formncsr852.htm - Generated by SEC Publisher for SEC Filing

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES

Investment Company Act file number

811-5877

 

 

 

Dreyfus Strategic Municipal Bond Fund, Inc.

 

 

(Exact name of Registrant as specified in charter)

 

 

 

 

 

 

c/o The Dreyfus Corporation

200 Park Avenue

New York, New York 10166

 

 

(Address of principal executive offices) (Zip code)

 

 

 

 

 

John Pak, Esq.

200 Park Avenue

New York, New York 10166

 

 

(Name and address of agent for service)

 

 

Registrant's telephone number, including area code:

(212) 922-6000

 

 

Date of fiscal year end:

 

11/30

 

Date of reporting period:

5/31/13

 

             

 

 


 

 

 

FORM N-CSR

Item 1.      Reports to Stockholders.

 


 




Dreyfus Strategic Municipal Bond Fund, Inc.

Protecting Your Privacy

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:

THE FUND DOES NOT SHARE NONPUBLIC PERSONAL INFORMATION WITH ANYONE UNLESS NECESSARY TO PROCESS A TRANSACTION, SERVICE AN

ACCOUNT, OR AS OTHERWISE 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.




 

Contents

 

THE FUND

2     

A Letter from the President

3     

Discussion of Fund Performance

6     

Statement of Investments

23     

Statement of Assets and Liabilities

24     

Statement of Operations

25     

Statement of Cash Flows

26     

Statement of Changes in Net Assets

27     

Financial Highlights

29     

Notes to Financial Statements

41     

Officers and Directors

 

FOR MORE INFORMATION

 

Back Cover



Dreyfus
Strategic Municipal Bond Fund, Inc.

The Fund

A LETTER FROM THE PRESIDENT

Dear Shareholder:

We are pleased to present this semiannual report for Dreyfus Strategic Municipal Bond Fund, Inc., covering the six-month period from December 1, 2012, through May 31, 2013. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.

The U.S. economic recovery gained traction over the reporting period, but remained slower than historical norms. On one hand, the expansion has been fueled by gradually falling unemployment, recovering housing markets, rapid growth in domestic oil and gas production, and, perhaps most significant, the aggressively simulative monetary policy of the Federal Reserve Board (the “Fed”). On the other hand, several factors have weighed on the nation’s economic growth rate, including relatively sluggish demand for exports to Europe and the emerging markets, higher tax rates for some Americans, and more restrictive fiscal policies stemming from sequestration.Yields of longer term municipal bonds climbed in response to these developments, but yields of short-term securities remained anchored by the Fed’s historically low target for the overnight federal funds rate.

In our analysis, real GDP growth seems poised to accelerate modestly over the remainder of 2013. In fact, we expect the relatively mild economic expansion to remain intact domestically and globally over the next several years. The moderate pace of the recovery implies that the risks of consumer price inflation are limited, making it unlikely that the Fed will adopt expansion-threatening, restrictive policies anytime soon. As always, we encourage you to discuss our observations with your financial advisor.

Thank you for your continued confidence and support.

Sincerely,


J. Charles Cardona
President
The Dreyfus Corporation
June 17, 2013

2



DISCUSSION OF FUND PERFORMANCE

For the period of December 1, 2012, through May 31, 2013, as provided by Daniel Barton and Steven Harvey, Portfolio Managers

Fund and Market Performance Overview

For the six-month period ended May 31, 2013, Dreyfus Strategic Municipal Bond Fund achieved a total return of –1.45% on a net-asset-value basis.1 Over the same period, the fund provided aggregate income dividends of $0.285 per share, which reflects a distribution rate of 6.66%.2

Selling pressure at the end of 2012 stemming from changing capital gains tax rates and dealers’ reluctance to maintain inventories dampened municipal bond market returns for the reporting period overall, as did rising long-term interest rates in 2013. The fund cushioned the brunt of market weakness through overweighted exposure to higher yielding revenue bonds.

The Fund’s Investment Approach

The fund seeks to maximize current income exempt from federal income tax to the extent believed by Dreyfus to be consistent with the preservation of capital. In pursuing this goal, the fund invests at least 80% of its assets in municipal bonds. Under normal market conditions, the weighted average maturity of the fund’s portfolio is expected to exceed 10 years. Under normal market conditions, the fund invests at least 80% of its net assets in municipal bonds considered investment grade or the unrated equivalent as determined by Dreyfus.

The fund also has issued auction-rate preferred stock (ARPS), a percentage of which remains outstanding from its initial public offering, and has invested the proceeds in a manner consistent with its investment objective.This, along with the fund’s participation in secondary inverse floater structures, has the effect of “leveraging” the portfolio, which can magnify gain and loss potential depending on market conditions.

Over time, many of the fund’s older, higher yielding bonds have matured or were redeemed by their issuers.We have attempted to replace those bonds with investments consistent with the fund’s investment policies.We have also sought to upgrade the fund

The Fund 3



DISCUSSION OF FUND PERFORMANCE (continued)

with newly issued bonds that, in our opinion, have better structural or income characteristics than existing holdings.When such opportunities arise, we usually look to sell bonds that are close to their optional redemption date or maturity.

Selling Pressure in Advance of Tax Changes

After an extended period of market support resulting, in part, from favorable supply-and-demand dynamics, municipal bonds lost some value at the end of 2012 when investors took profits in anticipation of higher capital gains tax rates for 2013. At the same time, municipal bond dealers proved reluctant to absorb the rising supply of municipal bonds in the secondary market as they sought to maintain light inventories of unsold securities at year-end.

While the supply of newly issued municipal bonds continued to moderate over the opening months of 2013, the robust investor demand that had characterized much of 2012 failed to rematerialize. In addition, yields of U.S. Treasury securities generally climbed over the first five months of 2013 in response to improved economic trends and mounting expectations that the Federal Reserve Board (the “Fed”) might back away from its ongoing quantitative easing program sooner than many had expected. These expectations intensified in May, when remarks by Fed Chairman Ben Bernanke were widely interpreted as a signal of the central bank’s intention to adopt a less accommodative monetary policy.The resulting downward pressure on municipal bond prices caused broad measures of long-term municipal bond performance to end the reporting period with mildly negative returns.

In this environment, shorter term and lower rated municipal bonds provided higher returns than their longer maturity and higher rated counterparts, on average.

Fund Strategies Produced Mixed Results

The fund benefited over the reporting period from overweighted exposure to revenue bonds backed by hospitals, airports, industrial development projects, and the state’s settlement of litigation with U.S. tobacco companies. The fund’s holdings of bonds with credit ratings toward the lower end of the investment-grade range also fared relatively well, as did tactical trades in bonds from Puerto Rico, which encountered

4



heightened volatility. On the other hand, results were dampened by a modestly long average duration, the effects of which were magnified by the fund’s leveraging strategy. In addition, higher quality revenue bonds backed by essential municipal services, such as water and sewer facilities, weighed on performance.

Maintaining a Selective Approach

We have been encouraged by recently improved economic data, but the U.S. economy remains vulnerable to domestic fiscal uncertainty and unexpected global developments. In addition, while credit fundamentals are improving for most states, many localities face ongoing fiscal pressures.Therefore, we have maintained a long-term perspective in which our research-intensive credit selection process seeks to identify attractively valued opportunities among fundamentally sound issuers. Over the near term, we believe that bouts of heightened market volatility may provide opportunities to purchase municipal bonds at more attractive valuations as yield differences widen along the market’s maturity spectrum.

June 17, 2013

Bond funds are subject generally to interest rate, credit, liquidity and market risks, to varying degrees, all of which are more fully described in the fund’s prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines.

High yield bonds are subject to increased credit risk and are considered speculative in terms of the issuer’s perceived ability to continue making interest payments on a timely basis and to repay principal upon maturity.

