forms
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) 

Michael A. Rosenberg, 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:    5/31/07 


FORM N-CSR

Item 1.    Reports to Stockholders. 


Dreyfus Strategic Municipal Bond Fund, Inc.

Protecting Your Privacy Our Pledge to You

THE FUND IS COMMITTED TO YOUR PRIVACY. On this page, you will find the Fund’s policies and practices for collecting, disclosing, and safeguarding “nonpublic personal information,” which may include financial or other customer information.These policies apply to individuals who purchase Fund shares for personal, family, or household purposes, or have done so in the past. This notification replaces all previous statements of the Fund’s consumer privacy policy, and may be amended at any time. We’ll keep you informed of changes as required by law.

YOUR ACCOUNT IS PROVIDED IN A SECURE ENVIRONMENT. The Fund maintains physical, electronic and procedural safeguards that comply with federal regulations to guard nonpublic personal information. The Fund’s agents and service providers have limited access to customer information based on their role in servicing your account.

THE FUND COLLECTS INFORMATION IN ORDER TO SERVICE AND ADMINISTER YOUR ACCOUNT.

The Fund collects a variety of nonpublic personal information, which may include:

THE FUND DOES NOT SHARE NONPUBLIC

PERSONAL INFORMATION WITH ANYONE, EXCEPT AS PERMITTED BY LAW.

Thank you for this opportunity to serve you.

The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.

Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value


    Contents 
 
    T H E F U N D 


2    A Letter from the CEO 
3    Discussion of Fund Performance 
6    Statement of Investments 
21    Statement of Assets and Liabilities 
22    Statement of Operations 
23    Statement of Changes in Net Assets 
24    Financial Highlights 
26    Notes to Financial Statements 
33    Officers and Directors 
    F O R M O R E I N F O R M AT I O N 


    Back Cover 


Dreyfus 
Strategic Municipal Bond Fund, Inc. 

The Fund

A L E T T E R F R O M T H E C E O

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, 2006, through May 31, 2007.

The U.S. economy continued to moderate during the reporting period as cooling housing markets took their toll on consumer and business spending. Labor markets, however, remained quite strong, and key measures of inflation have stayed stubbornly above the Federal Reserve’s stated “comfort zone.” Our economists believe that the anemic rate of U.S. economic growth recorded in the first quarter of 2007 should be the weakest reading of the current midcycle slowdown, and economic growth is likely to recover eventually to a near-trend pace.

The likely implications of our economic outlook include a long pause in Fed policy, a modest drop in 10-year Treasury bond yields (and consequent rise in price) and, in the absence of an as-yet unforeseen event, persistently tight yield spreads throughout the municipal bond market sectors.We expect these developments to produce both challenges and opportunities for fixed-income investors. As always, your financial advisor can help you position your investments for these trends.

For information about how the fund performed during the reporting period, as well as market perspectives, we have provided a Discussion of Fund Performance given by the fund’s Portfolio Manager.

Thank you for your continued confidence and support.

2


D I S C U S S I O N O F F U N D P E R F O R M A N C E

For the period of December 1, 2006, through May 31, 2007, as provided by James Welch, Portfolio Manager

Fund and Market Performance Overview

Although municipal bonds rallied over much of the reporting period, bouts of volatility largely offset those gains, and the market’s returns were derived primarily from income. The fund participated in the market’s strength, with particularly strong results from its core holdings of seasoned bonds.

For the six-month period ended May 31, 2007, the fund achieved a total return of 0.53% .1 Over the same period, the fund provided aggregate income dividends of $0.258 per share, which reflects a distribution rate of 5.66% .2

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. Municipal bonds are classified as general obligation bonds, revenue bonds and notes. 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 issues auction rate preferred stock and invests the proceeds in a manner consistent with its investment objective.This has the effect of “leveraging” the portfolio, which can increase the fund’s performance potential as well as, depending on market conditions, enhance net asset value volatility.

Over time, many of the fund’s older, higher yielding bonds have matured or were redeemed by their issuers. We have generally attempted to replace those bonds with investments consistent with the fund’s invest-

T h e F u n d 3


D I S C U S S I O N O F F U N D P E R F O R M A N C E (continued)

ment policies. We have also sought to upgrade the fund with newly issued bonds that, in our opinion, have better structural or income characteristics than existing holdings. When such opportunities arise, we usually look to sell bonds that are close to their optimal redemption date or maturity. In addition, we conduct credit analysis of the fund’s holdings in an attempt to avoid potential defaults on interest and principal payments.

Heightened Volatility Offset Previous Market Gains

After a sustained period of strong economic growth, higher energy prices and rising short-term interest rates, U.S. economic growth had begun to moderate by the time the reporting period began.Weakness in the housing and automobile sectors weighed on the economy, falling energy prices alleviated inflation concerns, and the Federal Reserve Board (the “Fed”) refrained from further rate hikes throughout the reporting period. As investors’ inflation fears waned, municipal bonds rallied. In addition, while the supply of newly issued municipal bonds increased compared to the same period one year earlier, technical forces remained positive due to robust investor demand.

However, heightened volatility over the first five months of 2007 erased earlier market gains.Turmoil in overseas equity markets and the U.S. sub-prime mortgage sector caused investor sentiment to falter in late February and early March, and signs of stronger-than-expected economic growth in April and May caused bond yields to rise and prices to fall. As a result, municipal bond prices ended the reporting period slightly lower than where they began, and the majority of the market’s and fund’s returns were comprised of current income.

Core Holdings Helped Boost Current Income

The fund benefited in this environment from its holdings of income-oriented bonds, including seasoned, core holdings that were acquired when yields were higher than today. The fund received especially strong income contributions from lower-rated holdings, such as bonds issued on behalf of airlines and the states’ settlement of litigation with

4


U.S. tobacco companies.The fund’s returns also were supported by a modestly long average duration, which enabled the fund to participate more fully in incrementally higher income toward the longer end of the market’s maturity range.

On the other hand, some of the fund’s longstanding holdings matured or were redeemed early by their issuers, and we were unable to replace them with securities carrying comparable yields. In addition, the fund’s leveraging strategy proved to be less effective than in previous reporting periods, primarily due to a narrowing of yield differences along the market’s maturity range. Yields of the fund’s auction-rate preferred notes, which fuel our leveraging strategy, rose along with short-term interest rates, while yields declined on the long-term municipal bonds in which the fund invests. These factors led us to reduce the fund’s dividend distribution rate in May to a level that better reflects prevailing and expected market conditions.

Fed Expected to Remain On Hold

Recent U.S. economic data have been mixed, with signs of greater economic weakness emerging at the same time that inflation has remained stubbornly above the Fed’s “comfort zone.” As a result, it seems to us that the Fed is unlikely to raise or reduce short-term interest rates any time soon. We therefore expect to maintain the fund’s long average duration and its focus on income-oriented securities.

