File Nos. 2-56878
811-2653
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 40 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 40 [X]
(Check appropriate box or boxes.)
DREYFUS MUNICIPAL BOND FUND, INC.
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box)
immediately upon filing pursuant to paragraph (b)
----
X on January 2, 1998 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(i)
----
on (date) pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
----
on (date) pursuant to paragraph (a)(ii) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
----
DREYFUS MUNICIPAL BOND FUND, INC.
Cross-Reference Sheet Pursuant to Rule 495(a)
Items in
Part A of
Form N-1A Caption Page
_________ _______ ____
1 Cover Page Cover
2 Synopsis 3
3 Condensed Financial Information 4
4 General Description of Registrant 4, 18
5 Management of the Fund 7
5(a) Management's Discussion of Fund's Performance *
6 Capital Stock and Other Securities 18
7 Purchase of Securities Being Offered 8
8 Redemption or Repurchase 13
9 Pending Legal Proceedings *
Items in
Part B of
Form N-1A
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10 Cover Page Cover
11 Table of Contents Cover
12 General Information and History B-1, B-29
13 Investment Objectives and Policies B-2
14 Management of the Fund B-12
15 Control Persons and Principal B-12
Holders of Securities
16 Investment Advisory and Other B-16
Services
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
DREYFUS MUNICIPAL BOND FUND, INC.
Cross-Reference Sheet Pursuant to Rule 495(a) (continued)
Items in
Part B of
Form N-1A Caption Page
_________ _______ _____
17 Brokerage Allocation B-25
18 Capital Stock and Other Securities B-29
19 Purchase, Redemption and Pricing B-18, B-19,
of Securities Being Offered B-24
20 Tax Status *
21 Underwriters B-18
22 Calculations of Performance Data B-27
23 Financial Statements B-30
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-9
30 Location of Accounts and Records C-12
31 Management Services C-12
32 Undertakings C-12
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
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PROSPECTUS JANUARY 2, 1998
DREYFUS MUNICIPAL BOND FUND, INC.
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DREYFUS MUNICIPAL BOND FUND, INC. (THE "FUND") IS AN OPEN-END,
DIVERSIFIED, MANAGEMENT INVESTMENT COMPANY, KNOWN AS A
NO-LOAD MUNICIPAL BOND FUND. THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE
YOU WITH AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL INCOME TAX AS
IS CONSISTENT WITH THE PRESERVATION OF CAPITAL.
THE FUND PROVIDES FREE REDEMPTION CHECKS, WHICH YOU CAN USE IN
AMOUNTS OF $500 OR MORE FOR CASH OR TO PAY BILLS. YOU CONTINUE TO EARN INCOME
ON THE AMOUNT OF THE CHECK UNTIL IT CLEARS. YOU CAN PURCHASE OR REDEEM SHARES
BY TELEPHONE USING DREYFUS TELETRANSFER.
THE DREYFUS CORPORATION PROFESSIONALLY MANAGES THE FUND'S PORTFOLIO.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED JANUARY 2, 1998, WHICH
MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF CERTAIN
AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST TO SOME
INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
IS INCORPORATED HEREIN BY REFERENCE. THE SECURITIES AND EXCHANGE COMMISSION
MAINTAINS A WEB SITE (HTTP://WWW.SEC.GOV) THAT CONTAINS THE STATEMENT OF
ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER
INFORMATION REGARDING THE FUND. FOR A FREE COPY OF THE STATEMENT OF
ADDITIONAL INFORMATION, WRITE TO THE FUND AT 144 GLENN CURTISS BOULEVARD,
UNIONDALE, NEW YORK 11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK
FOR OPERATOR 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL FLUCTUATE FROM TIME TO
TIME.
TABLE OF CONTENTS
<TABLE>
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Page Page
Fee Table....................... 3 How to Redeem Shares............. 13
Condensed Financial Information. 4 Shareholder Services Plan........ 16
Description of the Fund......... 4 Dividends, Distributions and Taxes 16
Management of the Fund.......... 7 Performance Information.......... 18
How to Buy Shares............... 9 General Information.............. 18
Shareholder Services............ 10 Appendix.......................... 20
</TABLE>
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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[This Page Intentionally Left Blank]
[Page 2]
<TABLE>
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<S> <C>
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Redemption Fee* (as a percentage of amount redeemed)........................................... .10%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees.............................................................................. .59%
Other Expenses............................................................................... .12%
Total Fund Operating Expenses................................................................ .71%
* Shares held less than 15 days may be subject to a .10% redemption fee
payable to the Fund. See "How to Redeem Shares."
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Example: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- ------- --------- ---------
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period: $7 $23 $40 $88
</TABLE>
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THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE
EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY
AND MAY RESULT IN AN ACTUAL RETURN GREATER OR LESS THAN 5%.
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The purpose of the foregoing table is to assist you in understanding
the costs and expenses borne by the Fund and investors, the payment of which
will reduce investors' annual return. The information in the foregoing table
does not reflect any fee waivers or expense reimbursement arrangements that
may be in effect or the proceeds from any redemption fee retained by the
Fund. You can purchase Fund shares without charge directly from the Fund's
distributor; you may be charged a fee if you effect transactions in Fund
shares through a securities dealer, bank or other financial institution. See
"Management of the Fund," "How to Redeem Shares" and "Shareholder Services
Plan."
[Page 3]
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited by Ernst &
Young LLP, the Fund's independent auditors. Further financial data, related
notes and report of independent auditors appear in the annual report and are
incorporated by reference into the Statement of Additional Information
("SAI). When you request an SAI, the annual report will be sent to you.
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,
___________________________________________________________________________________________________
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PERSHAREDATA:
Net asset value,
beginning of year $12.22 $12.03 $12.47 $12.24 $12.68 $13.17 $13.68 $12.39 $12.41 $12.23
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
INVESTMENT OPERATIONS:
Investment
income-net .91 .91 .90 .87 .84 .79 .75 .72 .69 .67
Net realized and
unrealized
gain (loss)
on investments (.19) .44 (.23) .44 .49 .79 (.96) .09 (.18) .33
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
TOTAL FROM INVESTMENT
OPERATIONS........ .72 1.35 .67 1.31 1.33 1.58 (.21) .81 .51 1.00
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
DISTRIBUTIONS:
Dividends from
investment
income-net........ (.91) (.91) (.90) (.87) (.84) (.79) (.75) (.72) (.69) (.67)
Dividends from net
realized
gain on investments __ __ __ __ __ (.28) (.33) (.07) __ (.01)
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
TOTAL DISTRIBUTIONS (.91) (.91) (.90) (.87) (.84) (1.07) (1.08) (.79) (.69) (.68)
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Net asset value,
end of year $12.03 $12.47 $12.24 $12.68 $13.17 $13.68 $12.39 $12.41 $12.23. $12.55
===== ====== ======= ======= ======= ======= ======= ======= ====== ========
TOTAL INVESTMENT RETURN 6.27% 11.60% 5.51% 11.11% 10.82% 12.62% (1.63%) 6.93% 4.16% 8.24%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets .71% .68% .67% .67% .68% .69% .68% .70% .71% .71%
Ratio of net
investment
income
to average
net assets 7.68% 7.41% 7.23% 7.05% 6.49% 5.96% 5.80% 5.94% 5.57% 5.39%
Portfolio
Turnover
Rate 50.63% 36.38% 28.06% 35.53% 67.86% 45.37% 36.25% 51.55% 64.48% 66.89%
Net Assets,
end of year
(000's omitted) $3,245,184 $3,485,053 $3,594,296 $4,081,440 $4,272,679 $4,724,389 $4,008,477 $3,936,734 $3,572,286 $3,454,776
</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 IBCA, Inc. ("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 for the current fiscal year
is not expected to exceed 100%. A turnover rate of 100% is equivalent to the
Fund buying and selling all of the securities in its portfolio once in the
course of a year. The Fund may engage in various investment techniques, such
as options and futures transactions and lending portfolio securities. Use of
certain of these techniques may give rise to taxable income. See "Dividends,
Distributions and Taxes". For a discussion of the investment techniques and
their related risks, see "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. Once the rating
of a portfolio security has been changed, the Fund will consider all
circumstances deemed relevant in determining whether to hold the security.
The Fund's net asset value generally will not be stable and should fluctuate
based upon changes in the value of the Fund's portfolio securities.
Securities in which the Fund will invest may earn a higher level of current
income than certain shorter-term or higher quality securities which generally
have greater liquidity, less market risk and less fluctuation in market
value.
INVESTING IN MUNICIPAL OBLIGATIONS _ The Fund may invest more than 25% of
the value of its total assets in Municipal Obligations which are related in
such a way that an economic, business or political development or change
affecting one such security also would affect the other securities; for
example, securities the interest upon which is paid from revenues of similar
types of projects, or securities whose issuers are located in the same state.
As a result, the Fund may be subject to greater risk as compared to a fund
that does not follow this practice.
Certain municipal lease/purchase obligations in which the Fund may
invest may contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease payments in future years unless
money is appropriated for such purpose on a yearly basis. Although
"non-appropriation" lease/purchase obligations are secured by the leased
property, disposition of the leased property in the event of foreclosure
might prove difficult. In evaluating the credit quality of a municipal
lease/purchase obligation that is unrated, The Dreyfus Corporation will
consider, on an ongoing basis, a number of factors including the likelihood
that the issuing municipality will discontinue appropriating funding for the
leased property.
Certain provisions in the Code relating to the issuance of Municipal
Obligations may reduce the volume of Municipal Obligations qualifying for
Federal tax exemption. One effect of these provisions could be to increase
the cost of the Municipal Obligations available for purchase by the Fund and
thus
[Page 6]
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 enacted that would reduce the availability of Municipal
Obligations for investment by the Fund so as to adversely affect Fund
shareholders, the Fund would reevaluate its investment objective and policies
and submit possible changes in the Fund's structure to shareholders for their
consideration. If legislation were enacted that would treat a type of
Municipal Obligation as taxable, the Fund would treat such security as a
permissible Taxable Investment within the applicable limits set forth herein.
ZERO COUPON SECURITIES _ Federal income tax law requires the holder of a
zero coupon security or of certain pay-in-kind bonds to accrue income with
respect to these securities prior to the receipt of cash payments. To
maintain its qualification as a regulated investment company and avoid
liability for Federal income taxes, the Fund may be required to distribute
such income accrued with respect to these securities and may have to dispose
of portfolio securities under disadvantageous circumstances in order to
generate cash to satisfy these distribution requirements.
USE OF DERIVATIVES _ The Fund may invest in derivatives ("Derivatives").
These are financial instruments which derive their performance, at least in
part, from the performance of an underlying asset, index or interest rate.
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
portfolio and make more difficult the accurate pricing of the Fund's
portfolio. See "Appendix _ Investment Techniques _ Use of Derivatives"
below, and "Investment Objective and Management Policies _ Management
Policies _ Derivatives" in the Statement of Additional Information.
LOWER RATED BONDS _ The Fund may invest up to 25% of the value of its net
assets in higher yielding (and, therefore, higher risk) debt securities, such
as those rated Ba by Moody's or BB by S&P or Fitch or as low as the lowest
rating assigned by Moody's, S&P or Fitch (commonly known as junk bonds). They
may be subject to certain risks with respect to the issuing entity and to
greater market fluctuations than certain lower yielding, higher rated
fixed-income securities. The retail secondary market for these bonds may be le
ss liquid than that of higher rated bonds; adverse market conditions could
make it difficult at times for the Fund to sell certain securities or could
result in lower prices than those used in calculating the Fund's net asset
value. See "Appendix_Certain Portfolio Securities_Ratings."
SIMULTANEOUS INVESTMENTS _ Investment decisions for the Fund are made
independently from those of other investment companies advised by The Dreyfus
Corporation. If, however, such other investment companies desire to invest
in, or dispose of, the same securities as the Fund, available investments or
opportunities for sales will be allocated equitably to each investment
company. In some cases, this procedure may adversely affect the size of the
position obtained for or disposed of by the Fund or the price paid or
received by the Fund.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER _ The Dreyfus Corporation, located at 200 Park Avenue,
New York, New York 10166, was formed in 1947 and serves as the Fund's
investment adviser. The Dreyfus Corporation is a wholly-owned subsidiary of
Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank
Corporation ("Mellon"). As of November 30, 1997, The Dreyfus Corporation
managed or administered approximately $94 billion in assets for approximately
1.7 million investor accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the Fund,
subject to the authority of the Fund's Board in accordance with Maryland law.
The Fund's primary portfolio manager is Richard J. Moynihan. He has held that
position since the inception of the Fund and has been employed by The Dreyfus
Corporation since 1973. The Fund's other portfolio managers are identified in
the Statement of Additional Information.
[Page 7]
The Dreyfus Corporation also provides research services for the Fund and for
other funds advised by The Dreyfus Corporation through a professional staff
of portfolio managers and securities analysts.
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
$299 billion in assets as of September 30, 1997, including approximately $102
billion in mutual fund assets. As of September 30, 1997, Mellon, through
various subsidiaries, provided non-investment services, such as custodial or
administration services, for more than $1.488 trillion in assets, including
approximately $60 billion in mutual fund assets.
Under the terms of the Management Agreement, the Fund has agreed to
pay The Dreyfus Corporation a monthly fee at the annual rate of .60 of 1% of
the value of the Fund's average daily net assets. For the fiscal year ended
August 31, 1997, the Fund paid The Dreyfus Corporation a monthly management
fee at the effective annual rate of .59 of 1% of the value of the Fund's
average daily net assets pursuant to a settlement of litigation. From time to
time, The Dreyfus Corporation may waive receipt of its fees and/or
voluntarily assume certain expenses of the Fund, which would have the effect
of lowering the expense ratio of the Fund and increasing yield to investors.
The Fund will not pay The Dreyfus Corporation at a later time for any amounts
it may waive, nor will the Fund reimburse The Dreyfus Corporation for any
amounts it may assume.
Pursuant to a settlement of litigation, effective October 14, 1988,
The Dreyfus Corporation agreed, among other things, to make payments to the
Fund to reduce its management fee for a period of ten years from the
effective date of the settlement, in an amount ranging from $90,000 per year,
if the Fund's average daily net assets are between $1 billion and $2 billion,
to $1 million per year, if the Fund's average daily net assets are in excess
of $10 billion. No payments are required if the Fund's average daily net
assets are less than $1 billion.
In allocating brokerage transactions, The Dreyfus Corporation seeks
to obtain the best execution of orders at the most favorable net price.
Subject to this determination, The Dreyfus Corporation may consider, among
other things, the receipt of research services and/or the sale of shares of
the Fund or other funds managed, advised or administered by The Dreyfus
Corporation as factors in the selection of broker-dealers to execute
portfolio transactions for the Fund. See "Portfolio Transactions" in the State
ment of Additional Information.