The use of leverage may magnify the fund’s gains or losses. For derivatives with a leveraging component, adverse changes in the value or level of the underlying asset can result in a loss that is much greater than the original investment in the derivative.

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. 
Return figures provided reflect the absorption of certain fund expenses by The Dreyfus Corporation pursuant to an 
undertaking in effect through November 30, 2014, at which time it may be extended, terminated or modified. Had 
these expenses not been absorbed, the fund’s returns would have been lower. 
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, adjusted for any capital gain distributions. 

 

The Fund 5



STATEMENT OF INVESTMENTS

May 31, 2013 (Unaudited)

Long-Term Municipal  Coupon  Maturity  Principal     
Investments—142.8%  Rate (%)  Date  Amount ($)    Value ($) 
Alabama—.7%           
Jefferson County,           
Limited Obligation           
School Warrants  5.25  1/1/17  2,000,000    2,000,260 
Jefferson County,           
Limited Obligation           
School Warrants  5.00  1/1/24  1,000,000    992,420 
Alaska—2.5%           
Northern Tobacco Securitization           
Corporation of Alaska, Tobacco           
Settlement Asset-Backed Bonds  5.00  6/1/32  2,500,000    2,330,075 
Northern Tobacco Securitization           
Corporation of Alaska, Tobacco           
Settlement Asset-Backed Bonds  5.00  6/1/46  9,465,000    8,414,196 
Arizona—6.0%           
Barclays Capital Municipal Trust           
Receipts (Series 21W) (Salt           
River Project Agricultural           
Improvement and Power           
District, Salt River Project           
Electric System Revenue)  5.00  1/1/38  13,198,367  a,b  14,785,601 
Pima County Industrial Development           
Authority, Education Revenue           
(American Charter Schools           
Foundation Project)  5.50  7/1/26  4,000,000    3,970,360 
Pima County Industrial Development           
Authority, IDR (Tucson           
Electric Power Company Project)  5.75  9/1/29  6,000,000    6,294,660 
Salt Verde Financial Corporation,           
Senior Gas Revenue  5.00  12/1/37  1,000,000    1,106,890 
California—15.9%           
Barclays Capital Municipal Trust           
Receipts (Los Angeles           
Department of Airports,           
Senior Revenue (Los Angeles           
International Airport))  5.00  5/15/31  5,247,500  a,b,c  5,873,563 
California,           
GO (Various Purpose)  5.75  4/1/31  7,800,000    9,078,030 
California,           
GO (Various Purpose)  6.00  3/1/33  2,250,000    2,752,672 

 

6



Long-Term Municipal  Coupon  Maturity  Principal     
Investments (continued)  Rate (%)  Date  Amount ($)    Value ($) 
California (continued)           
California,           
GO (Various Purpose)  6.50  4/1/33  5,000,000    6,163,100 
California,           
GO (Various Purpose)  6.00  11/1/35  5,000,000    6,033,050 
California State Public Works           
Board, LR (The Regents of the           
University of California)           
(Various University of           
California Projects)  5.00  4/1/34  3,000,000    3,304,260 
California Statewide Communities           
Development Authority, Revenue           
(Front Porch Communities           
and Services Project)  5.13  4/1/37  4,975,000  b  5,160,169 
Golden State Tobacco           
Securitization Corporation,           
Tobacco Settlement           
Asset-Backed Bonds  4.50  6/1/27  2,000,000    1,967,360 
Los Angeles Department of Water           
and Power, Power System Revenue  5.00  7/1/34  2,885,000    3,226,873 
Los Angeles Department of Water           
and Power, Water System Revenue  5.00  7/1/43  5,000,000    5,556,500 
Sacramento City Unified School           
District, GO (Insured; Assured           
Guaranty Municipal Corp.)  0.00  7/1/24  5,220,000  d  3,289,487 
Sacramento County,           
Airport System Subordinate and           
Passenger Facility Charges           
Grant Revenue  6.00  7/1/35  4,000,000  c  4,678,920 
San Buenaventura,           
Revenue (Community Memorial           
Health System)  7.50  12/1/41  1,500,000    1,827,390 
San Diego Public Facilities           
Financing Authority, Senior           
Sewer Revenue  5.25  5/15/34  2,500,000    2,905,975 
Santa Margarita/Dana Point           
Authority, Revenue (Santa           
Margarita Water District           
Improvement Districts           
Numbers 2,3 and 4)  5.13  8/1/38  5,000,000    5,711,950 

 

The Fund 7



STATEMENT OF INVESTMENTS (Unaudited) (continued)

Long-Term Municipal  Coupon  Maturity  Principal    
Investments (continued)  Rate (%)  Date  Amount ($)   Value ($) 
California (continued)           
Tuolumne Wind Project Authority,           
Revenue (Tuolumne           
Company Project)  5.88  1/1/29  2,000,000   2,365,120 
Colorado—.4%           
Colorado Housing and Finance           
Authority, Single Family           
Program Senior and Subordinate           
Bonds (Collateralized; FHA)  6.60  8/1/32  650,000   684,860 
The Plaza Metropolitan District           
Number 1, Revenue  4.00  12/1/16  1,000,000   1,062,750 
Connecticut—1.1%           
Connecticut Resources Recovery           
Authority, Special Obligation           
Revenue (American REF-FUEL           
Company of Southeastern           
Connecticut Project)  6.45  11/15/22  4,985,000   4,993,524 
Florida—6.0%           
Citizens Property Insurance           
Corporation, Personal Lines           
Account/Commercial Lines           
Account Senior Secured Revenue  5.00  6/1/22  3,500,000   4,122,090 
Martin County Industrial           
Development Authority, IDR           
(Indiantown Cogeneration,           
L.P. Project)  4.20  12/15/25  1,750,000   1,760,045 
Mid-Bay Bridge Authority,           
Springing Lien Revenue  7.25  10/1/34  5,000,000 c  6,252,350 
Palm Beach County Health           
Facilities Authority,           
Retirement Community Revenue           
(Adult Communities Total           
Services, Inc. Retirement—           
Life Communities, Inc.           
Obligated Group)  5.50  11/15/33  6,825,000   7,380,964 
Saint Johns County Industrial           
Development Authority, Revenue           
(Presbyterian Retirement           
Communities Project)  6.00  8/1/45  3,500,000   3,878,175 
South Lake County Hospital           
District, Revenue           
(South Lake Hospital, Inc.)  6.25  4/1/39  2,500,000   2,823,900 

 

8



Long-Term Municipal  Coupon  Maturity  Principal     
Investments (continued)  Rate (%)  Date  Amount ($)    Value ($) 
Georgia—3.7%           
Atlanta,           
Airport General Revenue  5.00  1/1/26  3,500,000  c  3,917,375 
Atlanta,           
Water and Wastewater Revenue  6.00  11/1/28  4,865,000    5,892,634 
Atlanta,           
Water and Wastewater Revenue           
(Insured; Assured Guaranty           
Municipal Corp.)  5.25  11/1/34  1,000,000    1,114,050 
Augusta,           
Airport Revenue  5.45  1/1/31  2,500,000  c  2,545,375 
Savannah Economic Development           
Authority, EIR (International           
Paper Company Project)  6.20  8/1/27  2,670,000    2,691,947 
Hawaii—1.2%           
Hawaii Department of Budget and           
Finance, Special Purpose           
Revenue (Hawai’i Pacific           
Health Obligated Group)  5.63  7/1/30  2,500,000    2,763,775 
Hawaii Department of Budget           
and Finance, Special Purpose           
Revenue (Hawaiian Electric           
Company, Inc. and           
Subsidiary Projects)  6.50  7/1/39  2,000,000    2,345,260 
Idaho—.0%           
Idaho Housing and Finance           
Association, SFMR           
(Collateralized; FNMA)  6.35  1/1/30  185,000    185,379 
Illinois—2.9%           
Chicago,           
General Airport Third Lien           
Revenue (Chicago O’Hare           
International Airport)  5.63  1/1/35  3,000,000  c  3,435,270 
Illinois,           
GO  5.00  4/1/22  3,500,000    3,949,050 
Illinois Finance Authority,           
Revenue (Sherman           
Health Systems)  5.50  8/1/37  1,020,000    1,103,538 
Railsplitter Tobacco Settlement           
Authority, Tobacco           
Settlement Revenue  6.00  6/1/28  3,600,000    4,299,480 