June 15, 2007

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 figure provided reflects the 
    absorption of certain expenses by The Dreyfus Corporation pursuant to an undertaking in effect 
    through August 31, 2007. Had these expenses not been absorbed, the fund’s return would have 
    been lower. 
2    Distribution rate per share is based upon dividends per share paid from net investment income 
    during the period, divided by the market price per share at the end of the period, adjusted for any 
    capital gain distributions. 

T h e F u n d 5


S TAT E M E N T   O F   I N V E S T M E N T S

M a y 3 1 , 2 0 0 7 ( U n a u d i t e d )

Long-Term Municipal    Coupon    Maturity    Principal     
Investments—144.3%    Rate (%)    Date    Amount ($)    Value ($) 





Alaska—3.8%                 
Alaska Housing Finance                 
Corporation, General Mortgage                 
Revenue (Insured; MBIA)    6.05    6/1/39    11,915,000    12,167,836 
Alaska Housing Finance                 
Corporation, Single-Family                 
Residential Mortgage Revenue                 
(Veterans Mortgage Program)    6.25    6/1/35    4,180,000    4,340,972 
Arizona—.5%                 
Apache County Industrial                 
Development Authority, PCR                 
(Tucson Electric Power                 
Company Project)    5.85    3/1/28    2,220,000    2,221,354 
Arkansas—.6%                 
Arkansas Development Finance                 
Authority, SFMR (Mortgage                 
Backed Securities Program)                 
(Collateralized: FNMA and GNMA)    6.25    1/1/32    2,610,000    2,659,433 
California—10.6%                 
California,                 
GO (Various Purpose)    5.50    4/1/14    4,605,000 a    5,056,014 
California,                 
GO (Various Purpose)    5.25    11/1/27    4,240,000    4,503,898 
California Department of Veteran                 
Affairs, Home Purchase Revenue    5.20    12/1/28    2,950,000    2,951,681 
California Health Facilities                 
Financing Authority, Revenue                 
(Cedars-Sinai Medical Center)    6.25    12/1/09    3,750,000 a    4,019,400 
Golden State Tobacco                 
Securitization Corporation,                 
Tobacco Settlement                 
Asset-Backed Bonds    5.00    6/1/33    5,000,000    4,949,050 
Golden State Tobacco                 
Securitization Corporation,                 
Tobacco Settlement                 
Asset-Backed Bonds    5.75    6/1/47    20,000,000    21,185,400 
Silicon Valley Tobacco Securitization             
Authority, Tobacco Settlement                 
Asset-Backed Bonds (Santa                 
Clara County Tobacco                 
Securitization Corporation)    0.00    6/1/36    15,290,000    3,111,821 

6


Long-Term Municipal    Coupon    Maturity    Principal     
Investments (continued)    Rate (%)    Date    Amount ($)    Value ($) 





Colorado—3.9%                 
Colorado Health Facilities                 
Authority, Revenue                 
(American Housing                 
Foundation I, Inc. Project)    8.50    12/1/31    1,970,000    2,100,335 
Colorado Housing Finance Authority             
(Single Family Program)                 
(Collateralized; FHA)    6.60    8/1/32    1,910,000    2,007,964 
Denver City and County,                 
Special Facilities Airport                 
Revenue (United Airlines Project)    6.88    10/1/32    2,885,000    2,922,505 
Northwest Parkway Public Highway                 
Authority, Revenue    7.13    6/15/41    7,000,000    7,503,440 
Salida Hospital District,                 
HR    5.25    10/1/36    2,500,000    2,515,400 
Connecticut—4.6%                 
Connecticut Development Authority,             
PCR (Connecticut Light and                 
Power Company Project)    5.95    9/1/28    9,000,000    9,330,120 
Connecticut Resources Recovery                 
Authority, Special Obligation                 
Revenue (American REF-FUEL                 
Company of Southeastern                 
Connecticut Project)    6.45    11/15/22    4,985,000    5,060,722 
Mohegan Tribe of Indians of                 
Connecticut Gaming Authority,                 
Priority Distribution Payment                 
Public Improvement Revenue    5.38    1/1/11    4,400,000    4,478,584 
Mohegan Tribe of Indians of                 
Connecticut Gaming Authority,                 
Priority Distribution Payment                 
Public Improvement Revenue    6.25    1/1/31    1,000,000    1,059,500 
District of Columbia—3.2%                 
District of Columbia Tobacco                 
Settlement Financing                 
Corporation, Tobacco                 
Settlement Asset-Backed Bonds    0.00    6/15/46    104,040,000    10,077,314 
Metropolitan Washington Airports                 
Authority, Special Facility                 
Revenue (Caterair                 
International Corporation)    10.13    9/1/11    3,700,000    3,705,624 

T h e F u n d 7


S TAT E M E N T   O F   I N V E S T M E N T S  ( U n a u d i t e d ) (continued)

Long-Term Municipal    Coupon    Maturity    Principal     
Investments (continued)    Rate (%)    Date    Amount ($)    Value ($) 





Florida—5.0%                 
Escambia County,                 
EIR (International Paper                 
Company Project)    5.00    8/1/26    1,825,000    1,835,439 
Escambia County,                 
EIR (International Paper                 
Company Project)    5.00    8/1/26    2,300,000    2,313,156 
Florida Housing Finance                 
Corporation, Housing Revenue             
(Seminole Ridge Apartments)                 
(Collateralized; GNMA)    6.00    4/1/41    6,415,000    6,617,586 
Highlands County Health Facilities             
Authority, HR (Adventist                 
Health System/Sunbelt                 
Obligated Group)    5.25    11/15/36    4,000,000    4,147,760 
Orange County Health Facilities                 
Authority, HR (Orlando                 
Regional Healthcare System)    6.00    10/1/09    70,000 a    73,972 
Orange County Health Facilities                 
Authority, HR (Orlando                 
Regional Healthcare System)    6.00    10/1/26    3,430,000    3,582,361 
Orange County Health Facilities                 
Authority, Revenue (Adventist             
Health System)    6.25    11/15/12    3,000,000 a    3,322,410 
Georgia—2.5%                 
Atlanta,                 
Airport Revenue                 
(Insured; FSA)    5.25    1/1/25    3,000,000    3,151,770 
Augusta,                 
Airport Revenue    5.45    1/1/31    2,500,000    2,623,225 
Georgia Housing and Finance                 
Authority, SFMR    5.60    12/1/32    2,335,000    2,431,342 
Savannah Economic Development             
Authority, EIR (International                 
Paper Company Project)    6.20    8/1/27    2,670,000    2,880,716 
Idaho—.1%                 
Idaho Housing and Finance                 
Association, SFMR                 
(Collateralized; FNMA)    6.35    1/1/30    390,000    401,213 

8


Long-Term Municipal    Coupon    Maturity    Principal     
Investments (continued)    Rate (%)    Date    Amount ($)    Value ($) 





