File Nos. 2-56878
811-2653
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 38 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 38 [X]
(Check appropriate box or boxes.)
DREYFUS 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)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
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X on January 2, 1997 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(i)
----
on (date) pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
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on (date) pursuant to paragraph (a)(ii) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
----
Registrant has registered an indefinite number of shares of its common
stock under the Securities Act of 1933 pursuant to Section 24(f) of the
Investment Company Act of 1940. Registrant's Rule 24f-2 Notice for the fiscal
year ended August 31, 1996 was filed on October 28, 1996.
DREYFUS MUNICIPAL BOND FUND, INC.
Cross-Reference Sheet Pursuant to Rule 495(a)
Items in
Part A of
Form N-1A Caption Page
_________ _______ ____
1 Cover Page Cover
2 Synopsis 3
3 Condensed Financial Information 4
4 General Description of Registrant 4, 18
5 Management of the Fund 7
5(a) Management's Discussion of Fund's Performance *
6 Capital Stock and Other Securities 18
7 Purchase of Securities Being Offered 8
8 Redemption or Repurchase 13
9 Pending Legal Proceedings *
Items in
Part B of
Form N-1A
- ---------
10 Cover Page Cover
11 Table of Contents Cover
12 General Information and History B-1, B-28
13 Investment Objectives and Policies B-2
14 Management of the Fund B-12
15 Control Persons and Principal B-12
Holders of Securities
16 Investment Advisory and Other B-16
Services
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
DREYFUS MUNICIPAL BOND FUND, INC.
Cross-Reference Sheet Pursuant to Rule 495(a) (continued)
Items in
Part B of
Form N-1A Caption Page
_________ _______ _____
17 Brokerage Allocation B-25
18 Capital Stock and Other Securities B-28
19 Purchase, Redemption and Pricing B-18, B-19,
of Securities Being Offered B-24
20 Tax Status *
21 Underwriters B-18
22 Calculations of Performance Data B-27
23 Financial Statements B-39
Items in
Part C of
Form N-1A
_________
24 Financial Statements and Exhibits C-1
25 Persons Controlled by or Under C-3
Common Control with Registrant
26 Number of Holders of Securities C-3
27 Indemnification C-3
28 Business and Other Connections of C-4
Investment Adviser
29 Principal Underwriters C-10
30 Location of Accounts and Records C-13
31 Management Services C-13
32 Undertakings C-13
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
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PROSPECTUS JANUARY 2, 1997
DREYFUS MUNICIPAL BOND FUND, INC.
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DREYFUS MUNICIPAL BOND FUND, INC. (THE "FUND") IS AN OPEN-END,
DIVERSIFIED, MANAGEMENT INVESTMENT COMPANY, KNOWN AS A NO-LOAD MUNICIPAL BOND
FUND. THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE YOU WITH AS HIGH A LEVEL
OF CURRENT INCOME EXEMPT FROM FEDERAL INCOME TAX AS IS CONSISTENT WITH THE
PRESERVATION OF CAPITAL.
THE FUND PROVIDES FREE REDEMPTION CHECKS, WHICH YOU CAN USE IN
AMOUNTS OF $500 OR MORE FOR CASH OR TO PAY BILLS. YOU CONTINUE TO EARN INCOME
ON THE AMOUNT OF THE CHECK UNTIL IT CLEARS. YOU CAN PURCHASE OR REDEEM SHARES
BY TELEPHONE USING DREYFUS TELETRANSFER.
THE DREYFUS CORPORATION PROFESSIONALLY MANAGES THE FUND'S PORTFOLIO.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED JANUARY 2, 1997, WHICH
MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF CERTAIN
AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST TO SOME
INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
IS INCORPORATED HEREIN BY REFERENCE. THE SECURITIES AND EXCHANGE COMMISSION
MAINTAINS A WEB SITE (HTTP://WWW.SEC.GOV) THAT CONTAINS THE STATEMENT OF
ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER
INFORMATION REGARDING THE FUND. FOR A FREE COPY OF THE STATEMENT OF
ADDITIONAL INFORMATION, WRITE TO THE FUND AT 144 GLENN CURTISS BOULEVARD,
UNIONDALE, NEW YORK 11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK
FOR OPERATOR 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. THE NET
ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO TIME.
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TABLE OF CONTENTS
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Page Page
Fee Table....................... 3 How to Redeem Shares............. 13
Condensed Financial Information. 4 Shareholder Services Plan........ 15
Description of the Fund......... 4 Dividends, Distributions and Taxes 16
Management of the Fund.......... 7 Performance Information.......... 17
How to Buy Shares............... 8 General Information.............. 18
Shareholder Services............ 10 Appendix.......................... 19
</TABLE>
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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[This Page Intentionally Left Blank]
Page 2
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FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Redemption Fee* (as a percentage of amount redeemed for shares held less
than fifteen days)............................................................................... .10%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees.............................................................................. .59%
Other Expenses............................................................................... .12%
Total Fund Operating Expenses................................................................ .71%
*Shares acquired by purchase or exchange after May 9, 1997 and held less
than 15 days may be subject to a .10%
redemption fee payable to the Fund. See "How to Redeem Shares."
</TABLE>
<TABLE>
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Example: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period: $7 $23 $40 $88
</TABLE>
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THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL
RETURN GREATER OR LESS THAN 5%.
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The purpose of the foregoing table is to assist you in understanding
the costs and expenses borne by the Fund and investors, the payment of which
will reduce investors' annual return. The information in the foregoing table
does not reflect any fee waivers or expense reimbursement arrangements that
may be in effect or the proceeds from any redemption fee retained by the
Fund. You can purchase Fund shares without charge directly from the Fund's
distributor; you may be charged a nominal fee if you effect transactions in
Fund shares through a securities dealer, bank or other financial institution.
See "Management of the Fund," "How to Redeem Shares" and "Shareholder
Services Plan."
Page 3
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited by Ernst &
Young LLP, the Fund's independent auditors, whose report thereon appears in
the Statement of Additional Information. Further financial data and related
notes are included in the Statement of Additional Information, available upon
request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share
of common stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each year indicated. This information
has been derived from the Fund's financial statements.
<TABLE>
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Year Ended August 31,
----------------------------------------------------------------------------------------------------------
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of year $12.87 $12.22 $12.03 $12.47 $12.24 $12.68 $13.17 $13.68 $12.39 $12.41
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INVESTMENT OPERATIONS:
Investment income-net .93 .91 .91 .90 .87 .84 .79 .75 .72 .69
Net realized
and unrealized
gain (loss)
on investments (.64) (.19) .44 (.23) .44 .49 .79 (.96) .09 (.18)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS........ .29 .72 1.35 .67 1.31 1.33 1.58 (.21) .81 .51
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
DISTRIBUTIONS:
Dividends from
investment income-net (.94) (.91) (.91) (.90) (.87) (.84) (.79) (.75) (.72) (.69)
Dividends from
net realized
gain on investments ._ ._ ._ ._ ._ ._ (.28) (.33) (.07) ._
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (.94) (.91) (.91) (.90) (.87) (.84) (1.07) (1.08) (.79) (.69)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value,
end of year $12.22 $12.03 $12.47 $12.24 $12.68 $13.17 $13.68 $12.39 $12.41 $12.23
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL INVESTMENT
RETURN 2.30% 6.27% 11.60% 5.51% 11.11% 10.82% 12.62% (1.63%) 6.93% 4.16%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses
to average
net assets .68% .71% .68% .67% .67% .68% .69% .68% .70% .71%
Ratio of net
investment income
to average
net assets 7.34% 7.68% 7.41% 7.23% 7.05% 6.49% 5.96% 5.80% 5.94% 5.57%
Portfolio Turnover
Rate 67.23% 50.63% 36.38% 28.06% 35.53% 67.86% 45.37% 36.25% 51.55% 64.48%
Net Assets,
end of year
(000's Omitted). $3,528,585 $3,245,184 $3,485,053 $3,594,296 $4,081,440 $4,272,679 $4,724,389 $4,008,477 $3,936,734 $3,572,286
</TABLE>
Further information about the Fund's performance is contained in the
Fund's annual report which may be obtained without charge by writing to the
address or calling the number set forth on the cover page of this Prospectus.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund's investment objective is to provide you with as high a
level of current income exempt from Federal income taxes as is consistent
with the preservation of capital. To accomplish its investment objective, the
Fund invests primarily in Municipal Obligations (described below) rated A or
better by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Ratings Group ("S&P") or Fitch Investors Service, L.P. ("Fitch"). The Fund's
investment objective cannot be changed without approval by the holders of a
majority (as defined in the Investment Company Act of 1940, as amended (the
"1940 Act")) of the Fund's outstanding voting shares. There can be no
assurance that the Fund's investment objective will be achieved.
Page 4
MUNICIPAL OBLIGATIONS
Municipal Obligations are debt obligations issued by states,
territories and possessions of the United States and the District of Columbia
and their political subdivisions, agencies and instrumentalities, or
multistate agencies or authorities, the interest from which is, in the
opinion of bond counsel to the issuer, exempt from Federal income tax.
Municipal Obligations generally include debt obligations issued to obtain
funds for various public purposes as well as certain industrial development
bonds issued by or on behalf of public authorities. Municipal Obligations are
classified as general obligation bonds, revenue bonds and notes. General
obligation bonds are secured by the issuer's pledge of its faith, credit and
taxing power for the payment of principal and interest. Revenue bonds are
payable from the revenue derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source, but not from the general taxing power. Tax exempt
industrial development bonds, in most cases, are revenue bonds that generally
do not carry the pledge of the credit of the issuing municipality, but
generally are guaranteed by the corporate entity on whose behalf they are
issued. Notes are short-term instruments which are obligations of the issuing
municipalities or agencies and are sold in anticipation of a bond sale,
collection of taxes or receipt of other revenues. Municipal Obligations
include municipal lease/purchase agreements which are similar to installment
purchase contracts for property or equipment issued by municipalities.
Municipal Obligations bear fixed, floating or variable rates of interest,
which are determined in some instances by formulas under which the Municipal
Obligation's interest rate will change directly or inversely to changes in
interest rates or an index, or multiples thereof, in many cases subject to a
maximum and minimum. Certain Municipal Obligations are subject to redemption
at a date earlier than their stated maturity pursuant to call options, which
may be separated from the related Municipal Obligations and purchased and
sold separately.
MANAGEMENT POLICIES
It is a fundamental policy of the Fund that it will invest at least
80% of the value of its net assets (except when maintaining a temporary
defensive position) in Municipal Obligations. At least 65% of the value of
the Fund's net assets (except when maintaining a temporary defensive
position) will be invested in bonds, debentures and other debt instruments.
At least 75% of the value of the Fund's net assets must consist of
Municipal Obligations which, in the case of bonds, are rated no lower than A
by Moody's, S&P or Fitch. The Fund may invest up to 25% of the value of its
net assets in Municipal Obligations which, in the case of bonds, are rated
lower than A by Moody's, S&P and Fitch and as low as the lowest rating
assigned by such rating organizations. The Fund may invest in short-term
Municipal Obligations which are rated in the two highest rating categories by
Moody's, S&P or Fitch. See "Appendix" in the Statement of Additional
Information. Municipal Obligations rated BBB by S&P or Fitch or Baa by
Moody's are considered investment grade obligations; those rated BBB by S&P
and Fitch are regarded as having an adequate capacity to pay principal and
interest, while those rated Baa by Moody's are considered medium grade
obligations which lack outstanding investment characteristics and have
speculative characteristics. Investments rated Ba or lower by Moody's and BB
or lower by S&P and Fitch ordinarily provide higher yields but involve
greater risk because of their speculative characteristics. The Fund may
invest in Municipal Obligations rated C by Moody's or D by S&P or Fitch which
is such rating organizations' lowest rating and indicates that the Municipal
Obligation is in default and interest and/or repayment of principal is in
arrears. See "Investment Considerations and Risks_Lower Rated Bonds" below
for a further discussion of certain risks. The Fund also may invest in
securities which, while not rated, are determined by The Dreyfus Corporation
to be of comparable quality to those rated securities in which the Fund may
invest; for purposes of the 75% requirement described in this paragraph, such
unrated securities shall be deemed to have the ratings so determined. The
Fund also may invest in Taxable Investments of the quality described under
"Appendix -- Certain Portfolio Securities -- Taxable Investments."
Page 5
From time to time, the Fund may invest more than 25% of the value of
its total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the non-governmental users. Interest on Municipal Obligations
(including certain industrial development bonds) which are specified private
activity bonds, as defined in the Internal Revenue Code of 1986, as amended
(the "Code"), issued after August 7, 1986, while exempt from Federal income
tax, is a preference item for the purpose of the alternative minimum tax.
Where a regulated investment company receives such interest, a proportionate
share of any exempt-interest dividend paid by the investment company may be
treated as such a preference item to shareholders. The Fund may invest
without limitation in such Municipal Obligations if The Dreyfus Corporation
determines that their purchase is consistent with the Fund's investment
objective. See "Investment Considerations and Risks" below.
The Fund's annual portfolio turnover rate is not expected to exceed
100%. The Fund may engage in various investment techniques, such as options
and futures transactions and lending portfolio securities. Use of certain of
these techniques may give rise to taxable income. For a discussion of the
investment techniques and their related risks, see "Investment Considerations
and Risks," "Dividends, Distributions and Taxes" and "Appendix_Investment
Techniques" below and "Investment Objective and Management Policies --
Management Policies"in the Statement of Additional Information.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL -- Even though interest-bearing securities are investments which
promise a stable stream of income, the prices of such securities are
inversely affected by changes in interest rates and, therefore, are subject
to the risk of market price fluctuations. Certain securities that may be
purchased by the Fund, such as those with interest rates that fluctuate
directly or indirectly based on multiples of a stated index, are designed to
be highly sensitive to changes in interest rates and can subject the holders
thereof to extreme reductions of yield and possibly loss of principal. The
values of fixed-income securities also may be affected by changes in the
credit rating or financial condition of the issuing entities. Once the rating
of a portfolio security has been changed, the Fund will consider all
circumstances deemed relevant in determining whether to hold the security.
The Fund's net asset value generally will not be stable and should fluctuate
based upon changes in the value of the Fund's portfolio securities.
Securities in which the Fund will invest may earn a higher level of current
income than certain shorter-term or higher quality securities which generally
have greater liquidity, less market risk and less fluctuation in market
value.
INVESTING IN MUNICIPAL OBLIGATIONS -- The Fund may invest more than 25% of
the value of its total assets in Municipal Obligations which are related in
such a way that an economic, business or political development or change
affecting one such security also would affect the other securities; for
example, securities the interest upon which is paid from revenues of similar
types of projects, or securities whose issuers are located in the same state.
As a result, the Fund may be subject to greater risk as compared to a fund
that does not follow this practice.
Certain municipal lease/purchase obligations in which the Fund may
invest may contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease payments in future years unless
money is appropriated for such purpose on a yearly basis. Although
"non-appropriation" lease/purchase obligations are secured by the leased
property, disposition of the leased property in the event of foreclosure
might prove difficult. In evaluating the credit quality of a municipal
lease/purchase obligation that is unrated, The Dreyfus Corporation will
consider, on an ongoing basis, a number of factors including the likelihood
that the issuing municipality will discontinue appropriating funding for the
leased property.
Certain provisions in the Code relating to the issuance of Municipal
Obligations may reduce the volume of Municipal Obligations qualifying for
Federal tax exemption. One effect of these provisions could be to increase
the cost of the Municipal Obligations available for purchase by the Fund and
thus reduce available yield. Shareholders should consult their tax advisers
concerning the effect of these provisions on an investment in the Fund.
Proposals that may restrict or eliminate the income tax exemption
Page 6
for interest on Municipal Obligations may be introduced in the future. If any
such proposal were enacted that would reduce the availability of Municipal
Obligations for investment by the Fund so as to adversely affect Fund
shareholders, the Fund would reevaluate its investment objective and policies
and submit possible changes in the Fund's structure to shareholders for their
consideration. If legislation were enacted that would treat a type of
Municipal Obligation as taxable, the Fund would treat such security as a
permissible Taxable Investment within the applicable limits set forth herein.
ZERO COUPON SECURITIES -- Federal income tax law requires the holder of a
zero coupon security or of certain pay-in-kind bonds to accrue income with
respect to these securities prior to the receipt of cash payments. To
maintain its qualification as a regulated investment company and avoid
liability for Federal income taxes, the Fund may be required to distribute
such income accrued with respect to these securities and may have to dispose
of portfolio securities under disadvantageous circumstances in order to
generate cash to satisfy these distribution requirements.
USE OF DERIVATIVES -- The Fund may invest in derivatives ("Derivatives").
These are financial instruments which derive their performance, at least in
part, from the performance of an underlying asset, index or interest rate.
The Derivatives the Fund may use include options and futures. While
Derivatives can be used effectively in furtherance of the Fund's investment
objective, under certain market conditions, they can increase the volatility
of the Fund's net asset value, can decrease the liquidity of the Fund's
portfolio and make more difficult the accurate pricing of the Fund's
portfolio. See "Appendix -- Investment Techniques -- Use of Derivatives"
below, and "Investment Objective and Management Policies -- Management
Policies -- Derivatives" in the Statement of Additional Information.
LOWER RATED BONDS -- The Fund may invest up to 25% of the value of its net
assets in higher yielding (and, therefore, higher risk) debt securities, such
as those rated Ba by Moody's or BB by S&P or Fitch or as low as the lowest
rating assigned by Moody's, S&P or Fitch (commonly known as junk bonds). They
may be subject to certain risks with respect to the issuing entity and to
greater market fluctuations than certain lower yielding, higher rated
fixed-income securities. The retail secondary market for these bonds may be
less liquid than that of higher rated bonds; adverse market conditions could
make it difficult at times for the Fund to sell certain securities or could
result in lower prices than those used in calculating the Fund's net asset
value. See "Appendix_Certain Portfolio Securities_Ratings."
SIMULTANEOUS INVESTMENTS -- Investment decisions for the Fund are made
independently from those of other investment companies advised by The Dreyfus
Corporation. If, however, such other investment companies desire to invest
in, or dispose of, the same securities as the Fund, available investments or
opportunities for sales will be allocated equitably to each investment
company. In some cases, this procedure may adversely affect the size of the
position obtained for or disposed of by the Fund or the price paid or
received by the Fund.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER -- The Dreyfus Corporation, located at 200 Park Avenue,
New York, New York 10166, was formed in 1947 and serves as the Fund's
investment adviser. The Dreyfus Corporation is a wholly-owned subsidiary of
Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank
Corporation ("Mellon"). As of November 29, 1996, The Dreyfus Corporation
managed or administered approximately $84 billion in assets for approximately
1.7 million investor accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the Fund,
subject to the authority of the Fund's Board in accordance with Maryland law.
The Fund's primary portfolio manager is Richard J. Moynihan. He has held that
position since the inception of the Fund and has been employed by The Dreyfus
Corporation since 1973. The Fund's other portfolio managers are identified in
the Statement of Additional Information. The Dreyfus Corporation also
provides research services for the Fund and for other funds advised by The
Dreyfus Corporation through a professional staff of portfolio managers and
securities analysts.
Page 7
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding companies in
the United States based on total assets. Mellon's principal wholly-owned
subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc., AFCO Credit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, including The Dreyfus Corporation, Mellon managed more than
$226 billion in assets as of September 30, 1996, including approximately $85
billion in proprietary mutual fund assets. As of September 30, 1996, Mellon,
through various subsidiaries, provided non-investment services, such as
custodial or administration services, for more than $905 billion in assets,
including approximately $60 billion in mutual fund assets.
Under the terms of the Management Agreement, the Fund has agreed to
pay The Dreyfus Corporation a monthly fee at the annual rate of .60 of 1% of
the value of the Fund's average daily net assets. For the fiscal year ended
August 31, 1996, the Fund paid The Dreyfus Corporation a monthly management
fee at the effective annual rate of .59 of 1% of the value of the Fund's
average daily net assets pursuant to a settlement of litigation. From time to
time, The Dreyfus Corporation may waive receipt of its fees and/or
voluntarily assume certain expenses of the Fund, which would have the effect
of lowering the expense ratio of the Fund and increasing yield to investors.
The Fund will not pay The Dreyfus Corporation at a later time for any amounts
it may waive, nor will the Fund reimburse The Dreyfus Corporation for any
amounts it may assume.
Pursuant to a settlement of litigation, effective October 14, 1988,
The Dreyfus Corporation agreed, among other things, to make payments to the
Fund to reduce its management fee for a period of ten years from the
effective date of the settlement, in an amount ranging from $90,000 per year,
if the Fund's average daily net assets are between $1 billion and $2 billion,
to $1 million per year, if the Fund's average daily net assets are in excess
of $10 billion. No payments are required if the Fund's average daily net
assets are less than $1 billion.
In allocating brokerage transactions for the Fund, The Dreyfus
Corporation seeks to obtain the best execution of orders at the most
favorable net price. Subject to this determination, The Dreyfus Corporation
may consider, among other things, the receipt of research services and/or the
sale of shares of the Fund or other funds managed, advised or administered by
The Dreyfus Corporation as factors in the selection of broker-dealers to
execute portfolio transactions for the Fund. See "Portfolio Transactions" in
the Statement of Additional Information.
The Dreyfus Corporation may pay the Fund's distributor for
shareholder services from The Dreyfus Corporation's own assets, including
past profits but not including the management fee paid by the Fund. The
Fund's distributor may use part or all of such payments to pay securities
dealers, banks or other financial institutions in respect of these services.
Distributor _ The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at 60 State Street, Boston, Massachusetts 02109.
The Distributor's ultimate parent is Boston Institutional Group, Inc.
Transfer and Dividend Disbursing Agent and Custodian _ Dreyfus Transfer,
Inc., a wholly-owned subsidiary of The Dreyfus Corporation, P.O. Box 9671,
Providence, Rhode Island 02940-9671, is the Fund's Transfer and Dividend
Disbursing Agent (the "Transfer Agent"). The Bank of New York, 90 Washington
Street, New York, New York 10286, is the Fund's Custodian.
HOW TO BUY SHARES
Fund shares are sold without a sales charge. You may be charged a
nominal fee if you effect transactions in Fund shares through a securities
dealer, bank or other financial institution. Stock certificates are issued
only upon your written request. No certificates are issued for fractional
shares. It is not recom-
Page 8
mended that the Fund be used as a vehicle for Keogh, IRA or other qualified
plans. The Fund reserves the right to reject any purchase order.
The minimum initial investment is $2,500, or $1,000 if you are a
client of a securities dealer, bank or other financial institution which
maintains an omnibus account in the Fund and has made an aggregate minimum
initial purchase for its customers of $2,500. Subsequent investments must be
at least $100. The initial investment must be accompanied by the Account
Application. For full-time or part-time employees of The Dreyfus Corporation
or any of its affiliates or subsidiaries, directors of The Dreyfus Corporation,
Board members of a fund advised by The Dreyfus Corporation, including
members of the Fund's Board, or the spouse or minor child of any of the
foregoing, the minimum initial investment is $1,000. For full-time or
part-time employees of The Dreyfus Corporation or any of its affiliates or
subsidiaries who elect to have a portion of their pay directly deposited into
their Fund account, the minimum initial investment is $50. The Fund reserves
the right to vary further the initial and subsequent investment minimum
requirements at any time. Fund shares also are offered without regard to the
minimum initial investment requirements through Dreyfus-AUTOMATIC Asset
BuilderRegistration Mark, Government Direct Deposit Privilege or Dreyfus
Payroll Savings Plan pursuant to the Dreyfus Step Program described under
"Shareholder Services." These services enable you to make regularly scheduled
investments and may provide you with a convenient way to invest for long-term
financial goals. You should be aware, however, that periodic investment plans
do not guarantee a profit and will not protect an investor against loss in a
declining market.
You may purchase Fund shares by check or wire, or through the Dreyfus
TELETRANSFER Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds." Payments to open new accounts which are mailed
should be sent to The Dreyfus Family of Funds, P.O. Box 9387, Providence,
Rhode Island 02940-9387, together with your Account Application. For
subsequent investments, your Fund account number should appear on the check
and an investment slip should be enclosed and sent to The Dreyfus Family of
Funds, P.O. Box 105, Newark, New Jersey 07101-0105. Neither initial nor
subsequent investments should be made by third party check. Purchase orders
may be delivered in person only to a Dreyfus Financial Center. THESE ORDERS
WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY.
For the location of the nearest Dreyfus Financial Center, please call one of
the telephone numbers listed under "General Information."