 

The Fund 9



STATEMENT OF INVESTMENTS (Unaudited) (continued)

Long-Term Municipal  Coupon  Maturity  Principal     
Investments (continued)  Rate (%)  Date  Amount ($)    Value ($) 
Indiana—1.0%           
Indiana Finance Authority,           
Private Activity Bonds (Ohio           
River Bridges East End           
Crossing Project)  5.00  1/1/19  1,000,000    1,102,130 
Indianapolis Local Public           
Improvement Bond Bank,           
Revenue (Indianapolis           
Airport Authority Project)           
(Insured; AMBAC)  5.00  1/1/36  3,000,000  c  3,147,990 
Iowa—1.3%           
Iowa Finance Authority,           
Midwestern Disaster Area           
Revenue (Iowa Fertilizer           
Company Project)  5.25  12/1/25  3,500,000    3,614,135 
Tobacco Settlement Authority of           
Iowa, Tobacco Settlement           
Asset-Backed Bonds  5.60  6/1/34  2,000,000    1,997,560 
Kentucky—.3%           
Louisville/Jefferson County Metro           
Government, Health Facilities           
Revenue (Jewish Hospital and           
Saint Mary’s HealthCare, Inc.           
Project) (Prerefunded)  6.13  2/1/18  1,000,000  e  1,235,440 
Louisiana—1.2%           
Lakeshore Villages Master           
Community Development           
District, Special           
Assessment Revenue  5.25  7/1/17  1,987,000  f  795,833 
Louisiana Local Government           
Environmental Facilities and           
Community Development           
Authority, Revenue (Westlake           
Chemical Corporation Projects)  6.75  11/1/32  4,000,000    4,543,360 
Maine—.6%           
Maine Health and Higher           
Educational Facilities Authority,           
Revenue (MaineGeneral           
Medical Center Issue)  7.50  7/1/32  2,000,000    2,519,540 

 

10



Long-Term Municipal  Coupon  Maturity  Principal     
Investments (continued)  Rate (%)  Date  Amount ($)    Value ($) 
Massachusetts—11.5%           
Barclays Capital Municipal           
Trust Receipts (Series 15W)           
(Massachusetts Health           
and Educational Facilities           
Authority, Revenue           
(Massachusetts Institute of           
Technology Issue))  5.00  7/1/38  10,200,000  a,b  11,498,766 
JPMorgan Chase Putters/Drivers           
Trust (Series 3840)           
(Massachusetts Development           
Finance Agency, Revenue           
(Harvard University Issue))  5.25  2/1/34  10,000,000  a,b  11,751,100 
JPMorgan Chase Putters/Drivers           
Trust (Series 3898)           
(Massachusetts,           
Consolidated Loan)  5.00  4/1/19  6,400,000  a,b  7,478,336 
Massachusetts Development Finance           
Agency, Revenue (Tufts Medical           
Center Issue)  7.25  1/1/32  2,500,000    3,090,475 
Massachusetts Health and           
Educational Facilities           
Authority, Revenue (Suffolk           
University Issue)  6.25  7/1/30  5,000,000    5,769,550 
Massachusetts Housing Finance           
Agency, Housing Revenue  7.00  12/1/38  4,575,000    5,200,723 
Massachusetts Housing Finance           
Agency, SFHR  5.00  12/1/31  5,015,000    5,149,402 
Michigan—8.3%           
Detroit,           
Sewage Disposal System Senior           
Lien Revenue (Insured; Assured           
Guaranty Municipal Corp.)  7.50  7/1/33  3,500,000    4,270,630 
Detroit,           
Water Supply System Senior           
Lien Revenue  5.00  7/1/31  3,780,000    3,970,777 
Detroit,           
Water Supply System Senior           
Lien Revenue  5.00  7/1/36  3,290,000    3,403,702 

 

The Fund 11



STATEMENT OF INVESTMENTS (Unaudited) (continued)

Long-Term Municipal  Coupon  Maturity  Principal     
Investments (continued)  Rate (%)  Date  Amount ($)    Value ($) 
Michigan (continued)           
Kent Hospital Finance Authority,           
Revenue (Metropolitan           
Hospital Project)  6.00  7/1/35  2,000,000    2,114,420 
Michigan Finance Authority,           
Clean Water Revolving           
Fund Revenue  5.00  10/1/31  2,000,000    2,308,480 
Michigan Strategic Fund,           
LOR (State of Michigan Cadillac           
Place Office Building Project)  5.25  10/15/31  4,500,000    5,041,035 
Michigan Strategic Fund,           
SWDR (Genesee Power           
Station Project)  7.50  1/1/21  6,120,000    6,107,882 
Royal Oak Hospital Finance           
Authority, HR (William Beaumont           
Hospital Obligated Group)  8.00  9/1/29  5,000,000    6,283,600 
Wayne County Airport Authority,           
Airport Revenue (Detroit           
Metropolitan Wayne County           
Airport) (Insured; National           
Public Finance Guarantee Corp.)  5.00  12/1/34  2,450,000  c  2,506,791 
Nevada—1.3%           
Clark County,           
Passenger Facility Charge           
Revenue (Las Vegas-McCarran           
International Airport)  5.00  7/1/30  5,000,000  c  5,531,850 
New Jersey—3.8%           
New Jersey Economic Development           
Authority, Cigarette Tax Revenue  5.00  6/15/25  2,490,000    2,797,117 
New Jersey Economic Development           
Authority, Cigarette Tax Revenue  5.00  6/15/28  1,000,000    1,099,490 
New Jersey Economic Development           
Authority, School Facilities           
Construction Revenue  5.50  12/15/29  5,000,000    5,684,200 
New Jersey Economic Development           
Authority, Special Facility Revenue           
(Continental Airlines, Inc. Project)  5.13  9/15/23  2,500,000  c  2,682,775 
New Jersey Economic Development           
Authority, Water Facilities           
Revenue (New Jersey—American           
Water Company, Inc. Project)  5.70  10/1/39  3,000,000    3,297,990 

 

12



Long-Term Municipal  Coupon  Maturity  Principal     
Investments (continued)  Rate (%)  Date  Amount ($)    Value ($) 
New Jersey (continued)           
Tobacco Settlement Financing           
Corporation of New Jersey,           
Tobacco Settlement           
Asset-Backed Bonds  5.00  6/1/41  1,000,000    888,630 
New Mexico—1.3%           
Farmington,           
PCR (Public Service           
Company of New Mexico           
San Juan Project)  5.90  6/1/40  5,000,000    5,578,300 
New York—15.7%           
Austin Trust (Series 1107)           
(Port Authority of New York           
and New Jersey, Consolidated           
Bonds, 151st Series)  6.00  9/15/28  10,000,000  a,b,c  11,656,000 
Barclays Capital Municipal Trust           
Receipts (Series 7B) (New York           
City Transitional Finance           
Authority, Future Tax Secured           
Subordinate Revenue)  5.50  11/1/27  5,000,000  a,b  6,057,800 
Barclays Capital Municipal Trust           
Receipts (Series 11B)           
(New York City Transitional           
Finance Authority, Future Tax           
Secured Revenue)  5.00  5/1/30  4,488,203  a,b  5,153,531 
JPMorgan Chase Putters/Drivers           
Trust (Series 3857) (New York           
City Transitional Finance           
Authority, Future Tax Secured           
Subordinate Revenue)  5.25  11/1/18  5,000,000  a,b  6,034,300 
Long Island Power Authority,           
Electric System           
General Revenue  6.25  4/1/33  3,000,000    3,633,270 
Metropolitan Transportation           
Authority, Transportation           
Revenue  6.25  11/15/23  9,425,000  c  11,540,724 
Metropolitan Transportation           
Authority, Transportation           
Revenue  5.00  11/1/28  1,500,000  c  1,712,085 
New York City Educational           
Construction Fund, Revenue  6.50  4/1/28  2,785,000    3,567,446 