The Dreyfus Corporation may pay the Fund's distributor for
shareholder services from The Dreyfus Corporation's own assets, including
past profits but not including the management fee paid by the Fund. The
Fund's distributor may use part or all of such payments to pay securities
dealers, banks or other financial institutions in respect of these services.
Distributor _ The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at 60 State Street, Boston, Massachusetts 02109.
The Distributor's ultimate parent is Boston Institutional Group, Inc.
Transfer and Dividend Disbursing Agent and Custodian _ Dreyfus Transfer,
Inc., a wholly-owned subsidiary of The Dreyfus Corporation, P.O. Box 9671,
Providence, Rhode Island 02940-9671, is the Fund's Transfer and Dividend
Disbursing Agent (the "Transfer Agent"). The Bank of New York, 90 Washington
Street, New York, New York 10286, is the Fund's Custodian.
[Page 8]
HOW TO BUY SHARES
Fund shares are sold without a sales charge. You may be charged a 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.
See "Appendix _ Additional Information About Purchases, Exchanges and
Redemptions."
The minimum initial investment is $2,500, or $1,000 if you are a
client of a securities dealer, bank or other financial institution which
maintains an omnibus account in the Fund and has made an aggregate minimum
initial purchase for its customers of $2,500. Subsequent investments must be
at least $100. The initial investment must be accompanied by the Account
Application. For full-time or part-time employees of The Dreyfus Corporation
or any of its affiliates or subsidiaries, directors of The Dreyfus Corporation,
Board members of a fund advised by The Dreyfus Corporation, including
members of the Fund's Board, or the spouse or minor child of any of the
foregoing, the minimum initial investment is $1,000. For full-time or
part-time employees of The Dreyfus Corporation or any of its affiliates or
subsidiaries who elect to have a portion of their pay directly deposited into
their Fund accounts, the minimum initial investment is $50. The Fund reserves
the right to vary further the initial and subsequent investment minimum
requirements at any time. Fund shares also are offered without regard to the
minimum initial investment requirements through Dreyfus-AUTOMATIC Asset
BuilderRegistration Mark, Government Direct Deposit Privilege or Dreyfus
Payroll Savings Plan pursuant to the Dreyfus Step Program described under
"Shareholder Services." These services enable you to make regularly scheduled
investments and may provide you with a convenient way to invest for long-term
financial goals. You should be aware, however, that periodic investment plans
do not guarantee a profit and will not protect an investor against loss in a
declining market.
You may purchase Fund shares by check or wire, or through the Dreyfus
TELETRANSFER Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds." Payments to open new accounts which are mailed
should be sent to The Dreyfus Family of Funds, P.O. Box 9387, Providence,
Rhode Island 02940-9387, together with your Account Application. For
subsequent investments, your Fund account number should appear on the check
and an investment slip should be enclosed and sent to The Dreyfus Family of
Funds, P.O. Box 105, Newark, New Jersey 07101-0105. Neither initial nor 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 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 purcha
se instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member.
[Page 9]
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."
Fund shares are sold on a continuous basis at the net asset value per
share next determined after an order in proper form is received by the
Transfer Agent or other entity authorized to receive orders on behalf of the
Fund. Net asset value per share is determined as of the close of trading on
the floor of the New York Stock Exchange (currently 4:00 p.m., New York
time), on each day the New York Stock Exchange is open for business. For
purposes of determining net asset value, options and futures contracts will
be valued 15 minutes after the close of trading on the floor of the New York
Stock Exchange. Net asset value per share is computed by dividing the value
of the Fund's net assets (i.e., the value of its assets less liabilities) by
the total number of shares outstanding. The Fund's investments are valued
each business day by an independent pricing service approved by the Fund's
Board and are valued at fair value as determined by the pricing service. The
pricing service's procedures are reviewed under the general supervision of
the Fund's Board. For further information regarding the methods employed in
valuing Fund investments, see "Determination of Net Asset Value" in the
Statement of Additional Information.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service (the "IRS").
DREYFUS TELETRANSFER PRIVILEGE _ You may purchase shares (minimum $500,
maximum $150,000 per day) by telephone if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds will
be transferred between the bank account designated in one of these documents
and your Fund account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
The Fund may modify or terminate this Privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of shares by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES
FUND EXCHANGES
You may purchase, in exchange for shares of the Fund, shares of
certain other funds managed or administered by The Dreyfus Corporation, to
the extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, please call 1-800-645-6561 to determine if
it is available and whether any conditions are imposed on its use.
To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. Before any exchange, you must
obtain and should review a copy of the current prospectus of the fund into
which the exchange is being made. Prospectuses may be obtained by calling
1-800-645-6561. Except in the case of personal retirement plans, the shares
being exchanged must have a current value of at least $500; furthermore, when
establishing a new account by exchange, the shares being exchanged must have
a value of at least the minimum initial investment required for the fund into
which the exchange is being made. The ability to issue exchange instructions
by telephone is given to all Fund shareholders automatically, unless you
check the applicable "No" box on the Account Application, indicating that you
specifically refuse this Privilege. The Telephone Exchange Privilege may be
established for an existing account by written request signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-645-6561, or by oral request from any of the
authorized signatories on the account by calling 1-800-645-6561. If you have
established the Telephone
[Page 10]
Exchange Privilege, you may telephone exchange instructions (including over
The Dreyfus TouchRegistration Mark automated telephone system) by calling
1-800-645-6561. If you are calling from overseas, call 516-794-5452. See "How
to Redeem Shares_Procedures." Upon an exchange into a new account, the
following shareholder services and privileges, as applicable and where
available, will be automatically carried over to the fund into which 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.
The Fund will impose a redemption fee equal to .10% of the net asset
value of Fund shares exchanged out of the Fund where the exchange is made
less than 15 days after issuance of such shares. See "How to Redeem Shares."
Otherwise, shares will be exchanged at the next determined net asset value;
however, a sales load may be charged with respect to exchanges into funds
sold with a sales load. If you are exchanging into a fund that charges a
sales load, you may qualify for share prices which do not include the sales
load or which reflect a reduced sales load, if the shares you are exchanging
were: (a) purchased with a sales load, (b) acquired by a previous exchange
from shares purchased with a sales load, or (c) acquired through reinvestment
of dividends or distributions paid with respect to the foregoing categories
of shares. To qualify, at the time of the exchange you must notify the
Transfer Agent. Any such qualification is subject to confirmation of your
holdings through a check of appropriate records. See "Shareholder Services"
in the Statement of Additional Information. No fees currently are charged
shareholders directly in connection with exchanges, although the Fund
reserves the right, upon not less than 60 days' written notice, to charge
shareholders a nominal administrative 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. See "Appendix _
Additional Information About Purchases, Exchanges and Redemptions." The
availability of Fund Exchanges may be modified or terminated at any time upon
notice to shareholders. See "Dividends, Distributions and Taxes."
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
the Fund, in shares of other funds in the Dreyfus Family of Funds of which
you are a shareholder. The amount you designate, which can be expressed
either in terms of a specific dollar or share amount ($100 minimum), will be
exchanged automatically on the first and/or fifteenth day of the month
according to the schedule you have selected. Shares will be exchanged at the
then-current net asset value; however, a sales load may be charged with
respect to exchanges into funds sold with a sales load. See "Shareholder
Services" in the Statement of Additional Information. The right to exercise
this Privilege may be modified or cancelled by the Fund or the Transfer
Agent. You may modify or cancel your exercise of this Privilege at any time
by mailing written notification to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671. The Fund may charge a service fee
for the use of this Privilege. No such fee currently is contemplated. For
more information concerning this Privilege and the funds in the Dreyfus
Family of Funds eligible to participate in this Privilege, or to obtain a
Dreyfus Auto-Exchange Authorization Form, please call toll free
1-800-645-6561. See "Dividends, Distributions and Taxes."
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark
Dreyfus-Automatic Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. Only an account maintained at a domestic
financial institution which is an Automated Clearing House member may be so
designated. To establish a Dreyfus-Automatic Asset Builder account, you must
file an authorization form with the Transfer Agent. You may
[Page 11]
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 BuilderRegistration Mark, Dreyfus Government Direct Deposit
Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step
Program account, you must supply the necessary information on the Account
Application and file the required authorization form(s) with the Transfer
Agent. For more information concerning this Program, or to request the
necessary authorization form(s), please call toll free 1-800-782-6620. You
may terminate your participation in this Program at any time by discontinuing
your participation in Dreyfus-AUTOMATIC Asset BuilderRegistration Mark,
Dreyfus Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan,
as the case may be, as provided under the terms of such Privilege(s). The
Fund may modify or terminate this Program at any time.
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by the Fund in
shares of another fund in the Dreyfus Family of Funds of which you are a
shareholder. Shares of the other fund will be purchased at the then-current
net asset value; however, a sales load may be charged with respect to
investments in shares of a fund sold with a sales load. If you are investing
in a fund that charges a sales load, you may qualify for share prices which
do not include the sales load or which reflect a reduced sales load. If you
are investing in a fund that charges a contingent deferred sales charge, the
shares purchased will be subject to the contingent deferred sales charge, if
any, applicable to the purchased shares. See "Shareholder Services" in the
[Page 12]
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 Automatic Withdrawal Plan may
be established by filing an Automatic Withdrawal Plan application with the
Transfer Agent or by oral request from any of the authorized signatories on
the account by calling 1-800-645-6561. The Automatic Withdrawal Plan may be
ended at any time by you, the Fund or the Transfer Agent. Shares for which
certificates have been issued may not be redeemed through the Automatic
Withdrawal Plan.
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form by the Transfer Agent or other entity
authorized to receive orders on behalf of the Fund, the Fund will redeem the
shares at the next determined net asset value. See "Appendix _ Additional
Information About Purchases, Exchanges and Redemptions."
The Fund will deduct a redemption fee of .10% of the net asset
value of Fund shares redeemed or exchanged in less than 15 days following the
issuance of such shares. The purpose of the redemption fee is to discourage
short-term trading. The fee will be retained by the Fund and used primarily
to offset the transaction costs that short-term trading imposes on the Fund
and its shareholders. For purposes of calculating the 15-day holding period,
the Fund will employ the "first in, first out" method, which assumes that the
shares you are redeeming or exchanging are the ones you have held the
longest. No redemption fee will be charged on the redemption or exchange of
shares (1) through the Fund's Check Redemption Privilege, Automatic
Withdrawal Plan or Dreyfus Auto-Exchange Privilege, (2) through accounts that
are reflected on the records of the Transfer Agent or omnibus accounts
approved by Dreyfus Service Corporation, (3) through accounts established by
securities dealers, banks or other financial institutions approved by Dreyfus
Service Corporation that utilize the National Securities Clearing
Corporation's networking system, or (4) acquired through the reinvestment of
dividends or capital gains distributions. The redemption fee may be waived,
modified or discontinued at any time or from time to time. In addition,
securities dealers, banks and other financial institutions may charge their
clients a fee for effecting redemptions of Fund shares. Any certificates
representing Fund shares being redeemed must be submitted with the redemption
request. The value of the shares redeemed may be more or less than their
original cost, depending on the Fund's then-current net asset value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY
[Page 13]
DREYFUS TELETRANSFER PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDER
Registration Mark AND SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO THE
TRANSFER AGENT, THE REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY
UPON BANK CLEARANCE OF YOUR PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE OR
DREYFUS-AUTOMATIC ASSET BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS
DAYS OR MORE. IN ADDITION, THE FUND WILL NOT HONOR REDEMPTION CHECKS UNDER
THE CHECK REDEMPTION PRIVILEGE, AND WILL REJECT REQUESTS TO REDEEM SHARES BY
WIRE OR TELEPHONE OR PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE, FOR A
PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE
PURCHASE CHECK, THE DREYFUS TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC
ASSET BUILDER ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE
PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR
IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER
THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS
ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED TO
EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares will not be
redeemed until the Transfer Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if your account has a balance of 50
shares or less and remains so during the notice period.
PROCEDURES
You may redeem shares by using the regular redemption procedure
through the Transfer Agent, or through the Telephone Redemption Privilege or
the Check Redemption Privilege, which are granted automatically unless you
specifically refuse them by checking the applicable "No" box on the Account
Application. The Telephone Redemption Privilege and the Check Redemption
Privilege may be established for an existing account by a separate signed
Shareholder Services Form or, with respect to the Telephone Redemption
Privilege, by oral request from any of the authorized signatories on the
account by calling 1-800-645-6561. You also may redeem shares through the
Wire Redemption Privilege or the Dreyfus TELETRANSFER Privilege, if you have
checked the appropriate box and supplied the necessary information on the
Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The 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. Shares
for which certificates have been issued are not eligible for the Check
Redemption, Wire Redemption, Telephone Redemption or Dreyfus TELETRANSFER
Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including
over The Dreyfus TouchRegistration Mark automated telephone system) from any
person representing himself or herself to be you and reasonably believed by
the Transfer Agent to be genuine. The Fund will require the Transfer Agent to
employ reasonable procedures, such as requiring a form of personal
identification, to confirm that instructions are genuine and, if it does not
follow such procedures, the Fund or the Transfer Agent may be liable for any
losses due to unauthorized or fraudulent instructions. Neither the Fund nor
the Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used. During the delay, the Fund's net asset value may fluctuate.
[Page 14]
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 valid reason. You should date your Redemption Checks with the current
date when you write them. Please do not postdate your Redemption Checks. If
you do, the Transfer Agent will honor, upon presentment, even if presented
before the date of the check, all postdated Redemption Checks which are dated
within six months of presentment for payment, if they are otherwise in good
order. This Privilege will be terminated immediately, without notice, with
respect to any account which is, or becomes, subject to backup withholding on
redemptions (See "Dividends, Distributions and Taxes"). Any Redemption Check
written on an account which has become subject to backup withholding on
redemptions will not be honored by the Transfer Agent. The Check Redemption
Privilege is granted automatically unless you refuse it.
WIRE REDEMPTION PRIVILEGE _ You may request by wire, telephone or letter
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. Holders of jointly registered Fund or bank
accounts may have redemption proceeds of not more than $250,000 wired within
any 30-day period. You may telephone redemption requests by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. The
Statement of Additional Information sets forth instructions for transmitting
redemption requests by wire.
TELEPHONE REDEMPTION PRIVILEGE _ You may request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. The
Telephone Redemption Privilege is granted automatically unless you refuse it.
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. 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.