Wire payments may be made if your bank account is in a commercial bank
that is a member of the Federal Reserve System or any other bank having a
correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, DDA #8900051825/Dreyfus Municipal
Bond Fund, Inc., for purchase of Fund shares in your name. The wire must
include your Fund account number (for new accounts, your Taxpayer
Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If your initial purchase of
Fund shares is by wire, please call 1-800-645-6561 after completing your wire
payment to obtain your Fund account number. Please include your Fund account
number on the Account Application and promptly mail the Account Application
to the Fund, as no redemptions will be permitted until the Account Application
is received. You may obtain further information about remitting funds in this
manner from your bank. All payments should be made in U.S. dollars and, to
avoid fees and delays, should be drawn only on U.S. banks. A charge will be
imposed if any check used for investment in your account does not clear. The
Fund makes available to certain large institutions the ability to issue
purchase instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct the
institution to transmit immediately available funds through the Automated
Clearing House to The Bank of New York with instructions to credit your Fund
account. The instructions must specify your Fund account registration and
your Fund account number PRECEDED BY THE DIGITS "1111."
Page 9
Fund shares are sold on a continuous basis at the net asset value per
share next determined after the Transfer Agent receives an order in proper
form. Net asset value per share is determined as of the close of trading on
the floor of the New York Stock Exchange (currently 4:00 p.m., New York
time), on each day the New York Stock Exchange is open for business. For
purposes of determining net asset value, options and futures contracts will
be valued 15 minutes after the close of trading on the floor of the New York
Stock Exchange. Net asset value per share is computed by dividing the value
of the Fund's net assets (i.e., the value of its assets less liabilities) by
the total number of shares outstanding. The Fund's investments are valued
each business day by an independent pricing service approved by the Fund's
Board and are valued at fair value as determined by the pricing service. The
pricing service's procedures are reviewed under the general supervision of
the Fund's Board. For further information regarding the methods employed in
valuing Fund investments, see "Determination of Net Asset Value" in the
Statement of Additional Information.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service (the "IRS").
DREYFUS TELETRANSFER PRIVILEGE -- You may purchase shares (minimum $500,
maximum $150,000 per day) by telephone if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds will
be transferred between the bank account designated in one of these documents
and your Fund account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
The Fund may modify or terminate this Privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of shares by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES
FUND EXCHANGES
You may purchase, in exchange for shares of the Fund, shares of
certain other funds managed or administered by The Dreyfus Corporation, to
the extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, please call 1-800-645-6561 to determine if
it is available and whether any conditions are imposed on its use.
To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. Before any exchange, you must
obtain and should review a copy of the current prospectus of the fund into
which the exchange is being made. Prospectuses may be obtained by calling
1-800-645-6561. Except in the case of personal retirement plans, the shares
being exchanged must have a value of at least $500; furthermore, when
establishing a new account by exchange, the shares being exchanged must have
a value of at least the minimum initial investment required for the fund into
which the exchange is being made. The ability to issue exchange instructions
by telephone is given to all Fund shareholders automatically, unless you
check the applicable "No" box on the Account Application, indicating that you
specifically refuse this Privilege. The Telephone Exchange Privilege may be
established for an existing account by written request, signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-645-6561, or by oral request from any of the
authorized signatories on the account by calling 1-800-645-6561. If you have
established the Telephone Exchange Privilege, you may telephone exchange
instructions (including over The Dreyfus TouchRegistration Mark automated
telephone system) by calling 1-800-645-6561. If you are calling from
overseas, call 516-794-5452. See "How to Redeem Shares_Procedures." Upon an
exchange into a new account, the following shareholder services and
privileges, as applicable and where available, will be automatically carried
over to the fund into which
Page 10
the exchange is made: Telephone Exchange Privilege, Check Redemption
Privilege, Wire Redemption Privilege, Telephone Redemption Privilege, Dreyfus
TELETRANSFER Privilege, and the dividend/capital gain distribution option
(except for Dreyfus Dividend Sweep) selected by the investor.
For shares acquired by purchase or exchange after May 9, 1997, the
Fund will impose a redemption fee of .10% of the net asset value of such
shares exchanged out of the Fund where the exchange is made less than fifteen
days after issuance. See "How to Redeem Shares." Otherwise, shares will be
exchanged at the next determined net asset value; however, a sales load may
be charged with respect to exchanges into funds sold with a sales load. If
you are exchanging into a fund that charges a sales load, you may qualify for
share prices which do not include the sales load or which reflect a reduced
sales load, if the shares you are exchanging were: (a) purchased with a sales
load, (b) acquired by a previous exchange from shares purchased with a sales
load, or (c) acquired through reinvestment of dividends or distributions paid
with respect to the foregoing categories of shares. To qualify, at the time
of the exchange you must notify the Transfer Agent. Any such qualification is
subject to confirmation of your holdings through a check of appropriate
records. See "Shareholder Services" in the Statement of Additional
Information. No fees currently are charged shareholders directly in
connection with exchanges, although the Fund reserves the right, upon not less
than 60 days' written notice, to charge shareholders a nominal fee in
accordance with rules promulgated by the Securities and Exchange Commission.
The Fund reserves the right to reject any exchange request in whole or in
part. The availability of Fund Exchanges may be modified or terminated at any
time upon notice to shareholders. See "Dividends, Distributions and Taxes."
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
the Fund, in shares of other funds in the Dreyfus Family of Funds of which
you are a shareholder. The amount you designate, which can be expressed
either in terms of a specific dollar or share amount ($100 minimum), will be
exchanged automatically on the first and/or fifteenth day of the month
according to the schedule you have selected. Shares will be exchanged at the
then-current net asset value; however, a sales load may be charged with
respect to exchanges into funds sold with a sales load. See "Shareholder
Services" in the Statement of Additional Information. The right to exercise
this Privilege may be modified or cancelled by the Fund or the Transfer
Agent. You may modify or cancel your exercise of this Privilege at any time
by mailing written notification to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671. The Fund may charge a service fee
for the use of this Privilege. No such fee currently is contemplated. For
more information concerning this Privilege and the funds in the Dreyfus
Family of Funds eligible to participate in this Privilege, or to obtain a
Dreyfus Auto-Exchange Authorization Form, please call toll free
1-800-645-6561. See "Dividends, Distributions and Taxes."
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-Automatic Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. Only an account maintained at a domestic
financial institution which is an Automated Clearing House member may be so
designated. To establish a Dreyfus-Automatic Asset Builder account, you must
file an authorization form with the Transfer Agent. You may obtain the
necessary authorization form by calling 1-800-645-6561. You may cancel your
participation in this Privilege or change the amount of purchase at any time
by mailing written notification to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671, and the notification will be
effective three business days following receipt. The Fund may modify or
terminate this Privilege at any time or charge a service fee. No such fee
currently is contemplated.
Page 11
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to purchase
Fund shares (minimum of $100 and maximum of $50,000 per transaction) by
having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into your
Fund account. You may deposit as much of such payments as you elect. To
enroll in Dreyfus Government Direct Deposit, you must file with the Transfer
Agent a completed Direct Deposit Sign-Up Form for each type of payment that
you desire to include in this Privilege. The appropriate form may be obtained
by calling 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency.
Further, the Fund may terminate your participation upon 30 days' notice to
you.
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase Fund shares
(minimum of $100 per transaction) automatically on a regular basis. Depending
upon your employer's direct deposit program, you may have part or all of your
paycheck transferred to your existing Dreyfus account electronically through
the Automated Clearing House system at each pay period. To establish a
Dreyfus Payroll Savings Plan account, you must file an authorization form
with your employer's payroll department. Your employer must complete the
reverse side of the form and return it to The Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may change the amount of
purchase or cancel the authorization only by written notification to your
employer. It is the sole responsibility of your employer, not the
Distributor, The Dreyfus Corporation, the Fund, the Transfer Agent or any
other person, to arrange for transactions under the Dreyfus Payroll Savings
Plan. The Fund may modify or terminate this Privilege at any time or charge a
service fee. No such fee currently is contemplated.
DREYFUS STEP PROGRAM
Dreyfus Step Program enables you to purchase Fund shares without
regard to the Fund's minimum initial investment requirements through Dreyfus-
AUTOMATIC Asset BuilderRegistration Mark, Dreyfus Government Direct Deposit
Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step
Program account, you must supply the necessary information on the Account
Application and file the required authorization form(s) with the Transfer
Agent. For more information concerning this Program, or to request the
necessary authorization form(s), please call toll free 1-800-782-6620. You
may terminate your participation in this Program at any time by discontinuing
your participation in Dreyfus-AUTOMATIC Asset BuilderRegistration Mark,
Dreyfus Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan,
as the case may be, as provided under the terms of such Privilege(s). The
Fund may modify or terminate this Program at any time.
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by the Fund in
shares of another fund in the Dreyfus Family of Funds of which you are a
shareholder. Shares of the other fund will be purchased at the then-current
net asset value; however, a sales load may be charged with respect to
investments in shares of a fund sold with a sales load. If you are investing
in a fund that charges a sales load, you may qualify for share prices which
do not include the sales load or which reflect a reduced sales load. If you
are investing in a fund that charges a contingent deferred sales charge, the
shares purchased will be subject to the contingent deferred sales charge, if
any, applicable to the purchased shares. See "Shareholder Services" in the
Statement of Additional Information. Dreyfus Dividend ACH permits you to
transfer electronically dividends or dividends and capital gain
distributions, if any, from the Fund to a designated bank account. Only an
account maintained at a domestic financial institution which is an Automated
Clearing House member may be so designated. Banks may charge a fee for this
service.
Page 12
For more information concerning these privileges or to request a
Dividend Options Form, please call toll free 1-800-645-6561. You may cancel
these privileges by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. To select a new
fund after cancellation, you must submit a new Dividends Options Form.
Enrollment in or cancellation of these privileges is effective three business
days following receipt. These privileges are available only for existing
accounts and may not be used to open new accounts. Minimum subsequent
investments do not apply for Dreyfus Dividend Sweep. The Fund may modify or
terminate these privileges at any time or charge a service fee. No such fee
currently is contemplated.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account. An Application for the Automatic
Withdrawal Plan can be obtained by calling 1-800-645-6561. The Automatic
Withdrawal Plan may be ended at any time by you, the Fund or the Transfer
Agent. Shares for which certificates have been issued may not be redeemed
through the Automatic Withdrawal Plan.
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value.
On shares acquired by purchase or exchange after May 9, 1997, the
Fund will deduct a redemption fee of .10% of the net asset value of Fund
shares redeemed or exchanged in less than 15 days following the issuance of
such shares. The purpose of the redemption fee is to discourage short-term
trading. The fee will be retained by the Fund and used primarily to offset
the transaction costs that short-term trading imposes on the Fund and its
shareholders. For purposes of calculating the 15-day holding period, the Fund
will employ the "first in, first out" method, which assumes that the shares
you are redeeming or exchanging are the ones you have held the longest. No
redemption fee will be charged on the redemption or exchange of shares (1)
through the Fund's Check Redemption Privilege, Automatic Withdrawal Plan or
Dreyfus Auto-Exchange Privilege, (2) through accounts that are reflected on
the records of the Transfer Agent or omnibus accounts approved by Dreyfus
Service Corporation, (3) through accounts established by securities dealers,
banks or other financial institutions approved by Dreyfus Service Corporation
that utilize the National Securities Clearing Corporation's networking
system, or (4) acquired through the reinvestment of dividends or capital gains
distributions. The redemption fee may be waived, modified or discontinued at
any time or from time to time. In addition, securities dealers, banks and
other financial institutions may charge their clients a nominal fee for
effecting redemptions of Fund shares. Any certificates representing Fund
shares being redeemed must be submitted with the redemption request. The
value of the shares redeemed may be more or less than their original cost,
depending on the Fund's then-current net asset value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY DREYFUS
TELETRANSFER PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDERRegistration
Mark AND SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER
AGENT, THE REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK
CLEARANCE OF YOUR PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE OR DREYFUS-
AUTOMATIC ASSET BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR
MORE. IN ADDITION, THE FUND WILL NOT HONOR REDEMPTION CHECKS UNDER THE CHECK
REDEMPTION PRIVILEGE, AND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR
TELEPHONE OR PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE, FOR A PERIOD OF
EIGHT BUSINESS DAYS
Page 13
AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE DREYFUS
TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST
WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR
SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT
COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO
THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE
AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF
BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until the Transfer
Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if your account has a balance of 50
shares or less and remains so during the notice period.
PROCEDURES
You may redeem shares by using the regular redemption procedure
through the Transfer Agent, or, if you have checked the appropriate box and
supplied the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent, through the Check
Redemption Privilege, the Wire Redemption Privilege, the Telephone Redemption
Privilege or the Dreyfus TELETRANSFER Privilege. The Fund makes available to
certain large institutions the ability to issue redemption instructions
through compatible computer facilities. The Fund reserves the right to refuse
any request made by wire or telephone, including requests made shortly after
a change of address, and may limit the amount involved or the number of such
requests. The Fund may modify or terminate any redemption Privilege at any
time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated. Shares for which certificates have been issued are
not eligible for the Check Redemption, Wire Redemption, Telephone Redemption
or Dreyfus TELETRANSFER Privilege.
You may redeem shares by telephone if you have checked the
appropriate box on the Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption
privilege or telephone exchange privilege (which is granted automatically
unless you refuse it), you authorize the Transfer Agent to act on telephone
instructions (including over The Dreyfus TouchRegistration Mark automated
telephone system) from any person representing himself or herself to be you
and reasonably believed by the Transfer Agent to be genuine. The Fund will
require the Transfer Agent to employ reasonable procedures, such as requiring
a form of personal identification, to confirm that instructions are genuine
and, if it does not follow such procedures, the Fund or the Transfer Agent
may be liable for any losses due to unauthorized or fraudulent instructions.
Neither the Fund nor the Transfer Agent will be liable for following
telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used. During the delay, the Fund's net asset value may fluctuate.
REGULAR REDEMPTION -- Under the regular redemption procedure, you may redeem
your shares by written request mailed to The Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671. Redemption requests may be
delivered in person only to a Dreyfus Financial Center. THESE REQUESTS WILL
BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For
the location of the nearest Dreyfus Financial Center, please call one of the
telephone numbers listed under "General Information." Redemption requests
must be signed by each shareholder, including each owner of a joint account,
and each signature must be guaranteed. The Transfer Agent has adopted
standards and procedures pursuant to which signature-guarantees in proper
form generally will be accepted from domestic banks, brokers, dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations, as well as from participants in
the New York Stock Exchange Medallion Signature Program, the Securities
Transfer Agents Medallion Program
Page 14
("STAMP"), and the Stock Exchanges Medallion Program. If you have any
questions with respect to signature-guarantees, please call one of the
telephone numbers listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
CHECK REDEMPTION PRIVILEGE _ You may write Redemption Checks drawn on your
Fund account. Redemption Checks may be made payable to the order of any
person in the amount of $500 or more. Potential fluctuations in the net asset
value of the Fund's shares should be considered in determining the amount of
the check. Redemption Checks should not be used to close your account.
Redemption Checks are free, but the Transfer Agent will impose a fee for
stopping payment of a Redemption Check upon your request or if the Transfer
Agent cannot honor the Redemption Check because of insufficient funds or
other valid reason. You should date your Redemption Checks with the current
date when you write them. Please do not postdate your Redemption Checks. If
you do, the Transfer Agent will honor, upon presentment, even if presented
before the date of the check, all postdated Redemption Checks which are dated
within six months of presentment for payment, if they are otherwise in good
order. This Privilege will be terminated immediately, without notice, with
respect to any account which is, or becomes, subject to backup withholding on
redemptions (See "Dividends, Distributions and Taxes"). Any Redemption Check
written on an account which has become subject to backup withholding on
redemptions will not be honored by the Transfer Agent.
WIRE REDEMPTION PRIVILEGE -- You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. You also may direct that redemption proceeds be paid by
check (maximum $150,000 per day)made out to the owners of record and mailed
to your address. Redemption proceeds of less than $1,000 will be paid
automatically by check. Holders of jointly registered Fund or bank accounts
may have redemption proceeds of not more than $250,000 wired within any
30-day period. You may telephone redemption requests by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. The
Statement of Additional Information sets forth instructions for transmitting
redemption requests by wire.
TELEPHONE REDEMPTION PRIVILEGE -- You may request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. Shares
for which certificates have been issued are not eligible for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE -- You may request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an Automated Clearing House member may be
designated. Redemption proceeds will be on deposit in your account at an
Automated Clearing House member bank ordinarily two days after receipt of the
redemption request or, at your request, paid by check (maximum $150,000 per
day) and mailed to your address. Holders of jointly registered Fund or bank
accounts may redeem through the Dreyfus TELETRANSFER Privilege for transfer
to their bank account not more than $250,000 within any 30-day period.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of shares by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan pursuant to which
the Fund reimburses Dreyfus Service Corporation, a wholly-owned subsidiary of
The Dreyfus Corporation, an amount not to exceed an annual rate of .25 of 1%
of the value of the Fund's average daily net assets for certain allocated
expenses of providing personal services and/or maintaining shareholder
accounts. The services provided may include personal services relating to
shareholder accounts, such as answering shareholder inquiries
Page 15
regarding the Fund and providing reports and other information, and services
related to the maintenance of shareholder accounts.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily declares dividends from its net investment income
on each day the New York Stock Exchange is open for business. Fund shares
begin earning dividends on the day following the date of purchase. The Fund's
earnings for Saturdays, Sundays and holidays are declared as dividends on the
next business day. Dividends usually are paid on the last business day of
each month and are reinvested in additional Fund shares at net asset value
or, at your option, paid in cash. If you redeem all shares in your account at
any time during the month, all dividends to which you are entitled will be
paid to you along with the proceeds of the redemption. If you are an omnibus
accountholder and indicate in a partial redemption request that a portion of
any accrued dividends to which such account is entitled belongs to an
underlying accountholder who has redeemed all shares in his or her account,
such portion of the accrued dividends will be paid to you along with the
proceeds of the redemption. Distributions from net realized securities gains,
if any, generally are declared and paid once a year, but the Fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Code, in all events in a manner consistent with the
provisions of the 1940 Act. The Fund will not make distributions from net
realized securities gains unless capital loss carryovers, if any, have been
utilized or have expired. You may choose whether to receive distributions in
cash or to reinvest in additional Fund shares at net asset value. All
expenses are accrued daily and deducted before declaration of dividends to
investors.
Except for dividends from Taxable Investments, the Fund anticipates
that substantially all dividends paid by the Fund will not be subject to
Federal income tax. Dividends derived from Taxable Investments, together with
distributions from any net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Fund are subject to Federal income tax as
ordinary income whether received in cash or reinvested in additional shares.
Distributions from net realized long-term securities gains of the Fund
generally are taxable as long-term capital gains for Federal income tax
purposes if you are a citizen or resident of the United States. Dividends and
distributions attributable to income or gain derived from securities
transactions and from the use of certain of the investment techniques
described under "Appendix -- Investment Techniques," will be subject to
Federal income tax. The Code provides that the net capital gain of an
individual generally will not be subject to Federal income tax at a rate in
excess of 28%. Under the Code, interest on indebtedness incurred or continued
to purchase or carry Fund shares which is deemed to relate to exempt-interest
dividends is not deductible. No dividend paid by the Fund will qualify for
the dividends received deduction allowable to certain U.S. corporations.
Although all or a substantial portion of the dividends paid by the
Fund may be excluded by shareholders of the Fund from their gross income for
Federal income tax purposes, the Fund may purchase specified private activity
bonds, the interest from which may be (i) a preference item for purposes of
the alternative minimum tax, (ii) a component of the "adjusted current
earnings" preference item for purposes of the corporate alternative minimum
tax as well as a component in computing the corporate environmental tax or
(iii) a factor in determining the extent to which a shareholder's Social
Security benefits are taxable. If the Fund purchases such securities, the
portion of the Fund's dividends related thereto will not necessarily be tax
exempt to an investor who is subject to the alternative minimum tax and/or
tax on Social Security benefits and may cause an investor to be subject to
such taxes.
Taxable dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized by the sale or other disposition of certain
market discount bonds, paid by the Fund to a foreign investor generally are
subject to U.S. nonresident withholding taxes at the rate of 30%, unless the
foreign investor claims the benefit of a lower rate specified in a tax
treaty. Distributions from net realized long-term securities gains paid by
the
Page 16
Fund to a foreign investor as well as the proceeds of any redemptions from a
foreign investor's account, regardless of the extent to which gain or loss may
be realized, generally will not be subject to U.S. nonresident withholding
tax. However, such distributions may be subject to backup withholding, as
described below, unless the foreign investor certifies his non-U.S. residency
status.
Notice as to the tax status of your dividends and distributions will
be mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year. These statements set forth
the dollar amount of income exempt from Federal tax and the dollar amount, if
any, subject to Federal tax. These dollar amounts will vary depending on the
size and length of time of your investment in the Fund. If the Fund derives
dividends from taxable income, it intends to designate as taxable the same
percentage of the day's dividend as the actual taxable income earned on that
day bears to total income earned on that day. Thus, the percentage of the
dividend designated as taxable, if any, may vary from day to day.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of taxable dividends,
distributions from net realized securities gains and the proceeds of any
redemption, regardless of the extent to which gain or loss may be realized,
paid to a shareholder if such shareholder fails to certify either that the
TIN furnished in connection with opening an account is correct, or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividends or
interest income on a Federal income tax return. Furthermore, the IRS may
notify the Fund to institute backup withholding if the IRS determines that a
shareholder's TIN is incorrect or if a shareholder has failed to properly
report taxable dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
record owner of the account, and may be claimed as a credit on the record
owner's Federal income tax return.
Management of the Fund believes that the Fund has qualified for the
fiscal year ended August 31, 1996 as a "regulated investment company" under
the Code. The Fund intends to continue to so qualify if such qualification is
in the best interest of its shareholders. Such qualification relieves the
Fund of any liability for Federal income tax to the extent its earnings are
distributed in accordance with applicable provisions of the Code. In
addition, the Fund is subject to a non-deductible 4% excise tax, measured
with respect to certain undistributed amounts of taxable investment income
and capital gains.
You should consult your tax adviser regarding specific questions as
to Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance may be calculated on several
bases, including current yield, tax equivalent yield, average annual total
return and/or total return.
Current yield refers to the Fund's annualized net investment income
per share over a 30-day period, expressed as a percentage of the net asset
value per share at the end of the period. For purposes of calculating current
yield, the amount of net investment income per share during that 30-day
period, computed in accordance with regulatory requirements, is compounded by
assuming that it is reinvested at a constant rate over a six-month period. An
identical result is then assumed to have occurred during a second six-month
period which, when added to the result for the first six months, provides an
"annualized" yield for an entire one-year period. Calculations of the Fund's
current yield may reflect absorbed expenses pursuant to any undertaking that
may be in effect. See "Management of the Fund."
Page 17
Tax equivalent yield is calculated by determining the pre-tax yield
which, after being taxed at a stated rate, would be equivalent to a stated
current yield calculated as described above.
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment in the Fund was purchased with an
initial payment of $1,000 and that the investment was redeemed at the end of
a stated period of time, after giving effect to the reinvestment of dividends
and distributions during the period. The return is expressed as a percentage
rate which, if applied on a compounded annual basis, would result in the
redeemable value of the investment at the end of the period. Advertisements
of the Fund's performance will include the Fund's average annual total return
for one, five and ten year periods.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the net asset
value per share at the beginning of the period. Advertisements may include
the percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes the
application of the percentage rate of total return.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from CDA
Technologies, Inc., Lipper Analytical Services, Inc., Moody's Bond Survey
Bond Index, Lehman Brothers Municipal Bond Index, Morningstar, Inc. and other
industry publications.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on July 12, 1976, and
commenced operations on October 4, 1976. Prior to January 22, 1993, the
Fund's name was Dreyfus Tax Exempt Bond Fund, Inc. The Fund is authorized to
issue 600 million shares of Common Stock, par value $.01 per share. Each
share has one vote.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Board members or
the appointment of auditors. However, pursuant to the Fund's By-Laws, the
holders of at least 10% of the shares outstanding and entitled to vote may
require the Fund to hold a special meeting of shareholders for purposes of
removing a Board member from office and the holders of at least 25% of such
shares may require the Fund to hold a special meeting of shareholders for any
other purpose. Fund shareholders may remove a Board member by the affirmative
vote of a majority of the Fund's outstanding voting shares. In addition, the
Fund's Board will call a meeting of shareholders for the purpose of electing
Board members if, at any time, less than a majority of the Board members then
holding office have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and sends
confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561. In New York City, call 1-718-895-1206; outside of the U.S.
and Canada, call 516-794-5452.
Page 18
APPENDIX
INVESTMENT TECHNIQUES
BORROWING MONEY -- The Fund is permitted to borrow to the extent permitted
under the 1940 Act, which permits an investment company to borrow in an
amount up to 331\3% of the value of its total assets. The Fund currently
intends to borrow money only for temporary or emergency (not leveraging)
purposes, in an amount up to 15% of the value of its total assets (including
the amount borrowed) valued at the lesser of cost or market, less liabilities
(not including the amount borrowed) at the time the borrowing is made. While
borrowings exceed 5% of the Fund's total assets, the Fund will not make any
additional investments.