 

The Fund 13



STATEMENT OF INVESTMENTS (Unaudited) (continued)

Long-Term Municipal  Coupon  Maturity  Principal     
Investments (continued)  Rate (%)  Date  Amount ($)    Value ($) 
New York (continued)           
New York City Industrial           
Development Agency, Senior           
Airport Facilities Revenue           
(Transportation Infrastructure           
Properties, LLC Obligated Group)  5.00  7/1/22  2,165,000  c  2,316,550 
New York City Industrial           
Development Agency, Special           
Facility Revenue (American           
Airlines, Inc. John F. Kennedy           
International Airport Project)  8.00  8/1/31  5,000,000  c  5,772,350 
New York State Dormitory           
Authority, Revenue (Orange           
Regional Medical Center           
Obligated Group)  6.25  12/1/37  2,500,000    2,758,400 
New York State Dormitory           
Authority, Revenue (Suffolk           
County Judicial Facility)  9.50  4/15/14  605,000    634,161 
Niagara Area Development           
Corporation, Solid Waste           
Disposal Facility Revenue           
(Covanta Energy Project)  5.25  11/1/42  2,000,000    2,042,380 
Port Authority of New York and New           
Jersey, Special Project Bonds           
(JFK International Air           
Terminal LLC Project)  6.00  12/1/36  4,710,000  c  5,497,748 
North Carolina—2.5%           
Barclays Capital Municipal Trust           
Receipts (Series 31W) (North           
Carolina Medical Care           
Commission, Health Care           
Facilities Revenue (Duke           
University Health System))  5.00  6/1/42  10,000,000  a,b  10,941,700 
Ohio—5.7%           
Butler County,           
Hospital Facilities Revenue           
(UC Health)  5.50  11/1/40  3,000,000    3,271,170 
Cleveland,           
Airport System Revenue  5.00  1/1/30  2,000,000  c  2,199,680 

 

14



Long-Term Municipal  Coupon  Maturity  Principal     
Investments (continued)  Rate (%)  Date  Amount ($)    Value ($) 
Ohio (continued)           
Muskingum County,           
Hospital Facilities Revenue           
(Genesis HealthCare System           
Obligated Group Project)  5.00  2/15/20  1,250,000    1,367,300 
Ohio Air Quality Development           
Authority, Air Quality Revenue           
(Ohio Valley Electric           
Corporation Project)  5.63  10/1/19  4,200,000    4,931,976 
Port of Greater Cincinnati           
Development Authority, Tax           
Increment Development Revenue           
(Fairfax Village Red Bank           
Infrastructure Project)  5.63  2/1/36  2,530,000  b  2,157,559 
Southeastern Ohio Port Authority,           
Hospital Facilities Improvement           
Revenue (Memorial Health           
System Obligated Group Project)  6.00  12/1/42  2,000,000    2,207,060 
Toledo-Lucas County Port           
Authority, Special Assessment           
Revenue (Crocker Park Public           
Improvement Project)  5.38  12/1/35  3,000,000    3,077,370 
University of Akron,           
General Receipts Bonds           
(Insured; Assured Guaranty           
Municipal Corp.)  5.00  1/1/22  5,000,000    5,805,350 
Oregon—.4%           
Warm Springs Reservation           
Confederated Tribes,           
Hydroelectric Revenue (Pelton           
Round Butte Project)  6.38  11/1/33  1,500,000    1,713,465 
Pennsylvania—2.3%           
Commonwealth Financing Authority           
of Pennsylvania, Revenue  5.00  6/1/23  1,000,000    1,191,650 
JPMorgan Chase Putters/Drivers           
Trust ) (Series 3916)           
(Geisinger Authority, Health           
System Revenue (Geisinger           
Health System))  5.13  6/1/35  3,000,000  a,b  3,312,270 

 

The Fund 15



STATEMENT OF INVESTMENTS (Unaudited) (continued)

Long-Term Municipal  Coupon  Maturity  Principal     
Investments (continued)  Rate (%)  Date  Amount ($)    Value ($) 
Pennsylvania (continued)           
Philadelphia,           
GO  6.50  8/1/41  4,700,000    5,568,607 
Rhode Island—1.3%           
Rhode Island Health and           
Educational Building           
Corporation, Hospital           
Financing Revenue (Lifespan           
Obligated Group Issue)           
(Insured; Assured Guaranty           
Municipal Corp.)  7.00  5/15/39  5,000,000    5,851,700 
Tennessee—1.5%           
Metropolitan Government of           
Nashville and Davidson County           
Health and Educational           
Facilities Board, Revenue           
(The Vanderbilt University)  5.50  10/1/29  2,500,000    2,945,500 
Metropolitan Government of           
Nashville and Davidson County           
Health and Educational           
Facilities Board, Revenue           
(The Vanderbilt University)  5.50  10/1/34  3,000,000    3,481,140 
Texas—19.4%           
Barclays Capital Municipal Trust           
Receipts (Series 28W) (Leander           
Independent School District,           
Unlimited Tax School Building           
Bonds (Permanent School Fund           
Guarantee Program))  5.00  8/15/40  9,997,299  a,b  11,082,499 
Barclays Capital Municipal Trust           
Receipts (Series 39W) (Texas           
A&M University System           
Board of Regents, Financing           
System Revenue)  5.00  5/15/39  13,160,000  a,b  14,509,953 
Dallas and Fort Worth,           
Joint Improvement Revenue           
(Dallas/Fort Worth           
International Airport)  5.00  11/1/42  5,000,000  c  5,157,450 
Dallas-Fort Worth International           
Airport Facility Improvement           
Corporation, Revenue           
(Learjet Inc. Project)  6.15  1/1/16  3,000,000  c  3,005,340 

 

16



Long-Term Municipal  Coupon  Maturity  Principal     
Investments (continued)  Rate (%)  Date  Amount ($)    Value ($) 
Texas (continued)           
Gulf Coast Industrial Development           
Authority, SWDR (CITGO           
Petroleum Corporation Project)  4.88  5/1/25  1,000,000    1,027,340 
Harris County Health Facilities           
Development Corporation, HR           
(Memorial Hermann Healthcare           
System) (Prerefunded)  7.25  12/1/18  7,290,000  e  9,678,204 
Houston,           
Combined Utility System First           
Lien Revenue (Insured; Assured           
Guaranty Municipal Corp.)  6.00  11/15/36  5,000,000    6,034,900 
Love Field Airport           
Modernization Corporation,           
Special Facilities Revenue           
(Southwest Airlines           
Company—Love Field           
Modernization Program Project)  5.00  11/1/28  1,000,000  c  1,074,540 
Lower Colorado River Authority,           
Transmission Contract Revenue           
(Lower Colorado River           
Authority Transmission           
Services Corporation Project)  5.00  5/15/31  3,250,000    3,669,900 
Matagorda County Navigation           
District Number One, Revenue           
(Houston Lighting and           
Power Company Project)           
(Insured; AMBAC)  5.13  11/1/28  4,295,000    5,053,454 
North Texas Tollway Authority,           
First Tier System Revenue           
(Insured; Assured Guaranty           
Municipal Corp.)  5.75  1/1/40  14,705,000  c  16,799,727 
North Texas Tollway Authority,           
Second Tier System Revenue  5.75  1/1/38  6,650,000  c  7,308,483 
Texas Department of Housing           
and Community Affairs,           
Home Mortgage Revenue           
(Collateralized: FHLMC,           
FNMA and GNMA)  13.41  7/2/24  500,000  g  532,300 
Vermont—.9%           
Burlington,           
Airport Revenue  3.50  7/1/18  4,000,000  c  3,985,200 

