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, 19
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 9
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-15
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-24
18 Capital Stock and Other Securities B-28
19 Purchase, Redemption and Pricing B-18, B-19,
of Securities Being Offered B-23
20 Tax Status *
21 Underwriters B-18
22 Calculations of Performance Data B-26
23 Financial Statements B-38
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-11
30 Location of Accounts and Records C-14
31 Management Services C-14
32 Undertakings C-14
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
FOR USE BY BANKS ONLY
December 29, 1995
DREYFUS MUNICIPAL BOND FUND, INC.
Supplement to Prospectus
Dated December 29, 1995
All mutual fund shares involve certain investment risks, including
the possible loss of principal.
054/s122994IST
PROSPECTUS DECEMBER 29, 1995
DREYFUS MUNICIPAL BOND FUND, INC.
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.
YOU CAN INVEST, REINVEST OR REDEEM SHARES AT ANY TIME WITHOUT CHARGE
OR PENALTY.
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 DECEMBER 29, 1995,
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. FOR A FREE COPY, 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.
TABLE OF CONTENTS
Page
Annual Fund Operating Expenses.......................... 3
Condensed Financial Information......................... 4
Description of the Fund................................. 4
Management of the Fund.................................. 7
How to Buy Fund Shares.................................. 9
Shareholder Services.................................... 10
How to Redeem Fund Shares............................... 13
Shareholder Services Plan............................... 15
Dividends, Distributions and Taxes...................... 15
Performance Information................................. 17
General Information..................................... 18
Appendix................................................ 19
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.
Page 1
[This Page Intentionally Left Blank]
Page 2
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
<S> <C> <C> <C> <C>
Management Fees (after expense reimbursement) ............................................... .59%
Other Expenses............................................................................... .11%
Total Fund Operating Expenses (after expense reimbursement).................................. .70%
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 $22 $39 $87
</TABLE>
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%.
The purpose of the foregoing table is to assist you in understanding
the costs and expenses borne by the Fund, the payment of which will reduce
investors' annual return. The expenses noted above, without reimbursements,
would be: Management Fees - .60% and Total Fund Operating Expenses - .71%;
and the amount of expenses that an investor would pay, assuming redemption
after one, three, five and ten years, would be $7, $23, $40 and $88,
respectively. 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" 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>
<CAPTION>
YEAR ENDED AUGUST 31,
------------------------------------------------------------------------------------
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year... $11.60 $12.87 $12.22 $12.03 $12.47 $12.24 $12.68 $13.17 $13.68 $12.39
------ ------ ------ ------ ----- ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net..... .99 .93 .91 .91 .90 .87 .84 .79 .75 .72
Net realized and unrealized
gain (loss) on investments... 1.27 (.64) (.19) .44 (.23) .44 .49 .79 (.96) .09
------ ------ ------ ------ ----- ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS........ 2.26 .29 .72 1.35 .67 1.31 1.33 1.58 (.21) .81
------ ------ ------ ------ ----- ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment
income-net........ (.99) (.94) (.91) (.91) (.90) (.87) (.84) (.79) (.75) (.72)
Dividends from net realized
gain on investments..... - - - - - - - (.28) (.33) (.07)
------ ------ ------ ------ ----- ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS.... (.99) (.94) (.91) (.91) (.90) (.87) (.84) (1.07) (1.08) (.79)
------ ------ ------ ------ ----- ------ ------ ------ ------ ------
Net asset value, end of year.... $12.87 $12.22 $12.03 $12.47 $12.24 $12.68 $13.17 $13.68 $12.39 $12.41
======= ======= ====== ===== ====== ====== ====== ====== ======= ======
TOTAL INVESTMENT RETURN... 20.22% 2.30% 6.27% 11.60% 5.51% 11.11% 10.82% 12.62% (1.63%) 6.93%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets....... .69% .68% .71% .68% .67% .67% .68% .69% .68% .70%
Ratio of net investment income
to average net assets... 8.16% 7.34% 7.68% 7.41% 7.23% 7.05% 6.49% 5.96% 5.80% 5.94%
Portfolio Turnover Rate.... 53.03% 67.23% 50.63% 36.38% 28.06% 35.53% 67.86% 45.37% 36.25% 51.55%
Net Assets, end of year
(000's Omitted) $3,647,778 $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
- ------------------
</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 lending
portfolio securities and options and futures transactions. Use of certain of
these techniques may give rise to taxable income. See also "Investment
Considerations and Risks" 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. 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 for
interest on Municipal Obligations may be introduced in the future. If any
such proposal were enact-
Page 6
ed 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, to a limited extent, 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. TheDerivatives 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 investments 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.
These are bonds 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 generally are not meant for short-term investing and 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."
The Fund may invest up to 5% of the value of its net assets in zero
coupon securities and pay-in-kind bonds (bonds which pay interest through the
issuance of additional bonds) rated Ba or lower by Moody's and BB or lower by
S&P and Fitch. These securities may be subject to greater fluctuations in
value due to changes in interest rates than interest-bearing securities and
thus may be considered more speculative than comparably rated
interest-bearing securities. See "Zero Coupon Securities" above, and "Investme
nt Objective and Management Policies -- Investment Considerations and Risks
- -- Lower Rated Bonds" and "Dividends, Distributions and Taxes" in the Statement
of Additional Information.
SIMULTANEOUS INVESTMENTS -- Investment decisions for the Fund are made
independently from those of other investment companies advised by The Dreyfus
Corporation. However, if such other investment companies are prepared to
invest in, or desire to dispose of, Municipal Obligations or Taxable
Investments, 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
Page 7
Corporation ("Mellon"). As of November 30, 1995, The Dreyfus Corporation
managed or administered approximately $83 billion in assets for more than 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 overall authority of the Fund's Board of Directors 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 as well
as for other funds advised by The Dreyfus Corporation through a professional
staff of portfolio managers and securities analysts.
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
$209 billion in assets as of September 30, 1995, including approximately $80
billion in proprietary mutual fund assets. As of September 30, 1995, Mellon,
through various subsidiaries, provided non-investment services, such as
custodial or administration services, for more than $717 billion in assets,
including approximately $55 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. 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
overall expense ratio of the Fund and increasing yield to investors at the
time such amounts are waived or assumed, as the case may be. 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. For the fiscal year ended August 31, 1995, 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.
Pursuant to such 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.
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 or others in respect of these services.
DISTRIBUTOR -- The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at One Exchange Place, 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 02903, 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.
Page 8
HOW TO BUY FUND 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 recommended 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 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 Fund's 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 Builder, 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 conveni
ent 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 subseq
uent 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 registratio
n 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 Fund's 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.
Page 9
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."
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs, or (ii) such plan's or program's aggregate investment in the
Dreyfus Family of Funds or certain other products made available by the
Distributor to such plans or programs exceeds $1,000,000. Shares of funds in
The Dreyfus Family of Funds then held by such employee benefit plans or
programs will be aggregated to determine the fee payable. The Distributor
reserves the right to cease paying these fees at any time. The Distributor
will pay such fees from its own funds, other than amounts received from the
Fund, including past profits or any other source available to it.
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. 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 Fund's 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 Fund's 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 telephoning
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
Page 10
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, or by a separate signed
Shareholder Services Form, also available by calling 1-800-645-6561. If you
have established the Telephone Exchange Privilege, you may telephone exchange
instructions by calling 1-800-645-6561 or, if you are calling from overseas,
call 516-794-5452. See "How to Redeem Fund 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 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.
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 of the fund from
which 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 an 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 currently an investor. 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 writing 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. See "Dividends, Distributions and Taxes." 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.
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,
Page 11
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.
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 Builder, 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 Fund's
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 Builder, 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 price
s which do not include the sales load or which reflect a reduced sales load.
See
Page 12
"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.
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. There is a service charge of 50cents for each withdrawal
check. 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 FUND 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.
The Fund imposes no charges when shares are redeemed. 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 upon 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 BUILDER 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 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.
Page 13
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. TheFund 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.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Fund's 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 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 ("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
Page 14
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.
Shares for which certificates have been issued may not be redeemed by
Redemption Check. 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. Shares for which certificates have been issued
are not eligible for this Privilege.
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 telephoning
1-800-645-6561 or, if you are calling from overseas, call
516-794-5452. Shares issued in certificate form are not eligible for this
Privilege.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan pursuant to which
the Fund reimburses Dreyfus Service 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 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 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. 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.
The Fund's earnings for Saturdays, Sundays and holidays are declared as
dividends on the next business day. If you redeem all shares in your account
Page 15
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, are taxable as ordinary income whether or not
reinvested. No dividend paid by the Fund will qualify for the dividends
received deduction allowable to certain U.S. corporations. 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. 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.
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 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.
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.
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
Page 16
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.
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, 1995 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."
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.
Page 17
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. On January 22, 1993 the Fund's name
was changed from Dreyfus Tax Exempt Bond Fund, Inc. to Dreyfus Municipal 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 Directors 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
Director 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 Director by the affirmative vote of a
majority of the Fund's outstanding voting shares. In addition, the Board of
Directors will call a meeting of shareholders for the purpose of electing
Directors if, at any time, less than a majority of the Directors 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 33-1\3% of the value of such company's 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 -- 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.
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.
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. In connection with such
loans, the Fund continues to be entitled to payments in amounts equal to the
interest, dividends or other distributions payable on the loaned securities.
Loans of portfolio securities afford the Fund an opportunity to earn interest
on the amount of the loan and at the same time to earn income on the loaned
securities' collateral. Loans of portfolio securities may not exceed 33-1\3%
of the value of the Fund's total assets. In connection with such loans, 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. TheFund might experience risk of loss if the institution with which
it has engaged in a portfolio loan transaction breaches its agreement with
the Fund.
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 that
will
Page 19
be received on a forward commitment or when-issued security are fixed at the
time the Fund enters into the commitment. However, the Fund does not make a
payment until it receives delivery from the other party to the transaction.
The Fund will make commitments 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 cash, cash equivalents or U.S. Government
securities or other high quality liquid debt securities 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 o
f 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 the prescribed
quality standards for banks set forth below, 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, the 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-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
Page 20
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. If the interest rate on the first
class exceeds the coupon rate of the underlying Municipal Obligations, its
interest rate will exceed the rate paid on the second 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
market prices of interest-bearing securities and are likely to respond to a
greater degree to changes in interest rates than interest-bearing securities
having similar maturities and credit qualities.