USE OF DERIVATIVES -- The Fund may invest in the types of Derivatives
enumerated under "Description of the Fund -- Investment Considerations and
Risks -- Use of Derivatives." These instruments and certain related risks are
described more specifically under "Investment Objective and Management
Policies -- Management Policies -- Derivatives" in the Statement of
Additional Information.
Derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in Derivatives
could have a large potential impact on the Fund's performance.
If the Fund invests in Derivatives at inappropriate times or judges
market conditions incorrectly, such investments may lower the Fund's return
or result in a loss. The Fund also could experience losses if its Derivatives
were poorly correlated with its other investments, or if the Fund were unable
to liquidate its position because of an illiquid secondary market. The market
for many Derivatives is, or suddenly can become, illiquid. Changes in
liquidity may result in significant, rapid and unpredictable changes in the
prices for Derivatives.
Although the Fund will not be a commodity pool, Derivatives subject
the Fund to the rules of the Commodity Futures Trading Commission which limit
the extent to which the Fund can invest in certain Derivatives. The Fund may
invest in futures contracts and options with respect thereto for hedging
purposes without limit. However, the Fund may not invest in such contracts
and options for other purposes if the sum of the amount of initial margin
deposits and premiums paid for unexpired options with respect to such
contracts, other than for bona fide hedging purposes, exceed 5% of the
liquidation value of the Fund's assets, after taking into account unrealized
profits and unrealized losses on such contracts and options; provided,
however, that in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.
The Fund may invest up to 5% of its assets, represented by the
premium paid, in the purchase of call and put options. The Fund may write
(i.e., sell) covered call and put option contracts to the extent of 20% of
the value of its net assets at the time such option contracts are written.
When required by the Securities and Exchange Commission, the Fund will set
aside permissible liquid assets in a segregated account to cover its
obligations relating to its purchase of Derivatives. To maintain this require
d cover, the Fund may have to sell portfolio securities at disadvantageous
prices or times since it may not be possible to liquidate a Derivative
position at a reasonable price.
LENDING PORTFOLIO SECURITIES -- The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to be
entitled to payments in amounts equal to the interest or other distributions
payable on the loaned securities which affords the Fund an opportunity to
earn interest on the amount of the loan and on the loaned securities'
collateral. Loans of portfolio securities may not exceed 331\3% of the value
of the Fund's total assets, and the Fund will receive collateral consisting
of cash, U.S. Government securities or irrevocable letters of credit which
will be maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. Such loans are terminable by
the Fund at any time upon specified notice. The Fund might experience risk of
loss if the institution with which it has engaged in a portfolio loan
transaction breaches its agreement with the Fund.
Page 19
FORWARD COMMITMENTS -- The Fund may purchase Municipal Obligations and other
securities on a forward commitment or when-issued basis, which means that
delivery and payment take place a number of days after the date of the
commitment to purchase. The payment obligation and the interest rate
receivable on a forward commitment or when-issued security are fixed when the
Fund enters into the commitment, but the Fund does not make payment until it
receives delivery from the counterparty. The Fund will commit to purchase
such securities only with the intention of actually acquiring the securities,
but the Fund may sell these securities before the settlement date if it is
deemed advisable. A segregated account of the Fund consisting of permissible
liquid assets at least equal at all times to the amount of the commitments
will be established and maintained at the Fund's custodian bank.
Certain Portfolio Securities
CERTAIN TAX EXEMPT OBLIGATIONS -- The Fund may purchase floating and variable
rate demand notes and bonds, which are tax exempt obligations ordinarily
having stated maturities in excess of one year, but which permit the holder
to demand payment of principal at any time, or at specified intervals.
Variable rate demand notes include master demand notes which are obligations
that permit the Fund to invest fluctuating amounts, at varying rates of
interest, pursuant to direct arrangements between the Fund, as lender, and
the borrower. These obligations permit daily changes in the amount borrowed.
Because these obligations are direct lending arrangements between the lender
and borrower, it is not contemplated that such instruments generally will be
traded, and there generally is no established secondary market for these
obligations, although they are redeemable at face value. Accordingly, where
these obligations are not secured by letters of credit or other credit
support arrangements, the Fund's right to redeem is dependent on the ability
of the borrower to pay principal and interest on demand. Each obligation
purchased by the Fund will meet the quality criteria established for the
purchase of Municipal Obligations.
TAX EXEMPT PARTICIPATION INTERESTS -- The Fund may purchase from financial
institutions participation interests in Municipal Obligations (such as
industrial development bonds and municipal lease/purchase agreements). A
participation interest gives the Fund an undivided interest in the Municipal
Obligation in the proportion that the Fund's participation interest bears to
the total principal amount of the Municipal Obligation. These instruments may
have fixed, floating or variable rates of interest. If the participation
interest is unrated, it will be backed by an irrevocable letter of credit or
guarantee of a bank that the Fund's Board has determined meets prescribed
quality standards for banks, or the payment obligation otherwise will be
collateralized by U.S. Government securities. For certain participation
interests, the Fund will have the right to demand payment, on not more than
seven days' notice, for all or any part of the Fund's participation interest
in the Municipal Obligation, plus accrued interest. As to these instruments, t
he Fund intends to exercise its right to demand payment only upon a default
under the terms of the Municipal Obligation, as needed to provide liquidity
to meet redemptions, or to maintain or improve the quality of its investment
portfolio.
TENDER OPTION BONDS -- The Fund may purchase tender option bonds. A tender
option bond is a Municipal 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 Municipal
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-
Page 20
term tax exempt rate. The Dreyfus Corporation, on behalf of the Fund,
will consider on an ongoing basis the creditworthiness of the issuers of the
underlying Municipal Obligations, of any custodian and of the third party
provider of the tender option. In certain instances and for certain tender
option bonds, the option may be terminable in the event of a default in
payment of principal or interest on the underlying Municipal Obligations and
for other reasons.
CUSTODIAL RECEIPTS -- The Fund may purchase custodial receipts representing
the right to receive certain future principal and interest payments on
Municipal Obligations which underlie the custodial receipts. A number of
different arrangements are possible. In a typical custodial receipt
arrangement, an issuer or a third party owner of Municipal Obligations
deposits such obligations with a custodian in exchange for two classes of
custodial receipts. The two classes have different characteristics, but, in
each case, payments on the two classes are based on payments received on the
underlying Municipal Obligations. One class has the characteristics of a
typical auction mechanism. This class's interest rate generally is expected
to be below the coupon rate of the underlying Municipal Obligations and
generally is at a level comparable to that of a Municipal Obligation of
similar quality and having a maturity equal to the period between interest
rate adjustments. The second class bears interest at a rate that exceeds the
interest rate typically borne by a security of comparable quality and
maturity; this rate also is adjusted, but in this case inversely to changes
in the rate of interest of the first class. In no event will the aggregate
interest paid with respect to the two classes exceed the interest paid by the
underlying Municipal Obligations. The value of the second class and similar
securities should be expected to fluctuate more than the value of a Municipal
Obligation of comparable quality and maturity and their purchase by the Fund
should increase the volatility of its net asset value and, thus, its price
per share. These custodial receipts are sold in private placements. The Fund
also may purchase directly from issuers, and not in a private placement,
Municipal Obligations having characteristics similar to custodial receipts.
These securities may be issued as part of a multi-class offering and the
interest rate on certain classes may be subject to a cap or floor.
STAND-BY COMMITMENTS -- The Fund may acquire "stand-by commitments" with
respect to Municipal Obligations held in its portfolio. Under a stand-by
commitment, the Fund obligates a broker, dealer or bank to repurchase, at the
Fund's option, specified securities at a specified price and, in this
respect, stand-by commitments are comparable to put options. The exercise of
a stand-by commitment, therefore, is subject to the ability of the seller to
make payment on demand. The Fund will acquire stand-by commitments solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes. The Fund may pay for stand-by commitments if
such action is deemed necessary, thus increasing to a degree the cost of the
underlying Municipal Obligation and similarly decreasing such security's
yield to investors. Gains realized in connection with stand-by commitments
will be taxable. The Fund also may acquire call options on specific Municipal
Obligations. The Fund generally would purchase these call options to protect
the Fund from the issuer of the related Municipal Obligation redeeming, or
other holder of the call option from calling away, the Municipal Obligation
before maturity. The sale by the Fund of a call option that it owns on a
specific Municipal Obligation could result in the receipt of taxable income
by the Fund.
ZERO COUPON SECURITIES -- The Fund may invest in zero coupon securities which
are debt securities issued or sold at a discount from their face value which
do not entitle the holder to any periodic payment of interest prior to
maturity or a specified redemption date (or cash payment date). The amount of
the discount varies depending on the time remaining until maturity or cash
payment date, prevailing interest rates, liquidity of the security and
perceived credit quality of the issuer. Zero coupon securities also may take
the form of debt securities that have been stripped of their unmatured
interest coupons, the coupons themselves and receipts or certificates
representing interest in such stripped debt obligations and coupons. The
market prices of zero coupon securities generally are more volatile than the
Page 21
market prices of securities that pay interest periodically and are likely to
respond to a greater degree to changes in interest rates than non-zero coupon
securities having similar maturities and credit qualities.
ILLIQUID SECURITIES -- The Fund may invest up to 15% of the value of its net
assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment
objective. Such securities may include securities that are not readily
marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, and repurchase agreements providing for
settlement in more than seven days after notice. As to these securities, the
Fund is subject to a risk that should the Fund desire to sell them when a
ready buyer is not available at a price the Fund deems representative of
their value, the value of the Fund's net assets could be adversely affected.
TAXABLE INVESTMENTS -- From time to time, on a temporary basis other than for
temporary defensive purposes (but not to exceed 20% of the value of the
Fund's net assets) or for temporary defensive purposes, the Fund may invest
in taxable short-term investments ("Taxable Investments") consisting of:
notes of issuers having, at the time of purchase, a quality rating within the
three highest grades of Moody's, S&P or Fitch; obligations of the U.S.
Government, its agencies or instrumentalities; commercial paper rated not
lower than P-l by Moody's, A-l by S&P or F-l by Fitch; certificates of
deposit of U.S. domestic banks, including foreign branches of domestic banks,
with assets of one billion dollars or more; time deposits; bankers'
acceptances and other short-term bank obligations; and repurchase agreements
in respect of any of the foregoing. Dividends paid by the Fund that are
attributable to income earned by the Fund from Taxable Investments will be
taxable to investors. See "Dividends, Distributions and Taxes." Except for
temporary defensive purposes, at no time will more than 20% of the value of
the Fund's net assets be invested in Taxable Investments. Under normal market
conditions, the Fund anticipates that not more than 5% of its total assets
will be invested in any one category of Taxable Investments. Taxable
Investments are more fully described in the Statement of Additional
Information, to which reference hereby is made.
RATINGS -- Bonds rated Ba by Moody's are judged to have speculative elements;
their future cannot be considered as well assured and often the protection of
interest and principal payments may be very moderate. Bonds rated BB by S&P
are regarded as having predominantly speculative characteristics and, while
such obligations have less near-term vulnerability to default than other
speculative grade debt, they face major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. Bonds
rated BB by Fitch are considered speculative and the payment of principal and
interest may be affected at any time by adverse economic changes. Bonds rated
C by Moody's are regarded as having extremely poor prospects of ever
attaining any real investment standing. Bonds rated D by S&P are in default
and the payment of interest and/or repayment of principal is in arrears.
Bonds rated DDD, DD or D by Fitch are in actual or imminent default, are
extremely speculative and should be valued on the basis of their ultimate
recovery value in liquidation or reorganization of the issuer; DDD represents
the highest potential for recovery of such bonds; and D represents the lowest
potential for recovery. Such bonds, though high yielding, are characterized
by great risk. See "Appendix" in the Statement of Additional Information for
a general description of Moody's, S&P and Fitch ratings of Municipal
Obligations.
The ratings of Moody's, S&P and Fitch represent their opinions as to
the quality of the Municipal Obligations which they undertake to rate. It
should be emphasized, however, that ratings are relative and subjective and,
although ratings may be useful in evaluating the safety of interest and
principal payments, they do not evaluate the market value risk of these
bonds. Therefore, although these ratings may be an initial criterion for
selection of portfolio investments, The Dreyfus Corporation also will evaluate
these securities and the ability of the issuers of such securities to pay
interest and principal. The Fund's ability to achieve its investment
objective may be more dependent on The Dreyfus Corporation's credit analysis
than might be the case for a fund that invested in higher rated securities.
Page 22
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 23
Municipal
Bond Fund, Inc.
Prospectus
Registration Mark
Copy Rights 1997, Dreyfus Service Corporation
054p010297
Page 24
________________________________________________________________________________
DREYFUS MUNICIPAL BOND FUND, INC.
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
JANUARY 2, 1997
________________________________________________________________________________
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus Municipal Bond Fund, Inc. (the "Fund"), dated January 2, 1997, as it may
be revised from time to time. To obtain a copy of the Fund's Prospectus, please
write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-
0144, or call the following numbers:
Outside New York State--Call Toll Free 1-800-645-6561
In New York City--Call 1-718-895-1206
Outside the U.S. and Canada--Call 516-794-5452
The Dreyfus Corporation (the "Manager") serves as the Fund's investment
adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the distributor
of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . . . . . . . . . . . . B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . . . . . . . B-12
Management Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . B-16
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . B-18
Shareholder Services Plan . . . . . . . . . . . . . . . . . . . . . . . B-19
Redemption of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . B-19
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . . . . . B-22
Determination of Net Asset Value. . . . . . . . . . . . . . . . . . . . B-24
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . . . . B-25
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . . . . B-25
Performance Information . . . . . . . . . . . . . . . . . . . . . . . . B-27
Information About the Fund. . . . . . . . . . . . . . . . . . . . . . . B-28
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors. . . . . . . . . . . . . . . . . . . B-29
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-30
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . B-39
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . . B-61
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Description of the Fund"
and "Appendix."
Portfolio Securities
Municipal Obligations. The average distribution of investments (at value)
in Municipal Obligations (including notes) by ratings for the fiscal year ended
August 31, 1996, computed on a monthly basis, was as follows:
Fitch Investors Moody's Standard &
Service, L.P. Investors Service, Poor's Ratings Group Percentage
("Fitch") or Inc. ("Moody's") or ("S&P") of Value
AAA Aaa AAA 27.2%
AA Aa AA 26.6
A A A 17.8
BBB Baa BBB 14.6
BB Ba BB 2.5
F-1, F-1+(1) MIG 1, P-1(1) SP-1, A-1(1) 5.2
Not Rated Not Rated Not Rated 6.1(2)
--------
100.0%
========
___________________________________
(1) Included in these categories are tax exempt notes rated within the two
highest grades by Fitch, Moody's or S&P. Therefore, these securities,
together with Municipal Obligations rated A or better by Fitch, Moody's
or S&P, are taken into account at the time of purchase to ensure that the
Fund's portfolio meets the 75% minimum quality standard discussed in the
Fund's Prospectus.
(2) Included in the Not Rated category are securities comprising 6.1% of the
Fund's market value which, while not rated, have been determined by the
Manager to be of comparable quality to securities in the following rating
categories: Aaa/AAA (.8%), A/A (.9%), Baa/BBB (3.4%), Ba/BB (.9%) and F-
1, F-1+/MIG 1, P-1/SP-1, A-1 (.1%).
The term "Municipal Obligations" generally includes debt obligations
issued to obtain funds for various public purposes, including the construction
of a wide range of public facilities such as airports, bridges, highways,
housing, hospitals, mass transportation, schools, streets and water and sewer
works. Other public purposes for which Municipal Obligations may be issued
include refunding outstanding obligations, obtaining funds for general operating
expenses and lending such funds to other public institutions and facilities. In
addition, certain types of industrial development bonds are issued by or on
behalf of public authorities to obtain funds to provide for the construction,
equipment, repair or improvement of privately operated housing facilities,
sports facilities, convention or trade show facilities, airport, mass transit,
industrial, port or parking facilities, air or water pollution control
facilities and certain local facilities for water supply, gas, electricity or
sewage or solid waste disposal; the interest paid on such obligations may be
exempt from Federal income tax, although current tax laws place substantial
limitations on the size of such issues. Such obligations are considered to be
Municipal Obligations if the interest paid thereon qualifies as exempt from
Federal income tax in the opinion of bond counsel to the issuer. There are, of
course, variations in the security of Municipal Obligations, both within a
particular classification and between classifications.
Floating and variable rate demand notes and bonds are tax exempt
obligations ordinarily having stated maturities in excess of one year, but which
permit the holder to demand payment of principal at any time, or at specified
intervals. The issuer of such obligations ordinarily has a corresponding right,
after a given period, to prepay in its discretion the outstanding principal
amount of the obligations plus accrued interest upon a specified number of days'
notice to the holders thereof. The interest rate on a floating rate demand
obligation is based on a known lending rate, such as a bank's prime rate, and is
adjusted automatically each time such rate is adjusted. The interest rate on a
variable rate demand obligation is adjusted automatically at specified
intervals.
For the purpose of diversification under the Investment Company Act of
1940, as amended (the "1940 Act"), the identification of the issuer of Municipal
Obligations depends on the terms and conditions of the security. When the
assets and revenues of an agency, authority, instrumentality or other political
subdivision are separate from those of the government creating the subdivision
and the security is backed only by the assets and revenues of the subdivision,
such subdivision would be deemed to be the sole issuer. Similarly, in the case
of an industrial development bond, if that bond is backed only by the assets and
revenues of the non-governmental user, then such non-governmental user would be
deemed to be the sole issuer. If, however, in either case, the creating
government or some other entity guarantees a security, such a guaranty would be
considered a separate security and will be treated as an issue of such
government or other entity.
The yields on Municipal Obligations are dependent on a variety of
factors, including general economic and monetary conditions, money market
factors, conditions in the Municipal Obligations market, size of a particular
offering, maturity of the obligation and rating of the issue. The imposition of
the Fund's management fee, as well as other operating expenses, will have the
effect of reducing the yield to investors.
Municipal lease obligations or installment purchase contract obligations
(collectively, "lease obligations") have special risks not ordinarily associated
with Municipal Obligations. Although lease obligations do not constitute
general obligations of the municipality for which the municipality's taxing
power is pledged, a lease obligation ordinarily is backed by the municipality's
covenant to budget for, appropriate and make the payments due under the lease
obligation. However, certain lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. Although "non-appropriation" lease obligations
are secured by the leased property, disposition of the property in the event
of foreclosure might prove difficult. The staff of the Securities and Exchange
Commission currently considers certain lease obligations to be illiquid.
Determination as to the liquidity of such securities is made in accordance with
guidelines established by the Fund's Board. Pursuant to such guidelines, the
Board has directed the Manager to monitor carefully the Fund's investment in
such securities with particular regard to (1) the frequency of trades and quotes
for the lease obligation; (2) the number of dealers willing to purchase or sell
the lease obligation and the number of other potential buyers; (3) the
willingness of dealers to undertake to make a market in the lease obligation;
(4) the nature of the marketplace trades including the time needed to dispose
of the lease obligation, the method of soliciting offers and the mechanics of
transfer; and (5) such other factors concerning the trading market for the lease
obligation as the Manager may deem relevant. In addition, in evaluating the
liquidity and credit quality of a lease obligation that is unrated, the Fund's
Board has directed the Manager to consider (a) whether the lease can be
cancelled; (b) what assurance there is that the assets represented by the lease
can be sold; (c) the strength of the lessee's general credit (e.g., its debt,
administrative, economic, and financial characteristics); (d) the likelihood
that the municipality will discontinue appropriating funding for the leased
property because the property is no longer deemed essential to the operations of
the municipality (e.g., the potential for an "event of nonappropriation"); (e)
the legal recourse in the event of failure to appropriate; and (f) such other
factors concerning credit quality as the Manager may deem relevant. The Fund
will not invest more than 15% of the value of its net assets in lease
obligations that are illiquid and in other illiquid securities.
The Fund will purchase tender option bonds only when it is satisfied that
the custodial and tender option arrangements, including the fee payment
arrangements, will not adversely affect the tax exempt status of the underlying
Municipal Obligations and that payment of any tender fees will not have the
effect of creating taxable income for the Fund. Based on the tender option bond
agreement, the Fund expects to be able to value the tender option bond at par;
however, the value of the instrument will be monitored to assure that it is
valued at fair value.
Ratings of Municipal Obligations. Subsequent to its purchase by the
Fund, an issue of rated Municipal Obligations may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require the sale of such Municipal Obligations by the Fund,
but the Manager will consider such event in determining whether the Fund should
continue to hold the Municipal Obligations. To the extent that the ratings
given by Moody's, S&P or Fitch for Municipal Obligations may change as a result
of changes in such organizations or their rating systems, the Fund will attempt
to use comparable ratings as standards for its investments in accordance with
the investment policies contained in the Prospectus and this Statement of
Additional Information. The ratings of Moody's, S&P and Fitch represent their
opinions as to the quality of the Municipal Obligations which they undertake to
rate. It should be emphasized, however, that ratings are relative and
subjective and are not absolute standards of quality. Although these ratings
may be an initial criterion for selection of portfolio investments, the Manager
also will evaluate these securities. See "Appendix."
Illiquid Securities. Where a substantial market of qualified
institutional buyers develops for certain restricted securities purchased by
the Fund pursuant to Rule 144A under the Securities Act of 1933, as amended, the
Fund intends to treat such securities as liquid securities in accordance with
procedures approved by the Fund's Board. Because it is not possible to predict
with assurance how the market for restricted securities pursuant to Rule 144A
will develop, the Fund's Board has directed the Manager to monitor carefully the
Fund's investments in such securities with particular regard to trading
activity, availability of reliable price information and other relevant
information. To the extent that for a period of time qualified institutional
buyers cease purchasing restricted securities pursuant to Rule 144A, the Fund's
investing in such securities may have the effect of increasing the level of
illiquidity in the Fund's portfolio during such period.
Taxable Investments. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury
securities, which differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies and
instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the U.S. Treasury;
others by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others only by the credit of
the agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. While the U.S. Government provides financial
support to such U.S. Government-sponsored agencies or instrumentalities, no
assurance can be given that it will always do so, since it is not so obligated
by law.
Commercial paper consists of short-term, unsecured promissory notes
issued to finance short-term credit needs.
Certificates of deposit are negotiable certificates representing the
obligation of a bank to repay funds deposited with it for a specified period of
time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven days)
at a stated interest rate. Investments in time deposits generally are limited
to London branches of domestic banks that have total assets in excess of one
billion dollars. Time deposits which may be held by the Fund will not benefit
from insurance from the Bank Insurance Fund or the Savings Association Insurance
Fund administered by the Federal Deposit Insurance Corporation.
Bankers' acceptances are credit instruments evidencing the obligation of
a bank to pay a draft drawn on it by a customer. These instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity. Other short-term bank obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
In a repurchase agreement, the Fund buys, and the seller agrees to
repurchase, a security at a mutually agreed upon time and price (usually within
seven days). The repurchase agreement thereby determines the yield during the
purchaser's holding period, while the seller's obligation to repurchase is
secured by the value of the underlying security. The Fund's custodian or sub-
custodian will have custody of, and will hold in a segregated account,
securities acquired by the Fund under a repurchase agreement. Repurchase
agreements are considered by the staff of the Securities and Exchange Commission
to be loans by the Fund. In an attempt to reduce the risk of incurring a loss
on a repurchase agreement, the Fund will enter into repurchase agreements only
with domestic banks with total assets in excess of $1 billion, or primary
government securities dealers reporting to the Federal Reserve Bank of New York,
with respect to securities of the type in which the Fund may invest, and will
require that additional securities be deposited with it if the value of
the securities purchased should decrease below resale price. Repurchase
agreements could involve risks in the event of a default or insolvency of the
other party to the agreement, including possible delays or restrictions upon the
Fund's ability to dispose of the underlying securities.
Management Policies
Lending Portfolio Securities. In connection with its securities lending
transactions, the Fund may return to the borrower or a third party which is
unaffiliated with the Fund, and which is acting as a "placing broker," a part of
the interest earned from the investment of collateral received from securities
loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned: (1)
the Fund must receive at least 100% cash collateral from the borrower; (2) the
borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the Fund must be able
to terminate the loan at any time; (4) the Fund must receive reasonable interest
on the loan, as well as any interest or other distributions payable on the
loaned securities, and any increase in market value; and (5) the Fund may pay
only reasonable custodian fees in connection with the loan.
Derivatives. The Fund may invest in Derivatives (as defined in the
Fund's Prospectus) for a variety of reasons, including to hedge certain market
risks, to provide a substitute for purchasing or selling particular securities
or to increase potential income gain. Derivatives may provide a cheaper,
quicker or more specifically focused way for the Fund to invest than
"traditional" securities would.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and the
portfolio as a whole. Derivatives permit the Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level of
risk, or change the character of the risk, of its portfolio by making
investments in specific securities.
