 -- --
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, net of
Preferred Stock,
end of period ($ x 1,000) 538,435 554,757 565,725 548,939 550,755 595,693
Preferred Stock outstanding,
end of period ($ x 1,000) 285,000 285,000 285,000 285,000 -- --
(A) AS REQUIRED, EFFECTIVE OCTOBER 1, 2001, THE FUND HAS ADOPTED THE PROVISIONS
OF THE AICPA AUDIT AND ACCOUNTING GUIDE FOR INVESTMENT COMPANIES AND BEGAN
AMORTIZING DISCOUNT OR PERMIUM ON A SCIENTIFIC BASIS FOR DEBT SECURITIES ON
A DAILY BASIS. THE EFFECT OF THIS CHANGE FOR THE PERIOD ENDED SEPTEMBER 30,
2002 WAS TO INCREASE NET INVESTMENT INCOME PER SHARE AND DECREASE NET
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS BY LESS THAN $.01 AND
INCREASE THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS FROM
8.58% TO 8.61%. PER SHARE DATA AND RATIOS/SUPPLEMENTAL DATA FOR PERIODS
PRIOR TO OCTOBER 1, 2001 HAVE NOT BEEN RESTATED TO REFLECT THIS CHANGE IN
PRESENTATION.
(B) BASED ON AVERAGE SHARES OUTSTANDING AT EACH MONTH END.
(C) CALUCULATED BASED ON MARKET VALUE.
(D) NOT ANNUALIZED.
(E) ANNUALIZED.
(F) DOES NOT REFLECT THE EFFECT OF DIVIDENDS TO PREFERRED STOCK SHAREHOLDERS.
(G) THE RATIO OF EXPENSES TO TOTAL AVERAGE NET ASSETS AND THE RATIO OF NET
INVESTMENT INCOME TO TOTAL AVERAGE NET ASSETS WERE .92% AND 5.43%,
RESPECTIVELY, FOR THE SIX MONTHS ENDED MARCH 31, 2003, .91% AND 5.69%,
RESPECTIVELY, FOR THE YEAR ENDED SEPTEMBER 30, 2002, .92% AND 5.65%,
RESPECTIVELY, FOR THE YEAR ENDED SEPTEMBER 30, 2001 AND .92% AND 5.79%,
RESPECTIVELY, FOR THE YEAR ENDED SEPTEMBER 30, 2000.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1-- Significant Accounting Policies:
Dreyfus Strategic Municipals, 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 consistent
with the preservation of capital. The Dreyfus Corporation (the "Manager") serves
as the fund's investment adviser. The Manager is a direct subsidiary of Mellon
Bank, N.A., which is a wholly-owned subsidiary of Mellon Financial Corporation.
The fund' s Common Stock trades on the New York Stock Exchange under the ticker
symbol LEO.
The fund has outstanding 2,280 shares of Series M, Series T, Series W, Series TH
and Series F for a total of 11,400 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 dividends rates are
determined pursuant to periodic auctions. Bankers Trust, as Auction Agent,
receives a fee from the fund for its services in connection with such auctions.
The fund also compensates broker-dealers generally at an annual rate of .25% of
the purchase price of the shares of APS placed by the broker-dealer in an
auction.
The fund is subject to certain restrictions relating to the APS. Failure to
comply with these restrictions could preclude the fund from declaring any
distributions to common shareholders or repurchasing common shares and/or could
trigger the mandatory redemption of APS at liquidation value.
The holders of the APS, voting as a separate class, have the right to elect at
least two directors. The holders of the APS will vote as a separate class on
certain other matters, as required by law. The fund has designated Robin R.
Pringle and John E. Zuccotti to represent holders of APS on the fund's Board of
Directors.
The fund' s financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which may require the use of
management estimates and assumptions. Actual results could differ from those
estimates.
(a) Portfolio valuation: Investments in municipal 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 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.
(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 discount and premium on investments, is earned from
settlement date and recognized on the accrual basis. Securities purchased or
sold on a when-issued or delayed-delivery basis may be settled a month or more
after the trade date.
(c) Dividends to shareholders of Common Stock ("Common Shareholders(s)"):
Dividends are recorded on the ex-dividend date. Dividends from investment
income-net are declared and paid monthly. Dividends from net realized capital
gain, if any, are normally declared and paid annually, but the fund may make
distributions on a more frequent basis to comply with distribution requirements
of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent
that net realized capital gain can be offset by capital loss carryovers, it is
the policy of the fund not to distribute such gain.
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
For Common Shareholders who elect to receive their distributions in additional
shares of the fund, in lieu of cash, such distributions will be reinvested at
the lower of the market price or net asset value per share (but not less than
95% of the market price) based on the record date's respective prices. If the
net asset value per share on the record date is lower than the market price per
share, shares will be issued by the fund at the record date's net asset value on
the payable date of the distribution. If the net asset value per share is less
than 95% of the market value, shares will be issued by the fund at 95% of the
market value. If the market price is lower than the net asset value per share on
the record date, The Bank of New York will purchase fund shares in the open
market commencing on the payable date and reinvest those shares accordingly. As
a result of purchasing fund shares in the open market, fund shares outstanding
will not be affected by this form of reinvestment.
On March 31, 2003, the Board of Directors declared a cash dividend to Common
Shareholders of $.060 per share from investment income-net, payable on April 28,
2003 to Common Shareholders of record as of the close of business on April 14,
2003.
(d) Dividends to shareholders of APS: For APS, dividends are currently reset
every 7 days for Series M and Series Th. The dividend rate for Series T will be
in effect until July 21, 2003. The dividend rate for Series W will be in effect
until December 4, 2003. The dividend rate for Series F will be in effect until
February 14, 2005. The dividend rates in effect at March 31, 2003 were as
follows: Series M-.90% , Series T-1.75% , Series W-1.65%, Series TH-1.10% and
Series F-1.64%.