Page 21
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.
Once the rating of a portfolio security has been changed, the Fund will
consider all circumstances deemed relevant in determining whether to continue
to hold the security.
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
Dreyfus Logo
Municipal
Bond Fund, Inc.
Prospectus
Registration Mark
Copyright 1995, Dreyfus Service Corporation
054p19122995
Page 24
______________________________________________________________________________
DREYFUS MUNICIPAL BOND FUND, INC.
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
DECEMBER 29, 1995
______________________________________________________________________________
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 December 29, 1995, 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-15
Shareholder Services Plan . . . . . . . . . . . . . . . . . . . . . . . . B-17
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . . . . . . . B-18
Redemption of Fund Shares . . . . . . . . . . . . . . . . . . . . . . . . B-19
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . . . . . . B-21
Determination of Net Asset Value. . . . . . . . . . . . . . . . . . . . . B-23
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . B-24
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . . . . . B-25
Performance Information . . . . . . . . . . . . . . . . . . . . . . . . . B-26
Information About the Fund. . . . . . . . . . . . . . . . . . . . . . . . B-28
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors. . . . . . . . . . . . . . . . . . . . B-28
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-29
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . B-38
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . . . B-63
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
- --------------------
The average distribution of investments (at value) in Municipal
Obligations (including notes) by ratings for the fiscal year ended August
31, 1995, computed on a monthly basis, was as follows:
<TABLE>
<CAPTION>
Fitch Investors Moody's Standard &
Services, L.P. Investors Ratings Poor's Rating Group Percentage
("Fitch") and/or Inc. ("Moody's") and/or ("S&P") of Value
- --------------- ----------------- ------------------- ----------
<S> <C> <C> <C>
AAA Aaa AAA 24.8%
AA Aa AA 27.9
A A A 17.9
BBB Baa BBB 18.5
BB Ba BB .7
F-1, F-1(1) MIG 1, P1(1) SP-1, A-1(1) 4.2(2)
Not Rated Not Rated Not Rated 6.0
---
100.0%
======
</TABLE>
_________________
(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 a 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 comparising 6.0% 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%), Aa/AA (.1.0%), A/A (1.0%), Baa/BBB
(3.9%), B/B (.1%) and F-1, F-1+/MIG 1, P-1/SP-1,A-1 (.1%).
Municipal Obligations. 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.
Illiquid Securities. If 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, for example, Government National Mortgage Association
pass-through certificates, are supported by the full faith and credit of the
U.S. Treasury; others, such as those of the Federal Home Loan Banks, by the
right of the issuer to borrow from the U.S. Treasury; others, such as those
issued by the Federal National Mortgage Association, by discretionary
authority of the U.S. Government to purchase certain obligations of the
agency or instrumentality; and others, such as those issued by the Student
Loan Marketing Association, 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 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 one billion dollars 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
- -------------------
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, decrease
or change the level of risk to which its portfolio is exposed in much the
same way as the Fund can increase, decrease or change the risk of its
portfolio by making investments in specific securities.
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
required 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. 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., 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 cash or high
quality money market instruments 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.
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.
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.
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. These conditions may be subject to future modification.
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 (collectively, the
"Rating Agencies"). Such bonds, though high yielding, are characterized by
risk. See in the Prospectus "Description of the Fund--Investment
Considerations and Risks--Lower Rated Bonds" for a discussion of certain
risks and "Appendix" in the Statement of Additional Information for a
general description of the Rating Agencies' 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 are considered by the Rating Agencies to be, on
balance, 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.
Lower rated zero coupon securities and pay-in-kind bonds, in which the
Fund may invest up to 5% of the value its net assets, involve special
considerations. The credit risk factors pertaining to lower rated
securities also apply to lower rated zero coupon bonds and pay-in-kind
bonds. Such 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
Directors 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 interest 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
Directors 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 Director who is deemed to be an "interested person"
of the Fund, as defined in the 1940 Act, is indicated by an asterisk.
Directors of the Fund
- ---------------------
*DAVID W. BURKE, Director. Consultant to the Manager since August, 1994.
From October 1990 to August, 1994, 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 58 years old and his address is 200
Park Avenue, New York, New York 10166.
HODDING CARTER, III, Director. President of MainStreet, a television
production company. Since 1991, a syndicated columnist for United
Media-NEA. 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's "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 59 years old and his address
is 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. For
more than five years prior thereto, 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
Chairman of the Board of Noel Group, Inc., a venture capital company;
a trustee of Bucknell University; 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 Simmons Outdoor Corporation and
Staffing Resources, Inc. He is 52 years old and his address is 200
Park Avenue, New York, New York 10166.
EHUD HOUMINER, Director. Since July 1991, Professor and Executive-in-
Residence at the Columbia Business School, Columbia University. He
was President and Chief Executive Officer of Philip Morris USA,
manufacturers of consumer products, from December 1988 to September
1990. He also is a Director of Avnet Inc. He is 55 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, Director. President of The Twentieth Century Fund, a tax
exempt research foundation engaged in studies of economic, foreign
policy and domestic issues. From April 1990 to March 1994, 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. and from May 1982 to December 1984, President of Atlantic Inc., a
wholly-owned subsidiary of Amerada Hess Corporation. Mr. Leone is
also a director of Resource Mortgage Capital, Inc. He is 55 years old
and his address is 41 East 70th Street, New York, New York 10021.
HANS C. MAUTNER, Director. 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 58
years old and his address is 305 East 47th Street, New York, New York
10017.
ROBIN A. SMITH, Director. 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 and the High/Slop Education Research Foundation.
She is 32 years old and her address is 280 Park Avenue, New York, New
York 10010.
JOHN E. ZUCCOTTI, Director. 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 management of real estate
properties corporation. He is 58 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, 1995, 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, 1994, is as follows:
<TABLE>
<CAPTION>
(5)
(3) Total
(2) Pension or (4) Compensation from
(1) Aggregate Retirement Benefits Estimated Annual Fund and Fund
Name of Board Compensation from Accrued as Part of Benefits Upon Complex Paid to
Member Fund* Fund's Expenses Retirement Board Member
- ------------- ----------------- -------------------- ---------------- -----------------
<S> <C> <C> <C> <C>
David W. Burke $6,000 none none $ 27,898 (52)
Hodding Carter, III $6,500 none none $ 33,625 (7)
Joseph S. DiMartino $4,530 none none $362,400 ** (94)
Ehud Houminer $6,500 none none $ 25,701 (11)
Richard C. Leone $6,500 none none $ 33,125 (7)
Hans C. Mautner $6,000 none none $ 33,625 (7)
Robin A. Smith $2,899 none none $ 30,000 ** (7)
John E. Zuccotti $6,500 none none $ 33,625 (7)
</TABLE>
- ----------------------------------
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $764 for all Directors as a group.
** Estimated amount for the year ending December 31, 1995.
Officers of the Fund
- --------------------
MARIE E. CONNOLLY, President and Treasurer. President and Chief Executive
Officer 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 company 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 38 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 31 years old.
ERIC B. FISCHMAN, Vice President and Assistant Secretary. Associate General
Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From September 1992
to August 1994, he was an attorney with the Board of Governors of the
Federal Reserve System. He is 30 years old.
ELIZABETH 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 26 years
old.
FREDERICK C. DEY, Vice President and Assistant Treasurer. Senior Vice
President of the Distributor and an officer of other investment
companies advised or administered by the Manager. From 1988 to August
1994, he was manager of the High Performance Fabric Division of
Springs Industries Inc. He is 33 years old.
JOSEPH S. TOWER,III, 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 33 years old.
JOHN J. PYBURN, Assistant Treasurer. Assistant Treasurer of the Distributor
and an officer of other investment companies advised or administered
by the Manager. From 1984 to July 1994, he was Assistant Vice
President in the Mutual Fund Accounting Department of the Manager. He
is 60 years old.
The address of each of the Fund's officers is 200 Park Avenue, New
York, New York 10166.
Directors and officers of the Fund, as a group, owned less than 1% of
the Fund's Common Stock outstanding on December 15, 1995.
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 30, 1995. 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:
Howard Stein, Chairman of the Board and Chief Executive Officer; W. Keith
Smith, Vice Chairman of the Board; Christopher M. Condron, President, 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; Phillip L. Toia, Vice Chairman--Operations and
Administration and a director; Barbara E. Casey, Vice President--Retirement
Services; Diane M. Coffey, Vice President--Corporate Communications; Elie M.
Genadry, Vice President--Institutional Sales; William F. Glavin, Jr., Vice
President--Corporate Development; Henry D. Gottmann, Vice President--Retail
Sales and Services; Mark N. Jacobs, Vice President--Legal and Secretary;
Daniel C. Maclean, Vice President and General Counsel; Jeffrey N. Nachman,
Vice President--Mutual Fund Accounting; Katherine C. Wickham, Vice
President--Human Resources; Maurice Bendrihem, Controller; Elvira Oslapas,
Assistant Secretary; and Mandell L. Berman, Frank V. Cahouet, Alvin E.
Friedman, Lawrence M. Greene, Julian M. Smerling and David B. Truman,
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. The
management fees paid for the fiscal years ended August 31, 1993, 1994 and
1995 amounted to $26,589,276, $25,447,556 and $22,188,564, respectively.
The management fees for the fiscal years ended August 31, 1993, 1994 and
1995 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, 1995, 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.
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 3, 1995. 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, 1995, $1,520,849 was chargeable
to the Fund under the Plan.
PURCHASE OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund 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,
banks or other 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
Fund 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.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Redeem
Fund Shares."
Check Redemption Privilege. An investor may indicate on the Account
Application or by later written request that the Fund provide Redemption
Checks ("Checks") drawn on the Fund's 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
Fund 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 Board reserves the right to make payments in whole or in part in
securities or other assets 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 would 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 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. There is a service charge of $.50 for each withdrawal check.
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 on their payment date the 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
Fund Shares."