Illinois—8.4%                 
Chicago,                 
MFHR (Sankofa House Project)                 
(Collateralized; GNMA and                 
Insured; FHA)    5.00    11/20/48    1,360,000    1,336,377 
Chicago,                 
SFMR (Collateralized: FHLMC,                 
FNMA and GNMA)    6.25    10/1/32    1,805,000    1,839,512 
Chicago O’Hare International                 
Airport, General Airport Third                 
Lien Revenue (Insured; XLCA)    6.00    1/1/29    5,000,000    5,561,350 
Chicago O’Hare International                 
Airport, Special Facilities Revenue                 
(American Airlines Inc. Project)    8.20    12/1/24    5,700,000    5,757,000 
Illinois Educational Facilities                 
Authority, Revenue                 
(Northwestern University)    5.00    12/1/38    5,000,000    5,172,300 
Illinois Health Facilities                 
Authority, Revenue (Advocate                 
Health Care Network)    6.13    11/15/10    5,000,000 a    5,358,800 
Illinois Health Facilities Authority,                 
Revenue (OSF Healthcare System)    6.25    11/15/09    10,900,000 a    11,623,542 
Indiana—1.5%                 
Franklin Township School Building                 
Corporation, First Mortgage Bonds    6.13    7/15/10    6,000,000 a    6,508,800 
Louisiana—2.2%                 
Lakeshore Villages Master                 
Community Development District,                 
Special Assessment Revenue    5.25    7/1/17    2,000,000    1,976,040 
West Feliciana Parish,                 
PCR (Entergy Gulf States Project)    7.00    11/1/15    3,000,000    3,032,280 
West Feliciana Parish,                 
PCR (Entergy Gulf States Project)    6.60    9/1/28    4,700,000    4,736,613 
Maryland—1.3%                 
Maryland Economic Development                 
Corporation, Senior Student                 
Housing Revenue (University of                 
Maryland, Baltimore Project)    5.75    10/1/33    2,550,000    2,548,062 

T h e F u n d 9


S TAT E M E N T   O F   I N V E S T M E N T S   ( U n a u d i t e d ) (continued)

Long-Term Municipal    Coupon    Maturity    Principal     
Investments (continued)    Rate (%)    Date    Amount ($)    Value ($) 





Maryland (continued)                 
Maryland Industrial Development                 
Financing Authority, EDR                 
(Medical Waste Associates                 
Limited Partnership Facility)    8.75    11/15/10    3,710,000    3,104,676 
Massachusetts—2.7%                 
Massachusetts Health and                 
Educational Facilities                 
Authority, Revenue (Civic                 
Investments Issue)    9.00    12/15/15    2,000,000    2,453,700 
Massachusetts Health and                 
Educational Facilities                 
Authority, Revenue (Partners                 
HealthCare System Issue)    5.75    7/1/32    3,000,000    3,214,950 
Massachusetts Housing Finance                 
Agency, SFHR    5.00    12/1/31    6,000,000    6,055,860 
Michigan—2.9%                 
Kent Hospital Finance Authority,                 
Revenue (Metropolitan                 
Hospital Project)    6.00    7/1/35    4,000,000    4,371,480 
Michigan Strategic Fund,                 
SWDR (Genesee Power                 
Station Project)    7.50    1/1/21    8,420,000    8,419,747 
Minnesota—1.1%                 
Saint Paul Housing and                 
Redevelopment Authority,                 
Hospital Facility Revenue                 
(HealthEast Project)    6.00    11/15/25    1,240,000    1,352,741 
Saint Paul Housing and                 
Redevelopment Authority,                 
Hospital Facility Revenue                 
(HealthEast Project)    6.00    11/15/35    3,000,000    3,270,570 
Mississippi—.7%                 
Mississippi Business Finance                 
Corporation, PCR (System                 
Energy Resources, Inc. Project)    5.90    5/1/22    3,160,000    3,191,853 
Nebraska—.2%                 
Nebraska Investment Finance                 
Authority, SFMR    7.77    3/1/26    1,000,000 b,c    1,016,260 

10


Long-Term Municipal    Coupon    Maturity    Principal     
Investments (continued)    Rate (%)    Date    Amount ($)    Value ($) 





Nevada—2.6%                 
Clark County,                 
IDR (Nevada Power                 
Company Project)    5.60    10/1/30    3,000,000    3,019,050 
Washoe County,                 
GO Convention Center Revenue                 
(Reno-Sparks Convention and                 
Visitors Authority) (Insured; FSA)    6.40    1/1/10    8,000,000 a    8,501,840 
New Hampshire—3.3%                 
New Hampshire Business Finance                 
Authority, PCR (Public Service                 
Company of New Hampshire                 
Project) (Insured; MBIA)    6.00    5/1/21    2,690,000    2,789,342 
New Hampshire Business Finance                 
Authority, PCR (Public Service                 
Company of New Hampshire                 
Project) (Insured; MBIA)    6.00    5/1/21    6,000,000    6,221,580 
New Hampshire Industrial                 
Development Authority, PCR                 
(Connecticut Light and Power                 
Company Project)    5.90    11/1/16    5,400,000    5,539,266 
New Jersey—4.9%                 
New Jersey Economic Development                 
Authority, Special Facility Revenue             
(Continental Airlines, Inc. Project)    6.25    9/15/19    4,620,000    4,778,697 
Tobacco Settlement Financing                 
Corporation of New Jersey,                 
Tobacco Settlement                 
Asset-Backed Bonds    7.00    6/1/13    10,095,000 a    11,746,037 
Tobacco Settlement Financing                 
Corporation of New Jersey,                 
Tobacco Settlement                 
Asset-Backed Bonds    5.00    6/1/41    5,000,000    4,886,500 
New York—8.1%                 
New York City Industrial                 
Development Agency, Special                 
Facility Revenue (American                 
Airlines, Inc. John F. Kennedy                 
International Airport Project)    8.00    8/1/28    3,000,000    3,671,130 

T h e F u n d 11


S TAT E M E N T   O F   I N V E S T M E N T S   ( U n a u d i t e d ) (continued)

Long-Term Municipal    Coupon    Maturity    Principal     
Investments (continued)    Rate (%)    Date    Amount ($)    Value ($) 





