UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
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Investment Company Act file number |
811-22784 | |||||
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Dreyfus Municipal Bond Infrastructure Fund, Inc. |
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(Exact name of Registrant as specified in charter) |
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c/o The Dreyfus Corporation 200 Park Avenue New York, New York 10166 |
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(Address of principal executive offices) (Zip code) |
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Bennett A. MacDougall, Esq. 200 Park Avenue New York, New York 10166 |
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(Name and address of agent for service) |
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Registrant's telephone number, including area code: |
(212) 922-6400 | |||||
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Date of fiscal year end:
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02/28(9) |
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Date of reporting period: |
08/31/17 |
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FORM N-CSR
Item 1. Reports to Stockholders.
Dreyfus Municipal Bond Infrastructure Fund, Inc.
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SEMIANNUAL REPORT |
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Dreyfus Municipal Bond Infrastructure 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: • 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. |
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The views expressed in this report reflect those of the portfolio manager(s) 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. |
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Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
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the Fund’s Management Agreement |
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FOR MORE INFORMATION
Back Cover
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The Fund |
A LETTER FROM THE CEO OF DREYFUS
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Municipal Bond Infrastructure Fund, Inc., covering the six-month period from March 1, 2017 through August 31, 2017. 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.
Financial markets generally rallied over the past six months as corporate earnings grew and global economic conditions improved. While the rally was relatively broad-based, U.S. stock market leadership shifted toward larger, growth-oriented companies and away from smaller, economically sensitive companies that had been expected to benefit from a new presidential administration’s stimulative policy proposals. International stocks fared particularly well amid more positive economic data from Europe and the emerging markets. In the bond market, despite short-term interest-rate hikes from the Federal Reserve Board, yields of longer-term U.S. government securities moderated somewhat and prices rose when it became clearer that major tax and fiscal reforms would take time and political capital to enact.
The markets’ strong performance has been supported by solid underlying fundamentals, most notably rising corporate profits, a robust labor market, and muted inflation. While we currently expect these favorable conditions to persist over the second half of the year, we remain watchful for economic and political risks that could derail the rallies. As always, we encourage you to discuss the risks and opportunities of today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Mark D. Santero
Chief Executive Officer
The Dreyfus Corporation
September 15, 2017
2
DISCUSSION OF FUND PERFORMANCE
For the period from March 1, 2017 through August 31, 2017, as provided by Daniel Rabasco and Jeffrey Burger, Portfolio Managers
Market and Fund Performance Overview
For the six-month period ended August 31, 2017, Dreyfus Municipal Bond Infrastructure Fund achieved a total return of 6.76% on a net-asset-value basis.1 Over the same period, the fund provided aggregate income dividends of $0.318 per share, which reflects a distribution rate of 4.79%.2
Municipal bonds produced positive returns over the reporting period as long-term interest rates moderated and supply-and-demand dynamics turned more positive. The fund benefited in this environment from its emphasis on income-oriented securities, including those with longer maturities and lower credit ratings.
The Fund’s Investment Approach
The fund seeks to provide as high a level of current income exempt from regular federal income tax as is consistent with the preservation of capital. The fund’s portfolio is composed principally of investments that finance the development, support, or improvement of America’s infrastructure.
Under normal circumstances, the fund pursues its investment objective by investing at least 80% of its Managed Assets3 in municipal bonds issued to finance infrastructure sectors and projects in the United States. Also, under normal circumstances, the fund will invest at least 50% of its Managed Assets in municipal bonds that, at the time of investment, are rated investment grade, meaning that up to 50% of Managed Assets can be invested in below-investment-grade municipal bonds. Projects in which the fund may invest include (but are not limited to) those in the transportation, energy and utilities, social infrastructure, and water and environmental sectors. We focus on identifying undervalued sectors and securities, and minimize the use of interest-rate forecasting. We select municipal bonds using fundamental credit analysis to estimate the relative value and attractiveness of various sectors and securities and to exploit pricing inefficiencies.
The fund employs leverage by issuing preferred stock and participating in tender-option bond programs. The use of leverage can magnify gain-and-loss potential depending on market conditions.
Supply-and-Demand Dynamics Buoyed Municipal Bonds
The reporting period began in the wake of heightened market volatility stemming from a flood of newly issued securities as states and municipalities sought to lock in low financing rates in advance of further short-term interest rate hikes from the Federal Reserve Board. In addition, the unexpected election of a new presidential administration had sparked uncertainty regarding potential changes in tax policy.
These negative trends reversed in early 2017, and municipal bonds rebounded from low valuations as the supply of newly issued securities moderated, demand increased, and investors realized that enactment of the new administration’s tax reform proposals was far from certain.
Although credit conditions have remained stable for most municipal bond issuers, growth in tax revenues has slowed and several states are facing pressure from underfunded pension systems.
3
DISCUSSION OF FUND PERFORMANCE (continued)
Higher-Yielding Securities Supported Fund Results
The fund performed well in a generally constructive market environment, producing highly competitive levels of after-tax income from infrastructure-related municipal bonds. An emphasis on municipal bonds with long-term maturities helped the fund benefit from declining interest rates over the reporting period, and the fund’s overweighted exposure to lower-rated securities enabled it to participate more fully in some of the market’s better-performing areas.
Most notably, the fund’s holdings of higher-yielding revenue-backed bonds with BBB and high yield credit ratings—and a correspondingly underweighted position in lower-yielding general obligation bonds—enabled the fund to maintain competitive yields compared to market averages. The fund achieved particularly favorable contributions from revenue bonds backed by the states’ settlement of litigation with U.S. tobacco companies. Bonds issued on behalf of hospitals and education facilities also added a significant degree of value. The fund further benefited from lack of exposure to distressed, uninsured Puerto Rico securities. These positions more than offset relatively weak results from bonds backed by revenues from state general obligation bonds and securities with shorter maturities. The fund’s leveraging strategy helped magnify the positive impact of the constructive market environment.
Positioned for Competitive Levels of Current Income
In the wake of the municipal bond market’s steady rally, yield differences have narrowed along the market’s credit-quality spectrum. In addition, short- and long-term interest rates are expected to rise in a growing economy. On the other hand, inflation has remained muted, supply-and-demand dynamics have remained positive, and credit fundamentals remain solid for municipal bonds. Therefore, we remain cautiously optimistic regarding the prospects for the municipal bond market over the foreseeable future.
As of the reporting period’s end, we have maintained the fund’s emphasis on longer-term, higher-yielding revenue-backed bonds. At the same time, we remain watchful for opportunities to invest in more attractively priced securities as opportunities arise in response to shifting market conditions.
September 15, 2017
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 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, adjusted for any capital gain distributions.
3 “Managed Assets” of the fund means the fund’s total assets, including any assets attributable to effective leverage, minus certain defined accrued liabilities.