Derivatives may be purchased on established exchanges or through
privately negotiated transactions referred to as over-the-counter Derivatives.
Exchange-traded Derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such Derivatives. This guarantee usually
is supported by a daily payment system (i.e., variation margin requirements)
operated by the clearing agency in order to reduce overall credit risk. As a
result, unless the clearing agency defaults, there is relatively little
counterparty credit risk associated with Derivatives purchased on an exchange.
By contrast, no clearing agency guarantees over-the-counter Derivatives.
Therefore, each party to an over-the-counter Derivative bears the risk that the
counterparty will default. Accordingly, the Manager will consider the
creditworthiness of counterparties to over-the-counter Derivatives in the same
manner as it would review the credit quality of a security to be purchased by
the Fund. Over-the-counter Derivatives are less liquid than exchange-traded
Derivatives since the other party to the transaction may be the only investor
with sufficient understanding of the Derivative to be interested in bidding for
it.
Futures Transactions--In General. The Fund may enter into futures contracts in
U.S. domestic markets, such as the Chicago Board of Trade. Engaging in these
transactions involves risk of loss to the Fund which could adversely affect the
value of the Fund's net assets. Although the Fund intends to purchase or sell
futures contracts only if there is an active market for such contracts, no
assurance can be given that a liquid market will exist for any particular
contract at any particular time. Many futures exchanges and boards of trade
limit the amount of fluctuation permitted in futures contract prices during a
single trading day. Once the daily limit has been reached in a particular
contract, no trades may be made that day at a price beyond that limit or trading
may be suspended for specified periods during the trading day. Futures contract
prices could move to the limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions and
potentially subjecting the Fund to substantial losses.
Successful use of futures by the Fund also is subject to the ability of
the Manager to predict correctly movements in the direction of the relevant
market and, to the extent the transaction is entered into for hedging purposes,
to ascertain the appropriate correlation between the transaction being hedged
and the price movements of the futures contract. For example, if the Fund uses
futures to hedge against the possibility of a decline in the market value of
securities held in its portfolio and the prices of such securities instead
increase, the Fund will lose part or all of the benefit of the increased value
of securities which it has hedged because it will have offsetting losses in its
futures positions. Furthermore, if in such circumstances the Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. The Fund may have to sell such securities at a time when it may
be disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities and
Exchange Commission, the Fund may be required to segregate permissible liquid
assets in connection with its commodities transactions in an amount generally
equal to the value of the underlying commodity. The segregation of such assets
will have the effect of limiting a Fund's ability otherwise to invest those
assets.
Specific Futures Transactions. The Fund may purchase and sell interest rate
futures contracts. An interest rate future obligates the Fund to purchase or
sell an amount of a specific debt security at a future date at a specific price.
Options--In General. The Fund may purchase and write (i.e., sell) call or put
options with respect to specific securities. A call option gives the purchaser
of the option the right to buy, and obligates the writer to sell, the underlying
security or securities at the exercise price at any time during the option
period, or at a specific date. Conversely, a put option gives the purchaser of
the option the right to sell, and obligates the writer to buy, the underlying
security or securities at the exercise price at any time during the option
period, or at a specific date.
A covered call option written by the Fund is a call option with respect
to which the Fund owns the underlying security or otherwise covers the
transaction by segregating cash or other securities. A put option written by
the Fund is covered when, among other things, cash or liquid securities having a
value equal to or greater than the exercise price of the option are placed in a
segregated account with the Fund's custodian to fulfill the obligation
undertaken. The principal reason for writing covered call and put options is to
realize, through the receipt of premiums, a greater return than would be
realized on the underlying securities alone. The Fund receives a premium from
writing covered call or put options which it retains whether or not the option
is exercised.
There is no assurance that sufficient trading interest to create a liquid
secondary market on a securities exchange will exist for any particular option
or at any particular time, and for some options no such secondary market may
exist. A liquid secondary market in an option may cease to exist for a variety
of reasons. In the past, for example, higher than anticipated trading activity
or order flow, or other unforeseen events, at times have rendered certain of the
clearing facilities inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of orders
or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
covered call option writer, the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.
Successful use by the Fund of options will be subject to the ability of
the Manager to predict correctly movements in interest rates. To the extent the
Manager's predictions are incorrect, the Fund may incur losses.
Future Developments. The Fund may take advantage of opportunities in the
area of options and futures contracts and options on futures contracts and any
other Derivatives which are not presently contemplated for use by the Fund or
which are not currently available but which may be developed, to the extent such
opportunities are both consistent with the Fund's investment objective and
legally permissible for the Fund. Before entering into such transactions or
making any such investment, the Fund will provide appropriate disclosure in its
Prospectus or Statement of Additional Information.
Forward Commitments. Municipal Obligations and other securities
purchased on a forward commitment or when-issued basis are subject to changes in
value (generally changing in the same way, i.e., appreciating when interest
rates decline and depreciating when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Securities purchased on a forward
commitment or when-issued basis may expose the Fund to risks because they may
experience such fluctuations prior to their actual delivery. Purchasing
securities on a when-issued basis can involve the additional risk that the yield
available in the market when the delivery takes place actually may be higher
than that obtained in the transaction itself. Purchasing securities on a
forward commitment or when-issued basis when the Fund is fully or almost fully
invested may result in greater potential fluctuation in the value of the Fund's
net assets and its net asset value per share.
Investment Considerations and Risks
Lower Rated Bonds. The Fund is permitted to invest in securities rated
below Baa by Moody's and below BBB by S&P and Fitch and as low as the lowest
rating assigned by Moody's, S&P or Fitch. Such bonds, though high yielding, are
characterized by risk. See "Description of the Fund--Investment Considerations
and Risks--Lower Rated Bonds" in the Prospectus for a discussion of certain
risks and "Appendix" for a general description of Moody's, S&P and Fitch ratings
of Municipal Obligations. Although ratings may be useful in evaluating the
safety of the interest and principal payments, they do not evaluate the market
value risk of these bonds. The Fund will rely on the Manager's judgment,
analysis and experience in evaluating the creditworthiness of an issuer.
Investors should be aware that the market values of many of these bonds
tend to be more sensitive to economic conditions than are higher rated
securities. These bonds generally are considered by Moody's, S&P and Fitch to
be predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation and generally will
involve more credit risk than securities in the higher rating categories.
Because there is no established retail secondary market for many of these
securities, the Fund anticipates that such securities could be sold only to a
limited number of dealers or institutional investors. To the extent a secondary
trading market for these bonds does exist, it generally is not as liquid as the
secondary market for higher rated securities. The lack of a liquid secondary
market may have an adverse impact on market price and yield and the Fund's
ability to dispose of particular issues when necessary to meet the Fund's
liquidity needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. The lack of a liquid
secondary market for certain securities also may make it more difficult for the
Fund to obtain accurate market quotations for purposes of valuing the Fund's
portfolio and calculating net asset value. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of these securities. In such cases, judgment may play a
greater role in valuation because less reliable, objective data may be
available.
These bonds may be particularly susceptible to economic downturns. It is
likely that an economic recession could disrupt severely the market for such
securities and may have an adverse impact on the value of such securities. In
addition, it is likely that any such economic downturn could adversely affect
the ability of the issuers of such securities to repay principal and pay
interest thereon and increase the incidence of default of such securities.
The Fund may acquire these bonds during an initial offering. Such
securities may involve special risks because they are new issues. The Fund has
no arrangement with any persons concerning the acquisition of such securities,
and the Manager will review carefully the credit and other characteristics
pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also apply
to lower rated zero coupon bonds and pay-in-kind bonds, in which the Fund may
invest up to 5% of the value its net assets. Zero coupon, pay-in-kind or
delayed interest bonds carry an additional risk in that, unlike bonds which pay
interest throughout the period to maturity, the Fund will realize no cash until
the cash payment date unless a portion of such securities are sold and, if the
issuer defaults, the Fund may obtain no return at all on its investment. See
"Dividends, Distributions and Taxes."
Investment Restrictions
The Fund has adopted investment restrictions numbered 1 through 8 as
fundamental policies, which cannot be changed without approval by the holders of
a majority (as defined in the 1940 Act) of the Fund's outstanding voting shares.
Investment restrictions numbered 9 through 14 are not fundamental policies and
may be changed by vote of a majority of the Fund's Board members at any time.
The Fund may not:
1. Invest more than 5% of its assets in the obligations of any
single issuer, except that up to 25% of the value of the Fund's
total assets may be invested, and securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities may be
purchased, without regard to any such limitation.
2. Hold more than 10% of the voting securities of any single issuer.
This Investment Restriction applies only with respect to 75% of
the Fund's total assets.
3. Invest more than 25% of its total assets in the securities of
issuers in any single industry; provided that there shall be no
limitation on the purchase of Municipal Obligations and, for
temporary defensive purposes, obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
4. Borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowing to no more than 33-1/3% of the
value of the Fund's total assets). For purposes of this
investment restriction, the entry into options, forward
contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices shall not
constitute borrowing.
5. Purchase or sell real estate, commodities or commodity contracts,
or oil and gas interests, but this shall not prevent the Fund
from investing in Municipal Obligations secured by real estate or
interests therein, or prevent the Fund from purchasing and
selling options, forward contracts, futures contracts, including
those relating to indices, and options on futures contracts or
indices.
6. Underwrite the securities of other issuers, except that the Fund
may bid separately or as part of a group for the purchase of
Municipal Obligations directly from an issuer for its own
portfolio to take advantage of the lower purchase price
available, and except to the extent the Fund may be deemed an
underwriter under the Securities Act of 1933, as amended, by
virtue of disposing of portfolio securities.
7. Make loans to others except through the purchase of debt
obligations and the entry into repurchase agreements; however,
the Fund may lend its portfolio securities in an amount not to
exceed 33-1/3% of the value of its total assets. Any loans of
portfolio securities will be made according to guidelines
established by the Securities and Exchange Commission and the
Fund's Board.
8. Issue any senior security (as such term is defined in Section
18(f) of the 1940 Act), except to the extent that the activities
permitted in Investment Restrictions numbered 4, 5 and 12 may be
deemed to give rise to a senior security.
9. Sell securities short or purchase securities on margin, but the
Fund may make margin deposits in connection with transactions in
futures contracts, including those relating to indices, and
options on futures contracts or indices.
10. Purchase securities other than Municipal Obligations and Taxable
Investments and those arising out of transactions in futures and
options or as otherwise provided in the Fund's Prospectus.
11. Invest in securities of other investment companies, except to the
extent permitted under the 1940 Act.
12. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to the extent necessary to secure permitted borrowings and
to the extent related to the deposit of assets in escrow in
connection with the purchase of securities on a when-issued or
delayed-delivery basis and collateral and initial or variation
margin arrangements with respect to options, forward contracts,
futures contracts, including those related to indices, and
options on futures contracts or indices.
13. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are
illiquid (which securities could include participation interests
(including municipal lease/purchase agreements) that are not
subject to the demand feature described in the Fund's Prospectus,
and floating and variable rate demand obligations as to which
the Fund cannot exercise the demand feature described in the
Fund's Prospectus on less than seven days' notice and as to which
there is no secondary market) if, in the aggregate, more than 15%
of its net assets would be so invested.
14. Invest in companies for the purpose of exercising control.
For purposes of Investment Restriction No. 3, industrial development
bonds, where the payment of principal and interest is the ultimate
responsibility of companies within the same industry, are grouped together as an
"industry."
If a percentage restriction is adhered to at the time of an investment, a
later increase in percentage resulting from a change in values or assets will
not constitute a violation of that restriction.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states. Should
the Fund determine that a commitment is no longer in the best interests of the
Fund and its shareholders, the Fund reserves the right to revoke the commitment
by terminating the sale of Fund shares in the state involved.
MANAGEMENT OF THE FUND
Board members and officers of the Fund, together with information as to
their principal business occupations during at least the last five years, are
shown below. Each Board member who is deemed to be an "interested person" of
the Fund, as defined in the 1940 Act, is indicated by an asterisk.
Board Members of the Fund
*DAVID W. BURKE, Board Member. Chairman of the Board of Governors, an
independent board' within the United States Information Agency, since
August 1995. From August 1994 to December 1994, Mr. Burke was a
Consultant to the Manager and, from October 1990 to August 1994, he was
Vice President and Chief Administrative Officer of the Manager. From
1977 to 1990, Mr. Burke was involved in the management of national
television news, as Vice President and Executive Vice President of ABC
News, and subsequently as President of CBS News. He is 60 years old and
his address is Box 654, Eastham, Massachusetts 02642.
HODDING CARTER, III, Board Member. Chairman of MainStreet, a television
production company. Since 1995, Knight Professor of public affairs
journalism at the University of Maryland. From 1985 to 1986, he was
editor and chief correspondent of "Capitol Journal," a weekly Public
Broadcasting System ("PBS") series on Congress. From 1981 to 1984, he
was anchorman and chief correspondent for PBS' "Inside Story," a
regularly scheduled half-hour critique of press performance.
From 1977 to July 1980, Mr. Carter served as Assistant Secretary of State
for Public Affairs and as Department of State spokesman. He is 61 years
old and his address is c/o MainStreet, 918 Sixteenth Street, N.W.,
Washington, D.C. 20006.
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman of
the Board of various funds in the Dreyfus Family of Funds. He is also
Chairman of the Board of Directors of Noel Group, Inc., a venture capital
company; and a director of the Muscular Dystrophy Association, HealthPlan
Services Corporation, Belding Heminway, Inc., a manufacturer and marketer
of industrial threads, specialty yarns, home furnishings, and fabrics,
Curtis Industries, Inc., a national distributor of security products,
chemicals and automotive and other hardware, and Staffing Resources, Inc.
For more than five years prior to January 1995, he was President, a
director and, until August 1994, Chief Operating Officer of the Manager
and Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of the Manager and, until August
24, 1994, the Fund's distributor. From August 1994 to December 31, 1994,
he was a director of Mellon Bank Corporation. He is 53 years old and his
address is c/o Noel Group, Inc., 667 Madison Avenue, 25th Floor, New
York, New York 10022.
EHUD HOUMINER, Board Member. Since July 1991, Professor and Executive-in-
Residence at the Columbia Business School, Columbia University. From
1991 to 1995, he was a Consultant to Bear, Stearns & Co. Inc., investment
bankers. He was President and Chief Executive Officer of Philip Morris
USA, manufacturers of consumer products, from December 1988 until
September 1990. He also is a Director of Avnet Inc. He is 56 years old
and his address is c/o Columbia Business School, Columbia University,
Uris Hall, Room 526, New York, New York 10027.
RICHARD C. LEONE, Board Member. President of The Twentieth Century Fund, Inc.,
a tax exempt research foundation engaged in the study of economic,
foreign policy and domestic issues. From April 1990 to March 1994, he
was Chairman and, from April 1988 to March 1994, a Commissioner of The
Port Authority of New York and New Jersey. A member in 1985, and from
January 1986 to January 1989, Managing Director of Dillon, Read & Co.
Inc. Mr. Leone is also a director of Resource Mortgage Capital, Inc. He
is 56 years old and his address is 41 East 70th Street, New York, New
York 10021.
HANS C. MAUTNER, Board Member. Chairman, Trustee and Chief Executive Officer of
Corporate Property Investors, a real estate investment company. Since
January 1986, a Director of Julius Baer Investment Management, Inc., a
wholly-owned subsidiary of Julius Baer Securities, Inc. He is 56 years
old and his address is 305 East 47th Street, New York, New York 10017.
ROBIN A. SMITH, Board Member. Since 1993, Vice President, and from March 1992
to October 1993, Executive Director, of One to One Partnership, Inc., a
national non-profit organization that seeks to promote mentoring and
economic empowerment for at-risk youths. From June 1986 to February
1992, she was an investment banker with Goldman, Sachs, & Co. She is
also a Trustee of Westover School and a Board member of the Jacobs A.
Riis Settlement House. She is 33 years old and her address is 375
Park Avenue, Suite 1705, New York, New York 10152.
JOHN E. ZUCCOTTI, Board Member. President and Chief Executive Officer of
Olympia & York Companies (U.S.A.), and of member of its Board of
Directors since the inception of a Board on July 27, 1993. From 1986 to
1990, he was partner in the law firm of Brown & Wood and from 1978 to
1986 a partner in the law firm of Tufo & Zuccotti. First Deputy Mayor of
the City of New York from December 1975 to June 1977, and Chairman of the
City Planning Commission for the City of New York from 1973 to 1975. Mr.
Zuccotti is also a Director of Starrett Housing Corporation, a
construction, development and real estate properties corporation, and
Capstone Pharmacy Services, Inc. He is 59 years old and his address is
237 Park Avenue, New York, New York 10017.
For so long as the Fund's Plan described in the section captioned
"Shareholder Services Plan" remains in effect, the Board members of the Fund who
are not "interested persons" (as defined in the 1940 Act) will be selected and
nominated by the Board members who are not "interested persons" of the Fund.
The Fund typically pays its Board members an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the Board
receives an additional 25% of such compensation. Emeritus Board members are
entitled to receive an annual retainer and a per meeting fee of one-half the
amount paid to them as Board members. The aggregate amount of compensation paid
to each Board member by the Fund for the fiscal year ended August 31, 1996, and
by all other funds in the Dreyfus Family of Funds for which such person is a
Board member (the number of which is set forth in parenthesis next to each Board
member's total compensation) for the year ended December 31, 1995, is as
follows:
Total
Compensation from
Aggregate Fund and Fund
Name of Board Compensation from Complex Paid to
Member Fund* Board Member
David W. Burke $7,500 $253,654 (49)
Hodding Carter, III $7,500 $ 49,500 (7)
Joseph S. DiMartino $9,375 $448,618 (94)
Ehud Houminer $7,500 $ 55,405 (8)
Richard C. Leone $7,500 $ 49,000 (7)
Hans C. Mautner $7,500 $ 47,000 (7)
Robin A. Smith $7,000 $ 27,526 (7)
John E. Zuccotti $7,500 $ 49,500 (7)
* Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $5,784 for all Board members as a group.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive Officer
and a director of the Distributor and an officer of other investment
companies advised or administered by the Manager. From December 1991 to
July 1994, she was President and Chief Compliance Officer of Funds
Distributor, Inc., the ultimate parent of which is Boston Institutional
Group, Inc. Prior to December 1991, she served as Vice President and
Controller, and later as Senior Vice President, of The Boston Company
Advisors, Inc. She is 39 years old.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President and
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From February 1992 to
July 1994, he served as Counsel for The Boston Company Advisors, Inc.
From August 1990 to February 1992, he was employed as an Associate at
Ropes & Gray. He is 32 years old.
ELIZABETH A. BACHMAN, Vice President and Assistant Secretary. Assistant Vice
President of the Distributor and an officer of other investment companies
advised or administered by the Manager. She is 27 years old.
DOUGLAS C. CONROY, Vice President and Assistant Secretary. Supervisor of
Treasury Services and Administration of the Distributor and an officer of
other investment companies advised or administered by the Manager. From
April 1993 to January 1995, he was a Senior Fund Accountant for Investors
Bank and Trust Company. From December 1991 to March 1993, he was
employed as a Fund Accountant at The Boston Company, Inc. He is 27 years
old.
RICHARD W. INGRAM, Vice President and Assistant Secretary. Senior Vice
President and Director of Client Services and Treasury Operations of the
Distributor and an officer of other investment companies advised or
administered by the Manager. From March 1994 to November 1995, he was
Vice President and Division Manager for First Data Investor Services
Group. From 1989 to 1994, Mr. Ingram was Vice President, Assistant
Treasurer and Tax Director - Mutual Funds at The Boston Company, Inc. He
is 41 years old.
MARK A. KARPE, Vice President and Assistant Secretary. Senior Paralegal of the
Distributor and an officer of other investment companies advised or
administered by the Manager. Prior to August 1993, he was employed as an
Associate Examiner at the National Association of Securities Dealers. He
is 28 years old.
MARY A. NELSON, Vice President and Assistant Treasurer. Vice President and
Manager of Treasury Services and Administration of the Distributor and an
officer of other investment companies advised or administered by the
Manager. From September 1989 to July 1994, she was an Assistant Vice
President and Client Manager for The Boston Company, Inc. She is 32
years old.
JOSEPH F. TOWER, III, Vice President and Assistant Treasurer. Senior Vice
President, Treasurer and Chief Financial Officer of the Distributor and
an officer of other investment companies advised or administered by the
Manager. From July 1988 to August 1994, he was employed by The Boston
Company, Inc. where he held various management positions in the Corporate
Finance and Treasury areas. He is 34 years old.
The address of each of the Fund's officers is 200 Park Avenue, New York,
New York 10166.
The Fund's Board members and officers as a group, owned less than 1% of
the Fund's voting securities outstanding on December 13, 1996.
MANAGEMENT AGREEMENT
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the Fund."
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") with the Fund dated August 24, 1994, which is
subject to annual approval by (i) the Fund's Board or (ii) vote of a majority
(as defined in the 1940 Act) of the outstanding voting securities of the Fund,
provided that in either event the continuance also is approved by a majority of
the Board members who are not "interested persons" (as defined in the 1940 Act)
of the Fund or the Manager, by vote cast in person at a meeting called for the
purpose of voting on such approval. The Agreement was approved by shareholders
on August 4, 1994. The Agreement was last approved by the Fund's Board,
including a majority of the Board members who are not "interested persons" of
any party to the Agreement, at a meeting held on October 28, 1996. The
Agreement is terminable without penalty, on 60 days' notice, by the Fund's Board
or by vote of the holders of a majority of the Fund's outstanding voting shares
or, on not less than 90 days' notice, by the Manager. The Agreement will
terminate automatically in the event of its assignment (as defined in the 1940
Act).
The following persons are officers and/or directors of the Manager: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E. Canter,
Vice Chairman, Chief Investment Officer and a director; Lawrence S. Kash, Vice
Chairman-Distribution and a director; Philip L. Toia, Vice Chairman-Operations
and Administration and a director; William T. Sandalls, Jr., Senior Vice
President and Chief Financial Officer; William F. Glavin, Jr., Vice President-
Corporate Development; Mark N. Jacobs, Vice President, General Counsel and
Secretary; Patrice M. Kozlowski, Vice President-Corporate Communications; Mary
Beth Leibig, Vice President-Human Resources; Jeffrey N. Nachman, Vice
President-Mutual Fund Accounting; Andrew S. Wasser, Vice President-Information
Systems; Elvira Oslapas, Assistant Secretary; and Mandell L. Berman, Frank V.
Cahouet, Alvin E. Friedman, Lawrence M. Greene and Julian M. Smerling,
directors.
The Manager manages the Fund's portfolio of investments in accordance
with the stated policies of the Fund, subject to the approval of the Fund's
Board. The Manager is responsible for investment decisions and provides the
Fund with portfolio managers who are authorized by the Fund's Board to execute
purchases and sales of securities. The Fund's portfolio managers are Joseph P.
Darcy, A. Paul Disdier, Karen M. Hand, Stephen C. Kris, Richard J. Moynihan,
Jill C. Shaffro, L. Lawrence Troutman, Samuel J. Weinstock and Monica S.
Wieboldt. The Manager also maintains a research department with a professional
staff of portfolio managers and securities analysts who provide research
services for the Fund as well as for other funds advised by the Manager. All
purchases and sales are reported for the Board members' review at the meeting
subsequent to such transactions.
The Manager maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time deems
appropriate.
All expenses incurred in the operation of the Fund are borne by the Fund,
except to the extent specifically assumed by the Manager. The expenses borne by
the Fund include without limitation: taxes, interest, loan commitment fees,
interest and distributions paid on securities sold short, brokerage fees and
commissions, if any, fees of Board members who are not officers, directors,
employees or holders of 5% or more of the outstanding voting securities of the
Manager, Securities and Exchange Commission fees, state Blue Sky qualification
fees, advisory fees, charges of custodians, transfer and dividend disbursing
agents' fees, certain insurance premiums, industry association fees, outside
auditing and legal expenses, costs of independent pricing services, costs of
maintaining corporate existence, costs attributable to investor services
(including, without limitation, telephone and personnel expenses), costs of
shareholders' reports and corporate meetings, costs of preparing and printing
prospectuses and statements of additional information for regulatory purposes
and for distribution to existing shareholders, and any extraordinary expenses.
As compensation for the Manager's services, the Fund has agreed to pay
the Manager a monthly management fee at the annual rate of .60 of 1% of the
value of the Fund's average daily net assets. This amount is reduced, pursuant
to the terms of a Stipulation of Settlement of Litigation, which became
effective on October 15, 1988, by annual amounts ranging from $90,000 per year
to $1 million per year, depending on the size of the Fund's average daily net
assets, for a period of 10 years from the effective date. For the fiscal years
ended August 31, 1994, 1995 and 1996, the management fees payable by the Fund
amounted to $25,447,556, $22,188,564 and $22,580,334, respectively, which fees
were reduced by $350,000 in each year pursuant to the Stipulation of Settlement
of Litigation. All fees and expenses are accrued daily and deducted before the
declaration of dividends to investors.