New York (continued)                 
New York City Industrial                 
Development Agency, Special                 
Facility Revenue (American                 
Airlines, Inc. John F. Kennedy                 
International Airport Project)    7.75    8/1/31    10,000,000    12,056,800 
New York Liberty Development                 
Corporation, Revenue (Goldman                 
Sachs Headquarters Issue)    5.25    10/1/35    13,000,000    14,473,550 
New York State Dormitory                 
Authority, Revenue (Marymount                 
Manhattan College)                 
(Insured; Radian)    6.25    7/1/29    4,000,000    4,205,000 
New York State Dormitory                 
Authority, Revenue (Suffolk                 
County Judicial Facility)    9.50    4/15/14    605,000    800,294 
North Carolina—.6%                 
North Carolina Eastern Municipal                 
Power Agency, Power System                 
Revenue    6.70    1/1/19    2,500,000    2,671,625 
Ohio—5.1%                 
Cuyahoga County,                 
Hospital Facilities Revenue                 
(UHHS/CSAHS-Cuyahoga, Inc. and                 
CSAHS/UHHS-Canton, Inc. Project)    7.50    1/1/30    3,500,000    3,815,210 
Cuyahoga County,                 
Hospital Improvement Revenue                 
(The Metrohealth Systems Project)    6.15    2/15/09    10,000,000 a    10,487,000 
Ohio Air Quality Development                 
Authority, PCR (The Cleveland                 
Electric Illuminating Company                 
Project) (Insured; ACA)    6.10    8/1/20    2,400,000    2,453,712 
Ohio Housing Finance Agency,                 
Residential Mortgage Revenue                 
(Mortgage-Backed Securities                 
Program) (Collateralized; GNMA)    6.15    3/1/29    1,510,000    1,547,826 
Ohio Water Development Authority,                 
PCR (The Cleveland Electric                 
Illuminating Company Project)                 
(Insured; ACA)    6.10    8/1/20    4,000,000    4,089,520 

12


Long-Term Municipal    Coupon    Maturity    Principal     
Investments (continued)    Rate (%)    Date    Amount ($)    Value ($) 





Oklahoma—3.3%                 
Oklahoma Development Finance                 
Authority, Revenue (Saint John                 
Health System)    6.00    2/15/29    9,000,000    9,361,620 
Oklahoma Industries Authority,                 
Health System Revenue                 
(Obligated Group) (Insured; MBIA)    5.75    8/15/09    2,105,000 a    2,213,260 
Oklahoma Industries Authority,                 
Health System Revenue                 
(Obligated Group)                 
(Insured; MBIA)    5.75    8/15/29    2,895,000    3,020,411 
Pennsylvania—3.4%                 
Allegheny County Port Authority,                 
Special Transportation Revenue                 
(Insured; MBIA)    6.13    3/1/09    4,750,000 a    4,981,467 
Lehman Municipal Trust Receipts                 
(Pennsylvania Economic                 
Development Financing                 
Authority, SWDR (USG                 
Corporation Project))    6.00    6/1/31    7,000,000 c,d    7,280,245 
Pennsylvania Economic Development             
Financing Authority, Exempt                 
Facilities Revenue (Reliant                 
Energy Seward, LLC Project)    6.75    12/1/36    2,000,000    2,211,340 
Pennsylvania Housing Finance                 
Agency, Multi-Family                 
Development Revenue    8.25    12/15/19    241,000    241,549 
Rhode Island—.7%                 
Rhode Island Health and                 
Educational Building                 
Corporation, Higher                 
Educational Facilities Revenue                 
(University of Rhode Island—                 
Auxiliary Enterprise Revenue                 
Issue) (Insured; MBIA)    5.88    9/15/09    3,000,000 a    3,165,600 
South Carolina—10.0%                 
Greenville County School District,                 
Installment Purchase Revenue                 
(Building Equity Sooner                 
for Tomorrow)    5.50    12/1/12    19,000,000 a,c,d    20,601,225 

T h e F u n d 13


S TAT E M E N T   O F   I N V E S T M E N T S   ( U n a u d i t e d ) (continued)

Long-Term Municipal    Coupon    Maturity    Principal     
Investments (continued)    Rate (%)    Date    Amount ($)    Value ($) 





South Carolina (continued)                 
Greenville Hospital System,                 
Hospital Facilities Revenue                 
(Insured; AMBAC)    5.50    5/1/26    7,000,000    7,418,530 
Medical University of South                 
Carolina, Hospital                 
Facilities Revenue    6.00    7/1/09    5,000,000 a    5,265,900 
Richland County,                 
EIR (International Paper                 
Company Project)    6.10    4/1/23    6,500,000    7,026,305 
Securing Assets for Education,                 
Installment Purchase Revenue                 
(Berkeley County School                 
District Project)    5.13    12/1/30    3,280,000    3,450,002 
Tennessee—6.0%                 
Johnson City Health and Educational                 
Facilities Board, Hospital First                 
Mortgage Revenue (Mountain                 
States Health Alliance)    7.50    7/1/25    2,000,000    2,308,240 
Johnson City Health and                 
Educational Facilities Board,                 
Hospital First Mortgage                 
Revenue (Mountain States                 
Health Alliance)    7.50    7/1/33    4,875,000    5,611,905 
Memphis Center City Revenue                 
Finance Corporation, Sports                 
Facility Revenue (Memphis Redbirds             
Baseball Foundation Project)    6.50    9/1/28    6,000,000    5,981,400 
Tennessee Energy Acquisition                 
Corporation, Gas Project                 
Revenue    5.25    9/1/26    9,700,000    10,583,573 
Tennessee Housing Development                 
Agency (Homeownership Program)    6.00    1/1/28    1,575,000    1,587,285 
Texas—21.5%                 
Alliance Airport Authority Inc.,                 
Special Facilities Revenue                 
(American Airlines, Inc. Project)    5.75    12/1/29    2,000,000    2,014,460 
Brazos River Harbor Navigation                 
District, Revenue (The Dow                 
Chemical Company Project)    5.13    5/15/33    5,000,000    5,046,650 

  14

Long-Term Municipal    Coupon    Maturity    Principal     
Investments (continued)    Rate (%)    Date    Amount ($)    Value ($) 





Texas (continued)                 
Cities of Dallas and Fort Worth,                 
Dallas/Fort Worth                 
International Airport, Facility                 
Improvement Corporation                 
Revenue (Learjet Inc. Project)    6.15    1/1/16    3,000,000    3,019,890 
Gregg County Health Facilities                 
Development Corporation, HR                 
(Good Shepherd Medical Center                 
Project) (Insured; Radian)    6.38    10/1/10    2,500,000 a    2,714,700 
Gulf Coast Industrial Development                 
Authority, Environmental                 
Facilities Revenue (Microgy                 
Holdings Project)    7.00    12/1/36    5,000,000    5,363,700 
Harris County Health Facilities                 
Development Corporation, HR                 
(Memorial Hermann                 
Healthcare System)    6.38    6/1/11    7,000,000 a    7,689,080 
Harris County-Houston Sports                 
Authority, Third Lien Revenue                 
(Insured; MBIA)    0.00    11/15/31    9,685,000    2,830,732 
Katy Independent School District,                 
Unlimited Tax School Building                 
Bonds (Permanent School Fund                 
Guarantee Program)    6.13    2/15/09    10,000,000 a    10,392,400 
Lubbock Housing Financing                 
Corporation, SFMR                 
(Collateralized: FNMA and GNMA)    6.70    10/1/30    1,430,000    1,441,426 
Sabine River Authority,                 
PCR (TXU Electric                 
Company Project)    6.45    6/1/21    4,900,000    5,112,905 
Texas                 
(Veterans Housing Assistance                 
Program) (Collateralized; FHA)    6.10    6/1/31    8,510,000    8,875,164 
Texas                 
(Veterans’ Land)    6.00    12/1/30    3,935,000    4,156,777 
Texas Department of Housing and                 
Community Affairs, Home Mortgage             
Revenue (Collateralized: FHLMC,                 
FNMA and GNMA)    9.61    7/2/24    1,300,000 b    1,369,394 