Bonds are subject generally to interest-rate, credit, liquidity, and market risks, to varying degrees. Generally, all other factors being equal, prices of investment-grade bonds are inversely related to interest-rate changes, and rate increases can cause price declines.
High yield bonds are subject to increased credit and liquidity risk and are considered speculative in terms of the issuer’s perceived ability to pay interest on a timely basis and to repay principal upon maturity. Unlike investment-grade bonds, prices of high yield bonds may fluctuate unpredictably and not necessarily inversely with changes in interest rates.
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.
4
STATEMENT OF INVESTMENTS
August 31, 2017 (Unaudited)
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Description |
Coupon |
Maturity |
Principal |
Value ($) |
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Long-Term Municipal Investments - 142.9% |
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Alabama - 2.4% |
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Birmingham Special Care Facilities Financing Authority, |
5.75 |
6/1/45 |
1,500,000 |
1,659,405 |
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Birmingham Special Care Facilities Financing Authority, |
6.00 |
6/1/50 |
2,350,000 |
2,638,603 |
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Jefferson County, |
0/7.90 |
10/1/50 |
2,500,000 |
a |
2,061,800 |
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6,359,808 |
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Arizona - 4.9% |
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Phoenix Industrial Development Authority, |
5.00 |
7/1/45 |
2,000,000 |
b |
2,074,640 |
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Pima County Industrial Development Authority, |
5.38 |
7/1/31 |
4,395,000 |
4,742,205 |
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Salt Verde Financial Corporation, |
5.00 |
12/1/37 |
5,000,000 |
6,105,900 |
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12,922,745 |
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California - 11.2% |
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California Statewide Communities Development Authority, |
6.38 |
11/1/43 |
2,035,000 |
2,320,531 |
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Golden State Tobacco Securitization Corporation, |
5.75 |
6/1/47 |
7,510,000 |
7,509,324 |
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Long Beach Bond Finance Authority, |
5.50 |
11/15/37 |
5,000,000 |
6,431,050 |
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Riverside County Transportation Commission, |
5.75 |
6/1/44 |
3,250,000 |
3,694,730 |
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San Buenaventura, |
7.50 |
12/1/41 |
2,500,000 |
2,926,000 |
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Tobacco Securitization Authority, |
0.00 |
6/1/45 |
6,370,000 |
c |
597,952 |
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University of California Regents, |
5.00 |
5/15/43 |
5,000,000 |
5,764,050 |
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29,243,637 |
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Colorado - 3.7% |
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City and County of Denver, |
5.25 |
11/15/43 |
5,000,000 |
5,572,500 |
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Colorado Health Facilities Authority, |
5.00 |
1/1/44 |
2,500,000 |
2,784,825 |
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5
STATEMENT OF INVESTMENTS (Unaudited) (continued)
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Description |
Coupon |
Maturity |
Principal |
Value ($) |
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Long-Term Municipal Investments - 142.9% (continued) |
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Colorado - 3.7% (continued) |
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Dominion Water and Sanitation District, |
6.00 |
12/1/46 |
1,200,000 |
1,251,204 |
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9,608,529 |
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District of Columbia - 1.7% |
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District of Columbia, |
6.00 |
7/1/43 |
1,700,000 |
1,973,938 |
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District of Columbia Tobacco Settlement Financing Corporation, |
0.00 |
6/15/46 |
17,000,000 |
c |
2,431,850 |
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4,405,788 |
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Florida - 2.1% |
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Davie, |
5.63 |
4/1/43 |
4,805,000 |
5,459,441 |
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Georgia - 1.2% |
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Fulton County Development Authority, |
5.00 |
4/1/47 |
1,750,000 |
1,988,053 |
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Gainesville and Hall County Development Authority, |
5.00 |
3/1/37 |
1,000,000 |
1,076,750 |
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3,064,803 |
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Hawaii - 1.4% |
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Hawaii Department of Budget and Finance, |
4.00 |
3/1/37 |
3,500,000 |
3,607,520 |
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Illinois - 9.7% |
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Chicago, |
5.75 |
1/1/43 |
3,750,000 |
4,379,325 |
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Chicago, |
6.00 |
1/1/38 |
2,500,000 |
2,892,450 |
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Chicago Transit Authority, |
5.00 |
12/1/46 |
3,500,000 |
3,827,635 |
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Metropolitan Pier and Exposition Authority, |
0.00 |
12/15/36 |
2,500,000 |
c |
1,123,475 |
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Metropolitan Pier and Exposition Authority, |
5.00 |
6/15/53 |
2,500,000 |
2,547,375 |
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Tender Option Bond Trust Receipts (Series 2017-XM0492), |
5.00 |
10/1/40 |
7,000,000 |
b,d |
8,008,910 |
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University of Illinois Board of Trustees, |
5.00 |
4/1/44 |
2,500,000 |
2,766,725 |
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25,545,895 |
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6
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Description |
Coupon |
Maturity |
Principal |
Value ($) |
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Long-Term Municipal Investments - 142.9% (continued) |
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Indiana - 6.6% |
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Indiana Finance Authority, |
5.50 |
8/15/40 |
7,425,000 |
7,987,592 |
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Indiana Finance Authority, |
5.00 |
7/1/40 |
5,000,000 |
5,361,050 |
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Indiana Finance Authority, |
6.00 |
11/15/41 |
3,500,000 |
4,002,950 |
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17,351,592 |
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Iowa - 2.9% |
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Iowa Finance Authority, |
5.25 |
12/1/25 |
7,000,000 |
7,485,170 |
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Kentucky - 1.5% |
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Christian County, |
5.50 |
2/1/44 |
1,000,000 |
1,101,760 |
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Louisville/Jefferson County Metro Government, |
5.75 |
10/1/42 |
2,370,000 |
2,741,284 |
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3,843,044 |
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Louisiana - 3.0% |
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Louisiana Public Facilities Authority, |
6.50 |
7/1/36 |
2,000,000 |
b |
2,216,040 |
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New Orleans, |
5.00 |
6/1/44 |
2,000,000 |
2,227,180 |
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New Orleans, |
5.00 |
12/1/34 |
1,000,000 |
1,142,700 |
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New Orleans, |
5.00 |
12/1/44 |
2,000,000 |
2,238,060 |
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7,823,980 |
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Massachusetts - 4.0% |
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Massachusetts Development Finance Agency, |
6.50 |
11/15/43 |
2,000,000 |
b |
2,259,320 |
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Massachusetts Port Authority, |
5.00 |
1/1/27 |
8,210,000 |
8,287,338 |
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10,546,658 |
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Michigan - 6.9% |
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Detroit, |
5.25 |
7/1/41 |
2,250,000 |
2,446,403 |
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Michigan Finance Authority, |