[Page 15]
If you have selected the Dreyfus TELETRANSFER Privilege,
you may request a Dreyfus TELETRANSFER redemption of shares by
calling 1-800-645-6561 or, if you are calling from overseas, call
516-794-5452.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan pursuant to which
the Fund reimburses Dreyfus Service Corporation, a wholly-owned subsidiary of
The Dreyfus Corporation, an amount not to exceed an annual rate of .25 of 1%
of the value of the Fund's average daily net assets for certain allocated
expenses of providing personal services and/or maintaining shareholder
accounts. The services provided may include personal services relating to
shareholder accounts, such as answering shareholder inquiries regarding the
Fund and providing reports and other information, and services related to the
maintenance of shareholder accounts.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily declares dividends from its net investment income
on each day the New York Stock Exchange is open for business. Fund shares
begin earning dividends on the day following the date of purchase. The Fund's
earnings for Saturdays, Sundays and holidays are declared as dividends on the
next business day. Dividends usually are paid on the last business day of
each month and are reinvested in additional Fund shares at net asset value
or, at your option, paid in cash. If you redeem all shares in your account at
any time during the month, all dividends to which you are entitled will be
paid to you along with the proceeds of the redemption. If you are an omnibus
accountholder and indicate in a partial redemption request that a portion of
any accrued dividends to which such account is entitled belongs to an
underlying accountholder who has redeemed all shares in his or her account,
such portion of the accrued dividends will be paid to you along with the
proceeds of the redemption. Distributions from net realized securities gains,
if any, generally are declared and paid once a year, but the Fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Code, in all events in a manner consistent with the
provisions of the 1940 Act. The Fund will not make distributions from net
realized securities gains unless capital loss carryovers, if any, have been
utilized or have expired. You may choose whether to receive distributions in
cash or to reinvest in additional Fund shares at net asset value. If you
elect to receive dividends and distributions in cash, and your dividend or
distribution check is returned to the Fund as undeliverable or remains
uncashed for six months, the Fund reserves the right to reinvest such
dividend or distribution and all future dividends and distributions payable
to you in additional Fund shares at net asset value. No interest will accrue
on amounts represented by uncashed distribution or redemption checks. All
expenses are accrued daily and deducted before declaration of dividends to
investors.
Except for dividends from Taxable Investments, the Fund anticipates
that substantially all dividends paid by the Fund will not be subject to
Federal income tax. Dividends derived from Taxable Investments, together with
distributions from any net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Fund are subject to Federal income tax as
ordinary income whether received in cash or reinvested in additional shares.
Distributions from net realized long-term securities gains of the Fund
generally are taxable as long-term capital gains for Federal income tax
purposes if you are a citizen or resident of the United States. The Code
provides that an individual generally will be taxed on the net amount of his
or her capital gain at a maximum rate of 28% with respect to capital gain
from property held for more than one year but not more than 18 months and at
a maximum rate of 20% with respect to capital gain from property held for
more than 18 months. Special rules (and generally lower maximum rates) apply
for individuals in lower tax brackets. Under the Code, interest on
indebtedness incurred or continued to purchase or carry Fund shares which is
deemed to relate to exempt-interest dividends is not deductible. No dividend
paid by the Fund will qualify for the dividends received deduction allowable
to certain U.S. corporations.
Although all or a substantial portion of the dividends paid by the
Fund may be excluded by shareholders of the Fund from their gross income for
Federal income tax purposes, the Fund may purchase
[Page 16]
specified private activity bonds, the interest from which may be (i) a
preference item for purposes of the alternative minimum tax, or (ii) 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.
Notice as to the tax status of your dividends and distributions will
be mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year. These statements set forth
the dollar amount of income exempt from Federal tax and the dollar amount, if
any, subject to Federal tax. These dollar amounts will vary depending on the
size and length of time of your investment in the Fund. If the Fund derives
dividends from taxable income, it intends to designate as taxable the same
percentage of the day's dividend as the actual taxable income earned on that
day bears to total income earned on that day. Thus, the percentage of the
dividend designated as taxable, if any, may vary from day to day.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of taxable dividends,
distributions from net realized securities gains and the proceeds of any
redemption, regardless of the extent to which gain or loss may be realized,
paid to a shareholder if such shareholder fails to certify either that the
TIN furnished in connection with opening an account is correct, or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividends or
interest income on a Federal income tax return. Furthermore, the IRS may
notify the Fund to institute backup withholding if the IRS determines that a
shareholder's TIN is incorrect or if a shareholder has failed to properly
report taxable dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number, IRS individual taxpayer
identification 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, 1997 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.
[Page 17]
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.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the net asset
value per share at the beginning of the period. Advertisements may include
the percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes the
application of the percentage rate of total return.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from CDA
Technologies, Inc., Lipper Analytical Services, Inc., Moody's Bond Survey
Bond Index, Lehman Brothers Municipal Bond Index, Morningstar, Inc. and other
industry publications.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on July 12, 1976, and
commenced operations on October 4, 1976. Prior to January 22, 1993, the
Fund's name was Dreyfus Tax Exempt Bond Fund, Inc. The Fund is authorized to
issue 600 million shares of Common Stock, par value $.01 per share. Each
share has one vote.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Board members or
the appointment of auditors. However, pursuant to the Fund's By-Laws, the
holders of at least 10% of the shares outstanding and entitled to vote may
require the Fund to hold a special meeting of shareholders for purposes of
removing a Board member from office and the holders of at least 25% of such
shares may require the Fund to hold a special meeting of shareholders for any
other
[Page 18]
purpose. Fund shareholders may remove a Board member by the affirmative vote
of a majority of the Fund's outstanding voting shares. In addition, the
Fund's Board will call a meeting of shareholders for the purpose of electing
Board members if, at any time, less than a majority of the Board members then
holding office have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and sends
confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561. In New York City, call 1-718-895-1206; outside of the U.S.,
call 516-794-5452.
[Page 19]
APPENDIX
INVESTMENT TECHNIQUES
BORROWING MONEY _ The Fund is permitted to borrow to the extent permitted
under the 1940 Act, which permits an investment company to borrow in an
amount up to 331\3% of the value of its total assets. The Fund currently
intends to borrow money only for temporary or emergency (not leveraging)
purposes, in an amount up to 15% of the value of its total assets (including
the amount borrowed) valued at the lesser of cost or market, less liabilities
(not including the amount borrowed) at the time the borrowing is made. While
borrowings exceed 5% of the Fund's total assets, the Fund will not make any
additional investments.
USE OF DERIVATIVES _ The Fund may invest in the types of Derivatives
enumerated under "Description of the Fund _ Investment Considerations and
Risks _ Use of Derivatives." These instruments and certain related risks are
described more specifically under "Investment Objective and Management
Policies _ Management Policies _ Derivatives" in the Statement of
Additional Information.
Derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in Derivatives
could have a large potential impact on the Fund's performance.
If the Fund invests in Derivatives at inopportune times or judges
market conditions incorrectly, such investments may lower the Fund's return
or result in a loss. The Fund also could experience losses if its Derivatives
were poorly correlated with its other investments, or if the Fund were unable
to liquidate its position because of an illiquid secondary market. The market
for many Derivatives is, or suddenly can become, illiquid. Changes in
liquidity may result in significant, rapid and unpredictable changes in the
prices for Derivatives.
Although the Fund will not be a commodity pool, certain Derivatives
subject the Fund to the rules of the Commodity Futures Trading Commission
which limit the extent to which the Fund can invest in such 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, exceeds 5% of the
liquidation value of the Fund's assets, after taking into account unrealized
profits and unrealized losses on such contracts and options; provided,
however, that in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.
The Fund may invest up to 5% of its assets, represented by the
premium paid, in the purchase of call and put options. The Fund may write
(i.e., sell) covered call and put option contracts to the extent of 20% of
the value of its net assets at the time such option contracts are written.
When required by the Securities and Exchange Commission, the Fund will set
aside permissible liquid assets in a segregated account to cover its
obligations relating to its purchase of Derivatives. To maintain this require
d cover, the Fund may have to sell portfolio securities at disadvantageous
prices or times since it may not be possible to liquidate a Derivative
position at a reasonable price.
LENDING PORTFOLIO SECURITIES _ The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to be
entitled to payments in amounts equal to the interest or other distributions
payable on the loaned securities which affords the Fund an opportunity to
earn interest on the amount of the loan and on the loaned securities'
collateral. Loans of portfolio securities may not exceed 331\3% of the value
of the Fund's total assets, and the Fund will receive collateral consisting
of cash, U.S. Government
[Page 20]
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
receivable on a forward commitment or when-issued security are fixed when the
Fund enters into the commitment, but the Fund does not make payment until it
receives delivery from the counterparty. The Fund will commit to purchase
such securities only with the intention of actually acquiring the securities,
but the Fund may sell these securities before the settlement date if it is
deemed advisable. A segregated account of the Fund consisting of permissible
liquid assets at least equal at all times to the amount of the commitments
will be established and maintained at the Fund's custodian bank.
CERTAIN PORTFOLIO SECURITIES
CERTAIN TAX EXEMPT OBLIGATIONS _ The Fund may purchase floating and variable
rate demand notes and bonds, which are tax exempt obligations ordinarily
having stated maturities in excess of one year, but which permit the holder
to demand payment of principal at any time, or at specified intervals.
Variable rate demand notes include master demand notes which are obligations
that permit the Fund to invest fluctuating amounts, at varying rates of
interest, pursuant to direct arrangements between the Fund, as lender, and
the borrower. These obligations permit daily changes in the amount borrowed.
Because these obligations are direct lending arrangements between the lender
and borrower, it is not contemplated that such instruments generally will be
traded, and there generally is no established secondary market for these
obligations, although they are redeemable at face value. Accordingly, where
these obligations are not secured by letters of credit or other credit
support arrangements, the Fund's right to redeem is dependent on the ability
of the borrower to pay principal and interest on demand. Each obligation
purchased by the Fund will meet the quality criteria established for the
purchase of Municipal Obligations.
TAX EXEMPT PARTICIPATION INTERESTS _ The Fund may purchase from financial
institutions participation interests in Municipal Obligations (such as
industrial development bonds and municipal lease/purchase agreements). A
participation interest gives the Fund an undivided interest in the Municipal
Obligation in the proportion that the Fund's participation interest bears to
the total principal amount of the Municipal Obligation. These instruments may
have fixed, floating or variable rates of interest. If the participation
interest is unrated, it will be backed by an irrevocable letter of credit or
guarantee of a bank that the Fund's Board has determined meets prescribed
quality standards for banks, or the payment obligation otherwise will be
collateralized by U.S. Government securities. For certain participation
interests, the Fund will have the right to demand payment, on not more than
seven days' notice, for all or any part of the Fund's participation interest
in the Municipal Obligation, plus accrued interest. As to these instruments,
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
[Page 21]
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 may be terminable in the event of a default in
payment of principal or interest on the underlying Municipal Obligations and
for other reasons.
CUSTODIAL RECEIPTS _ The Fund may purchase custodial receipts representing
the right to receive certain future principal and interest payments on
Municipal Obligations which underlie the custodial receipts. A number of
different arrangements are possible. In a typical custodial receipt
arrangement, an issuer or a third party owner of Municipal Obligations
deposits such obligations with a custodian in exchange for two classes of
custodial receipts. The two classes have different characteristics, but, in
each case, payments on the two classes are based on payments received on the
underlying Municipal Obligations. One class has the characteristics of a
typical auction mechanism. This class's interest rate generally is expected
to be below the coupon rate of the underlying Municipal Obligations and
generally is at a level comparable to that of a Municipal Obligation of
similar quality and having a maturity equal to the period between interest
rate adjustments. The second class bears interest at a rate that exceeds the
interest rate typically borne by a security of comparable quality and
maturity; this rate also is adjusted, but in this case inversely to changes
in the rate of interest of the first class. In no event will the aggregate
interest paid with respect to the two classes exceed the interest paid by the
underlying Municipal Obligations. The value of the second class and similar
securities should be expected to fluctuate more than the value of a Municipal
Obligation of comparable quality and maturity and their purchase by the Fund
should increase the volatility of its net asset value and, thus, its price
per share. These custodial receipts are sold in private placements. The Fund
also may purchase directly from issuers, and not in a private placement,
Municipal Obligations having characteristics similar to custodial receipts.
These securities may be issued as part of a multi-class offering and the
interest rate on certain classes may be subject to a cap or floor.
STAND-BY COMMITMENTS _ The Fund may acquire "stand-by commitments" with
respect to Municipal Obligations held in its portfolio. Under a stand-by
commitment, the Fund obligates a broker, dealer or bank to repurchase, at the
Fund's option, specified securities at a specified price and, in this
respect, stand-by commitments are comparable to put options. The exercise of
a stand-by commitment, therefore, is subject to the ability of the seller to
make payment on demand. The Fund will acquire stand-by commitments solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes. The Fund may pay for stand-by commitments if
such action is deemed necessary, thus increasing to a degree the cost of the
underlying Municipal Obligation and similarly decreasing such security's
yield to investors. Gains realized in connection with stand-by commitments
will be taxable. The Fund also may acquire call options on specific Municipal
Obligations. The Fund
[Page 22]
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 securities that pay interest periodically and are likely to
respond to a greater degree to changes in interest rates than non-zero coupon
securities having similar maturities and credit qualities.
ILLIQUID SECURITIES _ The Fund may invest up to 15% of the value of its net
assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment
objective. Such securities may include securities that are not readily
marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, and repurchase agreements providing for
settlement in more than seven days after notice. As to these securities, the
Fund is subject to a risk that should the Fund desire to sell them when a
ready buyer is not available at a price the Fund deems representative of
their value, the value of the Fund's net assets could be adversely affected.
TAXABLE INVESTMENTS _ From time to time, on a temporary basis other than for
temporary defensive purposes (but not to exceed 20% of the value of the
Fund's net assets) or for temporary defensive purposes, the Fund may invest
in taxable short-term investments ("Taxable Investments") consisting of:
notes of issuers having, at the time of purchase, a quality rating within the
three highest grades of Moody's, S&P or Fitch; obligations of the U.S.
Government, its agencies or instrumentalities; commercial paper rated not
lower than P-l by Moody's, A-l by S&P or F-l by Fitch; certificates of
deposit of U.S. domestic banks, including foreign branches of domestic banks,
with assets of one billion dollars or more; time deposits; bankers'
acceptances and other short-term bank obligations; and repurchase agreements
in respect of any of the foregoing. Dividends paid by the Fund that are
attributable to income earned by the Fund from Taxable Investments will be
taxable to investors. See "Dividends, Distributions and Taxes." Except for
temporary defensive purposes, at no time will more than 20% of the value of
the Fund's net assets be invested in Taxable Investments. Under normal market
conditions, the Fund anticipates that not more than 5% of its total assets
will be invested in any one category of Taxable Investments. Taxable
Investments are more fully described in the Statement of Additional
Information, to which reference hereby is made.
RATINGS _ Bonds rated Ba by Moody's are judged to have speculative elements;
their future cannot be considered as well assured and often the protection of
interest and principal payments may be very moderate. Bonds rated BB by S&P
are regarded as having predominantly speculative characteristics and, while
such obligations have less near-term vulnerability to default than other
speculative grade debt, they face major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. Bonds
rated BB by Fitch are considered speculative and the payment of principal and
interest may be affected at any
[Page 23]
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.
ADDITIONAL INFORMATION ABOUT PURCHASES, EXCHANGES AND REDEMPTIONS.