T h e F u n d 15


S TAT E M E N T   O F   I N V E S T M E N T S   ( U n a u d i t e d ) (continued)

Long-Term Municipal    Coupon    Maturity    Principal     
Investments (continued)    Rate (%)    Date    Amount ($)    Value ($) 





Texas (continued)                 
Texas Department of Housing and                 
Community Affairs, Residential                 
Mortgage Revenue (Collateralized:                 
FHLMC, FNMA and GNMA)    5.35    7/1/33    5,265,000    5,378,566 
Texas Transportation Commission,                 
GO (Mobility Fund) (Insured; FGIC)    4.50    4/1/35    7,500,000    7,319,250 
Texas Turnpike Authority,                 
Central Texas Turnpike System                 
Revenue (Insured; AMBAC)    5.25    8/15/42    6,775,000    7,113,818 
Tomball Hospital Authority,                 
Revenue (Tomball Regional                 
Hospital)    6.00    7/1/25    4,650,000    4,803,636 
Tyler Health Facilities                 
Development Corporation, HR                 
(East Texas Medical Center                 
Regional Healthcare                 
System Project)    6.75    11/1/25    5,850,000    5,894,987 
Willacy County Local Government                 
Corporation, Project Revenue    6.00    3/1/09    3,000,000    3,010,230 
Virginia—4.8%                 
Henrico County Industrial                 
Development Authority, Revenue                 
(Bon Secours Health System)                 
(Insured; FSA)    7.92    8/23/27    7,500,000 b    9,894,750 
Tobacco Settlement Financing                 
Corporation of Virginia, Tobacco                 
Settlement Asset-Backed Bonds    5.63    6/1/15    2,000,000 a    2,214,440 
Virginia Housing Development                 
Authority, Rental Housing Revenue    6.20    8/1/24    8,520,000    8,873,239 
Washington—2.4%                 
Washington Higher Educational                 
Facilities Authority, Revenue                 
(Whitman College)    5.88    10/1/09    10,000,000 a    10,468,800 

16

Long-Term Municipal    Coupon    Maturity    Principal     
Investments (continued)    Rate (%)    Date    Amount ($)    Value ($) 





Wisconsin—8.0%                 
Badger Tobacco Asset                 
Securitization Corporation,                 
Tobacco Settlement                 
Asset-Backed Bonds    6.13    6/1/27    9,560,000 c,d    10,255,347 
Badger Tobacco Asset                 
Securitization Corporation,                 
Tobacco Settlement                 
Asset-Backed Bonds    7.00    6/1/28    14,570,000    16,473,279 
Wisconsin Health and Educational                 
Facilities Authority, Revenue                 
(Aurora Health Care, Inc.)    6.40    4/15/33    5,500,000    6,054,180 
Wisconsin Health and Educational                 
Facilities Authority, Revenue                 
(Marshfield Clinic)    5.38    2/15/34    2,000,000    2,083,060 
Wyoming—3.5%                 
Sweetwater County,                 
SWDR (FMC Corporation Project)    5.60    12/1/35    5,000,000    5,285,450 
Wyoming Student Loan                 
Corporation, Student                 
Loan Revenue    6.20    6/1/24    5,000,000    5,000,000 
Wyoming Student Loan Corporation,             
Student Loan Revenue    6.25    6/1/29    5,000,000    5,000,000 
U.S. Related—.3%                 
Children’s Trust Fund of Puerto                 
Rico, Tobacco Settlement                 
Asset-Backed Bonds    0.00    5/15/50    5,000,000    351,850 
Children’s Trust Fund of Puerto                 
Rico, Tobacco Settlement                 
Asset-Backed Bonds    0.00    5/15/55    20,000,000    750,000 
Total Long-Term Municipal                 
Investments                 
(cost $605,105,949)                629,527,826 

T h e F u n d 17


S TAT E M E N T   O F   I N V E S T M E N T S   ( U n a u d i t e d ) (continued)

Option—.0%    Contracts    Value ($) 



Call Option;         
July 2007 10 Year U.S. Treasury Future June 2007 @ 107     
(cost $35,531)    125    21,484 



Total Investments (cost $605,141,480)    144.3%    629,549,310 
Liabilities, Less Cash and Receivables    (1.7%)    (7,242,981) 
Preferred Stock, at redemption value    (42.6%)    (186,000,000) 
Net Assets Applicable to Common Shareholders    100.0%    436,306,329 

a 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. b Inverse floater security—the interest rate is subject to change periodically. c Securities exempt from registration under Rule 144A of the Securities Act of 1933.These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At May 31, 2007, these securities amounted to $39,153,077 or 9.0% of net assets applicable to Common Shareholders. d Collateral for floating rate borrowings.

18


Summary of Abbreviations         
 
ACA    American Capital Access    AGC    ACE Guaranty Corporation 
AGIC    Asset Guaranty Insurance    AMBAC    American Municipal Bond 
    Company        Assurance Corporation 
ARRN    Adjustable Rate Receipt Notes    BAN    Bond Anticipation Notes 
BIGI    Bond Investors Guaranty Insurance    BPA    Bond Purchase Agreement 
CGIC    Capital Guaranty Insurance    CIC    Continental Insurance 
    Company        Company 
CIFG    CDC Ixis Financial Guaranty    CMAC    Capital Market Assurance 
            Corporation 
COP    Certificate of Participation    CP    Commercial Paper 
EDR    Economic Development Revenue    EIR    Environmental Improvement 
            Revenue 
FGIC    Financial Guaranty Insurance         
    Company    FHA    Federal Housing Administration 
FHLB    Federal Home Loan Bank    FHLMC    Federal Home Loan Mortgage 
            Corporation 
FNMA    Federal National         
    Mortgage Association    FSA    Financial Security Assurance 
GAN    Grant Anticipation Notes    GIC    Guaranteed Investment Contract 
GNMA    Government National         
    Mortgage Association    GO    General Obligation 
HR    Hospital Revenue    IDB    Industrial Development Board 
IDC    Industrial Development Corporation    IDR    Industrial Development Revenue 
LOC    Letter of Credit    LOR    Limited Obligation Revenue 
LR    Lease Revenue    MBIA    Municipal Bond Investors Assurance 
            Insurance Corporation 
MFHR    Multi-Family Housing Revenue    MFMR    Multi-Family Mortgage Revenue 
PCR    Pollution Control Revenue    PILOT    Payment in Lieu of Taxes 
RAC    Revenue Anticipation Certificates    RAN    Revenue Anticipation Notes 
RAW    Revenue Anticipation Warrants    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    SWDR    Solid Waste Disposal Revenue 
TAN    Tax Anticipation Notes    TAW    Tax Anticipation Warrants 
TRAN    Tax and Revenue Anticipation Notes    XLCA    XL Capital Assurance 