Valuation of Portfolio Securities. The Fund's investments are valued
each business day by an independent pricing service (the "Service") approved
by the 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 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, 1994 and 1995 was 36.25% and 51.55%, 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, 1995, 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, 1995
was 5.42%. 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 1995 Federal income tax rate of 39.60%, the Fund's tax
equivalent yield for the 30-day period ended August 31, 1995 was 8.97%. 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, 1995 was 6.93%, 7.82% and 8.41%, 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, 1995 was 254.05%. 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.
From time to time, 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.
From time to time, advertising materials for the Fund also may refer
to Morningstar ratings and related analysis supporting the rating.
From time to time, 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, 1995,
there were approximately $3.9 billion of net assets invested in tax exempt
funds throughout the investment company industry. ***
_________________________
*** Source: Lipper Analytical Services, Inc.
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 02903, 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. 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 of
Common Stock 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 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.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and in
the categories below B. The modifier 1 indicates a ranking for the security in
the higher end of a rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates a ranking in the lower end of a rating
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 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 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>
AVERAGE ANNUAL TOTAL RETURNS
<S> <C> <C>
ONE YEAR ENDED FIVE YEARS ENDED TEN YEARS ENDED
AUGUST 31, 1995 AUGUST 31, 1995 AUGUST 31, 1995
--------------------- --------------------- ---------------------------
6.93% 7.82% 8.41%
</TABLE>
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in the Dreyfus Municipal
Bond Fund on 8/31/85 to a $10,000 investment made in the Lehman Brothers
Municipal Bond Index on that date. All dividends and capital gain
distributions are reinvested.
The Fund invests primarily in municipal securities and its performance shown
in the line graph takes into account fees and expenses. Unlike the Fund, the
Lehman Brothers Municipal Bond Index is an unmanaged total return performance
benchmark for the long-term, investment-grade tax exempt bond market,
calculated by using municipal bonds selected to be representative of the
municipal market overall. The Index does not take into account charges, fees
and other expenses which can contribute to the Index potentially
outperforming the Fund. Further information relating to Fund performance,
including expense reimbursements, if applicable, is contained in the
Condensed Financial Information section of the Prospectus and elsewhere in
this report.
<TABLE>
<CAPTION>
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS AUGUST 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-93.0% AMOUNT VALUE
---------------- ----------------
<S> <C> <C>
ALABAMA-1.0%
Alabama Housing Finance Authority, SFMR:
6.80%, 4/1/2025......................................................... $ 5,000,000 $ 5,190,600
6.45%, 10/1/2025........................................................ 8,000,000 8,097,040
Columbia Industrial Development Board, PCR (Alabama Power Farley Plant
Project)
9.25%, 12/1/2015........................................................ 3,800,000 3,925,514
Industrial Development Board of the Town of Courtland, SWDR
(Champion International Corp. Project) 7%, 11/1/2022.................... 8,100,000 8,415,009
West Jefferson Industrial Development Board, PCR, Refunding
(Alabama Power Co. - Miller Plant) 6.05%, 5/1/2023 (Insured; MBIA)...... 15,000,000 15,016,500
ALASKA-1.1%
Alaska Housing Finance Corp. (Collateralized Veterans Mortgage Program)
6.375%, 12/1/2027....................................................... 9,135,000 9,182,593
Valdez, Marine Terminal Revenue, Refunding (BP Pipeline Inc. Project)
5.85%, 8/1/2025......................................................... 37,000,000 34,767,790
CALIFORNIA-5.6%
Airport Commission City and County of San Francisco,
(San Francisco International Airport)
6.50%, 5/1/2015 (Insured; FGIC)......................................... 10,100,000 10,532,987
California:
5.50%, 3/1/2010......................................................... 13,330,000 12,941,430
5.90%, 4/1/2023......................................................... 25,000,000 24,253,750
California Higher Education Loan Authority, Inc.,
Student Loan Revenue, Refunding 6.50%, 6/1/2005......................... 19,250,000 20,417,127
California Housing Finance Agency, Single Family Mortgage
6.45%, 8/1/2025......................................................... 13,125,000 13,327,781
Foothill/Eastern Transportation Corridor Agency, Toll Road Revenue
6.50%, 1/1/2032......................................................... 39,875,000 39,377,360
Los Angeles Department Water and Power, Electric Plant Revenue, Crossover
Refunding
5.875%, 9/1/2030........................................................ 18,125,000 17,563,487
San Diego County, COP, Refunding (Interim Justice Facilities Project)
6.50%, 8/1/2007......................................................... 10,110,000 10,559,996
San Marcos Public Facilities Authority, Revenue, Refunding, Public
Improvement
(Civic Center) 6.20%, 8/1/2022.......................................... 4,000,000 3,785,120
Southern California Public Power Authority, Power Project Revenue, Refunding
5.50%, 7/1/2012......................................................... 5,000,000 4,782,800
State Public Works Board of the State of California, LR:
(Department of Corrections - California State Prison-Madera County)
5.50%, 6/1/2015....................................................... 19,000,000 17,556,000
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
---------------- ----------------
CALIFORNIA (CONTINUED)
State Public Works Board of the State of California, LR (continued):
(Various University of California Projects)
6.375%, 10/1/2019..................................................... $ 5,000,000 $ 5,045,100
University of California, Revenue (Multi-Purpose Project)
6.75%, 9/1/2023 (Insured; AMBAC) (Prerefunded 9/1/1999) (a,b)........... 37,000,000 41,139,930
COLORADO-2.2%
City and County of Denver, Airport Revenue:
4.25%, 9/1/1995......................................................... 10,000,000 10,000,000
8%, 11/15/2017.......................................................... 8,175,000 8,762,782
6.75%, 11/15/2022....................................................... 12,000,000 12,096,360
7.25%, 11/15/2023....................................................... 25,765,000 27,047,839
8.50%, 11/15/2023....................................................... 12,750,000 14,434,530
7.50%, 11/15/2025....................................................... 15,000,000 15,564,300
CONNECTICUT-1.0%
Connecticut Housing Finance Authority (Housing Mortgage Finance Program):
6.70%, 11/15/2012....................................................... 4,000,000 4,163,800
6.30%, 5/15/2024........................................................ 8,000,000 8,050,960
6.50%, 5/15/2027........................................................ 18,500,000 18,633,200
Eastern Connecticut Resource Recovery Authority (American Fuel Co. Project)
6.45%, 11/15/2022....................................................... 7,325,000 7,411,435
DELAWARE-.5%
Delaware Economic Development Authority, Water Development Revenue
(Wilmington Suburban Water Corp. Project) 6.80%, 12/1/2023.............. 8,000,000 8,319,360
Delaware Housing Authority, Senior Single Family Mortgage Revenue
6.45%, 1/1/2026......................................................... 13,200,000 13,198,416
DISTRICT OF COLUMBIA-1.9%
District of Columbia, Revenue 6.562%, 4/1/2022.............................. 8,000,000 8,200,560
Metropolitan Washington Airports Authority, Airport System Revenue:
6.625%, 10/1/2012 (Insured; MBIA) (a)................................... 40,400,000 42,289,508
6.625%, 10/1/2019 (Insured; MBIA)....................................... 23,600,000 24,369,596
FLORIDA-5.1%
Brevard County Housing Finance Authority, SFMR
6.80%, 3/1/2028......................................................... 9,500,000 9,892,350
Charlotte County, HR (Bon Secours Health System - Saint Joseph's Hospital
Project)
8.25%, 8/15/2018 (Prerefunded 8/15/1998) (b)............................ 7,000,000 7,929,040
Escambia County, PCR (Champion International Corp. Project)
6.90%, 8/1/2022......................................................... 9,000,000 9,442,710
Florida (Jacksonville Transportation Authority) 9.20%, 1/1/2015............. 2,000,000 2,766,440
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
---------------- ----------------
FLORIDA (CONTINUED)
Florida Community Services Corp. Walton County Water and Sewer Revenue
(South Walton County Regional Utility):
6.95%, 3/1/2012....................................................... $ 3,000,000 $ 3,352,290
7%, 3/1/2018.......................................................... 3,500,000 3,822,770
Hospital Board of Directors of Lee County, HR, Refunding
(Lee Memorial Hospital Project):
6.206%, 4/1/2020 (Insured; MBIA)...................................... 31,000,000 31,546,840
6.348%, 4/1/2020 (Insured; MBIA)...................................... 4,000,000 4,070,560
Orange County Health Facilities Authority, Pooled Hospital Loan Revenue,
Refunding:
7.875%, Series A, 12/1/2025 (Insured; FGIC) (c)......................... 26,790,000 28,958,383
7.875%, Series B, 12/1/2025 (Insured; BIGI)............................. 16,470,000 17,803,082
Palm Beach County, Solid Waste Industrial Development Revenue:
(Okeelanta Power Limited Partnership Project) 6.70%, 2/15/2015.......... 23,400,000 22,755,564
(Osceola Power Limited Partnership) 6.95%, 1/1/2022..................... 33,800,000 33,313,618
Tampa, Water and Sewer System Revenue
6.60%, 10/1/2014 (Insured; FGIC) (Prerefunded 10/1/2002) (b,c).......... 20,000,000 22,668,200
Volusia County, Airport System Revenue (Daytona Beach Regional Airport):
7%, 10/1/2021 (Insured; MBIA) (Prerefunded 10/1/2000) (b)............... 810,000 920,322
7%, 10/1/2021 (Insured; MBIA)........................................... 2,390,000 2,612,198
GEORGIA-.9%
Fulco Hospital Authority, Revenue Anticipation Certificates