The Fund is intended to be a long-term investment vehicle and is not designed
to provide investors with a means of speculation on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to the
Fund's performance and its shareholders. Accordingly, if the Fund's
management determines that an investor is engaged in excessive trading, the
Fund, with or without prior notice, may temporarily or permanently terminate
the availability of Fund Exchanges, or reject in whole or part any purchase
or exchange request, with respect to such investor's account. Such investors
also may be barred from purchasing other funds in the Dreyfus Family of
Funds. Generally, an investor who makes more than four exchanges out of the
Fund during any calendar year (for calendar year 1998, beginning on January
15th) or who makes exchanges that appear to coincide with an active
market-timing strategy may be deemed to be engaged in excessive trading.
Accounts under common ownership or control will be considered as one account
for purposes of determining a pattern of excessive trading. In addition, the
Fund may refuse or restrict purchase or exchange requests by any person or
group if, in the judgment of the Fund's management, the Fund would be unable
to invest the money effectively in accordance with its investment objective
and policies or could otherwise be adversely affected or if the Fund receives
or anticipates receiving simultaneous orders that may significantly affect
the Fund (e.g., amounts equal to 1% or more of the Fund's total assets). If
an exchange request is refused, the Fund will take no other action with
respect to the shares until it receives further instructions from the
investor. The Fund may delay forwarding redemption proceeds for up to seven
days if the investor redeeming shares is engaged in excessive trading or if
the amount of the redemption request otherwise would be disruptive to
efficient portfolio management or would adversely affect the Fund. The Fund's
policy on excessive trading applies to investors who invest in the Fund
directly or through financial intermediaries, but does not apply to the
Dreyfus Auto-Exchange Privilege, to any automatic investment or withdrawal
privilege described herein, or to participants in employer-sponsored
retirement plans.
[Page 24]
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange requests
based on their separate components _ redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Fund's next determined net asset value but
the purchase order would be effective only at the net asset value next
determined after the fund being purchased receives the proceeds of the
redemption, which may result in the purchase being delayed.
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 25]
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[Page 26]
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[Page 27]
Municipal
Bond Fund, Inc.
Prospectus
Registration Mark
Copy Rights 1998, Dreyfus Service Corporation
054p0198
[Page 28]
DREYFUS MUNICIPAL BOND FUND, INC.
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
JANUARY 2, 1998
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus Municipal Bond Fund, Inc. (the "Fund"), dated January 2, 1998, 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.--Call 516-794-5452
The Dreyfus Corporation (the "Manager") serves as the Fund's investment
adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies B-2
Management of the Fund B-12
Management Agreement B-16
Purchase of Shares B-18
Shareholder Services Plan B-19
Redemption of Shares B-19
Shareholder Services B-22
Determination of Net Asset Value B-24
Portfolio Transactions B-25
Dividends, Distributions and Taxes B-26
Performance Information B-28
Information About the Fund B-29
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors B-29
Financial Statements and Report of Independent Auditors B-31
Appendix B-32
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Description of the
Fund" and "Appendix."
Portfolio Securities
Municipal Obligations. The average distribution of investments (at
value) in Municipal Obligations (including notes) by ratings for the fiscal
year ended August 31, 1997, computed on a monthly basis, was as follows:
Moody's Standard &
Fitch IBCA, Inc. Investors Service, Poor's Ratings Percentage
("Fitch") or Inc. ("Moody's") or Group ("S&P") of Value
AAA Aaa AAA 32.0%
AA Aa AA 24.6
A A A 18.9
BBB Baa BBB 14.3
BB Ba BB .9
F-1, F-1+(1) MIG 1, P-1(1) SP-1, A-1(1) 3.6
Not Rated Not Rated Not Rated 5.7 (2)
100.0%
_______________________________
(1) Included in these categories are tax exempt notes rated within the two
highest grades by Fitch, Moody's or S&P. Therefore, these securities,
together with Municipal Obligations rated A or better by Fitch, Moody's
or S&P, are taken into account at the time of purchase to ensure that
the Fund's portfolio meets the 75% minimum quality standard discussed in
the Fund's Prospectus.
(2) Included in the Not Rated category are securities comprising 5.7% 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 (.9%), A/A (.9%), Baa/BBB (2.6%), Ba/BB
(1.0%) and B/B (.3%).
The term "Municipal Obligations" generally includes debt obligations
issued to obtain funds for various public purposes, including the
construction of a wide range of public facilities such as airports,
bridges, highways, housing, hospitals, mass transportation, schools, streets
and water and sewer works. Other public purposes for which Municipal
Obligations may be issued include refunding outstanding obligations,
obtaining funds for general operating expenses and lending such funds to
other public institutions and facilities. In addition, certain types of
industrial development bonds are issued by or on behalf of public
authorities to obtain funds to provide for the construction, equipment,
repair or improvement of privately operated housing facilities, sports
facilities, convention or trade show facilities, airport, mass transit,
industrial, port or parking facilities, air or water pollution control
facilities and certain local facilities for water supply, gas, electricity
or sewage or solid waste disposal; the interest paid on such obligations may
be exempt from Federal income tax, although current tax laws place
substantial limitations on the size of such issues. Such obligations are
considered to be Municipal Obligations if the interest paid thereon
qualifies as exempt from Federal income tax in the opinion of bond counsel
to the issuer. There are, of course, variations in the security of
Municipal Obligations, both within a particular classification and between
classifications.
Floating and variable rate demand notes and bonds are tax exempt
obligations ordinarily having stated maturities in excess of one year, but
which permit the holder to demand payment of principal at any time, or at
specified intervals. The issuer of such obligations ordinarily has a
corresponding right, after a given period, to prepay in its discretion the
outstanding principal amount of the obligations plus accrued interest upon a
specified number of days' notice to the holders thereof. The interest rate
on a floating rate demand obligation is based on a known lending rate, such
as a bank's prime rate, and is adjusted automatically each time such rate is
adjusted. The interest rate on a variable rate demand obligation is
adjusted automatically at specified intervals.
For the purpose of diversification under the Investment Company Act of
1940, as amended (the "1940 Act"), the identification of the issuer of
Municipal Obligations depends on the terms and conditions of the security.
When the assets and revenues of an agency, authority, instrumentality or
other political subdivision are separate from those of the government
creating the subdivision and the security is backed only by the assets and
revenues of the subdivision, such subdivision would be deemed to be the sole
issuer. Similarly, in the case of an industrial development bond, if that
bond is backed only by the assets and revenues of the non-governmental user,
then such non-governmental user would be deemed to be the sole issuer. If,
however, in either case, the creating government or some other entity
guarantees a security, such a guaranty would be considered a separate
security and will be treated as an issue of such government or other entity.
The yields on Municipal Obligations are dependent on a variety of
factors, including general economic and monetary conditions, money market
factors, conditions in the Municipal Obligations market, size of a
particular offering, maturity of the obligation and rating of the issue.
The imposition of the Fund's management fee, as well as other operating
expenses, will have the effect of reducing the yield to investors.
Municipal lease obligations or installment purchase contract
obligations (collectively, "lease obligations") have special risks not
ordinarily associated with Municipal Obligations. Although lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation
ordinarily is backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such
purpose on a yearly basis. Although "non-appropriation" lease obligations
are secured by the leased property, disposition of the property in the event
of foreclosure might prove difficult. The staff of the Securities and
Exchange Commission currently considers certain lease obligations to be
illiquid. Determination as to the liquidity of such securities is made in
accordance with guidelines established by the Fund's Board. Pursuant to
such guidelines, the Board has directed the Manager to monitor carefully the
Fund's investment in such securities with particular regard to (1) the
frequency of trades and quotes for the lease obligation; (2) the number of
dealers willing to purchase or sell the lease obligation and the number of
other potential buyers; (3) the willingness of dealers to undertake to make
a market in the lease obligation; (4) the nature of the marketplace trades
including the time needed to dispose of the lease obligation, the method of
soliciting offers and the mechanics of transfer; and (5) such other factors
concerning the trading market for the lease obligation as the Manager may
deem relevant. In addition, in evaluating the liquidity and credit quality
of a lease obligation that is unrated, the Fund's Board has directed the
Manager to consider (a) whether the lease can be cancelled; (b) what
assurance there is that the assets represented by the lease can be sold; (c)
the strength of the lessee's general credit (e.g., its debt, administrative,
economic, and financial characteristics); (d) the likelihood that the
municipality will discontinue appropriating funding for the leased property
because the property is no longer deemed essential to the operations of the
municipality (e.g., the potential for an "event of nonappropriation"); (e)
the legal recourse in the event of failure to appropriate; and (f) such
other factors concerning credit quality as the Manager may deem relevant.
The Fund will not invest more than 15% of the value of its net assets in
lease obligations that are illiquid and in other illiquid securities.
The Fund will purchase tender option bonds only when it is satisfied
that the custodial and tender option arrangements, including the fee payment
arrangements, will not adversely affect the tax exempt status of the
underlying Municipal Obligations and that payment of any tender fees will
not have the effect of creating taxable income for the Fund. Based on the
tender option bond agreement, the Fund expects to be able to value the
tender option bond at par; however, the value of the instrument will be
monitored to assure that it is valued at fair value.
Ratings of Municipal Obligations. Subsequent to its purchase by the
Fund, an issue of rated Municipal Obligations may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require the sale of such Municipal Obligations by the
Fund, but the Manager will consider such event in determining whether the
Fund should continue to hold the Municipal Obligations. To the extent that
the ratings given by Moody's, S&P or Fitch for Municipal Obligations may
change as a result of changes in such organizations or their rating systems,
the Fund will attempt to use comparable ratings as standards for its
investments in accordance with the investment policies contained in the
Prospectus and this Statement of Additional Information. The ratings of
Moody's, S&P and Fitch represent their opinions as to the quality of the
Municipal Obligations which they undertake to rate. It should be
emphasized, however, that ratings are relative and subjective and are not
absolute standards of quality. Although these ratings may be an initial
criterion for selection of portfolio investments, the Manager also will
evaluate these securities. See "Appendix."
Illiquid Securities. Where a substantial market of qualified
institutional buyers develops for certain restricted securities purchased
by the Fund pursuant to Rule 144A under the Securities Act of 1933, as
amended, the Fund intends to treat such securities as liquid securities in
accordance with procedures approved by the Fund's Board. Because it is not
possible to predict with assurance how the market for restricted securities
pursuant to Rule 144A will develop, the Fund's Board has directed the
Manager to monitor carefully the Fund's investments in such securities with
particular regard to trading activity, availability of reliable price
information and other relevant information. To the extent that for a period
of time qualified institutional buyers cease purchasing restricted securities
pursuant to Rule 144A, the Fund's investing in such securities may have the
effect of increasing the level of illiquidity in the Fund's portfolio during
such period.
Taxable Investments. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury
securities, which differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the U.S.
Treasury; others by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others
only by the credit of the agency or instrumentality. These securities bear
fixed, floating or variable rates of interest. While the U.S. Government
provides financial support to such U.S. Government-sponsored agencies or
instrumentalities, no assurance can be given that it will always do so,
since it is not so obligated by law.
Commercial paper consists of short-term, unsecured promissory notes
issued to finance short-term credit needs.
Certificates of deposit are negotiable certificates representing the
obligation of a bank to repay funds deposited with it for a specified period
of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven
days) at a stated interest rate. Investments in time deposits generally are
limited to London branches of domestic banks that have total assets in
excess of one billion dollars. Time deposits which may be held by the Fund
will not benefit from insurance from the Bank Insurance Fund or the Savings
Association Insurance Fund administered by the Federal Deposit Insurance
Corporation.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face
amount of the instrument upon maturity. Other short-term bank obligations
may include uninsured, direct obligations bearing fixed, floating or
variable interest rates.
In a repurchase agreement, the Fund buys, and the seller agrees to
repurchase, a security at a mutually agreed upon time and price (usually
within seven days). The repurchase agreement thereby determines the yield
during the purchaser's holding period, while the seller's obligation to
repurchase is secured by the value of the underlying security. The Fund's
custodian or sub-custodian will have custody of, and will hold in a
segregated account, securities acquired by the Fund under a repurchase
agreement. Repurchase agreements are considered by the staff of the
Securities and Exchange Commission to be loans by the Fund. In an attempt
to reduce the risk of incurring a loss on a repurchase agreement, the Fund
will enter into repurchase agreements only with domestic banks with total
assets in excess of $1 billion, or primary government securities dealers
reporting to the Federal Reserve Bank of New York, with respect to
securities of the type in which the Fund may invest, and will require that
additional securities be deposited with it if the value of the securities
purchased should decrease below resale price. Repurchase agreements could
involve risks in the event of a default or insolvency of the other party to
the agreement, including possible delays or restrictions upon the Fund's
ability to dispose of the underlying securities.
Management Policies
Lending Portfolio Securities. In connection with its securities
lending transactions, the Fund may return to the borrower or a third party
which is unaffiliated with the Fund, and which is acting as a "placing
broker," a part of the interest earned from the investment of collateral
received from securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned:
(1) the Fund must receive at least 100% cash collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value of
the securities rises above the level of such collateral; (3) the Fund must
be able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any interest or other
distributions payable on the loaned securities, and any increase in market
value; and (5) the Fund may pay only reasonable custodian fees in connection
with the loan.
Derivatives. The Fund may invest in Derivatives (as defined in the
Fund's Prospectus) for a variety of reasons, including to hedge certain
market risks, to provide a substitute for purchasing or selling particular
securities or to increase potential income gain. Derivatives may provide a
cheaper, quicker or more specifically focused way for the Fund to invest
than "traditional" securities would.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and
the portfolio as a whole. Derivatives permit the Fund to increase or
decrease the level of risk, or change the character of the risk, to which
its portfolio is exposed in much the same way as the Fund can increase or
decrease the level of risk, or change the character of the risk, of its
portfolio by making investments in specific securities.
Derivatives may be purchased on established exchanges or through
privately negotiated transactions referred to as over-the-counter
Derivatives. Exchange-traded Derivatives generally are guaranteed by the
clearing agency which is the issuer or counterparty to such Derivatives.
This guarantee usually is supported by a daily payment system (i.e.,
variation margin requirements) operated by the clearing agency in order to
reduce overall credit risk. As a result, unless the clearing agency
defaults, there is relatively little counterparty credit risk associated
with Derivatives purchased on an exchange. By contrast, no clearing agency
guarantees over-the-counter Derivatives. Therefore, each party to an over-
the-counter Derivative bears the risk that the counterparty will default.
Accordingly, the Manager will consider the creditworthiness of
counterparties to over-the-counter Derivatives in the same manner as it
would review the credit quality of a security to be purchased by the Fund.
Over-the-counter Derivatives are less liquid than exchange-traded
Derivatives since the other party to the transaction may be the only
investor with sufficient understanding of the Derivative to be interested in
bidding for it.