The Manager has agreed that if in any fiscal year the aggregate expenses
of the Fund, exclusive of taxes, brokerage, interest on borrowings and (with the
prior written consent of the necessary state securities commissions)
extraordinary expenses, but including the management fee, exceed 1-1/2% of the
value of the Fund's average net assets for the fiscal year, the Fund may deduct
from the payment to be made to the Manager under the Agreement, or the Manager
will bear, such excess expense. Such deduction or payment, if any, will be
estimated, reconciled and effected or paid, as the case may be, on a monthly
basis. During the fiscal year ended August 31, 1996, no expense reimbursements
were made pursuant to such limitation.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of the Fund's net assets increases.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Shares."
The Distributor. The Distributor serves as the Fund's distributor on a
best efforts basis pursuant to an agreement which is renewable annually. The
Distributor also acts as distributor for the other funds in the Dreyfus Family
of Funds and for certain other investment companies. In some states, certain
financial institutions effecting transactions in Fund shares may be required to
register as dealers pursuant to state law.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders may
be made at any time. Purchase orders received by 4:00 p.m., New York time, on
any business day that Dreyfus Transfer, Inc., the Fund's transfer and dividend
disbursing agent (the "Transfer Agent"), and the New York Stock Exchange are
open for business will be credited to the shareholder's Fund account on the next
bank business day following such purchase order. Purchase orders made after
4:00 p.m., New York time, on any business day the Transfer Agent and the New
York Stock Exchange are open for business, or orders made on Saturday, Sunday or
any Fund holiday (e.g., when the New York Stock Exchange is not open for
business), will be credited to the shareholder's Fund account on the second
business day following such purchase order. To qualify to use the Dreyfus
TeleTransfer Privilege, the initial payment for purchase of Fund shares must be
drawn on, and redemption proceeds paid to, the same bank and account as are
designated on the Account Application or Shareholder Services Form on file. If
the proceeds of a particular redemption are to be wired to an account at any
other bank, the request must be in writing and signature-guaranteed. See
"Redemption of Shares--Dreyfus TeleTransfer Privilege."
Transactions Through Securities Dealers. Fund shares may be purchased
and redeemed through securities dealers which may charge a nominal transaction
fee for such services. Some dealers will place the Fund's shares in an account
with their firm. Dealers also may require that the customer invest more than
the $1,000 minimum investment; the customer not take physical delivery of share
certificates; the customer not request redemption checks to be issued in the
customer's name; fractional shares not be purchased; or other conditions. There
are no sales or service charges by the Fund or the Distributor although
investment dealers, banks and other financial institutions may make reasonable
charges to investors for their services. The services provided and fees
therefor are established by each institution acting independently of the Fund.
The Fund has been given to understand that these fees may be charged for
customer services including, but not limited to, same-day investment of client
funds; same-day access to client funds; advice to customers about the status of
their accounts, yield currently being paid or income earned to date; provision
of periodic account statements showing security and money market positions;
other services available from the dealer, bank or other financial institution;
and assistance with inquiries related to their investments. Any such fees will
be deducted monthly from the investor's account, which on smaller accounts could
constitute a substantial portion of distributions. Small, inactive, long-term
accounts involving monthly service charges may not be in the best interest of
investors. Investors should be aware that they may purchase shares of the Fund
directly from the Fund without the imposition of any maintenance or service
charges, other than those already described herein.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar
year the account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services Plan."
The Fund has adopted a Shareholder Services Plan (the "Plan") pursuant to
which the Fund reimburses Dreyfus Service Corporation for certain allocated
expenses of providing personal services and/or maintaining shareholder accounts.
The services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Fund and
providing reports and other information, and services related to the maintenance
of shareholder accounts.
A quarterly report of the amounts expended under the Plan, and the
purposes for which such expenditures were incurred, must be made to the Fund's
Board for its review. In addition, the Plan provides that material amendments
of the Plan must be approved by the Fund's Board, and by the Board members who
are not "interested persons" (as defined in the 1940 Act) of the Fund and have
no direct or indirect financial interest in the operation of the Plan by vote
cast in person at a meeting called for the purpose of considering such
amendments. The Plan is subject to annual approval by such vote cast in person
at a meeting called for the purpose of voting on the Plan. The Plan was last so
approved on April 29, 1996. The Plan is terminable at any time by vote of a
majority of the Board members who are not "interested persons" and have no
direct or indirect financial interest in the operation of the Plan.
For the fiscal year ended August 31, 1996, $2,087,233 was chargeable to
the Fund under the Plan.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Shares."
Redemption Fee. For shares purchased after May 9, 1997, the Fund will
deduct a redemption fee equal to .10% of the net asset value of Fund shares
redeemed or exchanged less than fifteen days following the issuance of such
shares. The redemption fee will be deducted from the redemption proceeds and
retained by the Fund.
No redemption fee will be charged upon the redemption of shares through
the Fund's Check Redemption Privilege, Automatic Withdrawal Plan or Dreyfus
Auto-Exchange Privilege or through omnibus accounts. Further, no redemption fee
will be charged upon redemption of Fund shares acquired through reinvestment of
dividends or capital gains distributions. This redemption fee may be waived,
modified or discontinued at any time, or from time to time.
Check Redemption Privilege. An investor may indicate on the Account
Application, Shareholder Services Form or by later written request that the Fund
provide Redemption Checks ("Checks") drawn on the investor's Fund account.
Checks will be sent only to the registered owner(s) of the account and only to
the address of record. The Account Application, Shareholder Services Form or
later written request must be manually signed by the registered owner(s).
Checks may be made payable to the order of any person in an amount of $500 or
more. When a Check is presented to the Transfer Agent for payment, the Transfer
Agent, as the investor's agent, will cause the Fund to redeem a sufficient
number of shares in the investor's account to cover the amount of the Check.
Dividends are earned until the Check clears. After clearance, a copy of the
Check will be returned to the investor. Investors generally will be subject to
the same rules and regulations that apply to checking accounts, although
election of this Privilege creates only a shareholder-transfer agent
relationship with the Transfer Agent.
If the amount of the Check is greater than the value of the shares in an
investor's account, the Check will be returned marked insufficient funds.
Checks should not be used to close an account.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the investor,
and reasonably believed by the Transfer Agent to be genuine. Ordinarily, the
Fund will initiate payment for shares redeemed pursuant to this Privilege on the
next business day after receipt by the Transfer Agent of the redemption request
in proper form. Redemption proceeds ($1,000 minimum) will be transferred by
Federal Reserve wire only to the commercial bank account specified by the
investor on the Account Application or Shareholder Services Form, or to
a correspondent bank if the investor's bank is not a member of the Federal
Reserve System. Fees ordinarily are imposed by such bank and usually borne by
the investor. Immediate notification by the correspondent bank to the
investor's bank is necessary to avoid a delay in crediting the funds to the
investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code which
may be used for domestic
or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
--------------------- -------------------------
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may have
the wire transmitted by contacting a TRT Cables operator at 1-800-654-7171, toll
free. Investors should advise the operator that the above transmittal code must
be used and should also inform the operator of the Transfer Agent's answer back
sign.
To change the commercial bank or account designated to receive redemption
proceeds, a written request must be sent to the Transfer Agent. This request
must be signed by each shareholder, with each signature guaranteed as described
below under "Stock Certificates; Signatures."
Dreyfus TeleTransfer Privilege. Investors should be aware that if they
have also selected the Dreyfus TeleTransfer Privilege, any request for a wire
redemption will be effected as a Dreyfus TeleTransfer transaction through the
Automated Clearing House ("ACH") system unless more prompt transmittal
specifically is requested. Redemption proceeds will be on deposit in the
investor's account at an ACH member bank ordinarily two business days after
receipt of the redemption request. See "Purchase of Shares--Dreyfus
TeleTransfer Privilege."
Stock Certificates; Signatures. Any stock certificate representing Fund
shares to be redeemed must be submitted with the redemption request. Written
redemption requests must be signed by each shareholder, including each holder of
a joint account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which signature-
guarantees in proper form generally will be accepted from domestic banks,
brokers, dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations, as well as
from participants in the New York Stock Exchange Medallion Signature Program,
the Securities Transfer Agents Medallion Program ("STAMP"), and the Stock
Exchanges Medallion Program. Guarantees must be signed by an authorized
signatory of the guarantor and "Signature-Guaranteed" must appear with the
signature. The Transfer Agent may request additional documentation from
corporations, executors, administrators, trustees or guardians, and may accept
other suitable verification arrangements from foreign investors, such as
consular verification. For more information with respect to signature-
guarantees, please call one of the telephone numbers listed on the cover.
Redemption Commitment. The Fund has committed itself to pay in cash all
redemption requests by any shareholder of record, limited in amount during any
90-day period to the lesser of $250,000 or 1% of the value of the Fund's net
assets at the beginning of such period. Such commitment is irrevocable without
the prior approval of the Securities and Exchange Commission. In the case of
requests for redemption in excess of such amount, the Fund's Board reserves the
right to make payments in whole or in part in securities (which may include non-
marketable securities) or other assets of the Fund in case of an emergency or
any time a cash distribution would impair the liquidity of the Fund to the
detriment of the existing shareholders. In such event, the securities would be
valued in the same manner as the Fund's portfolio is valued. If the recipient
sold such securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (b) when
trading in the markets the Fund ordinarily utilizes is restricted, or when an
emergency exists as determined by the Securities and Exchange Commission so that
disposal of the Fund's investments or determination of its net asset value is
not reasonably practicable, or (c) for such other periods as the Securities and
Exchange Commission by order may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Fund Exchanges. Shares of other funds purchased by exchange will be
purchased on the basis of relative net asset value per share as follows:
A. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Shares of any funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of any funds purchased with a sales load, shares of any
funds acquired by a previous exchange from shares purchased with
a sales load, and additional shares acquired through reinvestment
of dividends or distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect
to any reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number.
To request an exchange, an investor must give exchange instructions to
the Transfer Agent in writing or by telephone. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless the investor checks the applicable "No" box on the Account Application,
indicating that the investor specifically refuses this Privilege. By using the
Telephone Exchange Privilege, the investor authorizes the Transfer Agent to act
on telephonic instructions (including over The Dreyfus Touch(R) automated
telephone system) from any person representing himself or herself to be the
investor, and reasonably believed by the Transfer Agent to be genuine.
Telephone exchanges may be subject to limitations as to the amount involved or
the number of telephone exchanges permitted. Shares issued in certificate form
are not eligible for telephone exchanges.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made. For Dreyfus-
sponsored Keogh Plans, IRAs and SEP-IRAs with only one participant, the minimum
initial investment is $750. To exchange shares held in corporate plans,
403(b)(7) Plans and SEP-IRAs with more than one
participant, the minimum initial investment is $100 if the plan has at least
$2,500 invested among the funds in the Dreyfus Family of Funds. To exchange
shares held in personal retirement plans, the shares exchanged must have a
current value of at least $100.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege permits
an investor to purchase, in exchange for shares of the Fund, shares of another
fund in the Dreyfus Family of Funds. This Privilege is available only for
existing accounts. Shares will be exchanged on the basis of relative net asset
value as described above under "Fund Exchanges." Enrollment in or modification
or cancellation of this Privilege is effective three business days following
notification by the investor. An investor will be notified if his account falls
below the amount designated to be exchanged under this Privilege. In this case,
an investor's account will fall to zero unless additional investments are made
in excess of the designated amount prior to the next Auto-Exchange Transaction.
Shares held under IRA and other retirement plans are eligible for this
Privilege. Exchanges of IRA shares may be made between IRA accounts and from
regular accounts to IRA accounts, but not from IRA accounts to regular accounts.
With respect to all other retirement accounts, exchanges may be made only among
those accounts.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being acquired
may legally be sold. Shares may be exchanged only between accounts having
identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund Exchanges service or Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the yield on
the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. Automatic Withdrawal may be terminated at any time by the investor,
the Fund or the Transfer Agent. Shares for which stock certificates have been
issued may not be redeemed through the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest automatically their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of another fund in the Dreyfus
Family of Funds of which the investor is a shareholder. Shares of other funds
purchased pursuant to this privilege will be purchased on the basis of relative
net asset value per share as follows:
A. Dividends and distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that
are offered without a sales load.
B. Dividends and distributions paid by a fund which does not charge
a sales load may be invested in shares of other funds sold with a
sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a sales
load may be invested in shares of other funds sold with a sales
load (referred to herein as "Offered Shares"), provided that, if
the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any
reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Shares."
Valuation of Portfolio Securities. The Fund's investments are valued
each business day by an independent pricing service (the "Service") approved by
the Fund's Board. When, in the judgment of the Service, quoted bid prices for
investments are readily available and are representative of the bid side of the
market, these investments 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 bonds of
comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions. The Service may employ electronic data
processing techniques and/or a matrix system to determine valuations. The
Service's procedures are reviewed by the Fund's officers under the general
supervision of the Fund's Board. Expenses and fees, including the management
fee (reduced by the expense limitation, if any), are accrued daily and are taken
into account for the purpose of determining the net asset value of Fund shares.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased from and sold to parties
acting as either principal or agent. Newly-issued securities ordinarily are
purchased directly from the issuer or from an underwriter; other purchases and
sales usually are placed with those dealers from which it appears that the best
price or execution will be obtained. Usually no brokerage commissions, as such,
are paid by the Fund for such purchases and sales, although the price paid
usually includes an undisclosed compensation to the dealer acting as agent. The
prices paid to underwriters of newly-issued securities usually include a
concession paid by the issuer to the underwriter, and purchases of after-market
securities from dealers ordinarily are executed at a price between the bid and
asked price.
Transactions are allocated to various dealers by the Fund's portfolio
managers in their best judgment. The primary consideration is prompt and
effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected for research, statistical or
other services to enable the Manager to supplement its own research and analysis
with the views and information of other securities firms.
Research services furnished by brokers through which the Fund effects
securities transactions may be used by the Manager in advising other funds it
advises and, conversely, research services furnished to the Manager by brokers
in connection with other funds the Manager advises may be used by the Manager in
advising the Fund. Although it is not possible to place a dollar value on these
services, it is the opinion of the Manager that the receipt and study of such
services should not reduce the overall expenses of its research department.
The Fund's portfolio turnover rate for the fiscal years ended August 31,
1995 and 1996 was 51.55% and 64.48%, respectively. The Fund anticipates that its
annual portfolio turnover rate generally will not exceed 100%, but the turnover
rate will not be a limiting factor when the Fund deems it desirable to sell or
purchase securities. Therefore, depending upon market conditions, the Fund's
annual portfolio turnover rate may exceed 100% in particular years.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Distributions and
Taxes."
Management believes that the Fund has qualified as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"), for the fiscal year ended August 31, 1996, and the Fund intends to
continue to so qualify if such qualification is in the best interests of its
shareholders. As a regulated investment company, the Fund will pay no Federal
income tax on net investment income and net realized capital gains to the extent
that such income and gains are distributed to shareholders in accordance with
applicable provisions of the Code. The term "regulated investment company" does
not imply the supervision of management or investment practices or policies by
any government agency.
Any dividend or distribution paid shortly after an investor's purchase
may have the effect of reducing the net asset value of his shares below the cost
of his investment. Such a distribution would be a return on the investment in
an economic sense although taxable as stated in "Dividends, Distributions and
Taxes" in the Prospectus. In addition, the Code provides that if a shareholder
has not held his Fund shares for more than six months (or such shorter period as
the Internal Revenue Service may prescribe by regulation) and has received an
exempt-interest dividend with respect to such shares, any loss incurred on the
sale of such shares will be disallowed to the extent of the exempt-interest
dividend received.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gains or losses. However, all or a portion of any gains
realized from the sale or other disposition of certain market discount bonds
will be treated as ordinary income under Section 1276 of the Code. In addition,
all or a portion of the gain realized from engaging in "conversion transactions"
may be treated as ordinary income under Section 1258 of the Code. "Conversion
transactions" are defined to include certain forward, futures, options and
"straddles" transactions, transactions marketed or sold to produce capital
gains, or transactions described in Treasury regulations to be issued in the
future.
Under Section 1256 of the Code, gain or loss the Fund realizes from
certain futures and options transactions will be treated as 60% long-term
capital gain or loss and 40% short-term capital gain or loss. Gain or loss will
arise upon exercise or lapse of such futures and options as well as from closing
transactions. In addition, any such futures or options remaining unexercised at
the end of the Fund's taxable year will be treated as sold for their then fair
market value, resulting in additional gain or loss to the Fund characterized in
the manner described above.
Offsetting positions held by the Fund involving certain futures and
options transactions may be considered, for tax purposes, to constitute
"straddles." "Straddles" are defined to include "offsetting positions" in
actively traded personal property. The tax treatment of "straddles" is governed
by Sections 1092 and 1258 of the Code, which, in certain circumstances,
overrides or modifies the provisions of Section 1256 of the Code. As such, all
or a portion of any short- or long-term capital gain from certain "straddle"
transactions may be recharacterized to ordinary income.
If the Fund were treated as entering into "straddles" by reason of its
engaging in certain futures or options transactions, such "straddles" could be
characterized as "mixed straddles" if the futures or options transactions
comprising a part of such "straddles" were governed by Section 1256 of the Code.
The Fund may make one or more elections with respect to "mixed straddles."
Depending on which election is made, if any, the results to the Fund may differ.
To the extent the "straddle" rules apply to positions established by the Fund,
losses realized by the Fund will be deferred to the extent of unrealized gain in
the offsetting position. Moreover, as a result of the "straddle" and conversion
transaction rules, short-term capital losses on "straddle" positions may be
recharacterized as long-term capital losses, and long-term capital gains may be
treated as short-term capital gains or ordinary income.
Investment by the Fund in securities issued at a discount or providing
for deferred interest or for payment of interest in the form of additional
obligations could, under special tax rules, affect the amount, timing and
character of distributions to shareholders. For example, the Fund could be
required to take into account annually a portion of the discount (or deemed
discount) at which such securities were issued and to distribute such portion in
order to maintain its qualification as a regulated investment company. In such
case, the Fund may have to dispose of securities which it might otherwise have
continued to hold in order to generate cash to satisfy these distribution
requirements.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance Information."
The Fund's current yield for the 30-day period ended August 31, 1996 was
5.26%. Current yield is computed pursuant to a formula which operates as
follows: The amount of the Fund's expenses accrued for the 30-day period (net
of reimbursements) is subtracted from the amount of the dividends and interest
earned (computed in accordance with regulatory requirements) by the Fund during
the period. That result is then divided by the product of: (a) the average
daily number of shares outstanding during the period that were entitled to
receive dividends, and (b) the net asset value per share on the last day of the
period less any undistributed earned income per share reasonably expected to be
declared as a dividend shortly thereafter. The quotient is then added to 1, and
that sum is raised to the 6th power, after which 1 is subtracted. The current
yield is then arrived at by multiplying the result by 2.
Based upon a 1996 Federal income tax rate of 39.60%, the Fund's tax
equivalent yield for the 30-day period ended August 31, 1996 was 8.71%. Tax
equivalent yield is computed by dividing that portion of the current yield
(calculated as described above) which is tax exempt by 1 minus a stated tax rate
and adding the quotient to that portion, if any, of the yield of the Fund that
is not tax exempt.
The tax equivalent yield noted above represents the application of the
highest Federal marginal personal income tax rate presently in effect. The tax
equivalent figure, however, does not include the potential effect of any state
or local (including, but not limited to, county, district or city) taxes,
including applicable surcharges. In addition, there may be pending legislation
which could affect such stated tax rate or yield. Each investor should consult
its tax adviser, and consider its own factual circumstances and applicable tax
laws, in order to ascertain the relevant tax equivalent yield.
The Fund's average annual total return for the 1, 5 and 10 year periods
ended August 31, 1996 was 4.16%, 6.46% and 6.88%, respectively. Average annual
total return is calculated by determining the ending redeemable value of an
investment purchased with a hypothetical $1,000 payment made at the beginning of
the period (assuming the reinvestment of dividends and distributions), dividing
by the amount of the initial investment, taking the "n"th root of the quotient
(where "n" is the number of years in the period) and subtracting 1 from the
result.
The Fund's total return for the period from October 4, 1976 (commencement
of operations) to August 31, 1996 was 268.79%. Total return is calculated by
subtracting the amount of the Fund's net asset value per share at the beginning
of a stated period from the net asset value per share at the end of the period
(after giving effect to the reinvestment of dividends and distributions during
the period), and dividing the result by the net asset value per share at the
beginning of the period.
The Fund may use hypothetical tax equivalent yields or charts in its
advertising. These hypothetical yields or charts will be used for illustrative
purposes only and are not indicative of the Fund's past or future performance.
Advertising materials for the Fund also may refer to or discuss then-
current or past economic conditions, developments and/or events, including those
relating to actual or proposed tax legislation, and may refer to statistical or
other information concerning trends relating to investment companies, as
compiled by industry associations such as the Investment Company Institute, and
may refer to Morningstar ratings and related analysis supporting the rating.
The Fund may advertise that it was established in 1976 as the first
incorporated tax exempt fund, and may discuss historical events and
circumstances surrounding its formation. As of August 31, 1996, there were
approximately $____ billion of net assets invested in tax exempt funds
throughout the investment company industry.(***)
________________________________
(***) Source: Lipper Analytical Services, Inc.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio managers and may refer to, or
include commentary by, a portfolio manager relating to investment strategy,
asset growth, current or past business, political, economic or financial
conditions and other matters of general interest to investors.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
Each Fund share has one vote and, when issued and paid for in accordance
with the terms of the offering, is fully paid and non-assessable. Fund shares
are of one class and have equal rights as to dividends and in liquidation.
Shares have no preemptive, subscription or conversion rights and are freely
transferable.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN,
COUNSEL AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, P.O.
Box 9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Fund, the
Transfer Agent arranges for the maintenance of shareholder account records for
the Fund, the handling of certain communications between shareholders and the
Fund and the payment of dividends and distributions payable by the Fund. For
these services, the Transfer Agent receives a monthly fee computed on the basis
of the number of shareholder accounts it maintains for the Fund during the
month, and is reimbursed for certain out-of-pocket expenses. For the period
December 1, 1995 (effective date of transfer agency agreement) through August
31, 1996, the Fund paid the Transfer Agent $837,480.
The Bank of New York, 90 Washington Street, New York, New York 10286, is
the Fund's custodian.
Neither the Transfer Agent nor The Bank of New York has any part in
determining the investment policies of the Fund or which securities are to be
purchased or sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York 10004-
2696, as counsel for the Fund, has rendered its opinion as to certain legal
matters regarding the due authorization and valid issuance of the shares being
sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
APPENDIX
Description of certain S&P, Moody's and Fitch ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable, and will include: (1)
likelihood of default-capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligation; (2) nature of and provisions of the obligation; and (3)
protection afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A
Principal and interest payments on bonds in this category are regarded as
safe. This rating describes the third strongest capacity for payment of debt
service. It differs from the two higher ratings because:
General Obligation Bonds -- There is some weakness in the local economic
base, in debt burden, in the balance between revenues and expenditures, or in
quality of management. Under certain adverse circumstances, any one such
weakness might impair the ability of the issuer to meet debt obligations at some
future date.
Revenue Bonds -- Debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management performance
appears adequate.
BBB
Of the investment grade, this is the lowest.
General Obligation Bonds -- Under certain adverse conditions, several of
the above factors could contribute to a lesser capacity for payment of debt
service. The difference between "A" and "BBB" rating is that the latter shows
more than one fundamental weakness, or one very substantial fundamental
weakness, whereas the former shows only one deficiency among the factors
considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the pledged
revenues could show substantial variations, with the revenue flow possibly being
subject to erosion over time. Basic security provisions are no more than
adequate. Management performance could be stronger.
BB, B, CCC, CC, C
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest
degree of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
BB
Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payment.
B
Debt rated B has a greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions would likely impair capacity or willingness to
pay interest and repay principal.
CCC
Debt rated CCC has a current identifiable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions to meet
timely payments of principal. In the event of adverse business, financial or
economic conditions, it is not likely to have the capacity to pay interest and
repay principal.
CC
The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C
The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating.
D
Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus designation to show relative standing within the
major ratings categories.
Municipal Note Ratings
SP-1
The issuers of these municipal notes exhibit very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics are given a plus (+) designation.
SP-2
The issuers of these municipal notes exhibit satisfactory capacity to pay
principal and interest.