(Saint Joseph's Hospital of Atlanta, Inc.) 5.50%, 10/1/2014............. 9,200,000 8,317,904
Georgia Housing and Finance Authority:
Homeownership Mortgage Zero Coupon, 12/1/2031........................... 135,825,000 10,200,457
Single Family Mortgage:
7.125%, 12/1/2026..................................................... 10,000,000 10,549,100
6.55%, 12/1/2027...................................................... 5,495,000 5,561,380
Georgia Residential Finance Authority, Single Family Insured Mortgage
8.30%, 12/1/2019 (Insured; FHA)......................................... 2,000,000 2,139,560
IDAHO-.8%
Idaho Housing Agency:
Multi-Family Housing Refunding 6.70%, 7/1/2024.......................... 10,050,000 10,473,205
Single Family Mortgage:
6.40%, 7/1/2027....................................................... 8,345,000 8,357,351
6.45%, 7/1/2027....................................................... 8,460,000 8,507,714
6.60%, 7/1/2027....................................................... 4,365,000 4,441,126
ILLINOIS-7.4%
Bryant, PCR, Refunding (Central Illinois Light Co. Project)
5.90%, 8/1/2023......................................................... 11,000,000 10,763,720
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
---------------- ----------------
ILLINOIS (CONTINUED)
Chicago, Gas Supply Revenue (Peoples Gas Light and Coke Co. Project)
5.75%, 12/1/2023....................................................... $ 6,900,000 $ 6,392,712
Chicago O'Hare International Airport, Special Facilities Revenue:
(Lufthansa German Airlines Project)
7.125%, 5/1/2018 (LOC; Bayerische Vereinsbank) (d).................... 4,650,000 4,871,247
(United Airlines Inc. Project):
8.20%, 5/1/2018....................................................... 19,215,000 20,936,280
8.40%, 5/1/2018....................................................... 20,135,000 21,926,411
8.50%, 5/1/2018....................................................... 6,500,000 7,108,855
8.85%, 5/1/2018....................................................... 15,415,000 17,517,760
Illinois Development Finance Authority, Revenue:
(Community Rehabilitation Providers Facilities) 8.75%, 3/1/2010......... 19,365,000 20,892,898
Environmental Facilities (Citizens Utilities Co. Project) 5.90%, 11/15/2028 5,490,000 5,236,472
Pollution Control, Refunding (Central Illinois Public Service Co.):
5.70%, 8/15/2026...................................................... 8,650,000 8,286,527
6.375%, 1/1/2028...................................................... 14,000,000 14,283,640
Illinois Educational Facilities Authority, Revenue:
(Art Institute of Chicago) 5.80%, 3/1/2027.............................. 4,475,000 4,181,664
(Illinois Institute of Technology), Refunding 6.875%, 12/1/2015......... 7,250,000 7,440,312
Illinois Health Facilities Authority, Revenue:
(Beverly Farm Foundation) 9.125%, 12/15/2015............................ 3,730,000 4,041,828
Refunding:
(Evangelical Hospitals) 6.50%, 4/15/2009 (Insured; FSA)............... 5,000,000 5,295,250
(Mercy Hospital and Medical Center) 7%, 1/1/2015...................... 7,500,000 7,669,725
(Southern Illinois Hospital Services) 5.85%, 3/1/2014 (Insured; MBIA)... 7,275,000 7,154,017
(Trinity Medical Center) 7%, 7/1/2012................................... 3,000,000 3,033,000
Illinois Housing Development Authority:
Homeowner Mortgage Revenue:
6.45%, 8/1/2017....................................................... 6,500,000 6,611,540
6.70%, 8/1/2025....................................................... 4,980,000 5,083,933
6.625%, Subseries B-2, 8/1/2026....................................... 15,385,000 15,626,698
6.625%, Subseries C-2, 8/1/2026....................................... 2,200,000 2,235,156
Multi-Family Housing (Lawndale Redevelopment Project)
6.90%, 12/1/2026...................................................... 8,750,000 9,026,325
Multi-Family Program 6.75%, 9/1/2021.................................... 8,750,000 8,990,538
Residential Mortgage Revenue 6.874%, 2/1/2018 .......................... 14,600,000 15,034,788
Section 8 Elderly Housing Revenue (Morningside North Development)
6.85%, 1/1/2021....................................................... 11,220,000 11,551,102
Peru, Electric System Revenue 5.75%, 5/1/2025 (Insured; FGIC)............... 6,750,000 6,498,697
Robbins, RRR (Robbins Resource Recovery Partners)
9.25%, 10/15/2014....................................................... 32,000,000 35,213,440
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
---------------- ----------------
INDIANA-6.3%
Allen County, COP:
8.125%, 11/1/2017 (Prerefunded 5/1/1997) (b)............................ $ 5,000,000 $ 5,419,950
Refunding 6.50%, 11/1/2008.............................................. 5,000,000 5,260,950
Brownsburg School Building Corp., First Mortgage
6.10%, 2/1/2013 (Insured; CGIC)......................................... 7,500,000 7,604,175
Burns Harbor Solid Waste Disposal Facilities, Revenue
(Bethlehem Steel Corp. Project) 8%, 4/1/2024............................ 6,000,000 6,403,980
Danville Community Elementary School Building Corp., First Mortgage
6.90%, 1/15/2010........................................................ 4,400,000 4,720,364
Fort Wayne Hospital Authority, HR (Lutheran Hospital)
8%, 2/15/2003 (Prerefunded 2/15/1998) (b)............................... 7,000,000 7,627,130
Hammond Multi-School Building Corp., First Mortgage:
6%, 1/15/2013........................................................... 1,760,000 1,847,419
7.10%, 1/15/2015 (Prerefunded 7/15/2001) (b)............................ 5,585,000 6,403,258
6%, 1/15/2018........................................................... 1,250,000 1,318,162
Indiana Development Finance Authority, Environmental Revenue (PSI Energy
Inc.)
5.75%, 2/15/2028........................................................ 8,000,000 7,573,600
Indiana Health Facility Financing Authority, HR
Refunding (Welborn Memorial Baptist Hospital) 5.60%, 7/1/2018........... 3,195,000 2,897,162
Indiana Office Building Commission, Correctional Facilities Program Revenue
6.375%, 7/1/2016........................................................ 25,000,000 25,616,250
Indiana Transportation Finance Authority, Airport Facility LR
6.50%, 11/1/2007........................................................ 12,500,000 13,296,750
Indianapolis Airport Authority, Special Facility Revenue (United Airlines
Project)
6.50%, 11/15/2031....................................................... 22,900,000 22,398,032
Indianapolis Local Public Improvement Bond Bank
8.50%, 2/1/2018 (Prerefunded 2/1/1998) (b).............................. 73,000,000 81,592,830
IPS School Building Corp., First Mortgage 6.10%, 1/15/2020.................. 11,000,000 11,085,910
Jefferson County Hospital Authority, Hospital Facility Revenue, Refunding
(Kings Daughter's Hospital) 8.50%, 8/15/2013............................ 3,000,000 3,259,950
Lake Central Multi-District School Building Corp., First Mortgage Refunding
5.375%, 7/1/2012........................................................ 4,360,000 4,128,528
Lebanon High School Building Corp., First Mortgage Refunding
5.75%, 7/1/2005......................................................... 2,000,000 2,052,020
Logansport Multi - Purpose School Building Corp., First Mortgage Refunding
6%, 1/1/2009............................................................ 7,645,000 7,796,371
Monroe County Community School Corp., School Building Corp.,
First Mortgage Refunding 6.60%, 7/1/2009................................ 3,080,000 3,313,033
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
---------------- ----------------
INDIANA (CONTINUED)
Noblesville High School Building Corp., First Mortgage 5.75%, 2/15/2015..... $ 20,060,000 $ 19,510,356
IOWA-.4%
Iowa Finance Authority, Revenue:
Hospital Facility Refunding (Jennie Edmundson Memorial Hospital)
7.65%, 11/1/2016...................................................... 4,850,000 5,067,377
Single Family Mortgage (Mortgage Backed Securities Program)
6.65%, 7/1/2028....................................................... 12,070,000 12,328,660
KANSAS-1.6%
Kansas Department of Transportation, Highway Revenue
6.50%, 3/1/2012 (Prerefunded 3/1/2002) (b).............................. 7,840,000 8,766,610
Wichita, HR 6.464%, 10/1/2022 (Insured; MBIA)............................... 51,300,000 52,838,487
KENTUCKY-2.2%
City of Ashland, Sewage and Solid Waste Revenue
(Ashland Inc. Project) 7.125%, 2/1/2022................................. 13,170,000 13,890,399
Kenton County Airport Board, Airport Revenue:
(Greater Cincinnati International Airport):
8.25%, 3/1/2015 (Prerefunded 3/1/1998) (b)............................ 2,395,000 2,668,533
8.25%, 3/1/2015....................................................... 10,945,000 12,098,384
Special Facilities (Delta Airlines Project) 7.125%, 2/1/2021............ 8,455,000 8,715,499
Mount Sterling, LR (Kentucky League Cities Funding):
6.15%, 3/1/2013......................................................... 3,000,000 3,004,260
6.10%, 3/1/2018......................................................... 7,955,000 8,062,313
Pendleton County, Multi-County Lease Revenue
(Kentucky Associates Counties Leasing Trust Program) 6.50%, 3/1/2019.... 26,000,000 26,798,200
Trimble County, PCR (Louisville Gas and Electric Co. Project):
7.625%, 11/1/2020 (Prerefunded 11/1/2000) (b)........................... 1,445,000 1,678,310
7.625%, 11/1/2020....................................................... 7,555,000 8,410,755
LOUISIANA-1.5%
Beauregard Parish, Revenue (Boise Cascade Corp. Project):
Refunding 7.75%, 6/1/2021............................................... 3,420,000 3,643,736
Solid Waste Disposal 6.30%, 8/1/2023.................................... 5,650,000 5,504,908
Louisiana Public Facilities Authority, Revenue
(Tulane University of Louisiana):
6.625%, 11/15/2021.................................................... 7,270,000 7,592,134
6.625%, 11/15/2021 (Prerefunded 11/15/2002) (b)....................... 2,150,000 2,433,886
Parish of Saint Charles, PCR (Louisiana Power and Lighting Co. Project)
8.25%, 6/1/2014......................................................... 7,500,000 8,361,975
Parish of West Feliciana, PCR:
(Gulf States Utilities Co. Project) 9%, 5/1/2015........................ 13,500,000 15,438,600
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
---------------- ----------------
LOUISIANA (CONTINUED)
Parish of West Feliciana, PCR (continued):
(Gulf States Utilities-I) 7.70%, 12/1/2014.............................. $ 14,000,000 $ 14,901,740
MAINE-1.1%
Jay, SWDR (International Paper Co. Project) 6%, 12/1/2017................... 7,105,000 6,892,205
Maine Financial Authority, Solid Waste Revenue
Recycling Facilities (Great Northern Paper, Inc. Project-Bowater Inc.