 

The Fund 17



STATEMENT OF INVESTMENTS (Unaudited) (continued)

Long-Term Municipal  Coupon  Maturity  Principal     
Investments (continued)  Rate (%)  Date  Amount ($)    Value ($) 
Virginia—6.7%           
Henrico County Industrial           
Development Authority, Revenue           
(Bon Secours Health System,           
Inc.) (Insured; Assured           
Guaranty Municipal Corp.)  11.22  8/23/27  7,050,000  g  9,245,934 
Virginia Commonwealth           
Transportation Board,           
Transportation Capital           
Projects Revenue  5.00  5/15/21  5,000,000  c  6,124,250 
Virginia Commonwealth           
Transportation Board,           
Transportation Capital           
Projects Revenue  5.00  5/15/22  3,840,000  c  4,727,462 
Virginia Housing Development           
Authority, Commonwealth           
Mortgage Revenue  6.25  7/1/31  4,845,000    5,476,013 
Washington County Industrial           
Development Authority, HR           
(Mountain States           
Health Alliance)  7.75  7/1/38  3,000,000    3,647,370 
Washington—5.3%           
Barclays Capital Municipal           
Trust Receipts           
(Series 27B) (King           
County, Sewer Revenue)  5.00  1/1/29  8,577,246  a,b  9,798,437 
Seattle,           
Water System Revenue  5.00  9/1/24  5,000,000    6,040,900 
Washington Health Care Facilities           
Authority, Mortgage Revenue           
(Highline Medical Center)           
(Collateralized; FHA)  6.25  8/1/36  5,975,000    7,075,416 
West Virginia—1.9%           
The County Commission of           
Harrison County, SWDR           
(Allegheny Energy Supply           
Company, LLC Harrison           
Station Project)  5.50  10/15/37  7,920,000    8,339,839 

 

18



Long-Term Municipal  Coupon  Maturity  Principal    
Investments (continued)  Rate (%)  Date  Amount ($)   Value ($) 
Wisconsin—1.3%           
Public Finance Agency, Senior Airport           
Facilities Revenue (Transportation           
Infrastructure Properties, LLC           
Obligated Group)  5.00  7/1/42  1,500,000 c  1,555,365 
Wisconsin Health and Educational           
Facilities Authority, Revenue           
(Aurora Health Care, Inc.)  6.40  4/15/33  4,000,000   4,009,320 
U.S. Related—6.9%           
Puerto Rico Aqueduct and Sewer           
Authority, Senior Lien Revenue  5.13  7/1/37  3,660,000   3,480,184 
Puerto Rico Commonwealth,           
Public Improvement GO  5.50  7/1/32  1,500,000   1,516,140 
Puerto Rico Commonwealth,           
Public Improvement GO  6.00  7/1/39  1,610,000   1,664,064 
Puerto Rico Commonwealth,           
Public Improvement GO  6.50  7/1/40  2,390,000   2,593,604 
Puerto Rico Electric Power           
Authority, Power Revenue  5.25  7/1/24  1,895,000   1,942,186 
Puerto Rico Electric Power           
Authority, Power Revenue  5.00  7/1/42  1,900,000   1,819,934 
Puerto Rico Electric Power           
Authority, Power Revenue           
(Insured; National Public           
Finance Guarantee Corp.)  5.50  7/1/17  1,755,000   1,900,998 
Puerto Rico Sales Tax Financing           
Corporation, Sales Tax Revenue           
(First Subordinate Series)  5.38  8/1/39  2,500,000   2,626,825 
Puerto Rico Sales Tax Financing           
Corporation, Sales Tax Revenue           
(First Subordinate Series)  6.00  8/1/42  10,000,000   11,039,700 
Virgin Islands Public Finance Authority,           
Revenue (Virgin Islands Matching           
Fund Loan Notes) (Senior           
Lien/Capital Projects)  5.00  10/1/39  1,250,000   1,302,563 
Total Long-Term Municipal Investments         
(cost $559,138,602)          622,698,717 

 

The Fund 19



STATEMENT OF INVESTMENTS (Unaudited) (continued)

Short-Term Municipal  Coupon  Maturity  Principal        
Investments—.8%  Rate (%)  Date  Amount ($)     Value ($)  
New York—.0%               
New York City,               
GO Notes (LOC; JPMorgan               
Chase Bank)  0.09  6/3/13  200,000   h  200,000  
North Carolina—.8%               
Charlotte-Mecklenburg Hospital               
Authority, Health Care Revenue               
(Carolinas HealthCare System)               
(LOC; Wells Fargo Bank)  0.06  6/3/13  3,300,000   h  3,300,000  
Total Short-Term Municipal Investments             
(cost $3,500,000)            3,500,000  
 
Total Investments (cost $562,638,602)      143.6 %    626,198,717  
Liabilities, Less Cash and Receivables      (11.6 %)    (50,718,847 ) 
Preferred Stock, at redemption value      (32.0 %)    (139,500,000 ) 
Net Assets Applicable to Common Shareholders    100.0 %    435,979,870  

 

a Collateral for floating rate borrowings. 
b Securities exempt from registration pursuant to Rule 144A under the Securities Act of 1933.These securities may be 
resold in transactions exempt from registration, normally to qualified institutional buyers.At May 31, 2013, these 
securities were valued at $137,251,584 or 31.5% of net assets applicable to Common Shareholders. 
c At May 31, 2013, the fund had $131,005,213 or 30.0% of net assets applicable to Common Shareholders invested 
in securities whose payment of principal and interest is dependent upon revenues generated from transportation. 
d Security issued with a zero coupon. Income is recognized through the accretion of discount. 
e These securities are prerefunded; the date shown represents the prerefunded date. Bonds which are prerefunded are 
collateralized by U.S. Government securities which are held in escrow and are used to pay principal and interest on 
the municipal issue and to retire the bonds in full at the earliest refunding date. 
f Non-income producing—security in default. 
g Inverse floater security—the interest rate is subject to change periodically. Rate shown is the interest rate in effect at 
May 31, 2013. 
h Variable rate demand note—rate shown is the interest rate in effect at May 31, 2013. Maturity date represents the 
next demand date, or the ultimate maturity date if earlier. 

 