5.00 |
12/1/39 |
4,990,000 |
5,633,810 |
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Michigan Finance Authority, |
5.00 |
12/1/21 |
10,000 |
e |
11,622 |
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7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
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Description |
Coupon |
Maturity |
Principal |
Value ($) |
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Long-Term Municipal Investments - 142.9% (continued) |
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Michigan - 6.9% (continued) |
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Michigan Finance Authority, |
5.00 |
7/1/36 |
2,250,000 |
2,509,875 |
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Michigan Tobacco Settlement Finance Authority, |
6.00 |
6/1/34 |
5,000,000 |
4,999,550 |
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Wayne County Airport Authority, |
5.00 |
12/1/39 |
2,250,000 |
2,566,327 |
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18,167,587 |
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Minnesota - .4% |
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Saint Paul Housing and Redevelopment Authority, |
5.00 |
11/15/20 |
1,000,000 |
e |
1,126,630 |
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Missouri - 1.2% |
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Missouri Health and Educational Facilities Authority, |
5.50 |
5/1/43 |
2,000,000 |
2,201,720 |
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Saint Louis County Industrial Development Authority, |
5.00 |
9/1/42 |
1,000,000 |
1,067,790 |
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3,269,510 |
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New Jersey - 6.7% |
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New Jersey Economic Development Authority, |
5.38 |
1/1/43 |
2,500,000 |
2,797,375 |
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New Jersey Economic Development Authority, |
5.25 |
6/15/27 |
2,500,000 |
2,820,350 |
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New Jersey Economic Development Authority, |
5.25 |
6/15/40 |
2,000,000 |
2,202,320 |
|||||
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New Jersey Economic Development Authority, |
5.13 |
9/15/23 |
2,500,000 |
2,708,425 |
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New Jersey Economic Development Authority, |
5.25 |
9/15/29 |
4,500,000 |
4,905,585 |
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Tobacco Settlement Financing Corporation of New Jersey, |
5.00 |
6/1/41 |
2,330,000 |
2,263,898 |
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17,697,953 |
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8
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Description |
Coupon |
Maturity |
Principal |
Value ($) |
|||||
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Long-Term Municipal Investments - 142.9% (continued) |
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New York - 16.3% |
|||||||||
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New York City Industrial Development Agency, |
5.00 |
1/1/36 |
8,000,000 |
8,127,040 |
|||||
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New York Liberty Development Corporation, |
5.00 |
11/15/44 |
3,500,000 |
b |
3,813,250 |
||||
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New York State Dormitory Authority, |
5.00 |
7/1/44 |
2,000,000 |
2,221,560 |
|||||
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New York Transportation Development Corporation, |
5.00 |
7/1/46 |
3,000,000 |
3,311,520 |
|||||
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Niagara Area Development Corporation, |
5.25 |
11/1/42 |
7,870,000 |
b |
7,886,606 |
||||
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Tender Option Bond Trust Receipts/Certificates, |
5.00 |
11/15/38 |
15,000,000 |
b,d |
17,274,750 |
||||
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42,634,726 |
|||||||||
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Ohio - 8.4% |
|||||||||
|
Buckeye Tobacco Settlement Financing Authority, |
6.25 |
6/1/37 |
7,000,000 |
6,994,400 |
|||||
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Buckeye Tobacco Settlement Financing Authority, |
0.00 |
6/1/47 |
26,000,000 |
c |
1,687,140 |
||||
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Cuyahoga County Hospital, |
5.25 |
2/15/47 |
2,500,000 |
2,748,100 |
|||||
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Muskingum County, |
5.00 |
2/15/44 |
7,000,000 |
7,311,990 |
|||||
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Southeastern Ohio Port Authority, |
6.00 |
12/1/42 |
3,000,000 |
3,305,250 |
|||||
|
22,046,880 |
|||||||||
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Oklahoma - .6% |
|||||||||
|
Tulsa County Industrial Authority, |
5.25 |
11/15/45 |
1,500,000 |
1,644,990 |
|||||
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Pennsylvania - 11.7% |
|||||||||
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Allentown Neighborhood Improvement Zone Development Authority, |
5.00 |
5/1/42 |
1,000,000 |
b |
1,078,630 |
||||
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Clairton Municipal Authority, |
5.00 |
12/1/37 |
4,000,000 |
4,387,800 |
|||||
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Clairton Municipal Authority, |
5.00 |
12/1/42 |
1,500,000 |
1,637,040 |
|||||
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Pennsylvania Higher Educational Facilities Authority, |
5.00 |
9/1/45 |
3,000,000 |
3,370,290 |
|||||
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
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Description |
Coupon |
Maturity |
Principal |
Value ($) |
|||||
|
Long-Term Municipal Investments - 142.9% (continued) |
|||||||||
|
Pennsylvania - 11.7% (continued) |
|||||||||
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Pennsylvania Turnpike Commission, |
5.00 |
12/1/42 |
5,000,000 |
5,716,600 |
|||||
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Tender Option Bond Trust Receipts/Certificates, |
5.00 |
12/1/42 |
13,000,000 |
b,d |
14,514,615 |
||||
|
30,704,975 |
|||||||||
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South Carolina - 2.8% |
|||||||||
|
South Carolina Jobs-Economic Development Authority, |
5.13 |
5/1/48 |
1,750,000 |
1,804,950 |
|||||
|
South Carolina Public Service Authority, |
5.13 |
12/1/43 |
5,000,000 |
5,536,600 |
|||||
|
7,341,550 |
|||||||||
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Texas - 13.7% |
|||||||||
|
Clifton Higher Education Finance Corporation, |
6.00 |
8/15/43 |
1,500,000 |
1,760,610 |
|||||
|
Clifton Higher Education Finance Corporation, |
5.75 |
8/15/45 |
2,500,000 |
2,694,850 |
|||||
|
New Hope Cultural Education Facilities Finance Corporation, |
5.00 |
7/1/35 |
500,000 |
550,615 |
|||||
|
North Texas Education Finance Corporation, |
5.13 |
12/1/42 |
3,000,000 |
3,171,090 |
|||||
|
Tender Option Bond Trust Receipts (Series 2016-XM0374), |
5.00 |
11/15/20 |
7,410,000 |
b,d |
8,267,919 |
||||
|
Tender Option Bond Trust Receipts/Certificates, |
5.00 |
11/1/45 |
15,000,000 |
b,d |
16,603,050 |
||||
|
Texas Transportation Commission, |
5.00 |
8/15/41 |
2,500,000 |
2,804,450 |
|||||
|
35,852,584 |
|||||||||
|
Virginia - 5.3% |
|||||||||
|
Virginia Small Business Financing Authority, |
5.00 |
1/1/40 |
7,640,000 |
8,283,135 |
|||||
10
|
Description |
Coupon |
Maturity |
Principal |
Value ($) |
|||||
|
Long-Term Municipal Investments - 142.9% (continued) |
|||||||||
|
Virginia - 5.3% (continued) |
|||||||||
|
Virginia Small Business Financing Authority, |
5.50 |
1/1/42 |
5,000,000 |
5,579,750 |
|||||
|
13,862,885 |
|||||||||
|
Washington - 2.1% |
|||||||||
|
Washington Health Care Facilities Authority, |
5.00 |
10/1/42 |
5,000,000 |
5,542,700 |
|||||
|
Wisconsin - 8.5% |
|||||||||
|
Public Finance Agency of Wisconsin, |
5.00 |
7/1/42 |
5,000,000 |
5,360,700 |
|||||
|
Wisconsin Health and Educational Facilities Authority, |
5.25 |
4/15/35 |
5,000,000 |
5,550,550 |
|||||
|
Wisconsin Health and Educational Facilities Authority, |
5.25 |
8/15/34 |
5,700,000 |
6,114,732 |
|||||
|
Wisconsin Health and Educational Facilities Authority, |
5.38 |
2/1/48 |
5,000,000 |
5,215,600 |
|||||
|
22,241,582 |
|||||||||
|
U.S. Related - 2.0% |
|||||||||
|
Guam Waterworks Authority, |
5.50 |
7/1/43 |
3,000,000 |
3,345,780 |
|||||
|
Puerto Rico Commonwealth, |
5.00 |
7/1/35 |
1,750,000 |
1,827,683 |
|||||
|
5,173,463 |
|||||||||
|
Total Investments (cost $340,110,419) |
142.9% |
374,576,625 |
|||||||
|
Liabilities, Less Cash and Receivables |
(14.3%) |
(37,483,320) |
|||||||
|
VMTPS, at liquidation value |
(28.6%) |
(75,000,000) |
|||||||
|
Net Assets Applicable to Common Shareholders |
100.0% |
262,093,305 |
|||||||
a Zero coupon until a specified date at which time the stated coupon rate becomes effective until maturity.
b Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At August 31, 2017, these securities were valued at $83,997,730 or 32.05% of net assets.
c Security issued with a zero coupon. Income is recognized through the accretion of discount.
d Collateral for floating rate borrowings.
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.
11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
|
Portfolio Summary (Unaudited) † |
Value (%) |
|
Transportation Services |
41.7 |
|
Health Care |
22.1 |
|
Education |
17.8 |
|
Industrial |
13.7 |
|
Hospital |
10.3 |
|
Utility-Water and Sewer |
8.9 |
|
Tobacco |
7.4 |
|
Utility-Electric |
5.8 |
|
Pollution Control |
3.0 |
|
Utility-Gas |
2.4 |
|
Special Tax |
2.1 |
|
Retirement |
2.0 |
|
Asset-Backed |
1.8 |
|
City |
1.1 |
|
Prerefunded |
.4 |
|
Other |
2.4 |
|
142.9 |
† Based on net assets applicable to Common Shareholders.
See notes to financial statements.
12
|
Summary of Abbreviations (Unaudited) | |||
|
ABAG |
Association of Bay Area |
ACA |
American Capital Access |
|
AGC |
ACE Guaranty Corporation |
AGIC |
Asset Guaranty Insurance Company |
|
AMBAC |
American Municipal Bond |
ARRN |
Adjustable Rate |
|
BAN |
Bond Anticipation Notes |
BPA |
Bond Purchase Agreement |
|
CIFG |
CDC Ixis Financial Guaranty |
COP |
Certificate of Participation |
|
CP |
Commercial Paper |
DRIVERS |
Derivative Inverse |
|
EDR |
Economic Development |
EIR |
Environmental Improvement |
|
FGIC |
Financial Guaranty |
FHA |
Federal Housing Administration |
|
FHLB |
Federal Home |
FHLMC |
Federal Home Loan Mortgage |
|
FNMA |
Federal National |
GAN |
Grant Anticipation Notes |
|
GIC |
Guaranteed Investment |
GNMA |
Government National Mortgage |
|
GO |
General Obligation |
HR |
Hospital Revenue |
|
IDB |
Industrial Development Board |
IDC |
Industrial Development Corporation |
|
IDR |
Industrial Development |
LIFERS |
Long Inverse Floating |
|
LOC |
Letter of Credit |
LOR |
Limited Obligation Revenue |
|
LR |
Lease Revenue |
MERLOTS |
Municipal Exempt Receipts |
|
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 |
|
RAC |
Revenue Anticipation Certificates |
RAN |
Revenue Anticipation Notes |
|
RAW |
Revenue Anticipation Warrants |
RIB |
Residual Interest Bonds |
|
ROCS |
Reset Options Certificates |
RRR |
Resources Recovery Revenue |
|
SAAN |
State Aid Anticipation Notes |
SBPA |
Standby Bond Purchase Agreement |
|
SFHR |
Single Family Housing Revenue |
SFMR |
Single Family Mortgage Revenue |
|
SONYMA |
State of New York |
SPEARS |
Short Puttable Exempt |
|
SWDR |
Solid Waste Disposal Revenue |
TAN |
Tax Anticipation Notes |
|
TAW |
Tax Anticipation Warrants |
TRAN |
Tax and Revenue Anticipation Notes |
|
XLCA |
XL Capital Assurance |
||
See notes to financial statements.