Commercial Paper Ratings
The designation A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined
to possess overwhelming safety characteristics are denoted with a plus sign (+)
designation. Capacity for timely payment on issues with an A-2 designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
Moody's
Municipal Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are known
as high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A
Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa
Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate, and therefore not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca
Bonds which are rated Ca present obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Generally, Moody's provides either a generic rating or a rating with a
numerical modifier of 1 for bonds in each of the generic rating categories Aa,
A, Baa, Ba and B. Moody's also provides numerical modifiers of 2 and 3 in each
of these categories for bond issues in the health care, higher education and
other not-for-profit sectors; the modifier 1 indicates that the issue ranks in
the higher end of its generic category; the modifier 2 indicates that the issue
is in the mid-range of the generic category; and the modifier 3 indicates that
the issue is in the low end of the generic category.
Municipal Note Ratings
Moody's ratings for state municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG). Such ratings recognize the
differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower and short-term cyclical elements are
critical in short-term ratings, while other factors of major importance in bond
risk, long-term secular trends for example, may be less important over the short
run.
A short-term rating may also be assigned on an issue having a demand
feature. Such ratings will be designated as VMIG or, if the demand feature is
not rated, as NR. Short-term ratings on issues with demand features are
differentiated by the use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to the
fact that the source of payment may be limited to the external liquidity with no
or limited legal recourse to the issuer in the event the demand is not met.
Moody's short-term ratings are designated Moody's Investment Grade as MIG
1 or VMIG 1 through MIG 4 or VMIG 4. As the name implies, when Moody's assigns
a MIG or VMIG rating, all categories define an investment grade situation.
MIG 1/VMIG 1
This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG 2/VMIG 2
This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
MIG 3/VMIG 3
This designation denotes favorable quality. All security elements are
accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
MIG 4/VMIG 4
This designation denotes adequate quality. Protection commonly regarded
as required of an investment security is present and although not distinctly or
predominantly speculative, there is specific risk.
Commercial Paper Rating
The rating Prime-1 (P-1) is the highest commercial paper rating assigned
by Moody's. Issuers of P-1 paper must have a superior capacity for repayment of
short-term promissory obligations, and ordinarily will be evidenced by leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structures with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a wide range of financial markets and assured sources of alternative
liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2) have a
strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Fitch
Municipal Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to meet
the obligations of a specific debt issue or class of debt. The ratings take
into consideration special features of the issue, its relationship to other
obligations of the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the political and
economic environment that might affect the issuer's financial strength and
credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1+.
A
Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore, impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
BB
Bonds rated BB are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.
B
Bonds rated B are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC
Bonds rated CCC have certain identifiable characteristics, which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC
Bonds rated CC are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C
Bonds rated C are in imminent default in payment of interest or
principal.
DDD, DD and D
Bonds rated DDD, DD and D are in actual or imminent default of interest
and/or principal payments. Such bonds are extremely speculative and should be
valued on the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. DDD represents the highest potential for
recovery on these bonds and D represents the lowest potential for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to indicate
the relative position of a credit within the rating category. Plus and minus
signs, however, are not used in the DDD, DD, or D categories.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
Although the credit analysis is similar to Fitch's bond rating analysis,
the short-term rating places greater emphasis than bond ratings on the existence
of liquidity necessary to meet the issuer's obligations in a timely manner.
Fitch short-term ratings are as follows:
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
F-2
Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payments, but the margin of safety is not as
great as the F-1+ and F-1 categories.
Demand Bond or Notes Ratings
Certain demand securities empower the holder at his option to require the
issuer, usually through a remarketing agent, to repurchase the security upon
notice at par with accrued interest. This is also referred to as a put option.
The ratings of the demand provision may be changed or withdrawn at any time if,
in Fitch's judgment, changing circumstances warrant such action.
Fitch demand provision ratings carry the same symbols and related
definitions as its short-term ratings.
<TABLE>
<CAPTION>
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-93.3% AMOUNT VALUE
________ ________
<S> <C> <C>
ALABAMA-.9%
Alabama Housing Finance Authority, SFMR
6.45%, 10/1/2025........................................................ $ 7,970,000 $8,122,466
Industrial Development Board of the Town of Courtland, SWDR
(Champion International Corp. Project)
7%, 11/1/2022........................................................... 8,100,000 8,379,531
West Jefferson Industrial Development Board, PCR, Refunding
(Alabama Power Co.- Miller Plant) 6.05%, 5/1/2023 (Insured; MBIA)....... 15,000,000 15,088,950
ALASKA-1.6%
Alaska Housing Finance Corp.:
(Collateralized Veterans Mortgage Program)
6.375%, 12/1/2027..................................................... 9,135,000 9,265,174
Refunding 5.875%, 12/1/2030 (Insured; MBIA)............................. 12,475,000 12,054,842
Anchorage, Electric Utility Revenue, Refunding
6.50%, 12/1/2015 (Insured; MBIA)........................................ 6,135,000 6,699,788
Valdez, Marine Terminal Revenue, Refunding:
(BP Pipeline Inc. Project) 5.50%, 10/1/2028............................. 10,000,000 9,231,200
(Mobil Alaska Pipeline) 5.75%, 11/1/2028................................ 22,000,000 21,082,380
CALIFORNIA-4.7%
Airport Commission City and County of San Francisco
(San Francisco International Airport) 6.50%, 5/1/2015 (Insured; FGIC)... 10,100,000 10,605,202
California Department Water Resource, Water System Revenue (Central Valley
Project)
5%, 12/1/2022........................................................... 10,000,000 8,787,000
California Higher Education Loan Authority, Inc.,
Student Loan Revenue, Refunding 6.50%, 6/1/2005......................... 19,250,000 20,387,290
Duarte, COP (City of Hope Medical Center)
6.25%, 4/1/2023......................................................... 26,000,000 25,480,260
Long Beach, Harbor Revenue 5.25%, 5/15/2025 (Insured; MBIA)................. 25,000,000 22,429,500
Orange County, Recovery COP, Refunding:
5.875%, 7/1/2019 (Insured; MBIA)........................................ 21,000,000 20,635,440
6%, 7/1/2026 (Insured; MBIA)............................................ 31,500,000 31,475,115
San Diego County, COP, Refunding (Interim Justice Facilities Project) 6.50%, 8/1/2007 9,805,000 10,359,571
State Public Works Board of the State of California, LR
(Various University of California Projects) 6.375%, 10/1/2019........... 5,000,000 5,149,550
University of California, HR (University of California - Davis Medical
Center)
5.75%, 7/1/2014 (Insured; AMBAC)........................................ 12,160,000 12,085,216
COLORADO-1.8%
Arapahoe County Capital Improvement Trust Fund, Highway Revenue (E-470
Project)
7%, 8/31/2026........................................................... 18,025,000 18,959,957
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
COLORADO (CONTINUED)
City and County of Denver, Airport Revenue:
7.25%, 11/15/2023....................................................... $ 25,765,000 $ 27,168,162
5.50%, 11/15/2025 (Insured; MBIA)....................................... 18,000,000 16,989,300
CONNECTICUT-1.1%
Connecticut Housing Finance Authority (Housing Mortgage Finance Program):
6.70%, 11/15/2012....................................................... 4,000,000 4,178,920
6.30%, 5/15/2024........................................................ 8,000,000 8,089,760
6.50%, 5/15/2027........................................................ 18,480,000 18,662,213
Connecticut Resource Recovery Authority
(American Fuel Co. Project) 6.45%, 11/15/2022........................... 7,325,000 7,520,724
DELAWARE-.5%
Delaware Economic Development Authority, Water Development Revenue
(Wilmington Suburban Water Corp. Project) 6.80%, 12/1/2023.............. 8,000,000 8,324,320
Delaware Housing Authority, Senior SFMR
6.45%, 1/1/2026......................................................... 8,835,000 8,909,391
DISTRICT OF COLUMBIA-1.9%
Metropolitan Washington Airports Authority, Airport System Revenue:
6.625%, 10/1/2012 (Insured; MBIA)....................................... 40,400,000 42,858,744
6.625%, 10/1/2019 (Insured; MBIA) (a)................................... 23,600,000 24,848,912
FLORIDA-4.4%
Brevard County Housing Finance Authority, SFMR 6.80%, 3/1/2028.............. 5,885,000 6,031,360
Collier County School Board, COP 5%, 2/15/2016 (Insured; FSA)............... 6,500,000 5,908,565
Dade County, Water and Sewer System Revenue
5.50%, 10/1/2025 (Insured; FGIC)........................................ 22,445,000 21,276,962
Florida Community Services Corp. Walton County, Water and Sewer Revenue
(South Walton County Regional Utility):
6.95%, 3/1/2012....................................................... 3,000,000 3,278,490
7%, 3/1/2018.......................................................... 3,500,000 3,770,200
Hillsborough County, Capital Improvement Non-Ad Valorem, Refunding Revenue
(County Center Project) 5.125%, 7/1/2022 (Insured; MBIA)................ 17,050,000 15,340,908
Lakeland, Electric and Water Revenue 5.625%, 10/1/2036...................... 18,825,000 17,879,985
Palm Beach County, Solid Waste IDR:
(Okeelanta Power Limited Partnership Project) 6.70%, 2/15/2015.......... 23,400,000 20,218,302
(Osceola Power Limited Partnership) 6.95%, 1/1/2022..................... 33,800,000 29,589,196
Polk County Industrial Development Authority, IDR
(IMC Fertilizer) 7.525%, 1/1/2015....................................... 15,200,000 16,063,968
Saint Johns River Water Management District, Land Acquisition Revenue,
Refunding
5.125%, 7/1/2016 (Insured; FSA)......................................... 19,000,000 17,509,070
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
GEORGIA-.8%
Georgia Housing and Finance Authority:
Homeownership Mortgage
Zero Coupon, 12/1/2031................................................ $ 122,735,000 $ 9,553,692
Single Family Mortgage:
7.125%, 12/1/2026..................................................... 10,000,000 10,364,100
6.55%, 12/1/2027...................................................... 5,495,000 5,590,943
Georgia Residential Finance Authority, Single Family Insured Mortgage
8.30%, 12/1/2019........................................................ 2,000,000 2,099,440
IDAHO-.4%
Idaho Housing Agency:
Multi-Family Housing Refunding 6.70%, 7/1/2024.......................... 10,050,000 10,295,924
Single Family Mortgage 6.60%, 7/1/2027.................................. 4,365,000 4,446,276
ILLINOIS-8.1%
Bryant, PCR, Refunding (Central Illinois Light Co. Project) 5.90%, 8/1/2023. 11,000,000 10,831,700
Chicago:
Refunding 5.125%, 1/1/2016.............................................. 17,250,000 15,654,202
Wastewater Transmission Revenue, Refunding
5.125%, 1/1/2025 (Insured; FGIC)...................................... 23,600,000 20,873,728
Chicago Board of Education (Chicago School Reform)
6%, 12/1/2026 (Insured; MBIA)........................................... 9,425,000 9,321,513
Chicago O'Hare International Airport, Revenue:
Refunding 5%, 1/1/2008 (Insured; MBIA).................................. 12,475,000 11,968,265
Special Facilities (United Airlines Inc. Project):
8.50%, 5/1/2018....................................................... 6,500,000 7,160,140
8.85%, 5/1/2018....................................................... 15,125,000 17,182,454
Illinois, Refunding 5.25%, 12/1/2020 (Insured; FGIC)........................ 26,000,000 23,879,180
Illinois Development Finance Authority, Revenue:
(Community Rehabilitation Providers Facilities) 8.75%, 3/1/2010......... 18,720,000 19,936,426
Pollution Control, Refunding (Central Illinois Public Service Co.):
5.70%, 8/15/2026...................................................... 11,150,000 10,727,415
6.375%, 1/1/2028...................................................... 14,000,000 14,329,000
Illinois Educational Facilities Authority, Revenue
(Illinois Institute of Technology)
Refunding 6.875%, 12/1/2015............................................. 7,250,000 7,619,097
Illinois Health Facilities Authority, Revenue:
(Beverly Farm Foundation) 9.125%, 12/15/2015 (Prerefunded 12/15/2000) (b) 3,730,000 4,435,007
Refunding:
(Evangelical Hospitals) 6.50%, 4/15/2009 (Insured; FSA)............... 5,000,000 5,366,500
(Mercy Hospital and Medical Center) 7%, 1/1/2015...................... 7,500,000 7,721,775
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
ILLINOIS (CONTINUED)
Illinois Health Facilities Authority, Revenue (continued):
Refunding (continued):
(Trinity Medical Center) 7%, 7/1/2012................................. $ 3,000,000 $ 3,282,030
Illinois Housing Development Authority:
Homeowner Mortgage Revenue:
6.70%, 8/1/2025....................................................... 4,980,000 5,099,122
6.625%, Subseries B-2, 8/1/2026....................................... 15,385,000 15,707,470
Multi-Family Housing (Lawndale Redevelopment Project) 6.90%, 12/1/2026.. 8,750,000 9,081,713
Multi-Family Program 6.75%, 9/1/2021.................................... 8,750,000 8,948,450
Section 8 Elderly Housing Revenue (Morningside North Development)
6.85%, 1/1/2021....................................................... 11,220,000 11,569,391
Peru, Electric System Revenue 5.75%, 5/1/2025 (Insured; FGIC)............... 6,750,000 6,533,190
Robbins (Resource Recovery Partners) 9.25%, 10/15/2014...................... 32,000,000 31,920,000
Solid Waste Agency of Northern Cook County, Contract Revenue, Refunding
5.50%, 5/1/2015 (Insured; MBIA)......................................... 9,000,000 8,445,150
INDIANA-5.9%
Allen County, COP, Refunding 6.50%, 11/1/2008............................... 5,000,000 5,371,650
Brownsburg School Building Corp., First Mortgage
6.10%, 2/1/2013 (Insured; FSA).......................................... 7,500,000 7,678,425
Carmel High School Building Corp., First Mortgage
5.25%, 1/15/2018 (Insured; MBIA)........................................ 6,525,000 6,016,833
Fort Wayne Hospital Authority, HR (Lutheran Hospital)
8%, 2/15/2003 (Prerefunded 2/15/1998) (b)............................... 7,000,000 7,493,150
Hamilton Southeastern Consolidated School Building Corp., First Mortgage
5.25%, 1/15/2017 (Insured; AMBAC)....................................... 5,000,000 4,620,050
Hammond Multi-School Building Corp., First Mortgage
7.10%, 1/15/2015 (Prerefunded 7/15/2001) (b)............................ 5,585,000 6,252,910
Indiana Transportation Finance Authority, Airport Facility LR
6.50%, 11/1/2007........................................................ 12,500,000 13,132,125
Indianapolis Airport Authority, Special Facility Revenue (United Airlines
Project)
6.50%, 11/15/2031....................................................... 31,510,000 31,298,883
Indianapolis Local Public Improvement Bond Bank:
Refunding 5%, 1/1/2017.................................................. 14,575,000 13,167,784
8.50%, 2/1/2018 (Prerefunded 2/1/1998) (b).............................. 73,000,000 78,558,950
IPS School Building Corp., First Mortgage 6.10%, 1/15/2020.................. 11,000,000 11,182,600
Logansport Multi - Purpose School Building Corp., First Mortgage Refunding
6%, 1/1/2009............................................................ 7,645,000 7,848,357
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
INDIANA (CONTINUED)
New Prairie United School Building Corp., First Mortgage Refunding
5.50%, 7/5/2015 (Insured; FSA).......................................... $ 5,240,000 $ 5,005,929
Westfield High School 1995 Building Corp., First Mortgage
5.80%, 7/15/2018 (Insured; AMBAC)....................................... 10,000,000 9,668,800
IOWA-.4%
Iowa Finance Authority, SFMR
(Mortgage Backed Securities Program)
6.65%, 7/1/2028......................................................... 12,070,000 12,340,006
KANSAS-1.5%
Wichita, HR 6.464%, 10/1/2022 (Insured; MBIA)............................... 51,300,000 53,468,451
KENTUCKY-2.4%
City of Ashland, Sewage and Solid Waste Revenue
(Ashland Inc. Project) 7.125%, 2/1/2022................................. 13,170,000 13,848,123
Kenton County Airport Board, Airport Revenue:
(Greater Cincinnati International Airport)
8.25%, 3/1/2015....................................................... 10,945,000 11,677,658
Special Facilities (Delta Airlines Project):
7.125%, 2/1/2021...................................................... 8,455,000 8,780,179
6.125%, 2/1/2022...................................................... 20,000,000 19,206,000
Mount Sterling, LR (Kentucky League Cities Funding)
6.10%, 3/1/2018......................................................... 7,955,000 7,997,718
Pendleton County, Multi-County LR
(Kentucky Associates Counties Leasing Trust Program) 6.50%, 3/1/2019.... 21,000,000 21,740,880
LOUISIANA-1.1%
Parish of Saint Charles, PCR (Louisiana Power and Lighting Co. Project)
8.25%, 6/1/2014......................................................... 7,500,000 8,176,650
Parish of West Feliciana, PCR:
(Gulf States Utilities Co. Project) 9%, 5/1/2015........................ 13,500,000 15,047,775
(Gulf States Utilities-I) 7.70%, 12/1/2014.............................. 14,000,000 15,049,860
MAINE-.9%
Maine Financial Authority, Solid Waste Revenue
Recycling Facilities (Great Northern Paper, Inc. Project-Bowater Inc.
Obligor)
7.75%, 10/1/2022........................................................ 8,165,000 8,830,529
Maine Housing Authority, Mortgage Purchase
6.875%, 11/15/2023...................................................... 14,000,000 14,414,400
Skowhegan, SWDR (S.D. Warren Co. Project) 8.40%, 10/1/2015.................. 7,700,000 8,631,546
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
MARYLAND-2.2%
Calvert County, PCR, Refunding (Baltimore Gas and Electric Co. Project)
5.55%, 7/15/2014........................................................ $ 8,000,000 $ 7,800,400
Community Development Administration,
Department of Housing and Community Development State of Maryland,
Single Family Program Bonds:
6.80%, 4/1/2024....................................................... 33,690,000 34,446,677
6.55%, 4/1/2026....................................................... 9,190,000 9,386,206
6.75%, 4/1/2026....................................................... 19,990,000 20,541,724
Northeast Waste Disposal Authority, Solid Waste Revenue
(Montgomery County Resource Recovery Project) 6.30%, 7/1/2016........... 7,500,000 7,453,050
MASSACHUSETTS-2.1%
Massachusetts Bay Transportation Authority, General Transportation
5.375%, 3/1/2020 (Insured; AMBAC)....................................... 17,880,000 16,835,093
Massachusetts Housing Finance Agency, Revenue:
Housing:
6.65%, 7/1/2019 (Insured; AMBAC)...................................... 7,275,000 7,469,461
6.50%, 7/1/2025 (Insured; AMBAC)...................................... 4,140,000 4,233,233
6.60%, 1/1/2037 (Insured; AMBAC)...................................... 7,100,000 7,275,867
Single Family Housing:
7.125%, 6/1/2025...................................................... 26,975,000 28,051,842
6.65%, 12/1/2027...................................................... 7,200,000 7,393,752
Massachusetts Industrial Finance Agency, Revenue
Museum (Norman Rockwell Stockbridge) 8.125%, 7/1/2011................... 3,055,000 3,207,506
MICHIGAN-2.4%
Charter County of Wayne, Special Airport Facilities Revenue, Refunding
(Northwest Airlines, Inc., Facilities) 6.75%, 12/1/2015................. 8,800,000 8,867,760
Detroit, Sewage Disposal System Revenue 5.25%, 7/1/2015 (Insured; MBIA)..... 8,700,000 8,131,716
East Grand Rapids Public School District 5%, 5/1/2020 ...................... 8,675,000 7,751,112
The Economic Development Corp. of the County of Gratiot,
Limited Obligation EDR
(Danly Die Set Project) 7.625%, 4/1/2007................................ 3,200,000 3,328,608
Michigan Hospital Finance Authority, Revenue:
Hospital Refunding:
(Genesys Health System Obligated Group):
8.125%, 10/1/2021................................................. 15,000,000 16,417,800
7.50%, 10/1/2027.................................................. 15,300,000 15,942,141
(Henry Ford Health System)
5.25%, 11/15/2025................................................. 10,000,000 8,965,100
(Metropolitan Hospital) 8.125%, 7/1/2018 (Prerefunded 7/1/1999) (b)..... 5,000,000 5,607,150
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
MICHIGAN (CONTINUED)
Western Townships Utilities Authority, Sewer Disposal System
(Limited Tax G.O.) 8.125%, 1/1/2009..................................... $ 8,765,000 $ 9,568,049
MINNESOTA-1.7%
Minneapolis, HR, Refunding (Lifespan Inc. Issue)
9.125%, 12/1/2014 (Prerefunded 12/1/1997) (b)........................... 4,000,000 4,320,600
Minnesota Housing Finance Agency, Single Family Mortgage:
6.90%, 7/1/2022......................................................... 7,205,000 7,449,322
6.50%, 7/1/2024......................................................... 15,870,000 16,130,744
6.45%, 7/1/2025......................................................... 30,210,000 30,570,103
MISSOURI-1.0%
Kansas City Municipal Assistance Corp., Leasehold Refunding Revenue
(H. Roe Bartle Convention Center Project):
5.125%, 4/15/2015 (Insured; MBIA) .................................... 11,055,000 10,348,585
5%, 4/15/2020 (Insured; MBIA)......................................... 5,500,000 4,960,395
Missouri Higher Education Loan Authority, Student Loan Revenue
6.75%, 2/15/2009........................................................ 11,500,000 11,827,060
Sikeston, Electric Revenue, Refunding
5%, 6/1/2022 (Insured; MBIA)............................................ 7,745,000 6,897,387
MONTANA-.2%
Montana Board of Housing (Single Family Program)
6.35%, 12/1/2021........................................................ 7,255,000 7,277,273
NEBRASKA-.6%
Omaha Public Power District, Electric Revenue 5.50%, 2/1/2014............... 20,000,000 19,723,600
NEVADA-1.7%
Clark County, School District 5.50%, 6/15/2016 (Insured; FGIC).............. 28,475,000 27,232,636
Nevada, Refunding (Colorado River Commission)
5.25%, 7/1/2020......................................................... 10,000,000 9,348,600
Nevada Housing Division (Single Family Program)
6.80%, 4/1/2027......................................................... 9,960,000 10,219,956
Washoe County:
Gas Facilities Revenue (Sierra Pacific Power Co. Project)
6.70%, 11/1/2032 (Insured; MBIA)...................................... 10,000,000 10,603,400
Gas and Water Facilities Revenue, Refunding (Sierra Pacific)
6.30%, 12/1/2014 (Insured; AMBAC)..................................... 4,375,000 4,559,406
NEW HAMPSHIRE-4.5%
Business Finance Authority of the State of New Hampshire,
State Guaranteed Airport Revenue (Manchester Airport Project):
6.50%, 1/1/2019....................................................... 12,600,000 13,110,552
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
NEW HAMPSHIRE (CONTINUED)
Business Finance Authority of the State of New Hampshire,
State Guaranteed Airport Revenue (Manchester Airport Project)
(continued):
6.375%, 1/1/2022...................................................... $ 8,650,000 $ 8,903,531
New Hampshire Housing Finance Authority:
Multi-Family Housing:
7.55%, 7/1/2013....................................................... 4,205,000 4,606,872
(Mariners Village Project)
6.60%, 1/1/2038 (Insured; FHA).................................... 7,365,000 7,474,297
Single Family Mortgage:
7.25%, 1/1/2016....................................................... 3,430,000 3,610,452
6.55%, 7/1/2026....................................................... 22,190,000 22,634,688
Single Family Residential Mortgage:
7.10%, 1/1/2023....................................................... 24,860,000 25,947,874
7.75%, 7/1/2023....................................................... 16,930,000 17,785,981
6.85%, 1/1/2025....................................................... 10,515,000 10,772,617
6.95%, 1/1/2026....................................................... 10,210,000 10,553,771
New Hampshire Industrial Development Authority, Revenue
(Pollution Control Public Service Co. Project):
7.65%, Series A, 5/1/2021............................................. 21,450,000 21,766,173
7.65%, Series C, 5/1/2021............................................. 13,550,000 13,749,727
NEW JERSEY-3.6%
Howell Township Municipal Utilities Authority, Revenue
8.60%, 1/1/2014 (Prerefunded 7/1/1998) (b).............................. 4,000,000 4,367,800
New Jersey Economic Development Authority, PCR
(Public Service Electric and Gas Co. Project)
6.40%, 5/1/2032 (Insured; MBIA)......................................... 32,040,000 33,264,248
New Jersey Educational Facilities Authority, Revenue:
(Trenton State College Issue):
5.10%, 7/1/2021 (Insured; MBIA)....................................... 11,000,000 10,039,590
5.125%, 7/1/2024 (Insured; MBIA)...................................... 17,000,000 15,499,240
(University of Medicine and Dentistry of New Jersey Issue)
5.25%, 12/1/2021 (Insured; AMBAC)..................................... 15,000,000 13,958,850
New Jersey Housing and Mortgage Finance Agency, Revenue:
6%, 11/1/2002........................................................... 5,000,000 5,136,750
6.45%, 11/1/2007........................................................ 15,260,000 15,866,432
New Jersey Transportation Trust Fund Authority, Refunding
(Transportation System) 5.25%, 6/15/2014 (Insured; MBIA)................ 18,500,000 17,604,970
New Jersey Wastewater Treatment Trust, Insured Loan Revenue
9%, 9/1/2007 (Prerefunded 9/1/1997) (b)................................. 6,000,000 6,410,040
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
NEW JERSEY (CONTINUED)
Pollution Control Financing Authority of Salem County, PCR, Refunding
(Public Service Electric and Gas Co. Project)
6.25%, 6/1/2031 (Insured; MBIA)......................................... $ 6,500,000 $ 6,731,985
NEW MEXICO-.7%
Albuquerque, HR, Refunding (Presbyterian Health Care Services)
6.375%, 8/1/2007 (Insured; MBIA)........................................ 4,500,000 4,848,165
New Mexico Educational Assistance Foundation, Student Loan Revenue
7.45%, 3/1/2010......................................................... 12,045,000 12,584,496
New Mexico Mortgage Financing Authority
6.80%, 1/1/2026......................................................... 5,500,000 5,811,630
NEW YORK-10.9%
New York City:
7.50%, 2/1/2003......................................................... 9,000,000 9,871,650
5.90%, 2/1/2005......................................................... 11,815,000 11,744,819
8.25%, 6/1/2006......................................................... 2,750,000 3,278,990
5.60%, 8/15/2006........................................................ 23,100,000 22,263,318
5.70%, 8/15/2007........................................................ 13,445,000 12,915,670
7.25%, 8/15/2007........................................................ 13,790,000 15,086,122
6.25%, 8/1/2008......................................................... 10,000,000 9,991,000
6.375%, 8/15/2011....................................................... 31,285,000 31,320,352
5.75%, 2/1/2014......................................................... 15,000,000 13,999,050
5.75%, 2/1/2015......................................................... 12,280,000 11,366,736
5.75%, 2/1/2017......................................................... 20,000,000 18,411,400
5.875%, 3/15/2018....................................................... 20,000,000 18,593,800
5.875%, 2/15/2019....................................................... 23,715,000 21,989,259
5.75%, 2/1/2020......................................................... 9,580,000 8,726,518
6%, 2/15/2025........................................................... 23,375,000 21,824,536
New York City Municipal Water Finance Authority, Water and Sewer System
Revenue:
5.625%, 6/15/2011....................................................... 26,000,000 25,260,820
5.75%, 6/15/2026........................................................ 17,500,000 17,144,050
5.875%, 6/15/2026....................................................... 13,000,000 12,538,760
New York State Dormitory Authority, Revenue:
(City University) 7.50%, 7/1/2010....................................... 10,000,000 11,482,200
Court Facilities Lease 5.70%, 5/15/2022................................. 10,000,000 9,210,100
New York State Energy, Research and Development Authority,
Electric Facilities Revenue
(Con Edison Co. Project) 7.50%, 1/1/2026................................ 16,970,000 18,252,084
New York State Mortgage Agency, Revenue (Homeowner Mortgage)
6.65%, 10/1/2025........................................................ 22,225,000 22,869,525
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
NEW YORK (CONTINUED)
New York State Urban Development Corp., Revenue,
(Correctional Capital Facilities):
5.375%, 1/1/2025...................................................... $ 32,550,000 $ 28,767,365
5.50%, 1/1/2025 (Insured; MBIA)....................................... 9,210,000 8,711,002
NORTH CAROLINA-.7%
North Carolina Housing Finance Agency, Single Family Revenue
6.50%, 9/1/2026......................................................... 6,125,000 6,227,471
Pitt County, Revenue (Pitt County Memorial Hospital)
6.90%, 12/1/2021 (Prerefunded 12/1/2001) (b)............................ 12,000,000 13,423,920
Winston Salem, COP 6.90%, 6/1/2011 (Prerefunded 6/1/2001) (b)............... 5,245,000 5,806,687
NORTH DAKOTA-.2%
North Dakota Housing Finance Agency
(Housing Mortgage Finance Program) 6.75%, 7/1/2025...................... 6,375,000 6,530,614
OHIO-1.1%
Cleveland, Waterworks Revenue, Refunding and Improvement
5.75%, 1/1/2026 (Insured; MBIA)......................................... 18,285,000 17,840,675
Cuyahoga County, HR (Meridia Health System) 7%, 8/15/2023................... 7,000,000 7,461,090
Franklin County, HR (Holy Cross Health System Corp.)