T h e F u n d 19


S TAT E M E N T   O F   I N V E S T M E N T S   ( U n a u d i t e d ) (continued)

Summary of Combined Ratings (Unaudited)     
 
Fitch    or Moody’s    or    Standard & Poor’s    Value (%)  





AAA    Aaa        AAA    23.9 
AA    Aa        AA    19.6 
A        A        A    13.3 
BBB    Baa        BBB    24.9 
BB    Ba        BB    2.8 
B        B        B    5.9 
CCC    Caa        CCC    1.3 
Not Rated e    Not Rated e        Not Rated e    8.3 
                    100.0 
 
    Based on total investments.             
e    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.             

20


S TAT E M E N T   O F   A S S E T S    A N D    L I A B I L I T I E S 
M a y  3 1 , 2 0 0 7 ( U n a u d i t e d )         

    Cost    Value 



Assets ($):         
Investments in securities—See Statement of Investments    605,141,480    629,549,310 
Cash        229,785 
Interest receivable        11,248,638 
Prepaid expenses        5,702 
        641,033,435 



Liabilities ($):         
Due to The Dreyfus Corporation and affiliates—Note 3(a)        350,445 
Payable for floating rate notes issued        17,780,000 
Interest and related expenses payable        368,208 
Dividends payable to Preferred shareholders        44,456 
Commissions payable        16,725 
Accrued expenses and other liabilities        167,272 
        18,727,106 



Auction Preferred Stock, Series A, B and C, par value         
$.001 per share (7,440 shares issued and outstanding     
at $25,000 per share liquidation value)—Note 1        186,000,000 



Net Assets applicable to Common Shareholders ($)        436,306,329 



Composition of Net Assets ($):         
Common Stock, par value, $.001 per share         
(48,495,729 shares issued and outstanding)        48,496 
Paid-in capital        438,464,435 
Accumulated distributions in excess of investment income—net    (175,120) 
Accumulated net realized gain (loss) on investments        (26,439,312) 
Accumulated net unrealized appreciation         
(depreciation) on investments        24,407,830 



Net Assets applicable to Common Shareholders ($)        436,306,329 



Common Shares Outstanding         
(110 million shares of $.001 par value Common Stock authorized)    48,495,729 


Net Asset Value per share of Common Stock ($)        9.00 

See notes to financial statements.

T h e F u n d 21


S TAT E M E N T   O F   O P E R AT I O N S

S i x M o n t h s E n d e d M a y 3 1 , 2 0 0 7 ( U n a u d i t e d )

Investment Income ($):     
Interest Income    17,974,495 
Expenses:     
Investment advisory fee—Note 3(a)    1,561,873 
Administration fee—Note 3(a)    780,937 
Interest and related expenses    366,323 
Commission fees—Note 1    244,998 
Professional fees    41,301 
Shareholders’ reports    32,575 
Directors’ fees and expenses—Note 3(b)    23,944 
Registration fees    7,148 
Shareholder servicing costs    6,712 
Custodian fees    6,202 
Miscellaneous    31,118 
Total Expenses    3,103,131 
Less—reduction in investment advisory fee     
due to undertaking—Note 3(a)    (312,374) 
Less—reduction in custody fees due to     
earnings credit—Note 1(b)    (1,187) 
Net Expenses    2,789,570 
Investment Income—Net    15,184,925 


Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): 
Net realized gain (loss) on investments    1,742,758 
Net unrealized appreciation (depreciation) on investments    (11,284,091) 
Net Realized and Unrealized Gain (Loss) on Investments    (9,541,333) 
Dividends on Preferred Stock    (3,368,272) 
Net Increase in Net Assets Resulting from Operations    2,275,320 

See notes to financial statements.

22


S TAT E M E N T   O F   C H A N G E S  I N  N E T  A S S E T S

    Six Months Ended     
    May 31, 2007    Year Ended 
    (Unaudited)    November 30, 2006 



Operations ($):         
Investment income—net    15,184,925    31,008,822 
Net realized gain (loss) on investments    1,742,758    3,900,272 
Net unrealized appreciation         
(depreciation) on investments    (11,284,091)    11,976,354 
Dividends on Preferred Stock    (3,368,272)    (6,123,205) 
Net Increase (Decrease) in Net Assets         
Resulting from Operations    2,275,320    40,762,243 



Dividends to Common Shareholders from ($):     
Investment income—net    (12,484,751)    (24,902,021) 



Capital Stock Transactions ($):         
Dividends reinvested—Note 1(c)    1,916,979    272,463 
Total Increase (Decrease) in Net Assets    (8,292,452)    16,132,685 



Net Assets ($):         
Beginning of Period    444,598,781    428,466,096 
End of Period    436,306,329    444,598,781 
Undistributed (distributions in excess of)         
investment income—net    (175,120)    492,978 



Capital Share Transactions (Common Shares):     
Increase in Common Shares Outstanding         
as a Result of Dividends Reinvested    210,887    73,419 

See notes to financial statements.

T h e F u n d 23


F I N A N C I A L   H I G H L I G H T S

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, with respect to common stock and market price data for the fund’s common shares.

    Six Months Ended             
    May 31, 2007        Year Ended November 30,     



    (Unaudited)    2006    2005    2004    2003    2002 







Per Share Data ($):                         
Net asset value,                         
beginning of period    9.21    8.88    8.79    8.90    8.56    8.75 
Investment Operations:                         
Investment income—net a    .31    .64    .63    .61    .64    .70 
Net realized and unrealized                         
gain (loss) on investments    (.19)    .34    .13    (.06)    .36    (.26) 
Dividends on Preferred Stock                         
from investment income—net    (.07)    (.13)    (.08)    (.05)    (.06)    (.07) 
Total from                         
Investment Operations    .05    .85    .68    .50    .94    .37 
Distributions to                         
Common Shareholders:                         
Dividends from                         
investment income—net    (.26)    (.52)    (.59)    (.61)    (.60)    (.56) 
Net asset value, end of period    9.00    9.21    8.88    8.79    8.90    8.56 
Market value, end of period    9.12    9.29    8.16    8.41    8.81    7.88 