20



Summary of Abbreviations     
 
ABAG  Association of Bay Area  ACA  American Capital Access 
  Governments     
AGC  ACE Guaranty Corporation  AGIC  Asset Guaranty Insurance Company 
AMBAC  American Municipal Bond  ARRN  Adjustable Rate 
  Assurance Corporation    Receipt Notes 
BAN  Bond Anticipation Notes  BPA  Bond Purchase Agreement 
CIFG  CDC Ixis Financial Guaranty  COP  Certificate of Participation 
CP  Commercial Paper  DRIVERS  Derivative Inverse 
      Tax-Exempt Receipts 
EDR  Economic Development  EIR  Environmental Improvement 
  Revenue    Revenue 
FGIC  Financial Guaranty  FHA  Federal Housing 
  Insurance Company    Administration 
FHLB  Federal Home  FHLMC  Federal Home Loan Mortgage 
  Loan Bank    Corporation 
FNMA  Federal National  GAN  Grant Anticipation Notes 
  Mortgage Association     
GIC  Guaranteed Investment  GNMA  Government National Mortgage 
  Contract    Association 
GO  General Obligation  HR  Hospital Revenue 
IDB  Industrial Development Board  IDC  Industrial Development Corporation 
IDR  Industrial Development  LIFERS  Long Inverse Floating 
  Revenue    Exempt Receipts 
LOC  Letter of Credit  LOR  Limited Obligation Revenue 
LR  Lease Revenue  MERLOTS  Municipal Exempt Receipts 
      Liquidity Option Tender 
MFHR  Multi-Family Housing Revenue  MFMR  Multi-Family Mortgage Revenue 
PCR  Pollution Control Revenue  PILOT  Payment in Lieu of Taxes 
P-FLOATS  Puttable Floating Option  PUTTERS  Puttable Tax-Exempt Receipts 
  Tax-Exempt Receipts     
RAC  Revenue Anticipation Certificates  RAN  Revenue Anticipation Notes 
RAW  Revenue Anticipation Warrants  ROCS  Reset Options Certificates 
RRR  Resources Recovery Revenue  SAAN  State Aid Anticipation Notes 
SBPA  Standby Bond Purchase Agreement  SFHR  Single Family Housing Revenue 
SFMR  Single Family Mortgage Revenue  SONYMA  State of New York Mortgage Agency 
SPEARS  Short Puttable Exempt  SWDR  Solid Waste Disposal Revenue 
  Adjustable Receipts     
TAN  Tax Anticipation Notes  TAW  Tax Anticipation Warrants 
TRAN  Tax and Revenue Anticipation Notes  XLCA  XL Capital Assurance 

 

The Fund 21



STATEMENT OF INVESTMENTS (Unaudited) (continued)

Summary of Combined Ratings (Unaudited)   
 
Fitch  or  Moody’s  or  Standard & Poor’s  Value (%) 
AAA    Aaa    AAA  6.8 
AA    Aa    AA  28.1 
A    A    A  33.5 
BBB    Baa    BBB  20.0 
BB    Ba    BB  5.5 
B    B    B  2.3 
F1    MIG1/P1    SP1/A1  .6 
Not Ratedi    Not Ratedi    Not Ratedi  3.2 
          100.0 

 

† Based on total investments. 
i 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. 

 

22



STATEMENT OF ASSETS AND LIABILITIES

May 31, 2013 (Unaudited)

  Cost  Value  
Assets ($):       
Investments in securities—See Statement of Investments  562,638,602  626,198,717  
Interest receivable    8,999,913  
Prepaid expenses    32,226  
    635,230,856  
Liabilities ($):       
Due to The Dreyfus Corporation and affiliates—Note 2(a)    325,954  
Cash overdraft due to Custodian    2,055,665  
Payable for floating rate notes issued—Note 3    57,128,615  
Interest and expense payable related       
to floating rate notes issued—Note 3    100,773  
Commissions payable—Note 1    14,240  
Dividends payable to Preferred Shareholders    3,134  
Accrued expenses    122,605  
    59,750,986  
Auction Preferred Stock, Series A, B and C, par value       
$.001 per share (5,580 shares issued and outstanding       
at $25,000 per share liquidation value)—Note 1    139,500,000  
Net Assets applicable to Common Shareholders ($)    435,979,870  
Composition of Net Assets ($):       
Common Stock, par value, $.001 per share       
(49,082,366 shares issued and outstanding)    49,082  
Paid-in capital    418,521,230  
Accumulated undistributed investment income—net    5,867,028  
Accumulated net realized gain (loss) on investments    (52,017,585 ) 
Accumulated net unrealized appreciation       
(depreciation) on investments    63,560,115  
Net Assets applicable to Common Shareholders ($)    435,979,870  
Shares Outstanding       
(110 million shares of $.001 par value Common Stock authorized)    49,082,366  
Net Asset Value, per share of Common Stock ($)    8.88  
 
See notes to financial statements.       

 

The Fund 23



STATEMENT OF OPERATIONS

Six Months Ended May 31, 2013 (Unaudited)

Investment Income ($):     
Interest Income  15,183,473  
Expenses:     
Investment advisory fee—Note 2(a)  1,455,065  
Administration fee—Note 2(a)  727,532  
Interest and expense related to     
    floating rate notes issued—Note 3  185,550  
Commission fees—Note 1  116,514  
Directors’ fees and expenses—Note 2(c)  41,122  
Professional fees  36,854  
Shareholders’ reports  32,414  
Registration fees  25,779  
Shareholder servicing costs  18,900  
Custodian fees—Note 2(b)  706  
Miscellaneous  29,012  
Total Expenses  2,669,448  
Less—reduction in expenses due to undertaking—Note 2(a)  (291,066 ) 
Net Expenses  2,378,382  
Investment Income—Net  12,805,091  
Realized and Unrealized Gain (Loss) on Investments—Note 3 ($):     
Net realized gain (loss) on investments  2,105,305  
Net unrealized appreciation (depreciation) on investments  (21,388,514 ) 
Net Realized and Unrealized Gain (Loss) on Investments  (19,283,209 ) 
Dividends to Preferred Shareholders  (151,750 ) 
Net (Decrease) in Net Assets Applicable to     
    Common Shareholders Resulting from Operations  (6,629,868 ) 
 
See notes to financial statements.     

 

24



STATEMENT OF CASH FLOWS

May 31, 2013 (Unaudited)

Cash Flows from Operating Activities ($):         
Interest received  16,063,479      
Operating expenses paid  (2,227,675 )     
Dividends paid to Preferred Shareholders  (152,098 )     
Purchases of long-term portfolio securities  (30,083,410 )     
Net purchases of short-term portfolio securities  (200,000 )     
Proceeds from sales of long-term portfolio securities  30,120,728      
      13,521,024  
Cash Flows from Financing Activities ($):         
Dividends paid to Common Shareholders  (13,096,195 )     
Interest and expense related to floating rate notes issued  (205,742 )  (13,301,937 ) 
Increase in cash      219,087  
Cash overdraft at beginning of period      (2,274,752 ) 
Cash overdraft at end of period      (2,055,665 ) 
Reconciliation of Net Increase in Net Assets Applicable to         
Common Shareholders Resulting from Operations to         
Net Cash Provided by Operating Activities ($):         
Net Decrease in Net Assets Applicable to Common         
Shareholders Resulting From Operations      (6,629,868 ) 
Adjustments to reconcile net increase in net assets applicable         
to Common Shareholders resulting from operations to         
net cash provided by operating activities ($):         
Decrease in investments in securities, at cost      1,732,012  
Decrease in payable for investment securities purchased      (4,000,000 ) 
Decrease in interest receivable      175,434  
Decrease in commissions payable and accrued expenses      (31,278 ) 
Increase in prepaid expenses      (19,308 ) 
Increase in Due to The Dreyfus Corporation and affiliates      15,743  
Decrease in dividends payable to Preferred Shareholders      (347 ) 
Interest and expense related to floating rate notes issued      185,550  
Net unrealized depreciation on investments      21,388,514  
Net amortization of premiums on investments      704,572  
Net Cash Provided by Operating Activities      13,521,024  
Supplemental disclosure cash flow information ($):         
Non-cash financing activities:         
Reinvestment of dividends      878,285  
 
See notes to financial statements.         

 

The Fund 25



STATEMENT OF CHANGES IN NET ASSETS

  Six Months Ended      
  May 31, 2013   Year Ended  
  (Unaudited)   November 30, 2012  
Operations ($):         
Investment income—net  12,805,091   26,658,680  
Net realized gain (loss) on investments  2,105,305   2,571,654  
Net unrealized appreciation         
(depreciation) on investments  (21,388,514 )  57,696,686  
Dividends to Preferred Shareholders  (151,750 )  (358,587 ) 
Net Increase (Decrease) in Net Assets         
Applicable to Common Shareholders         
Resulting from Operations  (6,629,868 )  86,568,433  
Dividends to Common Shareholders from ($):         
Investment income—net  (13,974,480 )  (27,856,772 ) 
Capital Stock Transactions ($):         
Dividends reinvested  878,285   2,038,862  
Total Increase (Decrease) in Net Assets         
Applicable to Common Shareholders  (19,726,063 )  60,750,523  
Net Assets Applicable to         
Common Shareholders($):         
Beginning of Period  455,705,933   394,955,410  
End of Period  435,979,870   455,705,933  
Undistributed investment income—net  5,867,028   7,188,167  
Capital Share Transactions (Shares):         
Increase in Common Shares Outstanding         
as a Result of Dividends Reinvested  96,975   233,568  
 
See notes to financial statements.         