Futures Transactions--In General. The Fund may enter into futures contracts
in U.S. domestic markets, such as the Chicago Board of Trade. Engaging in
these transactions involves risk of loss to the Fund which could adversely
affect the value of the Fund's net assets. Although the Fund intends to
purchase or sell futures contracts only if there is an active market for
such contracts, no assurance can be given that a liquid market will exist
for any particular contract at any particular time. Many futures exchanges
and boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit or trading may be suspended for specified periods during
the trading day. Futures contract prices could move to the limit for
several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and potentially
subjecting the Fund to substantial losses.
Successful use of futures by the Fund also is subject to the ability of
the Manager to predict correctly movements in the direction of the relevant
market and, to the extent the transaction is entered into for hedging
purposes, to ascertain the appropriate correlation between the transaction
being hedged and the price movements of the futures contract. For example,
if the Fund uses futures to hedge against the possibility of a decline in
the market value of securities held in its portfolio and the prices of such
securities instead increase, the Fund will lose part or all of the benefit
of the increased value of securities which it has hedged because it will
have offsetting losses in its futures positions. Furthermore, if in such
circumstances the Fund has insufficient cash, it may have to sell securities
to meet daily variation margin requirements. The Fund may have to sell such
securities at a time when it may be disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities
and Exchange Commission, the Fund may be required to segregate permissible
liquid assets in connection with its commodities transactions in an amount
generally equal to the value of the underlying commodity. The segregation
of such assets will have the effect of limiting a Fund's ability otherwise
to invest those assets.
Specific Futures Transactions. The Fund may purchase and sell interest rate
futures contracts. An interest rate future obligates the Fund to purchase or
sell an amount of a specific debt security at a future date at a specific
price.
Options--In General. The Fund may purchase and write (i.e., sell) call or
put options with respect to specific securities. A call option gives the
purchaser of the option the right to buy, and obligates the writer to sell,
the underlying security or securities at the exercise price at any time
during the option period, or at a specific date. Conversely, a put option
gives the purchaser of the option the right to sell, and obligates the
writer to buy, the underlying security or securities at the exercise price
at any time during the option period, or at a specific date.
A covered call option written by the Fund is a call option with respect
to which the Fund owns the underlying security or otherwise covers the
transaction by segregating cash or other securities. A put option written
by the Fund is covered when, among other things, cash or liquid securities
having a value equal to or greater than the exercise price of the option are
placed in a segregated account with the Fund's custodian to fulfill the
obligation undertaken. The principal reason for writing covered call and
put options is to realize, through the receipt of premiums, a greater return
than would be realized on the underlying securities alone. The Fund
receives a premium from writing covered call or put options which it retains
whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options no such
secondary market may exist. A liquid secondary market in an option may
cease to exist for a variety of reasons. In the past, for example, higher
than anticipated trading activity or order flow, or other unforeseen events,
at times have rendered certain of the clearing facilities inadequate and
resulted in the institution of special procedures, such as trading
rotations, restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be possible
to effect closing transactions in particular options. If, as a covered call
option writer, the Fund is unable to effect a closing purchase transaction
in a secondary market, it will not be able to sell the underlying security
until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.
Successful use by the Fund of options will be subject to the ability of
the Manager to predict correctly movements in interest rates. To the extent
the Manager's predictions are incorrect, the Fund may incur losses.
Future Developments. The Fund may take advantage of opportunities in
the area of options and futures contracts and options on futures contracts
and any other Derivatives which are not presently contemplated for use by
the Fund or which are not currently available but which may be developed, to
the extent such opportunities are both consistent with the Fund's investment
objective and legally permissible for the Fund. Before entering into such
transactions or making any such investment, the Fund will provide
appropriate disclosure in its Prospectus or Statement of Additional
Information.
Forward Commitments. Municipal Obligations and other securities
purchased on a forward commitment or when-issued basis are subject to
changes in value (generally changing in the same way, i.e., appreciating
when interest rates decline and depreciating when interest rates rise) based
upon the public's perception of the creditworthiness of the issuer and
changes, real or anticipated, in the level of interest rates. Securities
purchased on a forward commitment or when-issued basis may expose the Fund
to risks because they may experience such fluctuations prior to their actual
delivery. Purchasing securities on a when-issued basis can involve the
additional risk that the yield available in the market when the delivery
takes place actually may be higher than that obtained in the transaction
itself. Purchasing securities on a forward commitment or when-issued basis
when the Fund is fully or almost fully invested may result in greater
potential fluctuation in the value of the Fund's net assets and its net
asset value per share.
Investment Considerations and Risks
Lower Rated Bonds. The Fund is permitted to invest in securities rated
below Baa by Moody's and below BBB by S&P and Fitch and as low as the lowest
rating assigned by Moody's, S&P or Fitch. Such bonds, though high yielding,
are characterized by risk. See "Description of the Fund--Investment
Considerations and Risks--Lower Rated Bonds" in the Prospectus for a
discussion of certain risks and "Appendix" for a general description of
Moody's, S&P and Fitch ratings of Municipal Obligations. Although ratings
may be useful in evaluating the safety of the interest and principal
payments, they do not evaluate the market value risk of these bonds. The
Fund will rely on the Manager's judgment, analysis and experience in
evaluating the creditworthiness of an issuer.
Investors should be aware that the market values of many of these bonds
tend to be more sensitive to economic conditions than are higher rated
securities. These bonds generally are considered by Moody's, S&P and Fitch
to be predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation and generally
will involve more credit risk than securities in the higher rating
categories.
Because there is no established retail secondary market for many of
these securities, the Fund anticipates that such securities could be sold
only to a limited number of dealers or institutional investors. To the
extent a secondary trading market for these bonds does exist, it generally
is not as liquid as the secondary market for higher rated securities. The
lack of a liquid secondary market may have an adverse impact on market price
and yield and the Fund's ability to dispose of particular issues when
necessary to meet the Fund's liquidity needs or in response to a specific
economic event such as a deterioration in the creditworthiness of the
issuer. The lack of a liquid secondary market for certain securities also
may make it more difficult for the Fund to obtain accurate market quotations
for purposes of valuing the Fund's portfolio and calculating net asset
value. Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of these
securities. In such cases, judgment may play a greater role in valuation
because less reliable, objective data may be available.
These bonds may be particularly susceptible to economic downturns. It
is likely that an economic recession could disrupt severely the market for
such securities and may have an adverse impact on the value of such
securities. In addition, it is likely that any such economic downturn could
adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon and increase the incidence of default of
such securities.
The Fund may acquire these bonds during an initial offering. Such
securities may involve special risks because they are new issues. The Fund
has no arrangement with any persons concerning the acquisition of such
securities, and the Manager will review carefully the credit and other
characteristics pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also
apply to lower rated zero coupon bonds and pay-in-kind bonds, in which the
Fund may invest up to 5% of the value its net assets. Zero coupon,
pay-in-kind or delayed interest bonds carry an additional risk in that,
unlike bonds which pay interest throughout the period to maturity, the Fund
will realize no cash until the cash payment date unless a portion of such
securities are sold and, if the issuer defaults, the Fund may obtain no
return at all on its investment. See "Dividends, Distributions and Taxes."
Investment Restrictions
The Fund has adopted investment restrictions numbered 1 through 8 as
fundamental policies, which cannot be changed without approval by the
holders of a majority (as defined in the 1940 Act) of the Fund's outstanding
voting shares. Investment restrictions numbered 9 through 14 are not
fundamental policies and may be changed by vote of a majority of the Fund's
Board members at any time. The Fund may not:
1. Invest more than 5% of its assets in the obligations of any single
issuer, except that up to 25% of the value of the Fund's total assets may be
invested, and securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities may be purchased, without regard to any such
limitation.
2. Hold more than 10% of the voting securities of any single issuer.
This Investment Restriction applies only with respect to 75% of the Fund's
total assets.
3. Invest more than 25% of its total assets in the securities of
issuers in any single industry; provided that there shall be no limitation
on the purchase of Municipal Obligations and, for temporary defensive
purposes, obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
4. Borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowing to no more than 33-1/3% of the value of
the Fund's total assets). For purposes of this investment restriction, the
entry into options, forward contracts, futures contracts, including those
relating to indices, and options on futures contracts or indices shall not
constitute borrowing.
5. Purchase or sell real estate, commodities or commodity contracts,
or oil and gas interests, but this shall not prevent the Fund from investing
in Municipal Obligations secured by real estate or interests therein, or
prevent the Fund from purchasing and selling options, forward contracts,
futures contracts, including those relating to indices, and options on
futures contracts or indices.
6. Underwrite the securities of other issuers, except that the Fund
may bid separately or as part of a group for the purchase of Municipal
Obligations directly from an issuer for its own portfolio to take advantage
of the lower purchase price available, and except to the extent the Fund may
be deemed an underwriter under the Securities Act of 1933, as amended, by
virtue of disposing of portfolio securities.
7. Make loans to others except through the purchase of debt
obligations and the entry into repurchase agreements; however, the Fund may
lend its portfolio securities in an amount not to exceed 33-1/3% of the
value of its total assets. Any loans of portfolio securities will be made
according to guidelines established by the Securities and Exchange
Commission and the Fund's Board.
8. Issue any senior security (as such term is defined in Section
18(f) of the 1940 Act), except to the extent that the activities permitted
in Investment Restrictions numbered 4, 5 and 12 may be deemed to give rise
to a senior security.
9. Sell securities short or purchase securities on margin, but the
Fund may make margin deposits in connection with transactions in futures
contracts, including those relating to indices, and options on futures
contracts or indices.
10. Purchase securities other than Municipal Obligations and Taxable
Investments and those arising out of transactions in futures and options or
as otherwise provided in the Fund's Prospectus.
11. Invest in securities of other investment companies, except to the
extent permitted under the 1940 Act.
12. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to the extent necessary to secure permitted borrowings and to the
extent related to the deposit of assets in escrow in connection with the
purchase of securities on a when-issued or delayed-delivery basis and
collateral and initial or variation margin arrangements with respect to
options, forward contracts, futures contracts, including those related to
indices, and options on futures contracts or indices.
13. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid
(which securities could include participation interests (including municipal
lease/purchase agreements) that are not subject to the demand feature
described in the Fund's Prospectus, and floating and variable rate demand
obligations as to which the Fund cannot exercise the demand feature
described in the Fund's Prospectus on less than seven days' notice and as to
which there is no secondary market) if, in the aggregate, more than 15% of
its net assets would be so invested.
14. Invest in companies for the purpose of exercising control.
For purposes of Investment Restriction No. 3, industrial development
bonds, where the payment of principal and interest is the ultimate
responsibility of companies within the same industry, are grouped together
as an "industry."
If a percentage restriction is adhered to at the time of an investment,
a later increase in percentage resulting from a change in values or assets
will not constitute a violation of that restriction.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states.
Should the Fund determine that a commitment is no longer in the best
interests of the Fund and its shareholders, the Fund reserves the right to
revoke the commitment by terminating the sale of Fund shares in the state
involved.
MANAGEMENT OF THE FUND
Board members and officers of the Fund, together with information as to
their principal business occupations during at least the last five years,
are shown below.
Board Members of the Fund
DAVID W. BURKE, Board Member. Chairman of the Board of Governors, an
independent board within the United States Information Agency, since
August 1995. From August 1994 to December 1994, Mr. Burke was a
Consultant to the Manager and, from October 1990 to August 1994, he was
Vice President and Chief Administrative Officer of the Manager. From
1977 to 1990, Mr. Burke was involved in the management of national
television news, as Vice President and Executive Vice President of ABC
News, and subsequently as President of CBS News. He is 61 years old
and his address is 197 Eighth Street, Charleston, Massachusetts 02642.
HODDING CARTER, III, Board Member. Chairman of MainStreet, a television
production company. Since 1995, Knight Professor of public affairs
journalism at the University of Maryland. From 1985 to 1986, he was
editor and chief correspondent of "Capitol Journal," a weekly Public
Broadcasting System ("PBS") series on Congress. From 1981 to 1984, he
was anchorman and chief correspondent for PBS' "Inside Story," a
regularly scheduled half-hour critique of press performance. From 1977
to July 1980, Mr. Carter served as Assistant Secretary of State for
Public Affairs and as Department of State spokesman. He is 62 years
old and his address is c/o MainStreet, 918 Sixteenth Street, N.W.,
Washington, D.C. 20006.
JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman of
the Board of various funds in the Dreyfus Family of Funds. He is also
a Director of Staffing Resources, Inc., a temporary placement agency;
The Muscular Dystrophy Association; Health Plan Services Corporation, a
provider of marketing, administrative and risk management services to
health and other benefit programs; The Noel Group, Inc., a venture
capital company; and Carlyle Industries (formerly, Belding Heminway,
Inc.), a button packager and distributor; and Century Business
Services, Inc., a company that provides various outsourcing functions
for small and medium sized businesses. For more than five years prior
to January 1995, he was President, a director and, until August 1994,
Chief Operating Officer of the Manager and Executive Vice President and
a director of Dreyfus Service Corporation, a wholly-owned subsidiary of
the Manager and, until August 24, 1994, the Fund's distributor. From
August 1994 to December 31, 1994, he was a director of Mellon Bank
Corporation. He is 54 years old and his address is 200 Park Avenue,
New York, New York 10166.
EHUD HOUMINER, Board Member. Professor and Executive-in-Residence at the
Columbia Business School, Columbia University Since January 1996,
Principal of Lear, Javits, and Associates, a management consultant
firm. He also is a Director of Avnet Inc. and Five Star Food Service,
Inc. He is 57 years old and his address is c/o Columbia Business
School, Columbia University, Uris Hall, Room 526, New York, New York
10027.
RICHARD C. LEONE, Board Member. President of The Twentieth Century Fund,
Inc., a tax exempt research foundation engaged in the study of
economic, foreign policy and domestic issues. From April 1990 to March
1994, he was Chairman and, from April 1988 to March 1994, a
Commissioner of The Port Authority of New York and New Jersey. A
member in 1985, and from January 1986 to January 1989, Managing
Director of Dillon, Read & Co. Inc. Mr. Leone is also a director of
Dynex, Inc. He is 57 years old and his address is 41 East 70th Street,
New York, New York 10021.
HANS C. MAUTNER, Board Member. Chairman, Trustee and Chief Executive
Officer of Corporate Property Investors, a real estate investment
company. Since January 1986, a Director of Julius Baer Investment
Management, Inc., a wholly-owned subsidiary of Julius Baer Securities,
Inc. He is 60 years old and his address is 305 East 47th Street, New
York, New York 10017.
ROBIN A. SMITH, Board Member. Since March 1996, President of The Boisi
Family Foundation, a private family foundation devoted to youths and
higher education located in New York City and Assistant to the Chief
Executive Officer of The Beacon Group, LLC, a private equity firm and
advisory partnership. 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
34 years old and her address is 1041 Crane Road, Atlanta, Georgia
30324.