Total Return (%) b    .99c    9.94    3.78    2.48    19.89    (.36) 

24


        Six Months Ended             



        May 31, 2007        Year Ended November 30,     



        (Unaudited)    2006    2005    2004    2003    2002 








Ratios/Supplemental Data (%):                     
Ratio of total expenses                         
to average net assets                         
applicable to Common Stock d    1.41e    1.38    1.26    1.26    1.28    1.28 
Ratio of net expenses                         
to average net assets                         
applicable to Common Stock d    1.27e    1.24    1.12    1.25    1.28    1.28 
Ratio of net investment income                         
to average net assets                         
applicable to Common Stock d    6.91e    7.16    6.98    6.96    7.35    8.10 
Ratio of total expenses                         
to total average net assets    .99e    .97    .88    .88    .86    .89 
Ratio of net expenses                         
to total average net assets    .89e    .87    .78    .86    .86    .89 
Ratio of net investment income                         
to total average net assets    4.86e    5.01    4.88    4.84    5.10    5.61 
Portfolio Turnover Rate    23.61c    57.12    44.20    39.94    77.92    44.71 
Asset coverage of Preferred Stock,                     
end of period    335    339    330    328    330    321 







Net Assets, net of Preferred Stock,                     
end of period ($ x 1,000)    436,306    444,599    428,466    423,556    428,301    411,369 
Preferred Stock outstanding,                         
end of period ($ x 1,000)    186,000    186,000    186,000    186,000    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 Stock shareholders.             
e    Annualized.                         
See notes to financial statements.                         

T h e F u n d 25


N O T E S   T O   F I N A N C I A L   S TAT E M E N T S ( U n a u d i t e d )

NOTE 1—Significant Accounting Policies:

Dreyfus Strategic Municipal Bond Fund, Inc. (the “fund”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified closed-end management investment company. The fund’s investment objective is to maximize current income exempt from federal income tax to the extent believed by the fund’s investment adviser to be consistent with the preservation of capital.The Dreyfus Corporation (the “Manager” or “Dreyfus”) serves as the fund’s investment adviser. During the reporting period, Dreyfus was a wholly-owned subsidiary of Mellon Financial Corporation (“Mellon Financial”). Mellon Trust of New England, N.A. (the “Custodian”) acts as the fund’s custodian. The Custodian is a wholly-owned subsidiary of Mellon Financial. PFPC Global Fund Services (“PFPC”), a subsidiary of PNC Bank (“PNC”), serves as the fund’s transfer agent, dividend-paying agent, registrar and plan agent. The fund’s Common Stock trades on the New York Stock Exchange under the ticker symbol DSM.

On July 1, 2007, Mellon Financial and The Bank of New York Company, Inc. merged, forming The Bank of New York Mellon Corporation. As part of this transaction, Dreyfus became a wholly-owned subsidiary of The Bank of New York Mellon Corporation.

The fund has outstanding 2,480 shares of Series A, Series B and Series C for a total of 7,440 shares of Auction Preferred Stock (“APS”), with a liquidation preference of $25,000 per share (plus an amount equal to accumulated but unpaid dividends upon liquidation).APS dividend rates are determined pursuant to periodic auctions. Deutsche Bank Trust Company Americas, as Auction Agent, receives a fee from the fund for its services in connection with such auctions.The fund also compensates broker-dealers generally at an annual rate of .25% of the purchase price of the shares of APS placed by the broker-dealer in an auction.

The fund is subject to certain restrictions relating to the APS. Failure to comply with these restrictions could preclude the fund from declar-

26


ing any distributions to common shareholders or repurchasing common shares and/or could trigger the mandatory redemption of APS at liquidation value.

The holders of the APS, voting as a separate class, have the right to elect at least two directors.The holders of the APS vote as a separate class on certain other matters, as required by law.The fund has designated Robin A. Melvin and John E. Zuccotti to represent holders of APS on the fund’s Board of Directors.

The fund’s financial statements are prepared in accordance with U.S. generally accepted accounting principles, 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: Investments in municipal debt securities are valued on the last business day of each week and month by an independent pricing service (the “Service”) approved by the Board of Directors. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. Options and financial futures on municipal securities and U.S.Treasury securities are valued at the last sales price

T h e F u n d 27


N O T E S   T O   F I N A N C I A L   S TAT E M E N T S   ( U n a u d i t e d ) (continued)

on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on the last business day of each week and month.

The Financial Accounting Standards Board (FASB) released Statement of Financial Accounting Standards No. 157 “Fair Value Measurements” (“FAS 157”). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of FAS 157 is required for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Management does not believe that the application of this standard will have a material impact on the financial statements of the fund.

(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Interest income, adjusted for 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.

The fund has an arrangement with the custodian bank whereby the fund receives earnings credits from the custodian 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.

(c) Dividends to shareholders of Common Stock (“Common Shareholder(s)”): Dividends are recorded on the ex-dividend date. Dividends from investment income-net are declared and paid monthly. Dividends from net realized capital gain, if any, are normally declared and paid 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

28


extent that net realized capital gain can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gain. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles.

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 assets value per share on the record date, PFPC will purchase fund shares in the open market commencing on the payable date and reinvest those shares accordingly.As a result of purchasing fund shares in the open market, fund shares outstanding will not be affected by this form of reinvestment.

On May 8, 2007, the Board of Directors declared a cash dividend to Common Shareholders of $.0405 per share from investment income-net, payable on June 29, 2007 to Common Shareholders of record as of the close of business on June 8, 2007.

(d) Dividends to Shareholders of APS: For APS, dividends are currently reset every 7 days for Series A,B and C.The dividend rates in effect at May 31, 2007 were as follows: Series A—3.79%, Series B—3.40% and Series C—3.80% .

(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

T h e F u n d 29


N O T E S   T O   F I N A N C I A L   S TAT E M E N T S   ( U n a u d i t e d ) (continued)

Internal Revenue Code of 1986 as amended, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.

The FASB released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more likely-than-not threshold would be recorded as a tax benefit or expense in the current year.Adoption of FIN 48 is required for fiscal years beginning after December 15,2006 and is to be applied to all open tax years as of the effective date. Management does not believe that the application of this standard will have a material impact on the financial statements of the fund.

The fund has an unused capital loss carryover of $28,408,189 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to November 30, 2006. If not applied, $2,280,744 of the carryover expires in fiscal 2008, $442,201 expires in fiscal 2009, $9,253,314 expires in fiscal 2010, $5,474,907 expires in fiscal 2011 and $10,957,023 expires in fiscal 2012.

The tax character of distributions paid to shareholders during the fiscal year ended November 30, 2006 were as follows: tax exempt income $31,025,226. The tax character of current year distributions will be determined at the end of the current fiscal year.

NOTE 2—Bank Line of Credit:

The fund participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowing. During the period ended May 31, 2007, the fund did not borrow under the Facility.