5.875%, 6/1/2021........................................................ 9,000,000 8,758,890
Ohio Air Quality Development Authority, PCR (Ohio Edison)
5.625%, 11/15/2029 (Insured; AMBAC)..................................... 6,750,000 6,400,620
OKLAHOMA-.8%
Claremore Industrial and Redevelopment Authority, EDR
(Yuba Project) 8.375%, 7/1/2011......................................... 7,500,000 7,918,200
Southern Oklahoma Memorial Hospital Authority, HR 6.60%, 12/1/2012.......... 5,725,000 5,853,813
Tulsa Municipal Airport Trust, Revenue
(AMR Corp.) 7.60%, 12/1/2030............................................ 14,390,000 15,346,216
PENNSYLVANIA-3.8%
Allegheny County Hospital Development Authority, Revenue (Health Center - University
of Pittsburgh Medical Center System) 5.375%, 12/1/2025 (Insured; MBIA).. 22,280,000 20,642,643
Delaware County Industrial Development Authority, Water Facilities Revenue
(Philadelphia Suburban Water) 6.35%, 8/15/2025 (Insured; FGIC).......... 10,000,000 10,306,100
Lehigh County Industrial Development Authority, PCR, Refunding
(Pennsylvania Power and Light Co. Project) 5.50%, 2/15/2027 (Insured; MBIA) 8,805,000 8,327,153
Pennsylvania:
5%, 11/15/2014 (Insured; AMBAC)......................................... 8,875,000 8,133,671
5%, 11/15/2015 (Insured; AMBAC)......................................... 8,875,000 8,063,026
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
PENNSYLVANIA (CONTINUED)
Pennsylvania Economic Development Financing Authority,
Exempt Facilities Revenue (MacMillan Ltd. Partnership Project)
7.60%, 12/1/2020........................................................ $ 4,500,000 $ 4,947,840
Pennsylvania Higher Educational Facilities Authority,
Health Services Revenue, Refunding (Allegheny Delaware Valley
Obligation):
5.40%, 11/15/2007 (Insured; MBIA)..................................... 5,000,000 5,030,900
5.60%, 11/15/2009 (Insured; MBIA)..................................... 9,475,000 9,540,093
Philadelphia:
5%, 5/15/2020 (Insured; MBIA)........................................... 7,650,000 6,843,614
Water and Wastewater Revenue, Refunding
5.25%, 6/15/2023 (Insured; MBIA)...................................... 6,000,000 5,436,600
Pittsburgh, Refunding 5.125%, 3/1/2009 (Insured; FGIC)...................... 29,655,000 28,441,814
Quakertown General Authority, Revenue (Community Mental Health/Retardation)
8.875%, 11/1/2010....................................................... 6,420,000 6,976,421
Ridley Park Hospital Authority, Revenue (Taylor Hospital)
8.625%, 12/1/2020 (Prerefunded 12/1/2000) (b)........................... 10,000,000 11,679,100
RHODE ISLAND-1.6%
Rhode Island Health and Educational Building Corp., Revenue:
(Johnson and Wales University) 8.375%, 4/1/2020 (Prerefunded 4/1/2000) (b) 11,000,000 12,516,350
(Landmark Medical Center) 5.60%, 10/1/2012 (Insured; FSA)............... 5,000,000 4,911,400
Rhode Island Housing and Mortgage Finance Corp.
(Homeownership Opportunity):
6.95%, 4/1/2022....................................................... 9,250,000 9,547,943
6.60%, 10/1/2025...................................................... 10,270,000 10,441,201
6.50%, 4/1/2027....................................................... 11,835,000 12,064,836
6.85%, 4/1/2027....................................................... 5,615,000 5,839,207
SOUTH CAROLINA-1.0%
Richland County, Solid Waste Disposal Facilities Revenue
(Union Camp Corp. Project) 7.125%, 9/1/2021............................. 6,250,000 6,666,750
South Carolina Housing Finance and Development Authority,
Mortgage Revenue:
6.55%, 7/1/2015....................................................... 3,950,000 4,046,617
6.75%, 7/1/2026....................................................... 7,000,000 7,170,870
6.70%, 7/1/2027....................................................... 8,000,000 8,175,760
Spartanburg County, Hospital Facilities Improvement Revenue, Refunding
(Mary Black Memorial Project) 8.25%, 10/1/2008 (Prerefunded 10/1/1998) (b) 5,000,000 5,461,800
York County, Industrial Revenue, Exempt Facility (Hoechst Celanese)
5.70%, 1/1/2024......................................................... 5,000,000 4,744,650
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
TENNESSEE-1.2%
Tennessee Housing Development Agency, Mortgage Finance:
6.45%, 7/1/2021......................................................... $ 11,565,000 $ 11,698,460
6.55%, 7/1/2026......................................................... 31,735,000 32,372,874
TEXAS-5.8%
Alliance Airport Authority Inc., Special Facilities Revenue:
(American Airlines Inc. Project)
7%, 12/1/2011......................................................... 12,330,000 13,263,258
(Federal Express Corp. Project)
6.375%, 4/1/2021...................................................... 28,800,000 28,376,352
Angelina and Neches River Authority, SWDR (Champion International Corp.
Project)
7.375%, 5/1/2015........................................................ 5,570,000 5,951,991
Austin, Utility System Revenue, Refunding:
5.25%, 5/15/2016 (Insured; FSA) (c)..................................... 23,645,000 22,087,740
5.60%, 5/15/2025 (Insured; MBIA)........................................ 25,000,000 23,982,500
Gulf Coast Waste Disposal Authority, Revenue:
(Champion International Corp.)
7.375%, 10/1/2025..................................................... 12,000,000 12,764,760
Solid Waste Disposal (Occidental Petroleum Corp. Project) 7%, 11/1/2020. 7,725,000 7,978,225
Harris County Hospital District, Mortgage Revenue, Refunding
7.40%, 2/15/2010 (Insured; AMBAC)....................................... 5,000,000 5,822,000
Houston Hotel Occupancy Tax, Revenue 7%, 7/1/2009 (Insured; FGIC)
(Prerefunded 7/1/2001) (b).............................................. 12,225,000 13,430,507
Rio Grande Valley Health Facilities Development Corp., HR, Refunding
(Valley Baptist Medical Center Project) 6.40%, 8/1/2016 ................ 11,200,000 11,791,808
Texas, GO (Veterans Housing Assistance Fund):
7%, 12/1/2025........................................................... 9,920,000 10,330,886
Refunding 6.45%, 12/1/2020.............................................. 15,210,000 15,346,282
Texas College Student Loan 5%, 8/1/2021..................................... 8,000,000 6,995,200
Texas Municipal Power Agency, Revenue, Refunding
5.25%, 9/1/2012 (Insured; MBIA)......................................... 10,065,000 9,548,062
Texas Public Property Finance Corp., Revenue
(Mental Health and Retardation Project):
8.625%, 11/1/2000..................................................... 1,700,000 1,822,230
8.75%, 11/1/2010...................................................... 4,745,000 5,199,998
University of Texas, Revenue (Financing System)
5%, 8/15/2016........................................................... 10,000,000 9,066,500
UTAH-1.5%
Carbon County, SWDR, Refunding (Sunnyside Cogeneration) 9.25%, 7/1/2018..... 20,000,000 14,221,800
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
UTAH (CONTINUED)
Intermountain Power Agency, Power Supply Revenue, Refunding
5%, 7/1/2021............................................................ $ 15,400,000 $ 13,504,106
Utah Housing Finance Agency, Single Family Mortgage:
6.55%, 1/1/2022......................................................... 5,340,000 5,443,756
6.40%, 1/1/2027......................................................... 6,695,000 6,811,493
6.65%, 7/1/2027......................................................... 10,325,000 10,563,817
7%, 7/1/2027............................................................ 4,025,000 4,207,775
VERMONT-.3%
Vermont Housing Finance Agency, Single Family Housing 6.875%, 5/1/2025...... 10,500,000 10,756,515
VIRGINIA-2.4%
Chesapeake Bay Bridge and Tunnel Commission, General Resolution, Revenue,
Refunding 5%, 7/1/2022 (Insured; MBIA).................................. 12,035,000 10,760,373
Giles County Industrial Development Authority,
Solid Waste Disposal Facility Revenue (Hoechst Celanese Corp. Project)
6.625%, 12/1/2022....................................................... 8,715,000 9,024,295
Henrico County Industrial Development Authority, Revenue
(Maryview Hospital Project) 7.50%, 9/1/2011 (Prerefunded 8/1/2000) (b).. 5,355,000 5,992,406
Virginia Housing Development Authority, Commonwealth Mortgage:
6.20%, 7/1/2021......................................................... 15,000,000 14,941,950
6.70%, 1/1/2022......................................................... 6,950,000 7,105,124
6.40%, 7/1/2022 (Insured; MBIA)......................................... 24,000,000 24,384,240
6.60%, 7/1/2022......................................................... 4,635,000 4,687,700
6.85%, 1/1/2027......................................................... 8,000,000 8,211,920
WASHINGTON-.4%
Public Utility District No. 1 of Chelan County,
Chelan Hydro Consolidated System Revenue 6.55%, 7/1/2023................ 10,000,000 10,326,900
Washington Health Care Facilities Authority, Revenue (Harrison Memorial
Hospital, Bremerton) 5.30%, 8/15/2014 (Insured; AMBAC).................. 5,000,000 4,662,500
WEST VIRGINA-.2%
Braxton County, Solid Waste Disposal Revenue (Weyerhaeuser Co. Project)
6.50%, 4/1/2025......................................................... 8,000,000 8,265,280
WISCONSIN-1.1%
Madison, IDR (Madison Gas and Electric Co. Project)
6.75%, 4/1/2027......................................................... 10,000,000 10,498,800
Wisconsin Health and Educational Facilities Authority, Revenue:
(Aurora Health Care)
5.25%, 8/15/2023 (Insured; MBIA)...................................... 14,000,000 12,528,040
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
WISCONSIN (CONTINUED)
Wisconsin Health and Educational Facilities Authority, Revenue (continued):
(Waukesha Memorial Hospital, Inc.)
5.50%, 8/15/2015 (Insured; AMBAC)..................................... $ 8,545,000 $ 8,097,157
Wisconsin Housing and Economic Development Authority,
Homeownership Revenue 6.45%, 3/1/2017................................... 7,000,000 7,149,450
WYOMING-.7%
Sweetwater County, SWDR (FMC Corp. Project)
6.90%, 9/1/2024......................................................... 16,225,000 16,811,534
Uinta County Hospital Facility, Revenue, Refunding
(IHC Hospitals Inc.) 7.25%, 2/15/2019 (Prerefunded 2/15/1999) (b)....... 7,350,000 7,969,458
U.S. RELATED-.5%
Commonwealth of Puerto Rico 5.40%, 7/1/2025................................. 18,115,000 16,666,162
_______
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $3,249,223,710)................................................... $3,304,895,308
=======
SHORT-TERM MUNICIPAL INVESTMENTS-6.7%
CALIFORNIA-.8%
California Pollution Control Financing Authority, PCR, Refunding
VRDN (Pacific Gas and Electric) 3.75% (d)............................... $ 11,500,000 $ 11,500,000
Irvine Ranch Water District, VRDN 3.75% (LOC; Bank of America) (d,e)........ 16,200,000 16,200,000
FLORIDA-.1%
Florida Board of Education, Capital Outlay 3.67% (f,g)...................... 3,000,000 3,000,000
INDIANA-.4%
Petersburg, PCR, Refunding, VRDN (Indiana Power and Light)
3.40% (Insured; AMBAC) (d).............................................. 15,000,000 15,000,000
IOWA-.7%
Iowa Finance Authority, SWDR, VRDN (Cedar River Paper Co. Project)
3.85% (LOC; Swiss Bank Corp.) (d,e)..................................... 25,000,000 25,000,000
MARYLAND-.1%
Prince Georges' Housing Authority, Mortgage Revenue, VRDN (Laurel-Oxford)
3.525% (LOC; Bankers Trust) (d,e)....................................... 2,500,000 2,500,000
MICHIGAN-1.6%
Michigan Strategic Fund, LOR, Refunding
VRDN (Detroit Edison Co.) 3.65% (LOC; Barclays Bank PLC) (d,e).......... 30,900,000 30,900,000
Midland County Economic Development Corp., Economic Development LOR
VRDN (Dow Chemical Co Project) 3.90% (d)................................ 27,000,000 27,000,000
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
SHORT-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
MINNESOTA-.2%
Cloquet, PCR, VRDN (Potlatch Corp. Project) 3.60% (LOC; Credit Suisse) (d,e) $ 2,000,000 $ 2,000,000
Golden Valley IDR Refunding, VRDN (Graco Inc. Project)
3.75% (LOC; Fuji Bank Ltd.) (d,e)....................................... 2,380,000 2,380,000
Minnesota Higher Education Coordinating Board, Revenue, VRDN
(Supplement Student Loan Program) 3.70% (d)............................. 1,000,000 1,000,000
MISSISSIPPI-.6%
Jackson County, PCR, Refunding, VRDN (Chevron USA Inc. Project)
3.80% (d)............................................................... 10,000,000 10,000,000
Perry County, PCR, Refunding, VRDN (Leaf River Forest Project)
3.80% (LOC; Credit Suisse) (d,e)........................................ 12,700,000 12,700,000
NEW JERSEY-.5%
New Jersey Sports and Exposition Authority, VRDN
3.15% (Insured; MBIA) (d)............................................... 18,000,000 18,000,000
PENNSYLVANIA-.0%
Bucks County Industrial Development Authority, VRDN
(Oxford Falls Plaza Project) 3.95% (d).................................. 900,000 900,000
Montgomery County Higher Education and Health Authority, HR,
VRDN (Holy Redeemer Hospital) 3.35% (Insured; AMBAC) (d)................ 100,000 100,000
SOUTH CAROLINA-.2%
Charleston County, Industrial Revenue, VRDN (Massey Coal Terminal SC Corp.)
3.80% (LOC; Morgan Guaranty Trust) (d,e)................................ 7,050,000 7,050,000
TEXAS-.4%
Bexar County Health Facilities Development Corp., VRDN
(Air Force Village Foundation Project) 3.40% (LOC; Rabobank Nederland) (d,e) 14,300,000 14,300,000
UTAH-.7%
Salt Lake County, PCR, Refunding, VRDN (Service Station Holdings Project)
3.75% (d)............................................................... 24,200,000 24,200,000
VIRGINIA-.4%
Peninsula Ports Authority, Revenue, Refunding VRDN
(Port Facility - Shell Oil Co. Project) 3.80% (d)....................... 14,000,000 14,000,000
U.S. RELATED-.0%
Commonwealth of Puerto Rico, Government Development Bank, Refunding VRDN
3.10% (LOC; Credit Suisse) (d,e)........................................ 1,000,000 1,000,000
_______
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $238,730,000)..................................................... $ 238,730,000
=======
TOTAL INVESTMENTS-100.0%
(cost $3,487,953,710)................................................... $3,543,625,308
=======
</TABLE>
<TABLE>
<CAPTION>
DREYFUS MUNICIPAL BOND FUND, INC.
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation LOC Letter of Credit
COP Certificate of Participation LOR Limited Obligation Revenue
EDR Economic Development Revenue LR Lease Revenue
FGIC Financial Guaranty Insurance Company MBIA Municipal Bond Investors Assurance
FHA Federal Housing Administration Insurance Corporation
FSA Financial Security Assurance PCR Pollution Control Revenue
GO General Obligation SFMR Single Family Mortgage Revenue
HR Hospital Revenue SWDR Solid Waste Disposal Revenue
IDR Industrial Development Revenue VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
<S> <C> <C> <C>
FITCH (H) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
____ ____ _________ __________
AAA Aaa AAA 33.5%
AA Aa AA 24.1
A A A 18.3
BBB Baa BBB 11.0
BB Ba BB 1.9
F1 MIG1/P1 SP1/A1 5.5
Not Rated (i) Not Rated (i) Not Rated (i) 5.7
____
100.0%
====
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Wholly held by custodian as collateral for delayed-delivery
security.
(b) 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.
(c) Purchased on a delayed-delivery basis.
(d) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(e) Secured by letters of credit.
(f) Inverse Floater Security - the interest rate is subject to change
periodically.
(g) Security exempt from registration under Rule 144A of the Securities
Act of 1933. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At August 31,
1996, this security amounted to $3,000,000 or .1% of net assets.
(h) Fitch currently provides creditworthiness information for a limited
number of investments.
(i) Securities which, while not rated by Fitch, Moody's or 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.
<TABLE>
<CAPTION>
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $3,487,953,710)-see statement................................... $3,543,625,308
Interest receivable..................................................... 52,990,639
Receivable for investment securities sold............................... 4,095,241
Receivable for subscriptions to Common Stock............................ 94
Prepaid expenses........................................................ 103,432
_______
3,600,814,714
LIABILITIES:
Due to The Dreyfus Corporation and affiliates........................... $ 2,393,810
Due to Custodian........................................................ 3,210,981
Payable for investment securities purchased............................. 22,581,566
Payable for Common Stock redeemed....................................... 150,634
Accrued expenses........................................................ 191,735 28,528,726
______ _______
NET ASSETS.................................................................. $3,572,285,988
=======
REPRESENTED BY:
Paid-in capital......................................................... $3,515,265,600
Accumulated undistributed investment income-net......................... 533,961
Accumulated undistributed net realized gain on investments.............. 814,829
Accumulated net unrealized appreciation on investments-Note 3(b)....... 55,671,598
_______
NET ASSETS at value applicable to 291,979,817 shares outstanding
(600 million shares of $.01 par value Common Stock authorized).......... $3,572,285,988
=======
NET ASSET VALUE, offering and redemption price per share
($3,572,285,988 / 291,979,817 shares)................................... $12.23
===
</TABLE>
<TABLE>
<CAPTION>
See notes to financial statements.
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF OPERATIONS YEAR ENDED AUGUST 31, 1996
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $236,295,788
EXPENSES:
Management fee-Note 2(a).............................................. $22,230,334
Shareholder servicing costs-Note 2(b)................................. 3,690,904
Custodian fees........................................................ 205,462
Prospectus and shareholders' reports.................................. 124,156
Professional fees..................................................... 101,704
Registration fees..................................................... 86,599
Directors' fees and expenses-Note 2(c)................................ 68,022
Miscellaneous......................................................... 210,384
______
TOTAL EXPENSES.................................................. 26,717,565
_______
INVESTMENT INCOME-NET........................................... 209,578,223
_______
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS-Note 3:
Net realized gain on investments........................................ $47,382,435
Net realized (loss) on financial futures................................ (2,211,822)
______
NET REALIZED GAIN..................................................... 45,170,613
Net unrealized (depreciation) on investments............................ (86,386,337)
_______
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS............... (41,215,724)
_______
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $168,362,499
=======
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
______________________________________
1995 1996
_________ _________
<S> <C> <C>
OPERATIONS:
Investment income-net............................................. $ 223,098,936 $ 209,578,223
Net realized gain (loss) on investments........................... (44,338,112) 45,170,613
Net unrealized appreciation (depreciation) on investments for the year 78,567,175 (86,386,337)
________ ________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ 257,327,999 168,362,499
________ ________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net............................................. (223,098,936) (209,044,262)
Net realized gain on investments.................................. (22,638,307) __
________ ________
TOTAL DIVIDENDS................................................. (245,737,243) (209,044,262)
________ ________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold..................................... 4,846,241,789 6,426,888,270
Dividends reinvested.............................................. 155,978,774 128,954,048
Cost of shares redeemed........................................... (5,085,554,561) (6,879,608,434)
________ ________
(DECREASE) IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS........ (83,333,998) (323,766,116)
________ ________
TOTAL (DECREASE) IN NET ASSETS.............................. (71,743,242) (364,447,879)
NET ASSETS:
Beginning of year................................................. 4,008,477,109 3,936,733,867
________ ________
End of year (including accumulated undistributed investment income-net;
$533,961 on August 31, 1996).................................... $ 3,936,733,867 $ 3,572,285,988
======== ========
SHARES SHARES
________ ________
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................................... 400,686,274 519,000,847
Shares issued for dividends reinvested............................ 12,969,173 10,376,060
Shares redeemed................................................... (419,990,511) (554,619,976)
________ ________
NET (DECREASE) IN SHARES OUTSTANDING............................ (6,335,064) (25,243,069)
======== ========
See notes to financial statements.
</TABLE>
DREYFUS MUNICIPAL BOND FUND, INC.
FINANCIAL HIGHLIGHTS
Reference is made to page 4 of the Fund's Prospectus
dated January 2, 1997.