JOHN E. ZUCCOTTI, Board Member. Since November 1996, Chairman and Chief
Executive Officer of World Financial Properties, Inc. From 1990 to
November 1996, he was President and Chief Executive Officer of Olympia
& York Companies (U.S.A.) and a member of its Board of Directors since
the inception of a Board in November 1996. 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. He was 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 Olympia & York Companies (U.S.A.),
Starrett Housing Corporation, a construction, development and real
estate properties corporation, and Capstone Pharmacy Services, Inc. He
is 60 years old and his address is One Liberty Plaza, New York, New
York 10006
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, 1997, 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, 1996, is as follows:
Total
Compensation from
Aggregate Fund and Fund
Name of Board Compensation from Complex Paid to
Member Fund* Board Member
David W. Burke $8,500 $232,899 (51)
Hodding Carter, III $7,500 $ 39,325 (7)
Joseph S. DiMartino $10,625 $517,075 (93)
Ehud Houminer $8,500 $ 48,769 (11)
Richard C. Leone $6,500 $ 38,825 (7)
Hans C. Mautner $8,000 $ 36,325 (7)
Robin A. Smith $7,500 $ 39,325 (7)
John E. Zuccotti $6,500 $ 39,325 (7)
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $9,615 for all Board members as a group.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive
Officer, Chief Compliance Officer and a director of the Distributor and
Funds Distributor, Inc., the ultimate parent of which is Boston
Institutional Group, Inc., and an officer of other investment companies
advised or administered by the Manager. She is 40 years old.
RICHARD W. INGRAM, Vice President and Assistant Treasurer. Executive Vice
President of the Distributor and Funds Distributor, Inc., and an
officer of other investment companies advised or administered by the
Manager. From March 1994 to November 1995, he was Vice President and
Division Manager for First Data Investor Services Group. From 1989 to
1994, he was Vice President, Assistant Treasurer and Tax Director -
Mutual Funds at The Boston Company, Inc. He is 42 years old.
MARY A. NELSON, Vice President and Assistant Treasurer. Vice President of
the Distributor and Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
September 1989 to July 1994, she was an Assistant Vice President and
Client Manager for The Boston Company, Inc. She is 33 years old.
MICHAEL. S. PETRUCELLI. Vice President and Assistant Treasurer, Senior Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
December 1989 through November 1996, he was employed by GE Investments
where he held various financial, business development and compliance
positions. He also served as Treasurer of the GE Funds and as Director
of GE Investment Services. He is 36 years old.
JOSEPH F. TOWER, III, Vice President and Assistant Treasurer. Senior Vice
President, Treasurer, Chief Financial Officer and a director of the
Distributor and Funds Distributor, Inc., 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 35 years old.
ELIZABETH A. KEELEY, Vice President and Assistant Secretary. Vice President
of the Distributor and Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. She has
been employed by the Distributor since September 1995. She is 28 years
old.
DOUGLAS C. CONROY, Vice President and Assistant Secretary. Assistant Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
April 1993 to January 1995, he was a Senior Fund Accountant for
Investors Bank & Trust Company. From December 1991 to March 1993, he
was employed as a Fund Accountant at The Boston Company, Inc. He is 28
years old.
The address of each of the Fund's officers is 200 Park Avenue, New
York, New York 10166.
The Fund's Board members and officers, as a group, owned less than 1%
of the Fund's voting securities outstanding on December 15, 1997.
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 27, 1997. The Agreement is terminable without penalty, on
60 days' notice, by the Fund's Board or by vote of the holders of a majority
of the Fund's outstanding voting shares or, on not less than 90 days'
notice, by the Manager. The Agreement will terminate automatically in the
event of its assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of the Manager: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E.
Canter, Vice Chairman, Chief Investment Officer and a director; Lawrence S.
Kash, Vice Chairman-Distribution and a director; William T. Sandalls, Jr.,
Senior Vice President and Chief Financial Officer; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Patrice M. Kozlowski, Vice
President-Corporate Communications; Mary Beth Leibig, Vice President-Human
Resources; Jeffrey N. Nachman, Vice President-Mutual Fund Accounting; Andrew
S. Wasser, Vice President-Information Systems; William V. Healey, Assistant
Secretary; and Mandell L. Berman, Burton C. Borgelt, Frank V. Cahouet and
Richard F. Syron, 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,W. Michael Petty, Jill C. Shaffro, 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 and for other funds advised by the
Manager.
The Manager maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time
deems appropriate.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The
expenses borne by the Fund include without limitation: taxes, interest,
loan commitment fees, interest and distributions paid on securities sold
short, brokerage fees and commissions, if any, fees of Board members who are
not officers, directors, employees or holders of 5% or more of the
outstanding voting securities of the Manager, Securities and Exchange
Commission fees, state Blue Sky qualification fees, advisory fees, charges
of custodians, transfer and dividend disbursing agents' fees, certain
insurance premiums, industry association fees, outside auditing and legal
expenses, costs of independent pricing services, costs of maintaining
corporate existence, costs attributable to investor services (including,
without limitation, telephone and personnel expenses), costs of
shareholders' reports and corporate meetings, costs of preparing and
printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders, and any
extraordinary expenses.
As compensation for the Manager's services, the Fund has agreed to pay
the Manager a monthly management fee at the annual rate of .60 of 1% of the
value of the Fund's average daily net assets. This amount is reduced,
pursuant to the terms of a Stipulation of Settlement of Litigation, which
became effective on October 15, 1988, by annual amounts ranging from $90,000
per year to $1 million per year, depending on the size of the Fund's average
daily net assets, for a period of 10 years from the effective date. For the
fiscal years ended August 31, 1995, 1996 and 1997, the management fees
payable by the Fund amounted to $22,188,564, $22,580,334 and $21,009,416,
respectively, which fees were reduced by $350,000 for fiscal years ended
August 31, 1995 and 1996 and by $300,000 for fiscal year ended August 31,
1997 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, 1997, no expense reimbursements were made pursuant to such
limitation.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of the Fund's net assets increases.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Shares."
The Distributor. The Distributor serves as the Fund's distributor on a
best efforts basis pursuant to an agreement which is renewable annually.
The Distributor also acts as distributor for the other funds in the Dreyfus
Family of Funds and for certain other investment companies.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 p.m., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York Stock
Exchange are open for business will be credited to the shareholder's Fund
account on the next bank business day following such purchase order.
Purchase orders made after 4:00 p.m., New York time, on any business day the
Transfer Agent and the New York Stock Exchange are open for business, or
orders made on Saturday, Sunday or any Fund holiday (e.g., when the New York
Stock Exchange is not open for business), will be credited to the
shareholder's Fund account on the second business day following such
purchase order. To qualify to use the Dreyfus TeleTransfer Privilege, the
initial payment for purchase of Fund shares must be drawn on, and redemption
proceeds paid to, the same bank and account as are designated on the Account
Application or Shareholder Services Form on file. If the proceeds of a
particular redemption are to be wired to an account at any other bank, the
request must be in writing and signature-guaranteed. See "Redemption of
Shares--Dreyfus TeleTransfer Privilege."
Transactions Through Securities Dealers. Fund shares may be purchased
and redeemed through securities dealers which may charge a fee for such
services. Some dealers will place the Fund's shares in an account with
their firm. Dealers also may require that the customer invest more than the
$1,000 minimum investment; the customer not take physical delivery of share
certificates; the customer not request redemption checks to be issued in the
customer's name; fractional shares not be purchased; or other conditions.
There are no sales or service charges by the Fund or the Distributor
although investment dealers, banks and other financial institutions may make
reasonable charges to investors for their services. The services provided
and fees therefor are established by each institution acting independently
of the Fund. The Fund has been given to understand that these fees may be
charged for customer services including, but not limited to, same-day
investment of client funds; same-day access to client funds; advice to
customers about the status of their accounts, yield currently being paid or
income earned to date; provision of periodic account statements showing
security and money market positions; other services available from the
dealer, bank or other financial institution; and assistance with inquiries
related to their investments. Any such fees will be deducted monthly from
the investor's account, which on smaller accounts could constitute a
substantial portion of distributions. Small, inactive, long-term accounts
involving monthly service charges may not be in the best interest of
investors. Investors should be aware that they may purchase shares of the
Fund directly from the Fund without the imposition of any maintenance or
service charges, other than those already described herein.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.
SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services
Plan."
The Fund has adopted a Shareholder Services Plan (the "Plan") pursuant
to which the Fund reimburses Dreyfus Service Corporation for certain
allocated expenses of providing personal services and/or maintaining
shareholder accounts. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder inquiries
regarding the Fund and providing reports and other information, and services
related to the maintenance of shareholder accounts.
A quarterly report of the amounts expended under the Plan, and the
purposes for which such expenditures were incurred, must be made to the
Fund's Board for its review. In addition, the Plan provides that material
amendments of the Plan must be approved by the Fund's Board, and by the
Board members who are not "interested persons" (as defined in the 1940 Act)
of the Fund and have no direct or indirect financial interest in the
operation of the Plan by vote cast in person at a meeting called for the
purpose of considering such amendments. The Plan is subject to annual
approval by such vote cast in person at a meeting called for the purpose of
voting on the Plan. The Plan was last so approved on October 27, 1997. 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, 1997, $1,983,210 was chargeable to
the Fund under the Plan.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Shares."
Redemption Fee. The Fund will deduct a redemption fee equal to .10% of
the net asset value of Fund shares redeemed (including redemptions through
the use of the Fund Exchanges service) less than 15 days following the
issuance of such shares. The redemption fee will be deducted from the
redemption proceeds and retained by the Fund.
No redemption fee will be charged upon the redemption or exchange of
shares (1) through the Fund's Check Redemption Privilege, Automatic
Withdrawal Plan or Dreyfus Auto-Exchange Privilege, (2) through accounts
that are reflected on the records of the Transfer Agent as omnibus accounts
approved by Dreyfus Service Corporation, (3) through accounts established by
securities dealers, banks or other financial institutions approved by
Dreyfus Service Corporation that utilize the National Securities Clearing
Corporation's networking system, or (4) acquired through the reinvestment of
dividends or capital gains distributions. The redemption fee may be waived,
modified or terminated at any time.
Check Redemption Privilege. The Fund provides Redemption Checks
("Checks") automatically upon opening an account, unless the investor
specifically refuses the Privilege by checking the applicable "No" box on
the Account Application. Checks will be sent only to the registered owner(s)
of the account and only to the address of record. The Check Redemption
Privilege may be established from existing account by a separate signed
Shareholder Services Form. The Account Application or Shareholder Services
Form must be manually signed by the registered owner(s). Checks are drawn
on the investor's Fund account and 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, telephone or letter 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 borne by the investor. Immediate notification by the
correspondent bank to the investor's bank is necessary to avoid a delay in
crediting the funds to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
--------------------- -------------------------
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at
1-800-654-7171, toll free. Investors should advise the operator that the
above transmittal code must be used and should also inform the operator of
the Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
Dreyfus TeleTransfer Privilege. Investors should be aware that if they
have also selected the Dreyfus TeleTransfer Privilege, any request for a
wire redemption will be effected as a Dreyfus TeleTransfer transaction
through the Automated Clearing House ("ACH") system unless more prompt
transmittal specifically is requested. Redemption proceeds will be on
deposit in the investor's account at an ACH member bank ordinarily two
business days after receipt of the redemption request. See "Purchase of
Shares--Dreyfus TeleTransfer Privilege."
Stock Certificates; Signatures. Any stock certificate representing
Fund shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP"), and the Stock Exchanges Medallion Program.
Guarantees must be signed by an authorized signatory of the guarantor and
"Signature-Guaranteed" must appear with the signature. The Transfer Agent
may request additional documentation from corporations, executors,
administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular
verification. For more information with respect to signature-guarantees,
please call one of the telephone numbers listed on the cover.
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Securities and Exchange
Commission. In the case of requests for redemption in excess of such
amount, the Fund's Board reserves the right to make payments in whole or in
part in securities or other assets of the Fund in case of an emergency or
any time a cash distribution would impair the liquidity of the Fund to the
detriment of the existing shareholders. In such event, the securities would
be valued in the same manner as the Fund's portfolio is valued. If the
recipient sold such securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (b)
when trading in the markets the Fund ordinarily utilizes is restricted, or
when an emergency exists as determined by the Securities and Exchange
Commission so that disposal of the Fund's investments or determination of
its net asset value is not reasonably practicable, or (c) for such other
periods as the Securities and Exchange Commission by order may permit to
protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Fund Exchanges. Shares of other funds purchased by exchange will be
purchased on the basis of relative net asset value per share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged for
shares of other funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of any funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a sales
load.
D. Shares of any funds purchased with a sales load, shares of
any funds acquired by a previous exchange from shares purchased
with a sales load, and additional shares acquired through
reinvestment of dividends or distributions of any such funds
(collectively referred to herein as "Purchased Shares") may be
exchanged for shares of other funds sold with a sales load
(referred to herein as "Offered Shares"), provided that, if the
sales load applicable to the Offered Shares exceeds the maximum
sales load that could have been imposed in connection with the
Purchased Shares (at the time the Purchased Shares were acquired),
without giving effect to any reduced loads, the difference will be
deducted.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number.
To request an exchange, an investor must give exchange instructions to
the Transfer Agent in writing or by telephone. The ability to issue
exchange instructions by telephone is given to all Fund shareholders
automatically, unless the investor checks the applicable "No" box on the
Account Application, indicating that the investor specifically refuses this
Privilege. By using the Telephone Exchange Privilege, the investor
authorizes the Transfer Agent to act on telephonic instructions (including
over The Dreyfus Touchr automated telephone system) from any person
representing himself or herself to be the investor, and reasonably believed
by the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchanges.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made. The minimum
initial investment is $750 for Dreyfus sponsored Keogh Plans, IRAs
(including regular IRAs, spousal IRAs for a non-working spouse, Roth IRAs,
IRAs setup under a Simplified Employee Pension Plan ("SEP-IRAs"), and
rollover IRAs), and 403 (b)(7) plans with only one participant, and $500 for
Dreyfus-Sponsored Education IRAs. To exchange shares held in corporate
plans, 403(b)(7) Plans and SEP-IRAs with more than one participant, the
minimum initial investment is $100 if the plan has at least $2,500 invested
among the funds in the Dreyfus Family of Funds. To exchange shares held in
personal retirement plans, the shares exchanged must have a current value of
at least $100.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund, shares
of another fund in the Dreyfus Family of Funds. This Privilege is available
only for existing accounts. Shares will be exchanged on the basis of
relative net asset value as described above under "Fund Exchanges."
Enrollment in or modification or cancellation of this Privilege is effective
three business days following notification by the investor. An investor
will be notified if his account falls below the amount designated to be
exchanged under this Privilege. In this case, an investor's account will
fall to zero unless additional investments are made in excess of the
designated amount prior to the next Auto-Exchange Transaction. Shares held
under IRA and other retirement plans are eligible for this Privilege.
Exchanges of IRA shares may be made between IRA accounts and from regular
accounts to IRA accounts, but not from IRA accounts to regular accounts.