30


NOTE 3—Investment Advisory Fee, Administration Fee and Other Transactions With Affiliates:

(a) The fee payable by the fund, pursuant to the provisions of an Investment Advisory Agreement with Dreyfus, is payable monthly based on an annual rate of .50% of the value of the fund’s average weekly net assets (including net assets representing auction preferred stock outstanding). The fund also has an Administration Agreement with Dreyfus, a Custody Agreement with the Custodian and a Transfer Agency and Registrar Agreement with PFPC. The fund pays in the aggregate for administration, custody and transfer agency services a monthly fee based on an annual rate of .25% of the value of the fund’s average weekly net assets (including net assets representing auction preferred stock outstanding); out-of pocket transfer agency and custody expenses are paid separately by the fund.

Dreyfus has agreed from December 1, 2006 through August 31, 2007, 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 auction preferred stock outstanding). The reduction in investment advisory fee, pursuant to the undertaking, amounted to $312,374 during the period ended May 31, 2007.

During the period ended May 31, 2007, the fund was charged $2,044 for services performed by the Chief Compliance Officer.

The Components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees $396,475, administration fees $3,226 and chief compliance officer fees $3,748, which are offset against an expense reimbursement currently in effect in the amount of $53,004.

(b) 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.

T h e F u n d 31


N O T E S   T O   F I N A N C I A L   S TAT E M E N T S   ( U n a u d i t e d ) (continued)

NOTE 4—Securities Transactions:

The aggregate amount of purchases and sales of investment securities, excluding short-term securities and options transactions, during the period ended May 31, 2007, amounted to $152,521,999 and $149,854,839, respectively.

The fund may purchase floating rate notes. A floating rate note is a Municipal Bond or other debt obligation (generally held pursuant to a custodial arrangement) having a relatively long maturity and bearing interest at a fixed rate substantially higher than prevailing short-term tax exempt rates, that has been coupled with the agreement of a third party, such as a bank, broker-dealer or other financial institution, pursuant to which such institution grants the security holders the option, at periodic intervals, to tender their securities to the institution and receive the face value thereof. As consideration for providing the option, the financial institution receives periodic fees equal to the difference between the obligation’s fixed coupon rate and the rate, as determined by a remarketing or similar agent at or near the commencement of such period, that would cause the securities, coupled with the tender option, to trade at par on the date of such determination.Thus, after payment of this fee, the security holder effectively holds a demand obligation that bears interest at the prevailing short-term tax exempt rate.

At May 31, 2007, accumulated net unrealized appreciation on investments was $24,407,830, consisting of $33,773,732 gross unrealized appreciation and $9,365,902 gross unrealized depreciation.

At May 31,2007,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).

32


O F F I C E R S   A N D   D I R E C T O R S

D rey f u s   S t ra te g i c   M u n i c i p a l   B o n d   Fu n d ,  I n c .

200 Park Avenue 
New York, NY 10166 
 
Directors 
Joseph S. DiMartino 
David W. Burke 
William Hodding Carter, III 
Gordon J. Davis 
Joni Evans 
Arnold S. Hiatt  
Ehud Houminer 
Richard C. Leone 
Hans C. Mautner 
Robin A. Melvin †† 
Burton N.Wallack 
John E. Zuccotti †† 
    Emeritus Board Member 
††    Auction Preferred Stock Directors 

Officers     
President     
J. David Officer 
Executive Vice Presidents 
A. Paul Disdier  
Vice President 
Mark N. Jacobs 
Vice President and Secretary 
Michael A. Rosenberg 
Vice President and Assistant Secretaries 
James Bitetto 
Joni Lacks Charatan 
Joseph M. Chioffi     
Janette E. Farragher     
John B. Hammalian 
Robert R Mullery 
Jeff Prusnofsky 
Treasurer     
James Windels 
Assistant Treasurers 
Robert Salviolo 
Robert Robol 
Robert Svagna 
Gavin C. Reilly 
Chief Compliance Officer 
Joseph W. Connolly 

Portfolio Managers 
Joseph P. Darcy     
A. Paul Disdier     
Douglas J. Gaylor 
Joseph A. Irace 
Colleen A. Meehan 
W. Michael Petty 
James Welch 
Monica S.Wieboldt 
Bill Vasiliou 
 
Investment Adviser 
and Administrator 
The Dreyfus Corporation 
 
Custodian 
Mellon Trust of New England, N.A. 
 
Counsel 
Stroock & Stroock & Lavan LLP 
 
Transfer Agent, 
Dividend-Paying Agent, 
Registrar and Disbursing Agent 
PFPC Global Fund Services 
(Common Stock) 
Deutsche Bank Trust Company Americas 
(Auction Preferred Stock) 
 
Auction Agent 
Deutsche Bank Trust Company Americas 
(Auction Preferred Stock) 
 
Stock Exchange Listing 
NYSE Symbol: DSM 
 
Initial SEC Effective Date 
11/22/89 

The Net Asset Value appears in the following publications:Barron’s,Closed-End Bond Funds section under the heading “Municipal Bond Funds”every Monday;Wall Street Journal,Mutual Funds section under the heading “Closed-End Funds”every Monday; NewYork Times,Business section under the heading “Closed-End Bond Funds—Municipal Bond Funds”every Monday.

Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that the fund may purchase shares of its common stock in the open market when it can do so at prices below the then current net asset value per share.

T h e F u n d 33


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.    Schedule of Investments. 
    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. 
    None. 
Item 10.    Submission of Matters to a Vote of Security Holders. 

The Registrant has a Nominating Committee (the "Committee"), which is responsible for selecting and nominating persons for election or appointment by the Registrant's Board as Board members. The Committee has adopted a Nominating Committee Charter (the "Charter"). Pursuant to the Charter, the Committee will consider recommendations for nominees from shareholders submitted to the Secretary of the Registrant, c/o The Dreyfus Corporation Legal Department, 200 Park Avenue, 8th Floor East, New York, New York 10166. A nomination submission must include information regarding the recommended nominee as specified in the Charter. This information includes all information relating to a recommended nominee that is required to be disclosed in solicitations or proxy statements for the election of Board members, as well as information sufficient to evaluate the factors to be considered by the Committee, including character and integrity, business and professional experience, and whether the person has the ability to apply sound and independent business judgment and would act in the interests of the Registrant and its shareholders.


Nomination submissions are required to be accompanied by a written consent of the individual to stand for election if nominated by the Board and to serve if elected by the shareholders, and such additional information must be provided regarding the recommended nominee as reasonably requested by the Committee.

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/ J. David Officer 
    J. David Officer 
    President 
 
Date:    July 23, 2007 

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/ J. David Officer 
    J. David Officer 
    President 
 
Date:    July 23, 2007 

By:    /s/ James Windels 
    James Windels 
    Treasurer 
 
Date:    July 23, 2007 

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)