Obligor)
7.75%, 10/1/2022........................................................ 8,165,000 8,706,258
Maine Health and Higher Education Facilities Authority, Revenue, Refunding
5.70%, 7/1/2013 (Insured; FSA).......................................... 5,000,000 4,879,350
Maine Housing Authority, Mortgage Purchase
6.875%, 11/15/2023...................................................... 14,000,000 14,442,680
Skowhegan, SWDR (S.D. Warren Co. Project) 8.40%, 10/1/2015.................. 7,700,000 8,544,767
MARYLAND-2.2%
Community Development Administration,
Department of Housing and Community Development State of Maryland,
Single Family Program Bonds:
6.80%, 4/1/2024....................................................... 33,980,000 34,920,566
6.55%, 4/1/2026....................................................... 9,260,000 9,386,862
6.75%, 4/1/2026....................................................... 20,000,000 20,561,600
Maryland Health and Higher Educational Facilities Authority,
Revenue (Maryland General Hospital Issue):
6.125%, 7/1/2019 (Insured; MBIA)...................................... 1,815,000 1,834,130
6.20%, 7/1/2024 (Insured; MBIA)....................................... 4,000,000 4,059,440
Northeast Waste Disposal Authority, Solid Waste Revenue
(Montgomery County Resource Recovery Project) 6.30%, 7/1/2016........... 15,000,000 15,052,800
MASSACHUSETTS-3.3%
Massachusetts Consolidated Loan 5.625%, 8/1/2015 (Insured; MBIA)............ 15,690,000 15,151,833
Massachusetts Housing Finance Agency, Revenue:
Housing:
6.65%, 7/1/2019 (Insured; AMBAC)...................................... 7,275,000 7,506,490
6.50%, 7/1/2025 (Insured; AMBAC)...................................... 4,140,000 4,194,068
6.60%, 1/1/2037 (Insured; AMBAC)...................................... 7,100,000 7,192,229
Single Family Housing:
6.60%, 12/1/2024...................................................... 19,550,000 19,802,390
7.125%, 6/1/2025...................................................... 26,975,000 28,210,994
6.65%, 12/1/2027...................................................... 7,200,000 7,322,328
Massachusetts Industrial Finance Agency, Revenue:
Museum (Norman Rockwell Stockbridge) 8.125%, 7/1/2011................... 3,160,000 3,346,693
(Provider Lease Program) 8.75%, 7/15/2009............................... 2,950,000 3,150,806
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
---------------- ----------------
MASSACHUSETTS (CONTINUED)
Massachusetts Municipal Wholesale Electric Co., Power Supply System Revenue
5.45%, 7/1/2018......................................................... $ 20,600,000 $ 19,007,620
The New England Education Loan Marketing Corp., Student Loan Refunding
5.70%, 7/1/2005......................................................... 16,500,000 16,590,915
MICHIGAN-2.9%
Detroit:
Refunding 6.375%, 4/1/2006.............................................. 8,635,000 8,871,772
Water Supply System Revenue 6.375%, 7/1/2022 (Insured; FGIC)............ 8,400,000 8,537,676
The Economic Development Corp. of the County of Gratiot,
Limited Obligation Economic Development Revenue (Danly Die Set Project)
7.625%, 4/1/2007........................................................ 3,200,000 3,356,224
Michigan Hospital Finance Authority, Revenue:
Hospital Refunding (Genesys Health System Obligated Group):
8.125%, 10/1/2021..................................................... 15,000,000 16,156,050
7.50%, 10/1/2027...................................................... 13,000,000 13,312,390
(Metropolitan Hospital) 8.125%, 7/1/2018 (Prerefunded 7/1/1999) (b)..... 5,000,000 5,788,500
(Sisters of Mercy) 6.30%, 2/15/2022 (Insured; FSA)...................... 36,200,000 36,551,502
Western Townships Utilities Authority, Sewer Disposal System
(Limited Tax GO):
8.125%, 1/1/2009...................................................... 8,765,000 9,879,820
8.20%, 1/1/2018....................................................... 9,250,000 10,447,782
8.30%, 1/1/2019....................................................... 1,000,000 1,132,550
MINNESOTA-2.3%
Minneapolis, HR, Refunding (Lifespan Inc. Issue)
9.125%, 12/1/2014 (Prerefunded 12/1/1997) (b)........................... 4,000,000 4,518,000
Minnesota Housing Finance Agency, Single Family Mortgage:
6.40%, 7/1/2015......................................................... 6,000,000 6,081,360
6.40%, 7/1/2017......................................................... 8,500,000 8,601,490
6.90%, 7/1/2022......................................................... 7,265,000 7,569,113
6.50%, 7/1/2024......................................................... 15,870,000 16,071,232
6.45%, 7/1/2025......................................................... 30,210,000 30,472,223
Rochester Health Care Facilities, Revenue 6.026%, 11/15/2015................ 18,000,000 18,068,580
MISSOURI-.5%
Missouri Higher Education Loan Authority, Student Loan Revenue
6.75%, 2/15/2009........................................................ 11,500,000 11,900,315
Saint Louis, Airport Revenue, Refunding and Improvement
(Lambert-Saint Louis International Airport Project)
6.125%, 7/1/2015 (Insured; FGIC)........................................ 8,000,000 8,088,800
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
---------------- ----------------
MONTANA-1.0%
Montana Board of Housing (Single Family Program)
6.35%, 12/1/2021 (e).................................................... $ 7,255,000 $ 7,290,840
Montana Health Facility Authority, HR
(Deaconess-Billings Clinic Health System Project) 5.342%, 2/15/2025..... 27,700,000 24,948,005
Montana Higher Education Student Assistance Corp., Student Loan Revenue
5.95%, 12/1/2012........................................................ 7,500,000 7,286,700
NEVADA-1.3%
Clark County, IDR (Nevada Power Co. Project) 6.70%, 6/1/2022 (Insured; FGIC) (a) 25,895,000 27,129,674
Nevada Housing Division (Single Family Program)
6.80%, 4/1/2027......................................................... 9,960,000 10,246,649
Washoe County:
Gas Facilities Revenue (Sierra Pacific Power Co. Project)
6.70%, 11/1/2032 (Insured; MBIA)...................................... 10,000,000 10,538,700
Gas and Water Facilities Revenue, Refunding (Sierra Pacific)
6.30%, 12/1/2014 (Insured; AMBAC)..................................... 4,375,000 4,513,819
NEW HAMPSHIRE-5.4%
Business Finance Authority of the State of New Hampshire,
State Guaranteed Airport Revenue (Manchester Airport Project):
6.50%, 1/1/2019....................................................... 12,600,000 12,825,288
6.375%, 1/1/2022...................................................... 8,650,000 8,785,718
New Hampshire Higher Educational and Health Facilities Authority, Revenue,
Refunding:
(Franklin Pierce College Issue) 6%, 10/1/2013........................... 4,655,000 4,490,632
(Wentworth - Douglas Hospital):
8.375%, 1/1/2006 (Prerefunded 1/1/1997) (b)........................... 2,300,000 2,475,950
8.50%, 1/1/2015 (Prerefunded 1/1/1997) (b)............................ 7,700,000 8,301,447
New Hampshire Housing Finance Authority:
Multi-Family Housing:
7.55%, 7/1/2013....................................................... 4,205,000 4,704,722
(Mariners Village Project):
6.50%, 7/1/2026 (Insured; FHA).................................... 3,195,000 3,222,669
6.60%, 1/1/2038 (Insured; FHA).................................... 7,365,000 7,428,413
Single Family Mortgage:
7.25%, 1/1/2016....................................................... 4,000,000 4,260,600
6.05%, 7/1/2025....................................................... 33,495,000 32,678,727
6.55%, 7/1/2026....................................................... 22,415,000 22,687,566
Single Family Residential Mortgage:
6.85%, 7/1/2016....................................................... 7,235,000 7,548,927
5.60%, 7/1/2017....................................................... 6,000,000 5,565,120
7.10%, 1/1/2023....................................................... 26,645,000 28,044,662
7.75%, 7/1/2023....................................................... 18,225,000 19,362,604
6.85%, 1/1/2025....................................................... 10,885,000 11,190,107
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
---------------- ----------------
NEW HAMPSHIRE (CONTINUED)
New Hampshire Housing Finance Authority (continued):
Single Family Residential Mortgage (continued):
6.95%, 1/1/2026....................................................... $ 10,410,000 $ 10,809,952
New Hampshire Industrial Development Authority, Revenue
(Pollution Control Public Service Co. Project) 7.65%, 5/1/2021.......... 18,300,000 19,384,641
NEW JERSEY-3.8%
Howell Township Municipal Utilities Authority, Revenue
8.60%, 1/1/2014 (Prerefunded 7/1/1998) (b).............................. 4,000,000 4,535,080
New Jersey Economic Development Authority, PCR
(Public Service Electric and Gas Co. Project)
6.40%, 5/1/2032 (Insured; MBIA) (a)..................................... 32,040,000 33,265,850
New Jersey Health Care Facilities Financing Authority, Revenue:
(Atlantic City Medical Center) 8.375%, 8/1/2020 (Insured; FHA)
(Prerefunded 2/1/1998) (b)............................................ 8,510,000 9,482,267
(Kimball Medical Center) 8%, 7/1/2013................................... 16,550,000 17,586,527
(Newton Memorial Hospital) 7.50%, 7/1/2019.............................. 5,000,000 5,224,100
New Jersey Housing and Mortgage Finance Agency, Revenue:
6%, 11/1/2002........................................................... 5,440,000 5,727,014
6.20%, 11/1/2004........................................................ 9,300,000 9,845,259
6.45%, 11/1/2007........................................................ 15,260,000 15,989,123
New Jersey Transportation Trust Fund Authority,
Transportation System 5.75%, 6/15/2014 (Insured; MBIA).................. 30,000,000 30,098,700
New Jersey Wastewater Treatment Trust, Insured Loan Revenue
9%, 9/1/2007 (Prerefunded 9/1/1997) (b)................................. 6,000,000 6,693,120
Passaic County Utilities Authority, Solid Waste System Revenue 7%, 11/15/2007 6,740,000 6,818,656
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 6,673,225
NEW MEXICO-.8%
Albuquerque, HR, Refunding (Presbyterian Health Care Services)
6.375%, 8/1/2007 (Insured; MBIA)........................................ 4,500,000 4,844,925
New Mexico Educational Assistance Foundation, Student Loan Revenue
7.45%, 3/1/2010......................................................... 12,045,000 12,771,314
New Mexico Mortgage Financing Authority:
6.85%, 7/1/2015......................................................... 5,100,000 5,450,574
6.75%, 7/1/2025......................................................... 2,250,000 2,462,760
6.80%, 1/1/2026......................................................... 5,500,000 6,020,410
NEW YORK-4.8%
New York City:
8%, 6/1/1996............................................................ 3,685,000 3,783,611
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
---------------- ----------------
NEW YORK (CONTINUED)
New York City (continued):
7.50%, 2/1/2003......................................................... $ 9,000,000 $ 9,953,910
8.25%, 6/1/2006......................................................... 2,750,000 3,236,998
7.25%, 8/15/2007........................................................ 6,790,000 7,427,513
6.375%, 8/15/2011....................................................... 31,285,000 31,348,509
New York City Industrial Development Agency, Special Facilities Revenue
(1994 American Airlines, Inc., Project) 6.90%, 8/1/2024................. 6,000,000 6,208,800
New York State Dormitory Authority, Revenue:
City University:
7.50%, 7/1/2010....................................................... 10,000,000 11,544,300
Refunding 8.125%, 7/1/2008............................................ 9,725,000 10,873,231
Judicial Facility Lease (Suffolk County Issue) 9.50%, 4/15/2014......... 8,000,000 9,377,040
New York State Energy, Research and Development Authority, Revenue,
Electric Facilities (Con Edison Co. Project) 7.50%, 1/1/2026............ 23,970,000 25,925,233
New York State Local Government Assistance Corp.