With respect to all other retirement accounts, exchanges may be made only
among those accounts.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchanges service or
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. Automatic Withdrawal may be terminated at any time by the
investor, the Fund or the Transfer Agent. Shares for which stock
certificates have been issued may not be redeemed through the Automatic
Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest automatically their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of another fund in the
Dreyfus Family of Funds of which the investor is a shareholder. Shares of
other funds purchased pursuant to this privilege will be purchased on the
basis of relative net asset value per share as follows:
A. Dividends and distributions paid by a fund may be
invested without imposition of a sales load in shares of
other funds that are offered without a sales load.
B. Dividends and distributions paid by a fund which
does not charge a sales load may be invested in shares
of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a sales
load may be invested in shares of other funds sold with a sales
load (referred to herein as "Offered Shares"), provided
that, if the sales load applicable to the Offered Shares exceeds
the maximum sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any
reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Shares."
Valuation of Portfolio Securities. The Fund's investments are valued
each business day by an independent pricing service (the "Service") approved
by the Fund's Board. When, in the judgment of the Service, quoted bid
prices for investments are readily available and are representative of the
bid side of the market, these investments are valued at the mean between the
quoted bid prices (as obtained by the Service from dealers in such
securities) and asked prices (as calculated by the Service based upon its
evaluation of the market for such securities). Other investments (which
constitute a majority of the portfolio securities) are carried at fair value
as determined by the Service, based on methods which include consideration
of: yields or prices of municipal bonds of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. The Service may employ electronic data processing techniques
and/or a matrix system to determine valuations. The Service's procedures
are reviewed by the Fund's officers under the general supervision of the
Fund's Board. Expenses and fees, including the management fee (reduced by
the expense limitation, if any), are accrued daily and are taken into
account for the purpose of determining the net asset value of Fund shares.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day, Martin
Luther King, Jr. 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, 1996 and 1997 was 64.48% and 66.89%, 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, 1997, 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, override or modify 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.
The Taxpayer Relief Act of 1997 included constructive sale provisions
that generally will apply if the Fund either (1) holds an appreciated
financial position with respect to stock, certain debt obligations, or
partnership interests ("appreciated financial position") and then enters
into a short sale, futures, forward, or offsetting notional principal
contract (collectively, a "Contract") respecting the same or substantially
identical property or (2) holds an appreciated financial position that is a
Contract and then acquires property that is the same as, or substantially
identical to, the underlying property. In each instance, with certain
exceptions, the Fund generally will be taxed as if the appreciated financial
position were sold at it fair market value on the date the Fund enters into
the financial position or acquires the property, respectively. Transactions
that are identified hedging or straddle transactions under other provisions
of the Code can be subject to the constructive sale provisions.
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, 1997
was 4.83%. 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 1997 Federal income tax rate of 39.60%, the Fund's tax
equivalent yield for the 30-day period ended August 31, 1997 was 8.00%. 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, 1997 was 8.24%, 5.96% and 7.48%, 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, 1997 was 299.21%. Total return
is calculated by subtracting the amount of the Fund's net asset value per
share at the beginning of a stated period from the net asset value per share
at the end of the period (after giving effect to the reinvestment of
dividends and distributions during the period), and dividing the result by
the net asset value per share at the beginning of the period.
The Fund may use hypothetical tax equivalent yields or charts in its
advertising. These hypothetical yields or charts will be used for
illustrative purposes only and are not indicative of the Fund's past or
future performance.
Advertising materials for the Fund also may refer to or discuss then-
current or past economic conditions, developments and/or events, including
those relating to actual or proposed tax legislation, and may refer to
statistical or other information concerning trends relating to investment
companies, as compiled by industry associations such as the Investment
Company Institute, and may refer to Morningstar ratings and related analysis
supporting the rating.
The Fund may advertise that it was established in 1976 as the first
incorporated tax exempt fund, and may discuss historical events and
circumstances surrounding its formation. The Fund also may advertise the
total net assets invested in tax exempt funds throughout the investment
company industry.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio managers and may refer
to, or include commentary by, a portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Fund shares are of one class and have equal rights as to dividends and in
liquidation. Shares have no preemptive, subscription or conversion rights
and are freely transferable.
The Fund sends annual and semi-annual financial statements to all its
shareholders
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN,
COUNSEL AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, P.O.
Box 9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Fund,
the Transfer Agent arranges for the maintenance of shareholder account
records for the Fund, the handling of certain communications between
shareholders and the Fund and the payment of dividends and distributions
payable by the Fund. For these services, the Transfer Agent receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Fund during the month, and is reimbursed for certain out-
of-pocket expenses. For the fiscal year ended August 31, 1997, the Fund
paid the Transfer Agent $1,069,603.
The Bank of New York, 90 Washington Street, New York, New York 10286,
is the Fund's custodian.
Stroock & Stroock & Lavan, 180 Maiden Lane, New York, New York 10038-
4982, as counsel for the Fund, has rendered its opinion as to certain legal
matters regarding the due authorization and valid issuance of the shares
being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT AUDITORS
The Fund's Annual Report to Shareholders for the fiscal year ended
August 31, 1997 is a separate document supplied with this Statement of
Additional Information, and the financial statements, accompanying notes,
and report of independent auditors appearing therein are incorporated by
reference into this Statement of Additional Information.
APPENDIX
Description of certain S&P, Moody's and Fitch ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable, and will include:
(1) likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature of and provisions of the obligation; and
(3) protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A
Principal and interest payments on bonds in this category are regarded
as safe. This rating describes the third strongest capacity for payment of
debt service. It differs from the two higher ratings because:
General Obligation Bonds -- There is some weakness in the local
economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse
circumstances, any one such weakness might impair the ability of the issuer
to meet debt obligations at some future date.
Revenue Bonds -- Debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management performance
appears adequate.
BBB
Of the investment grade, this is the lowest.
General Obligation Bonds -- Under certain adverse conditions, several
of the above factors could contribute to a lesser capacity for payment of
debt service. The difference between "A" and "BBB" rating is that the
latter shows more than one fundamental weakness, or one very substantial
fundamental weakness, whereas the former shows only one deficiency among the
factors considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the pledged
revenues could show substantial variations, with the revenue flow possibly
being subject to erosion over time. Basic security provisions are no more
than adequate. Management performance could be stronger.
BB, B, CCC, CC, C
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and
repay principal. BB indicates the least degree of speculation and C the
highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
BB
Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payment.
B
Debt rated B has a greater vulnerability to default but presently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC
Debt rated CCC has a current identifiable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions to
meet timely payments of principal. In the event of adverse business,
financial or economic conditions, it is not likely to have the capacity to
pay interest and repay principal.
CC
The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C
The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating.
D
Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by
the addition of a plus or minus designation to show relative standing within
the major ratings categories.
Municipal Note Ratings
SP-1
The issuers of these municipal notes exhibit very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics are given a plus (+) designation.
SP-2
The issuers of these municipal notes exhibit satisfactory capacity to
pay principal and interest.
Commercial Paper Ratings
The designation A-1 by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those
issues determined to possess overwhelming safety characteristics are denoted
with a plus sign (+) designation. Capacity for timely payment on issues
with an A-2 designation is strong. However, the relative degree of safety
is not as high as for issues designated A-1.
Moody's
Municipal Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa
Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca
Bonds which are rated Ca present obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Generally, Moody's provides either a generic rating or a rating with a
numerical modifier of 1 for bonds in each of the generic rating categories
Aa, A, Baa, Ba and B. Moody's also provides numerical modifiers of 2 and 3
in each of these categories for bond issues in the health care, higher
education and other not-for-profit sectors; the modifier 1 indicates that
the issue ranks in the higher end of its generic category; the modifier 2
indicates that the issue is in the mid-range of the generic category; and
the modifier 3 indicates that the issue is in the low end of the generic
category.
Municipal Note Ratings
Moody's ratings for state municipal notes and other short-term loans
are designated Moody's Investment Grade (MIG). Such ratings recognize the
differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower and short-term cyclical elements are
critical in short-term ratings, while other factors of major importance in
bond risk, long-term secular trends for example, may be less important over
the short run.
A short-term rating may also be assigned on an issue having a demand
feature. Such ratings will be designated as VMIG or, if the demand feature
is not rated, as NR. Short-term ratings on issues with demand features are
differentiated by the use of the VMIG symbol to reflect such characteristics
as payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to
the fact that the source of payment may be limited to the external liquidity
with no or limited legal recourse to the issuer in the event the demand is
not met.
Moody's short-term ratings are designated Moody's Investment Grade as
MIG 1 or VMIG 1 through MIG 4 or VMIG 4. As the name implies, when Moody's
assigns a MIG or VMIG rating, all categories define an investment grade
situation.
MIG 1/VMIG 1
This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2
This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
MIG 3/VMIG 3
This designation denotes favorable quality. All security elements are
accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access
for refinancing is likely to be less well established.
MIG 4/VMIG 4
This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and although not
distinctly or predominantly speculative, there is specific risk.
Commercial Paper Rating
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity for
repayment of short-term promissory obligations, and ordinarily will be
evidenced by leading market positions in well established industries, high
rates of return on funds employed, conservative capitalization structures
with moderate reliance on debt and ample asset protection, broad margins in
earnings coverage of fixed financial charges and high internal cash
generation, and well established access to a wide range of financial markets
and assured sources of alternative liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2) have a
strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but
to a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Fitch
Municipal Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to
meet the obligations of a specific debt issue or class of debt. The ratings
take into consideration special features of the issue, its relationship to
other obligations of the issuer, the current financial condition and
operative performance of the issuer and of any guarantor, as well as the
political and economic environment that might affect the issuer's financial
strength and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A
Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
impact on these bonds, and therefore, impair timely payment. The likelihood
that the ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.
BB
Bonds rated BB are considered speculative. The obligor's ability to
pay interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt service
requirements.
B
Bonds rated B are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC
Bonds rated CCC have certain identifiable characteristics, which, if
not remedied, may lead to default. The ability to meet obligations requires
an advantageous business and economic environment.
CC
Bonds rated CC are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C
Bonds rated C are in imminent default in payment of interest or
principal.
DDD, DD and D
Bonds rated DDD, DD and D are in actual or imminent default of interest
and/or principal payments. Such bonds are extremely speculative and should
be valued on the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. DDD represents the highest potential for
recovery on these bonds and D represents the lowest potential for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to indicate
the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the DDD, DD, or D categories.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
Fitch short-term ratings are as follows:
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-
1+.
F-2
Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payments, but the margin of safety is not as
great as the F-1+ and F-1 categories.
Demand Bond or Notes Ratings
Certain demand securities empower the holder at his option to require
the issuer, usually through a remarketing agent, to repurchase the security
upon notice at par with accrued interest. This is also referred to as a put
option. The ratings of the demand provision may be changed or withdrawn at
any time if, in Fitch's judgment, changing circumstances warrant such
action.
Fitch demand provision ratings carry the same symbols and related
definitions as its short-term ratings.
DREYFUS MUNICIPAL BOND FUND, INC.
PART C. OTHER INFORMATION
_________________________
Item 24. Financial Statements and Exhibits. - List
_______ _________________________________________
(a) Financial Statements:
Included in Part A of the Registration Statement
Condensed Financial Information for each of the ten years in
the period ended August 31, 1997.
Included in Part B of the Registration Statement:
Statement of Investments-- August 31, 1997.*
Statement of Assets and Liabilities--August 31, 1997.*
Statement of Operations--year ended August 31, 1997.*
Statement of Changes in Net Assets--for each of the years
ended August 31, 1996 and 1997.*
Notes to Financial Statements.*
Report of Ernst & Young LLP, Independent Auditors, dated
October 3, 1997.*
* Incorporated by reference to the Registrant's Annual Report to
Shareholders.
All schedules and other financial statement information, for which provision
is made in the applicable accounting regulations of the Securities and
Exchange Commission, are either omitted because they are not required under
the related instructions, they are inapplicable, or the required information
is presented in the financial statements or notes thereto which are included
in Part B of the Registration Statement.
Item 24. Financial Statements and Exhibits. - List (continued)
_______ _____________________________________________________
(b) Exhibits:
(1)(a) Articles of Incorporation and Articles of Amendment are
incorporated by reference to Exhibit (1)(a) of Post-Effective
Amendment No. 35 to the Registrant on Form N-1A, filed on October
27, 1995.
(b) The Registrant's Articles of Amendment are incorporated by
reference to Exhibit (1)(c) of Post-Effective Amendment No. 33 to
the Registrant on Form N-1A, filed on October 29, 1993.
(2) By-Laws are incorporated by reference to Exhibit (2) of Post-
Effective Amendment No. 35 to the Registrant on Form N-1A, filed
on October 27, 1995.
(5) The Registrant's Management Agreement dated August 24, 1994
is incorporated by reference to Exhibit (5) of Post-Effective
Amendment No. 34 to the Registration Statement on Form N-1A, filed
on October 28, 1994.
(6)(a) The Registrant's Distribution Agreement dated August 24, 1994 is
incorporated by reference to Exhibit (6)(a) of Post-Effective
Amendment No. 34 to the Registration Statement on Form N-1A, filed
on October 28, 1994.
(8)(a) Amended and Restated Custody Agreement are incorporated by
reference to Exhibit (8)(a) of Post-Effective Amendment No. 35 to
the Registrant on Form N-1A, filed on October 27, 1995.
(8)(b) The Registrant's Sub-Custodian Agreements are incorporated by
reference to Exhibit 8(b) of Post-Effective Amendment No. 34 to the
Registration Statement on Form N-1A, filed on October 28, 1994.
(9) The Registrant's Shareholder Services Plan dated October 24, 1994
is incorporated by reference to Exhibit (9) of Post-Effective
Amendment No. 34 to the Registration Statement on Form N-1A, filed
on October 28, 1994.
(10) Opinion and consent of Registrant's counsel are incorporated by
reference to Exhibit (10) of Post-Effective Amendment No. 35 to the
Registrant on Form N-1A, filed on October 27, 1995.
(11) Consent of Independent Auditors.
(16) Schedules of Computation of Performance Data are incorporated by
reference to Exhibit (16) of Post-Effective Amendment No. 33 to the
Registration Statement on Form N-1A, filed on October 29,
1993.
(17) Financial Data Schedule.
Item 24. Financial Statements and Exhibits. - List (continued)
_______ _____________________________________________________
Other Exhibits
______________
(a) Powers of Attorney are incorporated by reference to Other
Exhibits (a) of Post-Effective Amendment No. 38 to the
Registration Statement on Form N-1A, filed on December
18, 1996.
(b) Certificate of Corporate Secretary are incorporated by
reference to Other Exhibits (b) of Post-Effective
Amendment No. 38 to the Registration Statement on Form N-
1A, filed on December 18, 1996.
Item 25. Persons Controlled by or under Common Control with Registrant.
_______ ______________________________________________________________
Not Applicable
Item 26. Number of Holders of Securities.