13
STATEMENT OF ASSETS AND LIABILITIES
August 31, 2017 (Unaudited)
|
|
|
|
|
|
|
| |||
|
|
|
|
Cost |
|
Value |
| |||
|
Assets ($): |
|
|
|
| |||||
|
Investments in securities—See Statement of Investments |
|
340,110,419 |
|
374,576,625 |
| ||||
|
Cash |
|
|
|
|
1,740,944 |
| |||
|
Interest receivable |
|
|
|
|
4,284,851 |
| |||
|
Deferred VMTPS offering costs—Note 1(f) |
|
|
|
|
138,497 |
| |||
|
Prepaid expenses |
|
|
|
|
42,237 |
| |||
|
|
|
|
|
|
380,783,154 |
| |||
|
Liabilities ($): |
|
|
|
| |||||
|
Due to The Dreyfus Corporation and affiliates—Note 2(b) |
|
|
|
|
220,093 |
| |||
|
Payable for floating rate notes issued—Note 3 |
|
|
|
|
42,055,000 |
| |||
|
Dividends payable to Common Shareholders |
|
|
|
|
974,245 |
| |||
|
Interest and expense payable related to |
|
|
|
|
213,306 |
| |||
|
Interest expense payable on VMTPS—Note 1(f) |
|
|
|
|
129,493 |
| |||
|
Accrued expenses |
|
|
|
|
97,712 |
| |||
|
|
|
|
|
|
43,689,849 |
| |||
|
VMTPS, $.001 par value per share (750 shares issued and outstanding at $100,000 per share liquidation value)—Note 1 |
|
|
75,000,000 |
| |||||
|
Net Assets Applicable to Common Shareholders ($) |
|
|
262,093,305 |
| |||||
|
Composition of Net Assets ($): |
|
|
|
| |||||
|
Common Stock, par value, $.001 per share |
|
|
|
|
18,382 |
| |||
|
Paid-in capital |
|
|
|
|
262,411,841 |
| |||
|
Accumulated undistributed investment income—net |
|
|
|
|
463,746 |
| |||
|
Accumulated net realized gain (loss) on investments |
|
|
|
|
(35,266,870) |
| |||
|
Accumulated net unrealized appreciation (depreciation) |
|
|
|
|
34,466,206 |
| |||
|
Net Assets Applicable to Common Shareholders ($) |
|
|
262,093,305 |
| |||||
|
Shares Outstanding |
|
| |||||||
|
(250 million shares authorized) |
|
18,381,981 |
| ||||||
|
Net Asset Value Per Share of Common Stock ($) |
|
14.26 |
| ||||||
|
See notes to financial statements. |
|||||||||
14
STATEMENT OF OPERATIONS
Six Months Ended August 31, 2017 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
|
Interest Income |
|
|
8,877,505 |
| ||
|
Expenses: |
|
|
|
| ||
|
Management fee—Note 2(a) |
|
|
1,224,754 |
| ||
|
VMTPS interest expense and fees—Note 1(f) |
|
|
777,308 |
| ||
|
Interest and expense related to floating rate notes issued—Note 3 |
|
|
341,594 |
| ||
|
Directors’ fees and expenses—Note 2(c) |
|
|
81,003 |
| ||
|
Amortization of VMTPS offering costs—Note 1(f) |
|
|
58,558 |
| ||
|
Professional fees |
|
|
45,693 |
| ||
|
Registration fees |
|
|
9,896 |
| ||
|
Shareholder servicing costs |
|
|
6,461 |
| ||
|
Shareholders’ reports |
|
|
5,858 |
| ||
|
Custodian fees—Note 2(b) |
|
|
5,330 |
| ||
|
Redemption and paying agent fees—Note 2(b) |
|
|
3,975 |
| ||
|
Miscellaneous |
|
|
38,863 |
| ||
|
Total Expenses |
|
|
2,599,293 |
| ||
|
Investment Income—Net |
|
|
6,278,212 |
| ||
|
Realized and Unrealized Gain (Loss) on Investments—Note 3 ($): |
|
| ||||
|
Net realized gain (loss) on investments |
443,611 |
| ||||
|
Net unrealized appreciation (depreciation) on investments |
|
|
9,728,496 |
| ||
|
Net Realized and Unrealized Gain (Loss) on Investments |
|
|
10,172,107 |
| ||
|
Net Increase in Net Assets Applicable to Common |
|
16,450,319 |
| |||
|
See notes to financial statements. |
||||||
15
STATEMENT OF CASH FLOWS
Six Months Ended August 31, 2017 (Unaudited)
|
Cash Flows from Operating Activities ($): |
||
|
Interest received |
8,734,247 |
|
|
Operating expenses paid |
(1,487,697) |
|
|
Purchases of long-term portfolio securities |
(22,792,285) |
|
|
Proceeds from sales of long-term portfolio securities |
16,386,342 |
|
|
Net Cash Provided by Operating Activities |
840,607 | |
|
Cash Flows from Financing Activities ($): |
||
|
Dividends paid to Common Shareholders |
(5,845,470) |
|
|
VMTPS interest expense paid |
(757,027) |
|
|
Interest and expense related to floating rate notes issued paid |
(287,697) |
|
|
Net Cash Used in Financing Activities |
(6,890,194) | |
|
Decrease in cash |
(6,049,587) | |
|
Cash at beginning of period |
7,790,531 | |
|
Cash at end of period |
1,740,944 | |
|
Reconciliation of Net Increase in Net Assets Applicable to |
||
|
Net Increase in Net Assets Applicable to Common |
16,450,319 | |
|
Adjustments to reconcile net increase in net assets applicable |
||
|
Increase in investments in securities, at cost |
(6,771,154) | |
|
Increase in interest receivable |
(157,095) | |
|
Decrease in accrued expenses |
(44,471) | |
|
Increase in prepaid expenses |
(32,407) | |
|
Increase in Due to The Dreyfus Corporation and affiliates |
11,014 | |
|
Interest and expense related to floating rate notes issued |
341,594 | |
|
VMTPS interest expense and fees |
777,308 | |
|
Amortization of VMTPS offering costs |
58,558 | |
|
Net unrealized appreciation on investments |
(9,728,496) | |
|
Net amortization of premiums on investments |
(64,563) | |
|
Net Cash Provided By Operating Activities |
840,607 |
See notes to financial statements.
16
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
Six Months Ended |
|
|
|
Year Ended |
|
|
Operations ($): |
|
|
|
|
|
|
|
| |
|
Investment income—net |
|
|
6,278,212 |
|
|
|
12,515,235 |
| |
|
Net realized gain (loss) on investments |
|
443,611 |
|
|
|
799,085 |
| ||
|
Net unrealized appreciation (depreciation) |
|
9,728,496 |
|
|
|
(6,839,427) |
| ||
|
Net Increase (Decrease) in Net Assets Applicable to |
16,450,319 |
|
|
|
6,474,893 |
| |||
|
Dividends to Common Shareholders from ($): |
|
|
|
|
|
|
| ||
|
Investment income—net |
|
|
(5,845,470) |
|
|
|
(13,087,971) |
| |
|
Total Increase (Decrease) in Net Assets |
10,604,849 |
|
|
|
(6,613,078) |
| |||
|
Net Assets Applicable to Common Shareholders ($): |
|
|
|
|
|
| |||
|
Beginning of Period |
|
|
251,488,456 |
|
|
|
258,101,534 |
| |
|
End of Period |
|
|
262,093,305 |
|
|
|
251,488,456 |
| |
|
Undistributed investment income—net |
463,746 |
|
|
|
31,004 |
| |||
|
See notes to financial statements. |
|||||||||
17
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 |
||||||||||
|
August 31, 2017 |
Year Ended February 28/29, |
|||||||||
|
(Unaudited) |
2017 |
2016 |
2015 |
2014 |
a | |||||
|
Per Share Data ($): |
||||||||||
|
Net asset value, beginning of period |
13.68 |
14.04 |
13.85 |
12.42 |
14.33 |
b | ||||
|
Investment Operations: |
||||||||||
|
Investment income—netc |
.34 |
.68 |
.71 |
.73 |
.60 |
|||||
|
Net realized and unrealized |
.56 |
(.33) |
.23 |
1.45 |
(1.98) |
|||||
|
Total from Investment Operations |
.90 |
.35 |
.94 |
2.18 |
(1.38) |
|||||
|
Distributions to Common Shareholders: |
||||||||||
|
Dividends from investment income—net |
(.32) |
(.71) |
(.75) |
(.75) |
(.50) |
|||||
|
Offering costs charged to paid-in capital |
- |
- |
- |
- |
(.03) |
|||||
|
Net asset value, end of period |
14.26 |
13.68 |
14.04 |
13.85 |
12.42 |
|||||
|
Market value, end of period |
13.28 |
12.68 |
12.86 |
12.80 |
11.29 |
|||||
|
Total Return (%)d |
7.29 |
e |
3.97 |
6.81 |
20.69 |
(21.13) |
e | |||
|
Ratios/Supplemental Data (%): |
||||||||||
|
Ratio of total expenses |
2.01 |
f |
1.85 |
1.67 |
1.67 |
1.65 |
f | |||
|
Ratio of net expenses |
2.01 |
f |
1.85 |
1.67 |
1.67 |
1.65 |
f | |||
|
Ratio of interest and expense related |
.86 |
f |
.70 |
.53 |
.54 |
.52 |
f | |||
|
Ratio of net investment income |
4.85 |
f |
4.79 |
5.19 |
5.45 |
5.83 |
f | |||
|
Portfolio Turnover Rate |
5.03 |
e |
9.72 |
8.38 |
12.81 |
70.72 |
e | |||
|
Asset coverage of VMTPS, end of period |
449 |
435 |
444 |
439 |
404 |
|||||
|
Net Assets, Applicable |
262,093 |
251,488 |
258,102 |
254,585 |
228,319 |
|||||
|
VMTPS outstanding, |
75,000 |
75,000 |
75,000 |
75,000 |
75,000 |
|||||
|
Floating Rate Notes outstanding ($ x 1,000) |
42,055 |
42,055 |
36,805 |
36,805 |
36,805 |
|||||
a From April 26, 2013 (commencement of operations) to February 28, 2014.