6.25%, 4/1/2021......................................................... 9,735,000 9,830,792
New York State Medical Care Facilities Finance Agency, Revenue
Mental Health Services Facilities Improvement 7.875%, 8/15/2020......... 12,125,000 13,294,820
New York State Mortgage Agency, Revenue (Homeowner Mortgage)
6.65%, 10/1/2025........................................................ 17,220,000 17,524,794
New York State Thruway Authority, Local Highway and Bridge Service Contract
6.45%, 4/1/2015 (e)..................................................... 16,385,000 16,718,762
New York State Urban Development Corp., Revenue (Correctional Capital Facilities)
6.25%, 1/1/2020......................................................... 12,100,000 12,038,774
NORTH CAROLINA-1.3%
Martin County Industrial Facilities and Pollution Control Financing
Authority,
Revenue (Solid Waste-Weyerhaeuser Co.) 5.65%, 12/1/2023................. 15,440,000 14,064,759
North Carolina Housing Finance Agency, Single Family Revenue
6.50%, 9/1/2026......................................................... 7,000,000 7,084,770
North Carolina Medical Care Community, HR:
(Alamance Health Services Inc. Project):
5.50%, 8/15/2013 (Insured; FSA)....................................... 5,000,000 4,817,650
Refunding 6.375%, 8/15/2012 (Insured; FSA)............................ 3,000,000 3,140,370
(Duke University Hospital Project) 7%, 6/1/2021 (Prerefunded 6/1/2001) (b) 2,000,000 2,289,300
Pitt County, Revenue (Pitt County Memorial Hospital) 6.90%, 12/1/2021....... 12,000,000 12,733,200
Winston Salem, COP 6.90%, 6/1/2011 (Prerefunded 6/1/2001) (b)............... 5,245,000 5,940,067
NORTH DAKOTA-.3%
North Dakota Housing Finance Agency:
(Housing Mortgage Finance Program) 6.75%, 7/1/2025...................... 6,610,000 6,772,408
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
---------------- ----------------
NORTH DAKOTA (CONTINUED)
North Dakota Housing Finance Agency (continued):
SFMR:
8.375%, 7/1/2021...................................................... $ 2,275,000 $ 2,406,882
6.80%, 7/1/2023....................................................... 3,290,000 3,407,914
OHIO-.4%
Cuyahoga County, HR (Meridia Health System) 7%, 8/15/2023................... 7,000,000 7,347,200
Hamilton County, Hospital Facilities Revenue, Refunding (Bethesda Hospital)
6.25%, 1/1/2012......................................................... 3,115,000 3,167,488
Ohio Air Quality Development Authority, PCR (Cincinnati Gas and Electric)
10.125%, 12/1/2015...................................................... 5,500,000 5,721,320
OKLAHOMA-1.3%
Claremore Industrial and Redevelopment Authority, Economic Development
Revenue
(Yuba Project) 8.375%, 7/1/2011......................................... 7,500,000 7,999,050
Southern Oklahoma Memorial Hospital Authority, HR 6.60%, 12/1/2012.......... 5,725,000 5,887,705
Tulsa Municipal Airport Trust, Revenue:
(AMR Corp.) 7.60%, 12/1/2030............................................ 14,390,000 15,258,868
(American Airlines) 7.375%, 12/1/2020................................... 23,000,000 24,023,960
PENNSYLVANIA-1.2%
Delaware County Industrial Development Authority, Water Facilities Revenue
(Philadelphia Suburban Water) 6.35%, 8/15/2025 (Insured; FGIC).......... 10,000,000 10,141,800
Pennsylvania Economic Development Financing Authority,
Exempt Facilities Revenue (MacMillan Ltd. Partnership Project)
7.60%, 12/1/2020........................................................ 4,500,000 4,873,365
Philadelphia Hospitals and Higher Educational Facilities Authority, HR
(Philadelphia MR Project) 8.625%, 8/1/2011 (Prerefunded 8/1/1996) (b)... 3,000,000 3,191,790
Quakertown General Authority, Revenue (Community Mental Health/Retardation):
8.75%, 11/1/2000........................................................ 1,755,000 1,924,884
8.875%, 11/1/2010....................................................... 6,420,000 7,046,785
Ridley Park Hospital Authority, Revenue (Taylor Hospital)
8.625%, 12/1/2020 (Prerefunded 12/1/2000) (b)........................... 10,000,000 12,056,500
Schuykill County Industrial Development Authority, RRR, Refunding
(Schuykill Energy Resource Inc.) 6.50%, 1/1/2010........................ 7,675,000 7,754,590
RHODE ISLAND-1.5%
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 12,956,460
(Landmark Medical Center) 5.60%, 10/1/2012.............................. 5,000,000 4,711,400
Rhode Island Housing and Mortgage Finance Corp.
(Homeownership Opportunity):
6.95%, 4/1/2022....................................................... 9,250,000 9,590,308
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
---------------- ----------------
RHODE ISLAND (CONTINUED)
Rhode Island Housing and Mortgage Finance Corp.
(Homeownership Opportunity) (continued):
6.60%, 10/1/2025...................................................... $ 10,270,000 $ 10,368,489
6.50%, 4/1/2027....................................................... 9,835,000 9,961,970
6.85%, 4/1/2027....................................................... 5,750,000 6,009,325
Rhode Island Port Authority and Economic Development Corp., Airport Revenue
5.25%, 7/1/2015 (Insured: FSA).......................................... 6,000,000 5,430,060
SOUTH CAROLINA-1.0%
Richland County, Solid Waste Disposal Facilities Revenue
(Union Camp Corp. Project) 7.125%, 9/1/2021............................. 6,250,000 6,640,625
South Carolina Housing Finance and Development Authority,
Mortgage Revenue:
6.55%, 7/1/2015....................................................... 3,950,000 4,039,823
6.65%, 7/1/2019....................................................... 3,500,000 3,570,525
6.75%, 7/1/2026....................................................... 7,000,000 7,188,510
6.70%, 7/1/2027....................................................... 8,000,000 8,193,600
Spartanburg County, Hospital Facilities Improvement Revenue, Refunding
(Mary Black Memorial Project) 8.25%, 10/1/2008 (Prerefunded 10/1/1998) (b) 5,000,000 5,652,050
York County, Industrial Revenue, Exempt Facility (Hoechst Celanese)
5.70%, 1/1/2024......................................................... 5,000,000 4,667,750
SOUTH DAKOTA-.1%
South Dakota Housing Development Authority, Homeownership Mortgage
5.70%, 5/1/2013......................................................... 2,250,000 2,165,018
TENNESSEE-2.6%
Humphreys County Industrial Development Board, SWDR
(E.I. Dupont Denemours and Co. Project) 6.70%, 5/1/2024................. 21,070,000 21,864,128
McMinn County Industrial Development Board, PCR (Calhoun Newsprint Co.
Project)
7.625%, 3/1/2016........................................................ 15,000,000 15,861,750
Metropolitan Government Nashville and Davidson County, Water and Sewer
Revenue
6.074%, 1/1/2022 (Insured; AMBAC)....................................... 15,000,000 14,988,750
Tennessee Housing Development Agency, Mortgage Finance:
6.45%, 7/1/2021......................................................... 11,565,000 11,668,391
6.90%, 7/1/2025......................................................... 4,150,000 4,313,137
6.55%, 7/1/2026......................................................... 31,735,000 32,280,207
TEXAS-6.1%
Alliance Airport Authority Inc., Special Facilities Revenue
(American Airlines Inc. Project):
7%, 12/1/2011......................................................... 12,330,000 12,890,645
7.50%, 12/1/2029...................................................... 25,905,000 27,242,475
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
---------------- ----------------
TEXAS (CONTINUED)
Angelina and Neches River Authority, SWDR (Champion International Corp.
Project)
7.375%, 5/1/2015........................................................ $ 5,570,000 $ 5,868,218
Austin, Airport System Prior Lien Revenue 6.125%, 11/15/2025 (Insured MBIA) (e) 15,250,000 15,237,800
Bexar Metropolitan Water District, Waterworks System Revenue
6.35%, 5/1/2025 (Insured; MBIA)......................................... 3,200,000 3,281,856
Brazos County Health Facility Development Corp., Franciscan Services Corp.