See notes to financial statements.
DREYFUS MUNICIPAL BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Municipal Bond Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a diversified open-end management
investment company. The Fund's investment objective is to provide investors
with as high a level of current income exempt from Federal income tax as is
consistent with the preservation of capital. The Dreyfus Corporation
("Manager") serves as the Fund's investment adviser. The Manager is a direct
subsidiary of Mellon Bank, N.A. Premier Mutual Fund Services, Inc. acts as
the distributor of the Fund's shares, which are sold to the public without a
sales charge.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management
estimates and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: The Fund's investments (excluding financial
futures on municipal and U.S. treasury securities) are valued each business
day by an independent pricing service ("Service") approved by the Board of
Directors. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the
Service are valued at the mean between the quoted bid prices (as obtained by
the Service from dealers in such securities) and asked prices (as calculated
by the Service based upon its evaluation of the market for such securities).
Other investments (which constitute a majority of the portfolio securities)
are carried at fair value as determined by the Service based on methods which
include consideration of: yields or prices of municipal securities of
comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain 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. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Fund not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .60 of 1% of the value
of the Fund's average daily net assets and is payable monthly. However,
pursuant to the court approved settlement of previously disclosed litigation,
commencing October 15, 1988, the Manager has agreed to make payments to the
Fund for ten years, ranging from $0 to $1 million per year depending on
average daily net assets of the Fund. The management fee during the year
ended August 31, 1996 was reduced by $350,000 pursuant to the settlement
of litigation.
DREYFUS MUNICIPAL BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Agreement provides for an expense reimbursement from the Manager
should the Fund's aggregate expenses, exclusive of taxes, brokerage, interest
on borrowings and extraordinary expenses, exceed 1 1\2% of the value of the
Fund's average daily net assets for any full fiscal year. No expense
reimbursement was required for the year ended August 31, 1996.
(B) Pursuant to the Fund's Shareholder Services Plan, the Fund reimburses
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager, an
amount not to exceed an annual rate of .25 of 1% of the value of the Fund's
average daily net assets for certain allocated expenses of providing personal
services and/or maintaining shareholder accounts. The services provided may
include personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding the Fund and providing reports and other
information, and services related to the maintenance of shareholder accounts.
During the year ended August 31, 1996, the Fund was charged an aggregate of
$2,087,233 pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Fund compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement
for providing personnel and facilities to perform transfer agency services
for the Fund. Such compensation amounted to $837,480 during the period ended
August 31, 1996.
(C) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $4,500 and an attendance fee of $500
per meeting. The Chairman of the Board receives an additional 25% of such
compensation and the Director Emeritus receives 50% of such compensation.
NOTE 3-SECURITIES TRANSACTIONS:
(A) The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended August 31, 1996
amounted to $2,266,717,419 and $2,602,451,160, respectively.
The Fund may invest in financial futures contracts in order to gain
exposure to or protect against changes in the market. The Fund is exposed to
market risk as a result of changes in the value of the underlying financial
instruments. Investments in financial futures require the Fund to "mark to
market" on a daily basis, which reflects the change in the market value of
the contract at the close of each day's trading. Accordingly, variation
margin payments are received or made to reflect daily unrealized gains or
losses. When the contracts are closed, the Fund recognizes a realized gain or
loss. These investments require initial margin deposits with a custodian,
which consist of cash or cash equivalents, up to approximately 10% of the
contract amount. The amount of these deposits is determined by the exchange
or Board of Trade on which the contract is traded and is subject to change.
At August 31,1996, there were no financial futures contracts outstanding.
(B) At August 31, 1996, accumulated net unrealized appreciation on
investments was $55,671,598, consisting of $90,791,495 gross unrealized
appreciation and $35,119,897 gross unrealized depreciation.
At August 31, 1996, 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).
DREYFUS MUNICIPAL BOND FUND, INC.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS MUNICIPAL BOND FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Dreyfus Municipal Bond Fund, Inc., including the statement of investments, as
of August 31, 1996, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in
the period then ended and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 1996 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Dreyfus Municipal Bond Fund, Inc. at August 31, 1996, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.
[Ernst and Young LLP signature logo]
New York, New York
October 1, 1996
DREYFUS MUNICIPAL BOND FUND, INC.
PART C. OTHER INFORMATION
_________________________
Item 24. Financial Statements and Exhibits. - List
_______ _________________________________________
(a) Financial Statements:
Included in Part A of the Registration Statement
Condensed Financial Information for each of the ten years in
the period ended August 31, 1996.
Included in Part B of the Registration Statement:
Statement of Investments-- August 31, 1996.
Statement of Assets and Liabilities-- August 31, 1996.
Statement of Operations--year ended August 31, 1996.
Statement of Changes in Net Assets--for each of the years
ended August 31, 1995 and 1996.
Notes to Financial Statements.
Report of Ernst & Young LLP, Independent Auditors, dated
October 1, 1996.
All schedules and other financial statement information, for which provision is
made in the applicable accounting regulations of the Securities and Exchange
Commission, are either omitted because they are not required under the related
instructions, they are inapplicable, or the required information is presented in
the financial statements or notes thereto which are included in Part B of the
Registration Statement.
Item 24. Financial Statements and Exhibits. - List (continued)
_______ _____________________________________________________
(b) Exhibits:
(1)(a) Articles of Incorporation and Articles of Amendment are incorporated
by reference to Exhibit (1)(a) of Post-Effective Amendment No. 35
filed on October 27, 1995.
(b) The Registrant's Articles of Amendment are incorporated by reference
to Exhibit (1)(c) of Post-Effective Amendment No. 33 filed on October
29, 1993.
(2) By-Laws are incorporated by reference to Exhibit (2) of Post-
Effective Amendment No. 35 filed on October 27, 1995.
(5) The Registrant's Management Agreement dated August 24, 1994 is
incorporated by reference to Exhibit (5) of Post-Effective Amendment
No. 34 to the Registration Statement on Form N-1A, filed on October
28, 1994.
(6)(a) The Registrant's Distribution Agreement dated August 24, 1994 is
incorporated by reference to Exhibit (6)(a) of Post-Effective
Amendment No. 34 to the Registration Statement on Form N-1A, filed on
October 28, 1994.
(8)(a) Amended and Restated Custody Agreement are incorporated by reference
to Exhibit (8)(a) of Post-Effective Amendment No. 35 filed on October
27, 1995.
(8)(b) The Registrant's Sub-Custodian Agreements are incorporated by
reference to Exhibit 8(b) of Post-Effective Amendment No. 34 to the
Registration Statement on Form N-1A, filed on October 28, 1994.
(9) The Registrant's Shareholder Services Plan dated October 24, 1994 is
incorporated by reference to Exhibit (9) of Post-Effective Amendment
No. 34 to the Registration Statement on Form N-1A, filed on October
28, 1994.
(10) Opinion and consent of Registrant's counsel are incorporated by
reference to Exhibit (10) of Post-Effective Amendment No. 35 filed on
October 27, 1995.
(11) Consent of Independent Auditors.
(16) Schedules of Computation of Performance Data are incorporated by
reference to Exhibit (16) of Post-Effective Amendment No. 33 to the
Registration Statement on Form N-1A, filed on October 29, 1993.
Item 24. Financial Statements and Exhibits. - List (continued)
_______ _____________________________________________________
Other Exhibits
______________
(a) Powers of Attorney.
(b) Certificate of Corporate Secretary.
Item 25. Persons Controlled by or under Common Control with Registrant.
_______ ______________________________________________________________
Not Applicable
Item 26. Number of Holders of Securities.
_______ ________________________________
(1) (2)
Number of Record
Title of Class Holders as of December 13, 1996
______________ _______________________________
Common Stock 4,991
(Par value $.01)
Item 27. Indemnification
_______ _______________
Reference is made to Articles SEVENTH of the Registrant's
Articles of Incorporation filed as Exhibit 1 hereto and to Section
2-418 of the Maryland General Corporation Law. The application of
these provisions is limited by Article VIII of the Registrant's By-
Laws filed as Exhibit 2 hereto and by the following undertaking set
forth in the rules promulgated by the Securities and Exchange
Commission:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of
Item 27. Indemnification (continued)
_______ ___________________________
appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in such Act and will be
governed by the final adjudication of such issue.
Reference also is made to the Distribution Agreement filed as
Exhibit 6 hereto.
Item 28. Business and Other Connections of Investment Adviser.
_______ ____________________________________________________
The Dreyfus Corporation ("Dreyfus") and subsidiary companies
comprise a financial service organization whose business consists
primarily of providing investment management services as the
investment adviser, manager and distributor for sponsored
investment companies registered under the Investment Company Act of
1940 and as an investment adviser to institutional and individual
accounts. Dreyfus also serves as sub-investment adviser to and/or
administrator of other investment companies. Dreyfus Service
Corporation, a wholly-owned subsidiary of Dreyfus, serves primarily
as a registered broker-dealer of shares of investment companies
sponsored by Dreyfus and of other investment companies for which
Dreyfus acts as investment adviser, sub-investment adviser or
administrator. Dreyfus Management, Inc., another wholly-owned
subsidiary, provides investment management services to various
pension plans, institutions and individuals.
Item 28. Business and Other Connections of Investment Adviser (continued)
________ ________________________________________________________________
Officers and Directors of Investment Adviser
____________________________________________
Name and Position
with Dreyfus Other Businesses
_________________ ________________
MANDELL L. BERMAN Real estate consultant and private investor
Director 29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034;
Past Chairman of the Board of Trustees:
Skillman Foundation;
Member of The Board of Vintners Intl.
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation****;
Mellon Bank, N.A.****
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
ALVIN E. FRIEDMAN Senior Adviser to Dillon, Read & Co. Inc.
Director 535 Madison Avenue
New York, New York 10022;
Director and Member of the Executive
Committee of Avnet, Inc.**
LAWRENCE M. GREENE None
Director
JULIAN M. SMERLING None
Director
W. KEITH SMITH Chairman and Chief Executive Officer:
Chairman of the Board The Boston Company*****;
Vice Chairman of the Board:
Mellon Bank Corporation****;
Mellon Bank, N.A.****;
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
CHRISTOPHER M. CONDRON Vice Chairman:
President, Chief Mellon Bank Corporation****;
Executive Officer, The Boston Company*****;
Chief Operating Deputy Director:
Officer and a Mellon Trust****;
Director Chief Executive Officer:
The Boston Company Asset Management,
Inc.*****;
President:
Boston Safe Deposit and Trust
Company*****
STEPHEN E. CANTER Director:
Vice Chairman and The Dreyfus Trust Company++;
Chief Investment Officer, Formerly, Chairman and Chief Executive
and a Director Officer:
Kleinwort Benson Investment Management
Americas Inc.*
LAWRENCE S. KASH Chairman, President and Chief
Vice Chairman-Distribution Executive Officer:
and a Director The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
Executive Vice President and Director:
Dreyfus Service Organization, Inc.***;
Director:
Dreyfus America Fund
The Dreyfus Consumer Credit
Corporation*;
The Dreyfus Trust Company++;
Dreyfus Service Corporation*;
President:
The Boston Company*****;
Laurel Capital Advisors****;
Boston Group Holdings, Inc.;
Executive Vice President:
Mellon Bank, N.A.****;
Boston Safe Deposit and Trust
Company*****;
PHILIP L. TOIA Chairman of the Board and Trust Investment
Vice Chairman-Operations Officer:
and Administration The Dreyfus Trust Company++;
and a Director Chairman of the Board and Chief Operating
Officer:
Major Trading Corporation*;
Chairman and Director:
Dreyfus Transfer, Inc.
One American Express Plaza
Providence, Rhode Island 02903
Director:
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Corporation*;
Seven Six Seven Agency, Inc.*;
President and Director:
Dreyfus Acquisition Corporation*;
The Dreyfus Consumer Credit
Corporation*;
Dreyfus-Lincoln, Inc.*;
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Partnership Management, Inc.+;
Dreyfus Service Organization, Inc.***;
The Truepenny Corporation*;
Formerly, Senior Vice President:
The Chase Manhattan Bank, N.A. and
The Chase Manhattan Capital Markets
Corporation
One Chase Manhattan Plaza
New York, New York 10081
WILLIAM T. SANDALLS, JR. Director:
Senior Vice President and Dreyfus Partnership Management, Inc.*;
Chief Financial Officer Seven Six Seven Agency, Inc.*;
President and Director:
Lion Management, Inc.*;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.*;
Vice President, Chief Financial Officer and
Director:
Dreyfus Acquisition Corporation*;
Dreyfus America Fund
Vice President and Director:
The Dreyfus Consumer Credit
Corporation*;
The Truepenny Corporation*;
Treasurer, Financial Officer and Director:
The Dreyfus Trust Company++;
Treasurer and Director:
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Service Corporation*;
Major Trading Corporation*;
Formerly, President and Director:
Sandalls & Co., Inc.
WILLIAM F. GLAVIN, JR. Executive Vice President:
Vice President-Corporate Dreyfus Service Corporation*;
Development Senior Vice President:
The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
MARK N. JACOBS Vice President, Secretary and Director:
Vice President, Lion Management, Inc.*;
General Counsel Secretary:
and Secretary The Dreyfus Consumer Credit
Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.***;
Major Trading Corporation*;
The Truepenny Corporation*
PATRICE M. KOZLOWSKI None
Vice President-
Corporate Communications
MARY BETH LEIBIG None
Vice President-
Human Resources
JEFFREY N. NACHMAN President and Director:
Vice President-Mutual Fund Dreyfus Transfer, Inc.
Accounting One American Express Plaza
Providence, Rhode Island 02903
ANDREW S. WASSER Vice President:
Vice President-Information Mellon Bank Corporation****
Services
ELVIRA OSLAPAS Assistant Secretary:
Assistant Secretary Dreyfus Service Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Acquisition Corporation, Inc.*;
The Truepenny Corporation+
______________________________________
* The address of the business so indicated is 200 Park Avenue, New
York, New York 10166.
** The address of the business so indicated is 80 Cutter Mill Road,
Great Neck, New York 11021.
*** The address of the business so indicated is 131 Second Street,
Lewes, Delaware 19958.
**** The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
***** The address of the business so indicated is One Boston Place,
Boston, Massachusetts 02108.
+ The address of the business so indicated is Atrium Building,
80 Route 4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
Item 29. Principal Underwriters
________ ______________________
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or
exclusive distributor:
1) Comstock Partners Funds, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC GNMA Fund
7) Dreyfus BASIC Money Market Fund, Inc.
8) Dreyfus BASIC Municipal Fund, Inc.
9) Dreyfus BASIC U.S. Government Money Market Fund
10) Dreyfus California Intermediate Municipal Bond Fund
11) Dreyfus California Tax Exempt Bond Fund, Inc.
12) Dreyfus California Tax Exempt Money Market Fund
13) Dreyfus Cash Management
14) Dreyfus Cash Management Plus, Inc.
15) Dreyfus Connecticut Intermediate Municipal Bond Fund
16) Dreyfus Connecticut Municipal Money Market Fund, Inc.
17) Dreyfus Florida Intermediate Municipal Bond Fund
18) Dreyfus Florida Municipal Money Market Fund
19) The Dreyfus Fund Incorporated
20) Dreyfus Global Bond Fund, Inc.
21) Dreyfus Global Growth Fund
22) Dreyfus GNMA Fund, Inc.
23) Dreyfus Government Cash Management
24) Dreyfus Growth and Income Fund, Inc.
25) Dreyfus Growth and Value Funds, Inc.
26) Dreyfus Growth Opportunity Fund, Inc.
27) Dreyfus Income Funds
28) Dreyfus Institutional Money Market Fund
29) Dreyfus Institutional Short Term Treasury Fund
30) Dreyfus Insured Municipal Bond Fund, Inc.
31) Dreyfus Intermediate Municipal Bond Fund, Inc.
32) Dreyfus International Funds, Inc.
33) Dreyfus Investment Grade Bond Funds, Inc.
34) The Dreyfus/Laurel Funds, Inc.
35) The Dreyfus/Laurel Funds Trust
36) The Dreyfus/Laurel Tax-Free Municipal Funds
37) Dreyfus LifeTime Portfolios, Inc.
38) Dreyfus Liquid Assets, Inc.
39) Dreyfus Massachusetts Intermediate Municipal Bond Fund
40) Dreyfus Massachusetts Municipal Money Market Fund
41) Dreyfus Massachusetts Tax Exempt Bond Fund
42) Dreyfus MidCap Index Fund
43) Dreyfus Money Market Instruments, Inc.
44) Dreyfus Municipal Bond Fund, Inc.
45) Dreyfus Municipal Cash Management Plus
46) Dreyfus Municipal Money Market Fund, Inc.
47) Dreyfus New Jersey Intermediate Municipal Bond Fund
48) Dreyfus New Jersey Municipal Bond Fund, Inc.
49) Dreyfus New Jersey Municipal Money Market Fund, Inc.
50) Dreyfus New Leaders Fund, Inc.
51) Dreyfus New York Insured Tax Exempt Bond Fund
52) Dreyfus New York Municipal Cash Management
53) Dreyfus New York Tax Exempt Bond Fund, Inc.
54) Dreyfus New York Tax Exempt Intermediate Bond Fund
55) Dreyfus New York Tax Exempt Money Market Fund
56) Dreyfus 100% U.S. Treasury Intermediate Term Fund
57) Dreyfus 100% U.S. Treasury Long Term Fund
58) Dreyfus 100% U.S. Treasury Money Market Fund
59) Dreyfus 100% U.S. Treasury Short Term Fund
60) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
61) Dreyfus Pennsylvania Municipal Money Market Fund
62) Dreyfus S&P 500 Index Fund
63) Dreyfus Short-Intermediate Government Fund
64) Dreyfus Short-Intermediate Municipal Bond Fund
65) The Dreyfus Socially Responsible Growth Fund, Inc.
66) Dreyfus Stock Index Fund, Inc.
67) Dreyfus Tax Exempt Cash Management
68) The Dreyfus Third Century Fund, Inc.
69) Dreyfus Treasury Cash Management
70) Dreyfus Treasury Prime Cash Management
71) Dreyfus Variable Investment Fund
72) Dreyfus Worldwide Dollar Money Market Fund, Inc.
73) General California Municipal Bond Fund, Inc.
74) General California Municipal Money Market Fund
75) General Government Securities Money Market Fund, Inc.
76) General Money Market Fund, Inc.
77) General Municipal Bond Fund, Inc.
78) General Municipal Money Market Fund, Inc.
79) General New York Municipal Bond Fund, Inc.
80) General New York Municipal Money Market Fund
81) Premier Insured Municipal Bond Fund
82) Premier California Municipal Bond Fund
83) Premier Equity Funds, Inc.
84) Premier Global Investing, Inc.
85) Premier GNMA Fund
86) Premier Growth Fund, Inc.
87) Premier Municipal Bond Fund
88) Premier New York Municipal Bond Fund
89) Premier State Municipal Bond Fund
90) Premier Strategic Growth Fund
91) Premier Value Fund
(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
__________________ ___________________________ _____________
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Compliance Treasurer
Officer
Joseph F. Tower, III+ Senior Vice President, Treasurer Vice President
and Chief Financial Officer and Assistant
Treasurer
John E. Pelletier+ Senior Vice President, General Vice President
Counsel, Secretary and Clerk and Secretary
Roy M. Moura+ First Vice President None
Dale F. Lampe+ Vice President None
Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer
Paul Prescott+ Vice President None
Elizabeth A. Bachman++ Assistant Vice President Vice President
and Assistant
Secretary
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
________________________________
+ Principal business address is One Exchange Place, Boston, Massachusetts
02109.
++ Principal business address is 200 Park Avenue, New York, New York 10166.
Item 30. Location of Accounts and Records
________________________________
1. First Data Investor Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. The Bank of New York
90 Washington Street
New York, New York 10286
3. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 31. Management Services
_______ ___________________
Not Applicable
Item 32. Undertakings
________ ____________
(1) To call a meeting of shareholders for the purpose of voting upon
the question of removal of a Board member or Board members when
requested in writing to do so by the holders of at least 10% of the
Registrant's outstanding shares and in connection with such meeting
to comply with the provisions of Section 16(c) of the Investment
Company Act of 1940 relating to shareholder communications.
(2) To furnish each person to whom a prospectus is delivered with a
copy of the Fund's latest Annual Report to Shareholders, upon
request and without charge.
SIGNATURES
-------------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York, and
State of New York on the 18th day of December, 1996.
DREYFUS MUNICIPAL BOND FUND, INC.
BY: /s/Marie E. Connolly*
-----------------------------------------------
Marie E. Connolly, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signatures Title Date
__________________________ _______________________________ ________
/s/Marie E. Connolly* President and Treasurer 12/18/96
- ------------------------------ (Principal Executive Officer and
Marie E. Connolly Principal Financial Officer)
/s/Joseph F. Tower, III* Vice President and Assistant 12/18/96
- ------------------------------ Treasurer (Principal Accounting
Joseph F. Tower, III Officer)
/s/Joseph S. DiMartino* Chairman of the Board 12/18/96
- ------------------------------
Joseph S. DiMartino
/s/David W. Burke* Board Member 12/18/96
- ------------------------------
David W. Burke
/s/Hodding Carter, III* Board Member 12/18/96
- ------------------------------
Hodding Carter, III
/s/Ehud Houminer* Board Member 12/18/96
- ------------------------------
Ehud Houminer
/s/Richard C. Leone* Board Member 12/18/96
- ------------------------------
Richard C. Leone
/s/Hans C. Mautner* Board Member 12/18/96
- ------------------------------
Hans C. Mautner
/s/Robin A. Smith* Board Member 12/18/96
- ------------------------------
Robin A. Smith
/s/John E. Zuccotti* Board Member 12/18/96
- ------------------------------
John E. Zuccotti
*BY: /s/Mark A. Karpe
------------------------------
Mark A. Karpe,
Attorney-in-Fact
INDEX OF EXHIBITS
(11) Consent of Independent Auditors
Other Exhibits
(a) Powers of Attorney
(b) Certificate of Corporate Secretary
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed
Financial Information" and "Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors" and to the use of our report
dated October 1, 1996, in this Registration Statement (Form N-1A 2-56878)
of Dreyfus Municipal Bond Fund, Inc.
ERNST & YOUNG LLP
New York, New York
December 13, 1996
ITEM 24.(b)
OTHER EXHIBITS (a)
POWER OF ATTORNEY
The undersigned hereby constitute and appoint Elizabeth Bachman, Marie E.
Connolly, Richard W. Ingram, Mark A. Karpe and John E. Pelletier and each of
them, with full power to act without the other, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (until revoked in writing) to sign any and all amendments to the
Registration Statement of Dreyfus Municipal Bond Fund, Inc. (including
post-effective amendments and amendments thereto), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
/s/David W. Burke October 28, 1996
- --------------------------------
David W. Burke
/s/Hodding Carter, III October 28, 1996
- --------------------------------
Hodding Carter, III
/s/Joseph S. DiMartino October 28, 1996
- --------------------------------
Joseph S. DiMartino
/s/Ehud Houminer October 28, 1996
- --------------------------------
Ehud Houminer
/s/Richard C. Leone October 28, 1996
- --------------------------------
Richard C. Leone
/s/Hans C. Mautner October 28, 1996
- --------------------------------
Hans C. Mautner
/s/Robin A. Smith October 28, 1996
- --------------------------------
Robin A. Smith
/s/John E. Zuccotti October 28, 1996
- --------------------------------
John E. Zuccotti
ITEM 24.(b)
OTHER EXHIBITS (b)
DREYFUS MUNICIPAL BOND FUND, INC.
Certificate of Assistant Secretary
The undersigned, Mark A. Karpe, Vice President and Assistant Secretary of
Dreyfus Municipal Bond Fund, Inc. (the "Fund"), hereby certifies that set forth
below is a copy of the resolution adopted by the Fund's Board authorizing the
signing by Elizabeth Bachman, Marie E. Connolly, Richard W. Ingram, Mark A.
Karpe and John Pelletier on behalf of the proper officers of the Fund pursuant
to a power of attorney:
RESOLVED, that the Registration Statement and any and all
amendments and supplements thereto, may be signed by any one of
Elizabeth Bachman, Marie E. Connolly, Richard W. Ingram, Mark A.
Karpe and John Pelletier as the attorney-in-fact for the proper
officers of the Fund, with full power of substitution and
resubstituion; and that the appointment of each of such persons
as such attorney-in-fact hereby is authorized and approved; and
that such attorneys-in-fact, and each of them, shall have full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in connection with such
Registration Statement and any and all amendments and supplements
thereto, as fully to all intents and purposes as the officer, for
whom he or she is acting as attorney-in-fact, might or could do
in person.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the
seal of the Fund on December 18, 1996.
/s/ Mark A. Karpe
-----------------------
Mark A. Karpe,
Vice President and
Assistant Secretary
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</TABLE>