 

26



FINANCIAL HIGHLIGHTS

The following table describes the performance for the fiscal periods indicated.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements and, with respect to common stock, market price data for the fund’s common shares.

Six Months Ended                      
  May 31, 2013       Year Ended November 30,      
  (Unaudited)   2012   2011   2010   2009   2008  
Per Share Data ($):                         
Net asset value,                         
beginning of period  9.30   8.10   7.87   7.93   6.76   8.60  
Investment Operations:                         
Investment income—neta  .26   .55   .57   .59   .64   .63  
Net realized and unrealized                         
gain (loss) on investments  (.38 )  1.23   .24   (.10 )  1.02   (1.86 ) 
Dividends to Preferred                         
Shareholders from                         
investment income—net  (.01 )  (.01 )  (.01 )  (.01 )  (.03 )  (.14 ) 
Total from                         
Investment Operations  (.13 )  1.77   .80   .48   1.63   (1.37 ) 
Distributions to                         
Common Shareholders:                         
Dividends from                         
investment income—net  (.29 )  (.57 )  (.57 )  (.54 )  (.46 )  (.47 ) 
Net asset value, end of period  8.88   9.30   8.10   7.87   7.93   6.76  
Market value, end of period  8.56   9.79   8.39   7.94   7.58   5.53  
Total Return (%)b  (9.75 )c  24.46   13.67   11.95   46.74   (24.12 ) 

 

The Fund 27



FINANCIAL HIGHLIGHTS (continued)

Six Months Ended            
May 31, 2013     Year Ended November 30,   
(Unaudited)   2012  2011  2010  2009  2008 
Ratios/Supplemental Data (%):                 
Ratio of total expenses                 
to average net assets                 
applicable to Common Stockd    1.21 e  1.23  1.30  1.30  1.37  1.44 
Ratio of net expenses                 
to average net assets                 
applicable to Common Stockd    1.07 e  1.07  1.16  1.16  1.21  1.30 
Ratio of interest and expense                 
related to floating rate notes                 
issued to average net assets                 
applicable to Common Stockd    .08 e  .10  .10  .07  .01  .12 
Ratio of net investment income                 
to average net assets applicable                 
to Common Stockd    5.79 e  6.22  7.36  7.30  8.65  7.89 
Ratio of total expenses                 
to total average net assets    .92 e  .93  .95  .91  .90  .98 
Ratio of net expenses                 
to total average net assets    .82 e  .81  .85  .81  .80  .88 
Ratio of interest and expense                 
related to floating rate notes                 
issued to total average net assets  .05 e  .07  .07  .05  .01  .08 
Ratio of net investment income                 
to total average net assets    3.55 e  4.69  5.36  5.11  5.68  5.34 
Portfolio Turnover Rate    4.54 c  15.99  20.50  25.94  31.59  53.01 
Asset coverage of Preferred Stock,               
end of period    413   427  383  356  307  276 
Net Assets, net of Preferred Stock,                 
end of period ($ x 1,000)  435,980   455,706  394,955  382,293  384,457  327,879 
Preferred Stock outstanding,                 
end of period ($ x 1,000)  139,500   139,500  139,500  149,475  186,000  186,000 

 

a  Based on average common shares outstanding at each month end. 
b  Calculated based on market value. 
c  Not annualized. 
d  Does not reflect the effect of dividends to Preferred Shareholders. 
e  Annualized. 

 

See notes to financial statements. 

 

28



NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1—Significant Accounting Policies:

Dreyfus Strategic Municipal Bond Fund, Inc. (the “fund”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified closed-end management investment company. The fund’s investment objective is to maximize current income exempt from federal income tax to the extent consistent with the preservation of capital. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. The fund’s Common Stock trades on the New York Stock Exchange Amex (the “NYSE”) under the ticker symbol DSM.

The fund has outstanding 1,860 shares of Series A, Series B and Series C, for a total of 5,580 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 or by reference to a market rate. Deutsche Bank Trust Company America, as Auction Agent, receives a fee from the fund for its services in connection with such auctions. The fund also compensates broker-dealers generally at an annual rate of .15%-.25% of the purchase price of the shares of APS.

The fund is subject to certain restrictions relating to the APS. Failure to comply with these restrictions could preclude the fund from declaring any distributions to Common Shareholders or repurchasing common shares and/or could trigger the mandatory redemption of APS at liquidation value.Thus, redemptions of APS may be deemed to be outside of the control of the fund.

The holders of 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 A. Melvin and John E. Zuccotti as directors to be elected by the holders of APS.

The Fund 29



NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

On February 11, 2013, the fund’s Board of Directors (the “Board”) authorized the fund to redeem up to an additional 25% of the original amount of the fund’s outstanding APS, subject to market, regulatory and other conditions and factors, over a period of up to approximately twelve months.

The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions.Actual results could differ from those estimates.

The fund enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.

(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value.This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.

30



Various inputs are used in determining the value of the fund’s investments relating to fair value measurements.These inputs are summarized in the three broad levels listed below:

Level 1—unadjusted quoted prices in active markets for identical investments.

Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).

Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:

Investments in securities are valued each business day by an independent pricing service (the “Service”) approved by the Board. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of the following: yields or prices of municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. All of the preceding securities are categorized within Level 2 of the fair value hierarchy.

The Service’s procedures are reviewed by Dreyfus under the general supervision of the Board.

The Fund 31



NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers.These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.

For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are categorized within Level 3 of the fair value hierarchy.

The following is a summary of the inputs used as of May 31, 2013 in valuing the fund's investments:

    Level 2—Other   Level 3—     
  Level 1—  Significant   Significant     
  Unadjusted  Observable   Unobservable     
  Quoted Prices  Inputs   Inputs  Total  
Assets ($)             
Investments in Securities:           
Municipal Bonds    626,198,717     626,198,717  
Liabilities ($)             
Floating Rate Notes    (57,128,615 )    (57,128,615 ) 

 

  Certain of the fund's liabilities are held at carrying amount, which approximates fair value for 
  financial reporting purposes. 

 

At May 31, 2013, there were no transfers between Level 1 and Level 2 of the fair value hierarchy.

(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis.

32



Interest income, adjusted for accretion of discount and amortization of premium on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date.

(c) Dividends 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 gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.

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 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, BNY Mellon Investment Servicing (US) Inc. 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.

The Fund 33



NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

On May 30, 2013, the Board declared a cash dividend of $0.0475 per share from investment income net, payable on June 28, 2013 to Common Shareholders of record as of the close of business on June 13, 2013.

(d) Dividends to Shareholders of APS: Dividends, which are cumulative, are generally reset every 7 days for each Series of APS pursuant to a process specified in related fund charter documents. Dividend rates as of May 31, 2013, for each Series of APS were as follows: Series A-0.246%, Series B-0.246% and Series C-0.246%.These rates reflect the “maximum rates” under the governing instruments as a result of “failed auctions” in which sufficient clearing bids are not received.The average dividend rates for the period ended May 31, 2013 for each Series of APS were as follows: Series A-0.22%, Series B-0.22% and Series C-0.22%.

(e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax-exempt dividends, by complying with the applicable provisions of the Code and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.