Revenue,
Refunding (Saint Joseph's Hospital and Health Center)
8.875%, 1/1/2015 (Prerefunded 1/1/1998) (b)............................. 14,875,000 16,670,264
Denison Hospital Authority, HR, Refunding (Texoma Medical Center Project)
8%, 9/1/2016............................................................ 8,790,000 9,081,389
Gulf Coast Waste Disposal Authority, Revenue:
(Champion International Corp.):
7.375%, 10/1/2025..................................................... 12,000,000 12,775,320
6.875%, 12/1/2028..................................................... 6,000,000 6,183,720
Solid Waste Disposal (Occidental Petroleum Corp. Project) 7%, 11/1/2020. 7,725,000 7,933,961
Harris County Hospital District, Mortgage Revenue, Refunding
7.40%, 2/15/2010 (Insured; AMBAC)....................................... 5,000,000 5,867,200
Houston Hotel Occupancy Tax, Revenue 7%, 7/1/2009 (Insured; FGIC)
(Prerefunded 7/1/2001) (b).............................................. 12,225,000 13,756,670
Lower Neches Valley Authority Industrial Development Corp.,
Sewer Facilities Revenue (Mobil Oil Refining Corp. Project)
6.40%, 3/1/2030......................................................... 28,785,000 28,947,635
Rio Grande Valley Health Facilities Development Corp., HR, Refunding
(Valley Baptist Medical Center Project) 6.40%, 8/1/2016 ................ 11,200,000 11,544,064
Sabine River Authority, PCR (Collateralized-Texas Utilities Electric Project)
8.25%, 10/1/2020........................................................ 4,000,000 4,374,520
Texas, GO (Veterans Housing Assistance Program)
7%, 12/1/2025........................................................... 30,500,000 31,872,805
Texas General Service Commission, Lease Purchase Agreement
7.50%, 3/1/2012......................................................... 6,855,000 7,049,888
Texas Higher Education Coordinating Board,
College Student Loan Revenue (Senior Lien):
7.45%, 10/1/2006...................................................... 4,050,000 4,234,316
Zero Coupon, 10/1/2025................................................ 3,010,000 1,892,086
7.70%, 10/1/2025...................................................... 2,725,000 2,844,382
Texas Public Property Finance Corp., Revenue
(Mental Health and Retardation Project):
8.625%, 11/1/2000..................................................... 2,110,000 2,330,031
8.75%, 11/1/2010...................................................... 4,745,000 5,393,452
Texas Water Resources Finance Authority, Revenue 7.625%, 8/15/2008.......... 4,990,000 5,323,881
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
---------------- ----------------
UTAH-1.4%
Carbon County, SWDR, Refunding (Sunnyside Cogeneration) 9.25%, 7/1/2018..... $ 20,000,000 $ 21,846,800
Utah Housing Finance Agency, Single Family Mortgage:
6.55%, 1/1/2022......................................................... 5,340,000 5,403,226
6.65%, 7/1/2026......................................................... 3,600,000 3,671,316
6.40%, 1/1/2027......................................................... 6,875,000 6,949,113
6.65%, 7/1/2027......................................................... 10,340,000 10,551,039
7%, 7/1/2027............................................................ 5,250,000 5,488,613
Utah Municipal Finance Cooperative, Local Government Revenue
(Pooled Capital-Salt Lake):
Zero Coupon, 3/1/2013 (Insured: FSA).................................. 3,690,000 1,289,249
Zero Coupon, 3/1/2014 (Insured: FSA).................................. 3,190,000 1,042,045
Zero Coupon, 3/1/2015 (Insured: FSA).................................. 3,540,000 1,080,302
VERMONT-.3%
Vermont Housing Finance Agency, Single Family Housing 6.875%, 5/1/2025...... 10,500,000 10,793,160
VIRGINIA-2.1%
Giles County Industrial Development Authority,
Solid Waste Disposal Facility Revenue (Hoechst Celanese Corp. Project)
6.625%, 12/1/2022....................................................... 8,715,000 8,910,129
Henrico County Industrial Development Authority, Revenue
(Maryview Hospital Project) 7.50%, 9/1/2011 (Prerefunded 8/1/2000) (b).. 5,475,000 6,285,136
Virginia Housing Development Authority, Commonwealth Mortgage:
6.55%, 7/1/2017 (e)..................................................... 3,935,000 3,978,639
6.60%, 7/1/2020 (e)..................................................... 3,025,000 3,063,024
6.20%, 7/1/2021......................................................... 15,000,000 14,566,350
6.70%, 1/1/2022......................................................... 6,950,000 7,098,522
6.40%, 7/1/2022 (Insured; MBIA)......................................... 24,000,000 24,303,600
6.60%, 7/1/2022 (e)..................................................... 4,635,000 4,689,090
6.85%, 1/1/2027......................................................... 8,000,000 8,213,200
WASHINGTON-1.6%
Pilchuck Development Public Corp., Revenue, Special Facilities Airport
(Tramco Inc. Project) 6%, 8/1/2023...................................... 15,150,000 13,729,385
Public Utility District No. 1 of Chelan County,
Chelan Hydro Consolidated System Revenue 6.55%, 7/1/2023................ 10,000,000 10,224,100
Public Utility District No. 1 of Douglas County,
Wells Hydroelectric Revenue:
6.15%, 9/1/2013....................................................... 2,000,000 2,008,880
6.20%, 9/1/2018....................................................... 3,000,000 3,002,190
Puyallup School District No. 3, Pierce County:
6.65%, 12/1/2007 (Insured; AMBAC)....................................... 2,000,000 2,170,580
6.70%, 12/1/2008 (Insured; AMBAC)....................................... 4,515,000 4,879,631
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
---------------- ----------------
WASHINGTON (CONTINUED)
Snohomish County School District No. 6, Mukilteo
6.50%, 12/1/2011........................................................ $ 7,700,000 $ 8,295,210
Tacoma, Electric System Revenue 6.513% 1/1/2015 (Insured; AMBAC)............ 12,000,000 12,373,320
Washington 10%, 10/1/2002 (Insured; MBIA) (Prerefunded 10/1/96) (b)......... 3,000,000 3,196,710
Washington Health Care Facilities Authority, Revenue
(Harrison Memorial Hospital, Bremerton) 5.30%, 8/15/2014 (Insured; AMBAC) 5,000,000 4,590,800
WEST VIRGINIA-.2%
Braxton County, Solid Waste Disposal Revenue (Weyerhaeuser Co. Project)
6.50%, 4/1/2025......................................................... 8,000,000 8,096,800
WISCONSIN-1.4%
Janesville, IDR (Simmons Manufacturing Co., Inc. Project)
7%, 10/15/2017.......................................................... 3,000,000 3,158,610
Madison, Industrial Development Revenue (Madison Gas and Electric Co.
Project)
6.75%, 4/1/2027......................................................... 10,000,000 10,476,200
Wisconsin Housing and Economic Development Authority,
Homeownership Revenue:
6.45%, 3/1/2017....................................................... 7,000,000 7,149,800
6.30%, 3/1/2026....................................................... 30,750,000 30,218,333
Wisconsin Municipal Mutual Insurance Co., Revenue
8.50%, 12/1/2007 (LOC; Fuji Bank) (d)................................... 2,500,000 2,712,225
WYOMING-.8%
Sweetwater County, SWDR (FMC Corp. Project):
7%, 6/1/2024............................................................ 6,080,000 6,250,118
6.90%, 9/1/2024......................................................... 16,225,000 16,588,602
Uinta County Hospital Facility, Revenue, Refunding
(IHC Hospitals Inc.) 7.25%, 2/15/2019................................... 7,350,000 7,866,558
U.S. RELATED-.5%
Commonwealth of Puerto Rico, 5.85%, 7/1/2010................................ 5,725,000 5,710,401
Puerto Rico Highway and Transportation Authority, Highway Revenue
5.50%, 7/1/2008......................................................... 14,000,000 13,463,380
----------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $ 3,536,616,661).................................................. $3,678,674,596
=================
SHORT-TERM MUNICIPAL INVESTMENTS-7.0%
ARIZONA-.0%
Apache County Industrial Development Authority, IDR, VRDN
(Tucson Electric Power-Springerville Project) 3.70% (f)................. $ 300,000 $ 300,000
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
PRINCIPAL
SHORT-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
---------------- ----------------
ARIZONA (CONTINUED)
Pima County Industrial Development Authority,
Industrial Revenue, VRDN (Tuscon Electric):
3.65% (LOC; Bank America National Trust and Saving Association) (d,f). $ 1,000,000 $ 1,000,000
(Irvington Project) 3.65% (LOC; Societe Generale) (d,f)............... 100,000 100,000
COLORADO-.0%
Colorado Student Obligation Bond Authority, Student Loan Revenue, VRDN
3.55% (f)............................................................... 200,000 200,000
FLORIDA-1.0%
Dade County, Water and Sewer System Revenue, VRDN
3.45% (Insured; FGIC) (f)............................................... 17,100,000 17,100,000
Jacksonville, PCR, Refunding VRDN (Florida Power and Light Co. Project)
3.35% (f)............................................................... 22,840,000 22,840,000
IOWA-1.0%
Iowa Finance Authority, SWDR, VRDN (Cedar River Paper Co. Project):
3.50% (LOC; Swiss Bank Corp.) (d,f)..................................... 25,000,000 25,000,000
3.50% (LOC; Swiss Bank Corp.) (d,f)..................................... 13,000,000 13,000,000
LOUISIANA-.2%
West Feliciana Parish, PCR, VRDN (Gulf State Utilities Co. Project)
3.70% (LOC; Long Term Credit Bank of Japan) (d,f)....................... 6,300,000 6,300,000
MARYLAND-.4%
Frederick, VRDN 3.80% (LOC; The Fuji Bank and Trust Co.) (d,f).............. 800,000 800,000
Maryland Energy Financing Administration, Limited Obligation Revenue, VRDN
(Baltimore Ferst Project) 3.55% (f)..................................... 8,000,000 8,000,000
Northeast Waste Disposal Authority, RRR, Refunding, VRDN
(Harford County Resource) 3.40% (Insured; AMBAC) (f).................... 3,360,000 3,360,000
Prince Georges' County Housing Authority, Mortgage Revenue, VRDN
(Laurel-Oxford)
3.675% (LOC; Bankers Trust) (d,f)....................................... 4,500,000 4,500,000
MICHIGAN-1.2%
Michigan Higher Education Student Loan Authority, Revenue, VRDN
3.55% (Insured; AMBAC) (f).............................................. 2,000,000 2,000,000
Michigan Strategic Fund, Limited Obligation Revenue, VRDN:
(Coil Center Corp. Project) 4.55% (LOC; Tokai Bank) (d,f)............... 4,100,000 4,100,000
Refunding (Dow Chemical Co. Project) 3.45% (f).......................... 12,500,000 12,500,000
Midland County Economic Development Corp., Economic Development Ltd.