b Reflects a deduction of $.675 per share sales load from the initial offering price of $15.00 per share.
c Based on average common shares outstanding.
d Calculated based on market value.
e Not annualized.
f Annualized.
See notes to financial statements.
18
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus Municipal Bond Infrastructure Fund, Inc. (the “fund”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as a non-diversified closed-end management investment company. The fund’s investment objective is to seek to provide as high a level of current income exempt from regular federal income tax as is 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. Standish Mellon Asset Management Company LLC (“Standish”), a wholly-owned subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s sub-investment adviser. The fund’s Common Stock trades on the New York Stock Exchange (the “NYSE”) under the ticker symbol DMB.
The fund has outstanding 750 shares of VMTPS, with a liquidation preference of $100,000 per share (plus an amount equal to accumulated but unpaid dividends upon liquidation) and a stated mandatory redemption date of July 29, 2018, which are not registered under the Act. The fund is subject to a Redemption and Paying Agent Agreement with The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus, with respect to the VMTPS.
The fund is subject to certain restrictions relating to the VMTPS. Failure to comply with these restrictions could preclude the fund from declaring any distributions to shareholders of Common Stock (“Common Shareholders”) or repurchasing shares of Common Stock and/or could trigger the mandatory redemption of VMTPS at liquidation value. Thus, redemptions of VMTPS may be deemed to be outside of the control of the fund. In addition, the VMTPS have a mandatory redemption date of July 29, 2018. The fund will have the right to request that the holders of 100% of the aggregate outstanding amount of the VMTPS, in their sole and absolute discretion, extend the term of the Term Redemption Date for an additional 364 day period.
The holders of VMTPS, voting as a separate class, have the right to elect at least two directors. The holders of VMTPS will vote as a separate class on certain other matters, as required by law. The fund’s Board of Directors (the “Board”) has designated Nathan Leventhal and Benaree Pratt Wiley as directors to be elected by the holders of VMTPS.
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
19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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.
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:
20
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 generally categorized within Level 2 of the fair value hierarchy.
The Service is engaged under the general supervision of the Board.
When market quotations or official closing prices are not readily available, or are determined not to 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 generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of August 31, 2017 in valuing the fund’s investments:
21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
|
Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 -Significant Unobservable Inputs |
Total | |
|
Assets ($) |
||||
|
Investments in Securities: |
|
|
|
|
|
Municipal Bonds† |
- |
374,576,625 |
- |
374,576,625 |
|
Liabilities ($) |
||||
|
Floating Rate Notes†† |
- |
(42,055,000) |
- |
(42,055,000) |
|
VMTPS†† |
- |
(75,000,000) |
- |
(75,000,000) |
† See Statement of Investments for additional detailed categorizations.
†† Certain of the fund’s liabilities are held at carrying amount, which approximates fair value for financial reporting purposes.
At August 31, 2017, there were no transfers between levels 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. Interest income, adjusted for accretion of discount and amortization of premium on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when issued or delayed delivery basis may be settled a month or more after the trade date.
(c) Dividends and distributions to Common Shareholders: Dividends and distributions are recorded on the ex-dividend date. Dividends from investment income-net are normally declared and paid monthly. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
Common Shareholders will have their distributions reinvested in additional shares of the fund, unless such Common Shareholders elect to receive cash, at the lower of the market price or net asset value per share (but not less than 95% of the market price). If market price is equal to or exceeds net asset value, shares will be issued at net asset value. If net asset value exceeds market price, Computershare Inc., the transfer agent for the fund’s Common Stock, will buy fund shares in the open market and reinvest those shares accordingly.
22
On August 2, 2017, the Board declared a cash dividend of $.0530 per share from investment income-net, payable on September 1, 2017 to Common Shareholders of record as of the close of business on August 16, 2017.
(d) Dividends and distributions to shareholders of VMTPS: Dividends on VMTPS are normally declared daily and paid monthly. The Applicable Rate is equal to the rate per annum that results from the sum of the (a) Applicable Base Rate and (b) Ratings Spread as determined pursuant to the Applicable Rate Determination for the VMTPS on the Rate Determination Date immediately preceding such Subsequent Rate Period. The Applicable Rate of the VMTPS was equal to the sum of 1.25% per annum plus the Securities Industry and Financial Markets Association Municipal Swap Index rate of .79% on August 31, 2017. The dividend rate as of August 31, 2017 for the VMTPS was 2.04%.
(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 August 31, 2017, the fund did not have any liabilities for any uncertain tax positions. The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended August 31, 2017, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended February 28, 2017 remains subject to examination by the Internal Revenue Service and state taxing authorities.
Under the Regulated Investment Company Modernization Act of 2010, the fund is permitted to carry forward capital losses for an unlimited period. Furthermore, capital loss carryovers retain their character as either short-term or long-term capital losses.
The fund has an unused capital loss carryover of $35,993,989 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to February 28, 2017. The fund has $31,013,974 of short-term capital losses and $4,980,015 of long-term capital losses which can be carried forward for an unlimited period.
The tax character of distributions paid to shareholders during the fiscal year ended February 28, 2017 was as follows: tax-exempt income $13,063,207 and ordinary income $24,764. The tax character of current year distributions will be determined at the end of the current fiscal year.