_______ ________________________________
(1) (2)
Number of Record
Title of Class Holders as of December 15, 1997
______________ _______________________________
Common Stock 56,220
(Par value $.01)
Item 27. Indemnification
_______ _______________
The Statement as to the general effect of any contract,
arrangements or Statute under which a director, officer,
underwriter or affiliated person of the Registrant is insured or
indemnified in any manner against any liability which may be
incurred in such capacity, other than insurance provided any
director, officer, affiliated person or underwriter for their
own protection is incorporated by reference to Item 27 of Part C
of Post-Effective Amendment No. 38 to the Registration Statement
on Form N-1A, filed on December , 1996. Reference is also made
to the Distribution Agreement filed as Exhibit (6)(a) of Post-
Effective Amendment No. 34 to the Registration Statement on Form
N-1A, filed on October 28, 1994.
Item 28. Business and Other Connections of Investment Adviser.
_______ ____________________________________________________
The Dreyfus Corporation ("Dreyfus") and subsidiary
companies comprise a financial service organization whose
business consists primarily of providing investment management
services as the investment adviser, manager and distributor for
sponsored investment companies registered under the Investment
Company Act of 1940 and as an investment adviser to
institutional and individual accounts. Dreyfus also serves as
sub-investment adviser to and/or administrator of other
investment companies. Dreyfus Service Corporation, a wholly-
owned subsidiary of Dreyfus, serves primarily as a registered
broker-dealer of shares of investment companies sponsored by
Dreyfus and of other investment companies for which Dreyfus
acts as investment adviser, sub-investment adviser or
administrator. Dreyfus Management, Inc., another wholly-owned
subsidiary, provides investment management services to various
pension plans, institutions and individuals.
Item 28. Business and Other Connections of Investment Adviser (continued)
________ ________________________________________________________________
Officers and Directors of Investment Adviser
____________________________________________
Name and Position
with Dreyfus Other Businesses
_________________ ________________
MANDELL L. BERMAN Real estate consultant and private investor
Director 29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034;
Past Chairman of the Board of Trustees:
Skillman Foundation;
Member of The Board of Vintners Intl.
BURTON C. BORGELT Chairman Emeritus of the Board and
Director Past Chairman, Chief Executive Officer and
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405;
Director:
DeVlieg-Bullard, Inc.
1 Gorham Island
Westport, Connecticut 06880
Mellon Bank Corporation***;
Mellon Bank, N.A.***
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation***;
Mellon Bank, N.A.***;
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
W. KEITH SMITH Chairman and Chief Executive Officer:
Chairman of the Board The Boston Company****;
Vice Chairman of the Board:
Mellon Bank Corporation***;
Mellon Bank, N.A.***;
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
CHRISTOPHER M. CONDRON Vice Chairman:
President, Chief Mellon Bank Corporation***;
Executive Officer, The Boston Company****;
Chief Operating Deputy Director:
Officer and a Mellon Trust***;
Director Chief Executive Officer:
The Boston Company Asset Management,
Inc.****;
President:
Boston Safe Deposit and Trust Company****
STEPHEN E. CANTER Director:
Vice Chairman and The Dreyfus Trust Company++;
Chief Investment Officer, Formerly, Chairman and Chief Executive Officer:
and a Director Kleinwort Benson Investment Management
Americas Inc.*
LAWRENCE S. KASH Chairman, President and Chief
Vice Chairman-Distribution Executive Officer:
and a Director The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.**;
Director:
Dreyfus America Fund+++;
The Dreyfus Consumer Credit Corporation*;
The Dreyfus Trust Company++;
Dreyfus Service Corporation*;
President:
The Boston Company****;
Laurel Capital Advisors***;
Boston Group Holdings, Inc.;
Executive Vice President:
Mellon Bank, N.A.***;
Boston Safe Deposit and Trust
Company****
RICHARD F. SYRON Chairman of the Board and
Director Chief Executive Officer:
American Stock Exchange
86 Trinity Place
New York, New York 10006;
Director:
John Hancock Mutual Life Insurance Company
John Hancock Place, Box 111
Boston, Massachusetts, 02117;
Thermo Electron Corporation
81 Wyman Street, Box 9046
Waltham, Massachusetts 02254-9046;
American Business Conference
1730 K Street, NW, Suite 120
Washington, D.C. 20006;
Trustee:
Boston College - Board of Trustees
140 Commonwealth Ave.
Chestnut Hill, Massachusetts 02167-3934
WILLIAM T. SANDALLS, JR. Director:
Senior Vice President and Dreyfus Partnership Management, Inc.*;
Chief Financial Officer Seven Six Seven Agency, Inc.*;
Chairman and Director:
Dreyfus Transfer, Inc.
One American Express Plaza
Providence, Rhode Island 02903
President and Director:
Lion Management, Inc.*;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.*;
Vice President, Chief Financial Officer and
Director:
Dreyfus America Fund+++;
Vice President and Director:
The Dreyfus Consumer Credit Corporation*;
The Truepenny Corporation*;
Treasurer, Financial Officer and Director:
The Dreyfus Trust Company++;
Treasurer and Director:
Dreyfus Management, Inc.*;
Dreyfus Service Corporation*;
Formerly, President and Director:
Sandalls & Co., Inc.
MARK N. JACOBS Vice President, Secretary and Director:
Vice President, Lion Management, Inc.*;
General Counsel Secretary:
and Secretary The Dreyfus Consumer Credit Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.**;
Major Trading Corporation*;
The Truepenny Corporation*
PATRICE M. KOZLOWSKI None
Vice President-
Corporate Communications
MARY BETH LEIBIG None
Vice President-
Human Resources
JEFFREY N. NACHMAN President and Director:
Vice President-Mutual Fund Dreyfus Transfer, Inc.
Accounting One American Express Plaza
Providence, Rhode Island 02903
ANDREW S. WASSER Vice President:
Vice President-Information Mellon Bank Corporation***
Services
WILLIAM V. HEALEY President:
Assistant Secretary The Truepenny Corporation*;
Vice President and Director:
The Dreyfus Consumer Credit Corporation*;
Secretary and Director:
Dreyfus Partnership Management Inc.*;
Director:
The Dreyfus Trust Company++;
Assistant Secretary:
Dreyfus Service Corporation*;
Dreyfus Investment Advisors, Inc.*;
Assistant Clerk:
Dreyfus Insurance Agency of Massachusetts,
Inc.+++++
______________________________________
* The address of the business so indicated is 200 Park Avenue, New York,
New York 10166.
** The address of the business so indicated is 131 Second Street,
Lewes, Delaware 19958.
*** The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
**** The address of the business so indicated is One Boston Place,
Boston, Massachusetts 02108.
+ The address of the business so indicated is Atrium Building,
80 Route 4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144.
+++ The address of the business so indicated is 69, Route `d'Esch, L-
1470 Luxembourg.
++++ The address of the business so indicated is 69, Route `d'Esch, L-
2953 Luxembourg.
+++++ The address of the business so indicated is 53 State Street, Boston,
Massachusetts 02103.
Item 29. Principal Underwriters
________ ______________________
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or
exclusive distributor:
1) Comstock Partners Funds, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC GNMA Fund
7) Dreyfus BASIC Money Market Fund, Inc.
8) Dreyfus BASIC Municipal Fund, Inc.
9) Dreyfus BASIC U.S. Government Money Market Fund
10) Dreyfus California Intermediate Municipal Bond Fund
11) Dreyfus California Tax Exempt Bond Fund, Inc.
12) Dreyfus California Tax Exempt Money Market Fund
13) Dreyfus Cash Management
14) Dreyfus Cash Management Plus, Inc.
15) Dreyfus Connecticut Intermediate Municipal Bond Fund
16) Dreyfus Connecticut Municipal Money Market Fund, Inc.
17) Dreyfus Florida Intermediate Municipal Bond Fund
18) Dreyfus Florida Municipal Money Market Fund
19) The Dreyfus Fund Incorporated
20) Dreyfus Global Bond Fund, Inc.
21) Dreyfus Global Growth Fund
22) Dreyfus GNMA Fund, Inc.
23) Dreyfus Government Cash Management
24) Dreyfus Growth and Income Fund, Inc.
25) Dreyfus Growth and Value Funds, Inc.
26) Dreyfus Growth Opportunity Fund, Inc.
27) Dreyfus Income Funds
28) Dreyfus Institutional Money Market Fund
29) Dreyfus Institutional Short Term Treasury Fund
30) Dreyfus Insured Municipal Bond Fund, Inc.
31) Dreyfus Intermediate Municipal Bond Fund, Inc.
32) Dreyfus International Funds, Inc.
33) Dreyfus Investment Grade Bond Funds, Inc.
34) The Dreyfus/Laurel Funds, Inc.
35) The Dreyfus/Laurel Funds Trust
36) The Dreyfus/Laurel Tax-Free Municipal Funds
37) Dreyfus LifeTime Portfolios, Inc.
38) Dreyfus Liquid Assets, Inc.
39) Dreyfus Massachusetts Intermediate Municipal Bond Fund
40) Dreyfus Massachusetts Municipal Money Market Fund
41) Dreyfus Massachusetts Tax Exempt Bond Fund
42) Dreyfus MidCap Index Fund
43) Dreyfus Money Market Instruments, Inc.
44) Dreyfus Municipal Cash Management Plus
45) Dreyfus Municipal Money Market Fund, Inc.
46) Dreyfus New Jersey Intermediate Municipal Bond Fund
47) Dreyfus New Jersey Municipal Bond Fund, Inc.
48) Dreyfus New Jersey Municipal Money Market Fund, Inc.
49) Dreyfus New Leaders Fund, Inc.
50) Dreyfus New York Insured Tax Exempt Bond Fund
51) Dreyfus New York Municipal Cash Management
52) Dreyfus New York Tax Exempt Bond Fund, Inc.
53) Dreyfus New York Tax Exempt Intermediate Bond Fund
54) Dreyfus New York Tax Exempt Money Market Fund
55) Dreyfus 100% U.S. Treasury Intermediate Term Fund
56) Dreyfus 100% U.S. Treasury Long Term Fund
57) Dreyfus 100% U.S. Treasury Money Market Fund
58) Dreyfus 100% U.S. Treasury Short Term Fund
59) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
60) Dreyfus Pennsylvania Municipal Money Market Fund
61) Dreyfus Premier California Municipal Bond Fund
62) Dreyfus Premier Equity Funds, Inc.
63) Dreyfus Premier International Growth Fund, Inc.
64) Dreyfus Premier GNMA Fund
65) Dreyfus Premier Worldwide Growth Fund, Inc.
66) Dreyfus Premier Insured Municipal Bond Fund
67) Dreyfus Premier Municipal Bond Fund
68) Dreyfus Premier New York Municipal Bond Fund
69) Dreyfus Premier State Municipal Bond Fund
70) Dreyfus Premier Value Fund
71) Dreyfus S&P 500 Index Fund
72) Dreyfus Short-Intermediate Government Fund
73) Dreyfus Short-Intermediate Municipal Bond Fund
74) The Dreyfus Socially Responsible Growth Fund, Inc.
75) Dreyfus Stock Index Fund, Inc.
76) Dreyfus Tax Exempt Cash Management
77) The Dreyfus Third Century Fund, Inc.
78) Dreyfus Treasury Cash Management
79) Dreyfus Treasury Prime Cash Management
80) Dreyfus Variable Investment Fund
81) Dreyfus Worldwide Dollar Money Market Fund, Inc.
82) General California Municipal Bond Fund, Inc.
83) General California Municipal Money Market Fund
84) General Government Securities Money Market Fund, Inc.
85) General Money Market Fund, Inc.
86) General Municipal Bond Fund, Inc.
87) General Municipal Money Market Fund, Inc.
88) General New York Municipal Bond Fund, Inc.
89) General New York Municipal Money Market Fund
(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
__________________ ___________________________ ______________
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Compliance Treasurer Officer
Joseph F. Tower, III+ Director, Senior Vice President, Vice President
Tresurer and Chief Financial Officer and Assistant
Treasurer
Richard W. Ingram Executive Vice President Vice President
and Assistant
Treasurer
Elizabeth A. Keeley++ Vice President Vice President
and Assistant
Secretary
Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer
Paul Prescott+ Vice President None
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
________________________________
+ Principal business address is 60 State Street, Boston, Massachusetts 02109.
++ Principal business address is 200 Park Avenue, New York, New York 10166.
Item 30. Location of Accounts and Records
________________________________
1. First Data Investor Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. The Bank of New York
90 Washington Street
New York, New York 10286
3. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 31. Management Services
_______ ___________________
Not Applicable
Item 32. Undertakings
________ ____________
(1) To call a meeting of shareholders for the purpose of voting upon the
question of removal of a Board member or Board members when requested
in writing to do so by the holders of at least 10% of the
Registrant's outstanding shares and in connection with such meeting
to comply with the provisions of Section 16(c) of the Investment
Company Act of 1940 relating to shareholder communications.
(2) To furnish each person to whom a prospectus is delivered with a copy
of the Fund's latest Annual Report to Shareholders, upon request and
without charge.
SIGNATURES
-------------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New
York, and State of New York on the 17th day of December, 1997.
DREYFUS MUNICIPAL BOND FUND, INC.
BY: /s/Marie E. Connolly*
-----------------------------------------------
Marie E. Connolly, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signatures Title Date
__________________________ ________________________________ ______
/s/Marie E. Connolly* President and Treasurer 12/17/97
- ------------------------------ (Principal Executive Officer and
Marie E. Connolly Principal Financial Officer)
/s/Joseph F. Tower, III* Vice President and Assistant 12/17/97
- ------------------------------ Treasurer (Principal Accounting
Joseph F. Tower, III Officer)
/s/Joseph S. DiMartino* Chairman of the Board 12/17/97
- ------------------------------
Joseph S. DiMartino
/s/David W. Burke* Board Member 12/17/97
- ------------------------------
David W. Burke
/s/Hodding Carter, III* Board Member 12/17/97
- ------------------------------
Hodding Carter, III
/s/Ehud Houminer* Board Member 12/17/97
- ------------------------------
Ehud Houminer
/s/Richard C. Leone* Board Member 12/17/97
- ------------------------------
Richard C. Leone
/s/Hans C. Mautner* Board Member 12/17/97
- ------------------------------
Hans C. Mautner
/s/Robin A. Smith* Board Member 12/17/97
- ------------------------------
Robin A. Smith
/s/John E. Zuccotti* Board Member 12/17/97
- ------------------------------
John E. Zuccotti
*BY: /s/ Michael S. Petrucelli
------------------------------
Michael S. Petrucelli,
Attorney-in-Fact
INDEX OF EXHIBITS
(11) Consent of Independent Auditors
(17) Financial Data Schedule
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed
Financial Information" and "Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors" and to the use of our report
dated October 3, 1997, which is incorporated by reference, in this Registration
Statement (Form N-1A 2-56878) of Dreyfus Municipal Bond Fund, Inc.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
December 12, 1997
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