Obligation Revenue, VRDN (Dow Chemical Co. Project) 3.45% (f)........... 27,400,000 27,400,000
MISSISSIPPI-.2%
Jackson County, Port Facility Revenue, Refunding VRDN (Chevron USA Inc.
Project)
3.50% (f)............................................................... 9,600,000 9,600,000
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1995
PRINCIPAL
SHORT-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
---------------- ----------------
NEVADA-.2%
Clark County IDR, VRDN (Nevada Cogeneration Associates)
3.65% (LOC; Swiss Bank Corp.) (d,f)..................................... $ 8,450,000 $ 8,450,000
NEW JERSEY-.3%
New Jersey Turnpike Authority, Turnpike Revenue, Refunding, VRDN
3.05% (Insured; FGIC) (f)............................................... 13,000,000 13,000,000
OREGON-.1%
Oregon Economic Development Revenue, VRDN (JAE Oregon Inc. Project)
4.075% (LOC; Bank of Tokyo) (d,f)....................................... 3,000,000 3,000,000
PENNSYLVANIA-.0%
Allegheny County Hospital Development Authority, Revenue, VRDN
(Presbyterian Health Center) 3.60% (Insured; MBIA) (f).................. 700,000 700,000
TENNESSEE-.3%
Franklin Industrial Development Board, Multi-Family Revenue, VRDN
(Landings Project) 3.55% (LOC; Citibank) (d,f).......................... 10,700,000 10,700,000
TEXAS-.7%
Brazos River Harbor Navigation District, Harbor Revenue, VRDN
(Dow Chemical Co. Project) 3.70% (f).................................... 5,200,000 5,200,000
El Paso Health Facilities Development Corp., Revenue, VRDN
(Providence Memorial Hospital) 3.55% (LOC; Fuji Bank) (d,f)............. 7,100,000 7,100,000
Gulf Coast Waste Disposal Authority, SWDR, VRDN
(Amoco Oil Co. Project) 3.65% (f)....................................... 14,100,000 14,100,000
UTAH-.6%
Salt Lake County, PCR, Refunding, VRDN (Service Station Holdings Project)
3.40% (f)............................................................... 24,200,000 24,200,000
WASHINGTON-.8%
Student Loan Finance Association, Revenue (Guaranteed Student Loan Program)
VRDN 3.55% (LOC; Sanwa Bank) (d,f)...................................... 32,800,000 32,800,000
----------------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $277,350,000)..................................................... $ 277,350,000
================
TOTAL INVESTMENTS-100.0%
(cost $3,813,966,661)................................................... $3,956,024,596
================
</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
BIGI Bond Investors Guaranty Insurance LR Lease Revenue
CGIC Capital Guaranty Insurance Corporation MBIA Municipal Bond Investors Assurance
COP Certificate of Participation Insurance Corporation
FGIC Financial Guaranty Insurance Company PCR Pollution Control Revenue
FHA Federal Housing Administration RRR Resources Recovery Revenue
FSA Financial Security Assurance SFMR Single Family Mortgage Revenue
GO General Obligation SWDR Solid Waste Disposal Revenue
HR Hospital Revenue VRDN Variable Rate Demand Notes
IDR Industrial Development Revenue
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (G) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
- ---------- --------- -------------------- -----------------------
<S> <C> <C> <C>
AAA Aa AAA 24.4%
AA Aa AA 26.2
A A A 18.5
BBB Baa BBB 16.6
BB Ba BB .8
F1 MIG1/P1 SP1/A1 6.9
Not Rated (h) Not Rated (h) Not Rated (h) 6.6
--------------
100.0%
==============
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Partially 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) Wholly held by custodian as collateral for delayed delivery
security.
(d) Secured by letters of credit.
(e) Purchased on a delayed delivery basis.
(f) 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.
(g) Fitch currently provides creditworthiness information for a limited
number of investments.
(h) 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.
(i) At August 31, 1995, the Fund had $987,210,790 (25.1% of net assets)
invested in securities whose payment of principal and interest is
dependent upon revenues generated from housing projects.
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1995
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $3,813,966,661)-see statement................................... $3,956,024,596
Interest receivable..................................................... 63,285,958
Prepaid expenses........................................................ 39,050
---------------------
4,019,349,604
LIABILITIES:
Due to The Dreyfus Corporation......................................... $ 2,150,354
Due to Custodian............................................ . 4,363,471
Payable for investment securities purchased............................. 75,671,154
Payable for Common Stock redeemed....................................... 112,832
Accrued expenses........................................................ 317,926 82,615,737
--------------------- ---------------------
NET ASSETS.................................................................. $3,936,733,867
=====================
REPRESENTED BY:
Paid-in capital......................................................... $3,839,031,716
Accumulated net realized (loss) on investments.......................... (44,355,784)
Accumulated net unrealized appreciation on investments-Note 3........... 142,057,935
---------------------
NET ASSETS at value applicable to 317,222,886 shares outstanding
(600 million shares of $.01 par value Common Stock authorized)......... $3,936,733,867
=====================
NET ASSET VALUE, offering and redemption price per share
($3,936,733,867 / 317,222,886 shares)................................... $12.41
==============
See notes to financial statements.
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF OPERATIONS YEAR ENDED AUGUST 31, 1995
INVESTMENT INCOME:
INTEREST INCOME......................................................... $249,365,968
EXPENSES:
Management fee-Note 2(a).............................................. $ 22,188,564
Shareholder servicing costs-Note 2(b)................................. 3,282,191
Custodian fees........................................................ 242,444
Professional fees..................................................... 128,864
Registration fees..................................................... 128,055
Prospectus and shareholders' reports.................................. 117,328
Directors' fees and expenses-Note 2(c)................................ 48,523
Miscellaneous......................................................... 131,063
--------------------
TOTAL EXPENSES.................................................... 26,267,032
---------------------
INVESTMENT INCOME-NET............................................. 223,098,936
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized (loss) on investments-Note 3............................... $(44,338,112)
Net unrealized appreciation on investments.............................. 78,567,175
---------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 34,229,063
---------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $257,327,999
=====================
See notes to financial statements.
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
----------------------------------------
1994 1995
----------------- -----------------
OPERATIONS:
Investment income-net................................................. $ 249,332,136 $ 223,098,936
Net realized gain (loss) on investments............................... 40,066,377 (44,338,112)
Net unrealized appreciation (depreciation) on investments for the year (349,064,340) 78,567,175
----------------- ------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS..... (59,665,827) 257,327,999
----------------- ------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net................................................. (249,332,136) (223,098,936)
Net realized gain on investments...................................... (110,423,674) (22,638,307)
----------------- ------------------
TOTAL DIVIDENDS..................................................... (359,755,810) (245,737,243)
----------------- ------------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold......................................... 3,541,071,359 4,846,241,789
Dividends reinvested.................................................. 239,678,805 155,978,774
Cost of shares redeemed............................................... (4,077,240,448) (5,085,554,561)
----------------- ------------------
(DECREASE) IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS............ (296,490,284) (83,333,998)
----------------- ------------------
TOTAL (DECREASE) IN NET ASSETS.................................. (715,911,921) (71,743,242)
NET ASSETS:
Beginning of year..................................................... . 4,724,389,030 4,008,477,109
---------------- ------------------
End of year........................................................... $ 4,008,477,109 $ 3,936,733,867
================ ==================
SHARES SHARES
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Shares sold........................................................... 271,726,312 400,686,274
Shares issued for dividends reinvested................................ 18,369,588 12,969,173
Shares redeemed....................................................... (311,906,108) (419,990,511)
---------------- ---------------
NET (DECREASE) IN SHARES OUTSTANDING................................ (21,810,208) (6,335,064)
================ ===============
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 December 29, 1995.
See notes to financial statements.
DREYFUS MUNICIPAL BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940 ("Act")
as a diversified open-end management investment company. Premier Mutual Fund
Services, Inc. (the "Distributor") acts as the distributor of the Fund's
shares, which are sold to the public without a sales charge. The Distributor,
located at One Exchange Place, Boston, Massachusetts 02109, is a wholly-owned
subsidiary of FDI Distribution Services, Inc., a provider of mutual fund
administration services, which in turn is a wholly-owned subsidiary of FDI
Holdings, Inc., the parent company of which is Boston Institutional Group,
Inc. The Dreyfus Corporation ("Manager") serves as the Fund's investment
adviser. The Manager is a direct subsidiary of Mellon Bank, N.A.
(A) PORTFOLIO VALUATION: The Fund's investments 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, 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.
The Fund has an unused capital loss carryover of approximately
$15,947,000 available for Federal income tax purposes to be applied against
future net securities profits, if any, realized subsequent to August 31,
1995. The carryover does not include net realized securities losses from
November 1, 1994 through August 31, 1995 which are treated for Federal income
tax purposes as arising in fiscal 1996. If not applied, the carryover expires
in fiscal 2003.
DREYFUS MUNICIPAL BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 6/10ths of 1% of the
average daily value of the Fund's 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 10 years, ranging from $0 to $1 million per year depending upon
average daily net assets of the Fund. The management fee for the year ended
August 31, 1995 was reduced by $350,000 pursuant to the settlement of
litigation.
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 average value
of the Fund's net assets for any full fiscal year. No expense reimbursement
was required for the year ended August 31, 1995.
(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 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, 1995, the Fund was charged an aggregate of
$1,520,849 pursuant to the Shareholder Services Plan.
(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:
The aggregate amount of purchases and sales of investment securities
amounted to $6,988,266,905 and $7,041,881,503, respectively, for the year
ended August 31, 1995, and consisted entirely of long-term and short-term
municipal investments.
At August 31, 1995, accumulated net unrealized appreciation on
investments was $142,057,935, consisting of $157,147,406 gross unrealized
appreciation and $15,089,471 gross unrealized depreciation.
At August 31, 1995, 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, 1995, 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, 1995 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, 1995, 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.
/s/ Ernst & Young LLP
New York, New York
October 4, 1995