23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(f) VMTPS: In the fund’s Statement of Assets and Liabilities, VMTPS aggregate liquidation preference is shown as a liability since they have a stated mandatory redemption date of July 29, 2018. Dividends paid to VMTPS are treated as interest expense and recorded on the accrual basis. Costs directly related to the issuance of the VMTPS are considered debt issuance costs which have been deferred and are being amortized into expense over the life of the VMTPS.
NOTE 2—Management Fee and Other Transactions with Affiliates:
(a) Pursuant to a management agreement (the “Agreement”) with Dreyfus, the management fee is computed at the annual rate of .65% of the value of the fund’s daily total assets, including any assets attributable to effective leverage, minus certain defined accrued liabilities (the “Managed Assets”) and is payable monthly.
Pursuant to a sub-investment advisory agreement between Dreyfus and Standish, Dreyfus pays Standish a monthly fee at the annual rate of .27% of the value of the fund’s average daily Managed Assets.
(b) The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets and transaction activity. During the period ended August 31, 2017, the fund was charged $5,330 pursuant to the custody agreement.
The fund has an arrangement with the custodian whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a Redemption and Paying Agent Agreement for providing certain transfer agency and payment services with respect to the VMTPS for the fund. During the period ended August 31, 2017, the fund was charged $3,975 for the services provided by the Redemption and Paying Agent.
During the period ended August 31, 2017, the fund was charged $3,363 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: management fees $208,628, custodian fees $8,000, Redemption and Paying Agent fees $663 and Chief Compliance Officer fees $2,802.
24
(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 August 31, 2017, amounted to $22,792,285 and $16,386,342, respectively.
Inverse Floater Securities: The fund participates in secondary inverse floater structures in which fixed-rate, tax-exempt municipal bonds are transferred to a trust (the “Inverse Floater Trust”). The Inverse Floater Trust typically issues two variable rate securities that are collateralized by the cash flows of the fixed-rate, tax-exempt municipal bonds. One of these variable rate securities pays interest based on a short-term floating rate set by a remarketing agent at predetermined intervals (“Trust Certificates”). A residual interest tax-exempt security is also created by the Inverse Floater Trust, which is transferred to the fund, and is paid interest based on the remaining cash flows of the Inverse Floater Trust, after payment of interest on the other securities and various expenses of the Inverse Floater Trust. An Inverse Floater Trust may be collapsed without the consent of the fund due to certain termination events such as bankruptcy, default or other credit event.
The fund accounts for the transfer of bonds to the Inverse Floater Trust as secured borrowings, with the securities transferred remaining in the fund’s investments, and the Trust Certificates reflected as fund liabilities in the Statement of Assets and Liabilities.
The fund may invest in inverse floater securities on either a non-recourse or recourse basis. These securities are typically supported by a liquidity facility provided by a bank or other financial institution (the “Liquidity Provider”) that allows the holders of the Trust Certificates to tender their certificates in exchange for payment from the Liquidity Provider of par plus accrued interest on any business day prior to a termination event. When the fund invests in inverse floater securities on a non-recourse basis, the Liquidity Provider is required to make a payment under the liquidity facility due to a termination event to the holders of the Trust Certificates. When this occurs, the Liquidity Provider typically liquidates all or a portion of the municipal securities held in the Inverse Floater Trust. A liquidation shortfall occurs if the Trust Certificates exceed the proceeds of the sale of the bonds in the Inverse Floater Trust (“Liquidation Shortfall”). When a fund invests in inverse floater securities on a recourse basis, the fund typically enters into a reimbursement agreement with the Liquidity
25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Provider where the fund is required to repay the Liquidity Provider the amount of any Liquidation Shortfall. As a result, a fund investing in a recourse inverse floater security bears the risk of loss with respect to any Liquidation Shortfall.
The average amount of borrowings outstanding under the inverse floater structure during the period ended August 31, 2017 was approximately $42,055,000, with a related weighted average annualized interest rate of 1.61%.
VMTPS: The average amount of borrowings outstanding for the VMTPS during the period ended August 31, 2017 was approximately $75,000,000, with a related weighted average annualized interest rate of 2.06%.
At August 31, 2017, accumulated net unrealized appreciation on investments was $34,466,206, consisting of $34,649,200 gross unrealized appreciation and $182,994 gross unrealized depreciation.
At August 31, 2017, 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).
26
PROXY RESULTS (Unaudited)
Common Shareholders and holders of VMTPS voted together as a single class (except as noted below) on the following proposal presented at the annual shareholders’ meeting held on August 8, 2017.
|
|
|
Shares | ||
|
For |
|
Authority Withheld | ||
|
To elect three Class III Directors:† |
||||
|
Joseph S. DiMartino |
17,186,396 |
399,520 | ||
|
Isabel P. Dunst |
17,204,942 |
380,974 | ||
|
Benaree Pratt Wiley†† |
750 |
- | ||
† The terms of these Directors expire in 2020.
†† Elected by holders of VMTPS.
27
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited)
At a meeting of the fund’s Board of Directors held on July 25-26, 2017, the Board considered the renewal of the fund’s Management Agreement, pursuant to which Dreyfus provides the fund with investment advisory and administrative services (the “Agreement”), and the Sub-Investment Advisory Agreement (together, the “Agreements”), pursuant to which Standish Mellon Asset Management Company, LLC (the “Subadviser”) provides day-to-day management of the fund’s investments. The Board members, a majority of whom are not “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of Dreyfus and the Subadviser. In considering the renewal of the Agreements, the Board considered all factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to them at the meeting and in previous presentations from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex. Dreyfus representatives noted that the fund is a closed-end fund without daily inflows and outflows of capital and provided the fund’s asset size.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that Dreyfus also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered Dreyfus’ extensive administrative, accounting, and compliance infrastructures, as well as Dreyfus’ supervisory activities over the Subadviser.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended May 31, 2017, and (2) the fund’s actual and contractual management fees and total expenses with those of a group of comparable funds (the “Expense Group”) and with a broader group of funds (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds. The Board discussed with representatives
28
of Dreyfus, its affiliates and/or the Subadviser the results of the comparisons and considered that the fund’s total return performance, on both a net asset value basis and a market price basis, was above the Performance Group and Performance Universe medians for all periods. The Board also considered that, on a net asset basis, the fund’s yield performance was below the Performance Group and Performance Universe medians for all three one-year periods ended May 31st except for the one-year period ended May 31, 2016 when the fund’s yield performance was above the Performance Group median, and that the fund’s yield performance, on a market price basis, was above the Performance Group median for two of the three one-year periods ended May 31st and below the Performance Universe medians for all three periods. The Board also considered the proximity of the fund’s yield to the relevant median(s) in certain periods when the yield was below the applicable Performance Group and/or Performance Universe median(s). Dreyfus also provided a comparison of the fund’s calendar year total returns (on a net asset basis) to the returns of the fund’s Broadridge category average.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that, based on common assets alone, the fund’s contractual management fee was slightly above the Expense Group median and the fund’s actual management fee and total expense ratio were above the Expense Group and Expense Universe medians. The Board also considered that, based on common and leveraged assets together, the fund’s actual management fee and total expense ratio were above the Expense Group and Expense Universe medians.