As of and during the period ended May 31, 2013, the fund did not have any liabilities for any uncertain tax positions.The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period, the fund did not incur any interest or penalties.

Each tax year in the three-year period ended November 30, 2012 remains subject to examination by the Internal Revenue Service and state taxing authorities.

Under the Regulated Investment Company Modernization Act of 2010 (the “2010 Act”), the fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 (“post-enactment losses”) for an unlimited period. Furthermore,

34



post-enactment capital loss carryovers retain their character as either short-term or long-term capital losses rather than short-term as they were under previous statute. The 2010 Act requires post-enactment losses to be utilized before the utilization of losses incurred in taxable years prior to the effective date of the 2010 Act (“pre-enactment losses”).As a result of this ordering rule, pre-enactment losses may be more likely to expire unused.

The fund has an unused capital loss carryover of $54,159,939 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to November 30, 2012. If not applied, $1,427,978 of the carryover expires in fiscal year 2015, $5,522,685 expires in fiscal year 2016, $20,261,695 expires in fiscal year 2017, $5,075,623 expires in fiscal year 2018 and $21,871,958 expires in fiscal year 2019.

The tax character of distributions paid to shareholders during the fiscal year ended November 30, 2012 was as follows: tax-exempt income $27,885,959 and ordinary income $329,400.The tax character of current year distributions will be determined at the end of the current fiscal year.

NOTE 2—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 the value of the fund’s average weekly net assets (including net assets representing APS outstanding).The fund also has an Administration Agreement with Dreyfus, a Custody Agreement with The Bank of New York Mellon (the “Custodian”), a subsidiary of BNY Mellon and an affiliate of Dreyfus, and a Transfer Agency and Registrar Agreement with BNY Mellon Investment Servicing (US) Inc., a subsidiary of BNY Mellon and an affiliate of Dreyfus.The fund

The Fund 35



NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)

pays in the aggregate for administration, custody and transfer agency services a monthly fee based on an annual rate of .25% of the value of the fund’s average weekly net assets (including net assets representing APS outstanding). All out of pocket transfer agency and custody expenses, including custody transaction expenses, are paid separately by the fund.

Dreyfus has agreed, from December 1, 2012 through November 30, 2013, to waive receipt of a portion of the fund’s investment advisory fee, in the amount of .10% of the value of the fund’s average weekly net assets (including net assets representing APS outstanding). The reduction in expenses, pursuant to the undertaking, amounted to $291,066 during the period ended May 31, 2013.

(b) The fund compensates the Custodian under a custody agreement for providing custodial services for the fund. During the period ended May 31, 2013, the fund was charged $706 for out-of-pocket and custody transaction expenses, pursuant to the custody agreement.

During the period ended May 31, 2013, the fund was charged $4,558 for services performed by the Chief Compliance Officer and his staff.

The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees $321,610, administration fees $49,663, Custodian out of pocket fees $363 and Chief Compliance Officer fees $3,830, which are offset against an expense reimbursement currently in effect in the amount of $49,512.

(c) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.

NOTE 3—Securities Transactions:

The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended May 31, 2013, amounted to $26,083,410 and $30,120,726, respectively.

36



Inverse Floater Securities: The fund participates in secondary inverse floater structures in which fixed-rate, tax-exempt municipal bonds are transferred to a trust.The trust subsequently issues two or more variable rate securities that are collateralized by the cash flows of the fixed-rate, tax-exempt municipal bonds. One or more of these variable rate securities pays interest based on a short-term floating rate set by a remarketing agent at predetermined intervals.A residual interest tax-exempt security is also created by the trust, which is transferred to the fund, and is paid interest based on the remaining cash flow of the trust, after payment of interest on the other securities and various expenses of the trust.

The fund accounts for the transfer of bonds to the trust as secured borrowings, with the securities transferred remaining in the fund’s investments, and the related floating rate certificate securities reflected as fund liabilities in the Statement of Assets and Liabilities.

The average amount of borrowings outstanding under the inverse floater structure during the period ended May 31, 2013, was approximately $57,128,600, with a related weighted average annualized interest rate of .65%.

At May 31, 2013, accumulated net unrealized appreciation on investments was $63,560,115, consisting of $65,781,203 gross unrealized appreciation and $2,221,088 gross unrealized depreciation.

At May 31, 2013, 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 37



NOTES

38



The Fund 39



NOTES

40



OFFICERS AND DIRECTORS
Dreyfus Strategic Municipal Bond Fund, Inc.

200 Park Avenue
New York, NY 10166

Directors  Officers (continued) 
Joseph S. DiMartino, Chairman  Chief Compliance Officer 
William Hodding Carter, III  Joseph W. Connolly 
Gordon J. Davis   
  Portfolio Managers 
Joni Evans   
Ehud Houminer  Dan Barton 
Richard C. Leone  Steven Harvey 
Hans C. Mautner  Investment Adviser 
Robin A. Melvin ††  and Administrator 
Burton N.Wallack   
John E. Zuccotti ††  The Dreyfus Corporation 
 
†† Auction Preferred Stock Directors  Custodian 
  The Bank of New York Mellon 
Officers   
President  Counsel 
Bradley J. Skapyak  Stroock & Stroock & Lavan LLP 
Chief Legal Officers   
  Transfer Agent, 
John Pak   
  Dividend-Paying Agent, 
Vice President and Secretary   
  Registrar and Disbursing Agent 
Janette E. Farragher   
Vice Presidents and Assistant Secretaries  BNY Mellon Investment Servicing 
Keisha Astwood  (US) Inc. (Common Stock) 
James Bitetto  Deutsche Bank Trust Company America 
Joni Lacks Charatan  (Auction Preferred Stock) 
Joseph M. Chioffi   
  Auction Agent 
John B. Hammalian   
Robert R. Mullery  Deutsche Bank Trust Company America 
Jeff Prusnofsky  (Auction Preferred Stock) 
 
Treasurer  Stock Exchange Listing 
James Windels   
  NYSE Symbol: DSM 
Assistant Treasurers   
Richard Cassaro  Initial SEC Effective Date 
Gavin C. Reilly   
  11/22/89 
Robert Robol   
Robert Salviolo   
Robert Svagna   

 

The NetAssetValue 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.

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 41




 

Item 2.      Code of Ethics.

                  Not applicable.

Item 3.      Audit Committee Financial Expert.

                  Not applicable.

Item 4.      Principal Accountant Fees and Services.

                  Not applicable.

Item 5.      Audit Committee of Listed Registrants.

                  Not applicable.

Item 6.      Investments.

(a)              Not applicable.

Item 7.      Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

                  Not applicable.

Item 8.      Portfolio Managers of Closed-End Management Investment Companies.

Not applicable.

Item 9.      Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers.

                  Not applicable.  [CLOSED END FUNDS ONLY]

Item 10.    Submission of Matters to a Vote of Security Holders.

                  There have been no material changes to the procedures applicable to Item 10.

Item 11.    Controls and Procedures.

(a)        The Registrant's principal executive and principal financial officers have concluded, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant's disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

(b)        There were no changes to the Registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.

 


 

 

Item 12.    Exhibits.

(a)(1)   Not applicable.

(a)(2)   Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940.

(a)(3)   Not applicable.

(b)        Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940.

 


 

 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dreyfus Strategic Municipal Bond Fund, Inc.

By: /s/ Bradley J. Skapyak

Bradley J. Skapyak,

President

 

Date:

July 24, 2013

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

By: /s/ Bradley J. Skapyak

Bradley J. Skapyak,

President

 

Date:

July 24, 2013

 

By: /s/ James Windels

James Windels,

Treasurer

 

Date:

July 24, 2013

 

 

 


 

 

EXHIBIT INDEX

(a)(2)   Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940.  (EX-99.CERT)

(b)        Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940.  (EX-99.906CERT)