(e) Federal income taxes: It is the policy of the fund to continue to qualify as
a regulated investment company, which can distribute tax exempt dividends, by
complying with the applicable provisions of the Code and to make distributions
of income and net realized capital gain sufficient to relieve it from
substantially all federal income and excise taxes.
The fund has unused capital loss carryover of $9,912,633 available for federal
tax purposes to be applied against future net securities profits,
if any, realized subsequent to September 30, 2002. If not applied, $9,836,505 of
the carryover expires in fiscal 2009 and $76,128 expires in fiscal 2010.
The tax character of distributions paid to shareholders during the fiscal year
ended September 30, 2002 was as follows: tax exempt income $43,989,948. The tax
character of current year distributions will be determined at the end of the
current fiscal year.
NOTE 2--Bank Line of Credit:
The fund participates with other Dreyfus-managed funds in a $100 million
unsecured line of credit primarily to be utilized for temporary or emergency
purposes. Interest is charged to the fund based on prevailing market rates in
effect at the time of borrowings. During the period ended March 31, 2003, the
fund did not borrow under the line of credit.
NOTE 3--Management Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement ("Agreement") with the Manager, the
management fee is computed at the annual rate of .75 of 1% of the value of the
fund's average weekly net assets and is payable monthly. The Agreement provides
for an expense reimbursement from the Manager should the fund's aggregate
expenses, exclusive of taxes, interest on borrowings, brokerage and
extraordinary expenses, in any full fiscal year exceed the lesser of (1) the
expense limitation of any state having jurisdiction over the fund or (2) 2% of
the first $10 million, 1 1_2% of the next $20 million and 1% of the excess over
$30 million of the average value of the fund's net assets. During the period
ended March 31, 2003, there was no expense reimbursement pursuant to the
Agreement.
(b) The fund compensates Boston Safe Deposit and Trust Company, an affiliate of
the Manager, under a custody agreement for providing custodial services to the
fund. During the period ended March 31, 2003, $69,922 was charged by Boston Safe
Deposit and Trust Company pursuant to the custody agreement.
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
(c) Through January 27th, 2003, each director who is not an "affiliated person"
as defined in the Act received from the fund an annual fee of $4,500 and an
attendance fee of $500 per meeting. Each such director also serves as a board
member of other Funds within the Dreyfus complex (collectively, the "Fund
Group" ). After January 27th, 2003, Board compensation was changed from a "Fund
by Fund" basis to a "Fund Group" basis, such that each such director now
receives an annual fee of $30,000 and an attendance fee of $4,000 for each in
person meeting and $500 for telephone meetings. These fees are allocated among
the funds in the Fund Group. The Chairman of the Board receives an additional
25% of such compensation. Subject to the fund's Emeritus Program Guidelines,
Emeritus Board members, if any, receive 50% of the annual retainer fee and per
meeting fee paid at the time the Board member achieves emeritus status.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities, during the period ended March 31, 2003, amounted to
$182,965,922 and $182,708,471, respectively.
At March 31, 2003, accumulated net unrealized appreciation on investments was
$9,063,606, consisting of $40,965,531 gross unrealized appreciation and
$31,901,925 gross unrealized depreciation.
At March 31, 2003, 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).
NOTES
OFFICERS AND DIRECTORS
Dreyfus Strategic Municipals, Inc.
200 Park Avenue
New York, NY 10166
DIRECTORS
Joseph S. DiMartino
David W. Burke
William 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
Mark N. Jacobs
Executive Vice Presidents
Stephen Byers
Paul Disdier
Secretary
John B. Hammalian
Assistant Secretaries
Steven F. Newman
Michael A. Rosenberg
Treasurer
James Windels
Assistant Treasurers
Gregory S. Gruber
Kenneth J. Sandgren
Anti-Money Laundering Compliance Officer
William Germenis
PORTFOLIO MANAGERS:
Joseph P. Darcy
A. Paul Disdier
PORTFOLIO MANAGERS (CONTINUED)
Douglas J. Gaylor
Joseph A. Irace
Colleen A. Meehan
W. Michael Petty
Scott Sprauer
James Welch
Monica S. Wieboldt
INVESTMENT ADVISER
The Dreyfus Corporation
CUSTODIAN
Boston Safe Deposit
and Trust Company
COUNSEL
Stroock & Stroock & Lavan LLP
TRANSFER AGENT,
DIVIDEND DISBURSING AGENT
AND REGISTRAR
The Bank of New York (Common Stock)
Bankers Trust (Auction Preferred Stock)
AUCTION AGENT
Bankers Trust (Auction Preferred Stock)
STOCK EXCHANGE LISTING
NYSE Symbol: LEO
INITIAL SEC EFFECTIVE DATE
9/23/87
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 BOND FUNDS"
EVERY MONDAY; NEW YORK TIMES, BUSINESS SECTION UNDER THE HEADING "CLOSED-END
BOND FUNDS--NATIONAL MUNICIPAL BOND FUNDS" EVERY SUNDAY.
NOTICE IS HEREBY GIVEN IN ACCORDANCE WITH SECTION 23(C) OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED, THAT THE FUND MAY PURCHASE SHARES OF ITS COMMON
STOCK IN THE OPEN MARKET WHEN IT CAN DO SO AT PRICES BELOW THE THEN CURRENT NET
ASSET VALUE PER SHARE.
The Fund
For More Information
Dreyfus Strategic
Municipals, 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 Disbursing Agent
and Registrar
(Common Stock)
The Bank of New York
101 Barclay Street
New York, NY 10286
(c) 2003 Dreyfus Service Corporation 853SA0303