Dreyfus representatives reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by Dreyfus that are in the same Broadridge category as the fund and (2) paid to Dreyfus or the Subadviser or its affiliates for advising any separate accounts and/or other types of client portfolios that are considered to have similar investment strategies and policies as the fund (the “Similar Clients”), and explained the nature of the Similar Clients. They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors, noting that the fund is a closed-end fund. The Board considered the relevance of the fee information provided for the Similar Clients to evaluate the appropriateness of the fund’s management fee.
The Board considered the fee to the Subadviser in relation to the fee paid to Dreyfus by the fund and the respective services provided by the Subadviser and Dreyfus. The Board also took into consideration that the Subadviser’s fee is paid by Dreyfus (out of its fee from the fund) and not the fund.
Analysis of Profitability and Economies of Scale. Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to Dreyfus and its affiliates for managing the funds in the Dreyfus fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not unreasonable, given the services rendered and service levels
29
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued)
provided by Dreyfus. The Board also had been provided with information prepared by an independent consulting firm regarding Dreyfus’ approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreements, considered in relation to the mix of services provided by Dreyfus and the Subadviser, including the nature, extent and quality of such services, supported the renewal of the Agreements and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Since Dreyfus, and not the fund, pays the Subadviser pursuant to the Sub-Investment Advisory Agreement, the Board did not consider the Subadviser’s profitability to be relevant to its deliberations. Dreyfus representatives stated that, because the fund is a closed-end fund without daily inflows and outflows of capital, there were not at this time significant economies of scale to be realized by Dreyfus in managing the fund’s assets. Dreyfus representatives also stated that, as a result of shared and allocated costs among funds in the Dreyfus fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to Dreyfus and the Subadviser from acting as investment adviser and sub-investment adviser, respectively, and took into consideration that there were no soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreements. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
· The Board concluded that the nature, extent and quality of the services provided by Dreyfus and the Subadviser are adequate and appropriate.
· The Board generally was satisfied with the fund’s overall performance.
· The Board concluded that the fees paid to Dreyfus and the Subadviser supported the renewal of the Agreements in light of the considerations described above.
· The Board determined that the economies of scale which may accrue to Dreyfus and its affiliates in connection with the management of the fund had been adequately considered by Dreyfus in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
30
In evaluating the Agreements, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with Dreyfus and its affiliates and the Subadviser, of Dreyfus and the Subadviser and the services provided to the fund by Dreyfus and the Subadviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreements, including information on the investment performance of the fund in comparison to similar funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for this fund had the benefit of a number of years of reviews of the Agreements for the fund, or substantially similar agreements for other Dreyfus funds that the Board oversees, during which lengthy discussions took place between the Board and Dreyfus representatives. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other Dreyfus funds that the Board oversees, in prior years. The Board determined to renew the Agreements.
31
NOTES
32
OFFICERS AND DIRECTORS
Dreyfus Municipal Bond Infrastructure Fund, Inc.
200 Park Avenue
New York, NY 10166
|
Officers (continued) |
|||
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Joseph S. DiMartino, Chairman |
Assistant Treasurers (continued) |
||
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Francine J. Bovich |
Robert Salviolo |
||
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J. Charles Cardona† |
Robert Svagna |
||
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Gordon J. Davis† |
Chief Compliance Officer |
||
|
Isabel P. Dunst |
Joseph W. Connolly |
||
|
Nathan Leventhal†† |
Portfolio Managers |
||
|
Robin A. Melvin |
Jeffrey Burger |
||
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Roslyn M. Watson |
Thomas C. Casey |
||
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Benaree Pratt Wiley†† |
Daniel A. Rabasco |
||
|
† Interested Board Member |
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|
†† Elected by holders of VMTPS |
Manager |
||
|
Officers |
The Dreyfus Corporation |
||
|
President |
Custodian |
||
|
Bradley J. Skapyak |
The Bank of New York Mellon |
||
|
Chief Legal Officer |
Counsel |
||
|
Bennett A. MacDougall |
Proskauer Rose LLP |
||
|
Vice President and Secretary |
Transfer Agent, |
||
|
Janette E. Farragher |
Dividend Disbursing Agent |
||
|
Vice Presidents and Assistant Secretaries |
and Registrar |
||
|
James Bitetto |
Computershare Inc. |
||
|
Joseph M. Chioffi |
(Common Stock) |
||
|
Maureen E. Kane |
The Bank of New York Mellon |
||
|
Sarah S. Kelleher |
(VMTP Shares) |
||
|
Jeff Prusnofsky |
Stock Exchange Listing |
||
|
Natalya Zelensky |
NYSE Symbol: DMB |
||
|
Treasurer |
Initial SEC Effective Date |
||
|
James Windels |
4/26/13 |
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|
Assistant Treasurers |
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Richard Cassaro |
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Gavin C. Reilly |
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Robert S. Robol |
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The fund’s net asset value per share appears in the following publications: Barron’s, Closed-End Bond Funds section under the | |||
|
Notice is hereby given in accordance with Section 23(c) of the Act that the fund may purchase shares of its common stock in the | |||
33
Dreyfus Municipal Bond Infrastructure Fund, Inc.
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Sub-Investment Adviser
Standish Mellon Asset
Management Company LLC
BNY Mellon Center
201 Washington Street
Suite 2900
Boston, MA 02108-4408
Custodian
The Bank of New York Mellon
225 Liberty Street
New York, NY 10286
Transfer Agent &
Registrar (Common Stock)
Computershare Inc.
480 Washington Boulevard
Jersey City, NJ 07310
Dividend Disbursing Agent (Common Stock)
Computershare Inc.
P.O. Box 30170
College Station, TX 77842
|
Ticker Symbol: |
DMB |
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. (phone 1-800-SEC-0330 for information).
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.dreyfus.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-DREYFUS.
The fund posts regularly certain information at https://public.dreyfus.com/insightsideas/
research-articles/splash/DMB.html, including certain asset coverage and leverage ratios (within 5 business days of the last day of each month) and a fact sheet containing certain statistical information (within 15 business days of the last day of each month).
|
© 2017 MBSC Securities Corporation |
|
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.
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 Municipal Bond Infrastructure Fund, Inc.
By: /s/ Bradley J. Skapyak
Bradley J. Skapyak
President
Date: October 27, 2017
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: October 27, 2017
By: /s/ James Windels
James Windels
Treasurer
Date: October 27, 2017
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)