DREYFUS MUNICIPAL BOND FUND, INC.
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
JANUARY 2, 1997
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus
of Dreyfus Municipal Bond Fund, Inc. (the "Fund"), dated January 2, 1997,
as it may be revised from time to time. To obtain a copy of the Fund's
Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call the following numbers:
Outside New York State--Call Toll Free 1-800-645-6561
In New York City--Call 1-718-895-1206
Outside the U.S. and Canada--Call 516-794-5452
The Dreyfus Corporation (the "Manager") serves as the Fund's
investment adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies............... B-2
Management of the Fund..................................... B-12
Management Agreement....................................... B-16
Purchase of Shares......................................... B-18
Shareholder Services Plan.................................. B-19
Redemption of Shares....................................... B-19
Shareholder Services....................................... B-22
Determination of Net Asset Value........................... B-24
Portfolio Transactions..................................... B-25
Dividends, Distributions and Taxes......................... B-25
Performance Information.................................... B-27
Information About the Fund................................. B-28
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors......................... B-29
Appendix................................................... B-30
Financial Statements....................................... B-39
Report of Independent Auditors............................. B-61
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the sections in the Fund's Prospectus entitled
"Description of the Fund" and "Appendix."
Portfolio Securities
Municipal Obligations. The average distribution of investments (at
value) in Municipal Obligations (including notes) by ratings for the fiscal
year ended August 31, 1996, computed on a monthly basis, was as follows:
Fitch Investors Moody's Standard &
Service, L.P. Investors Service, Poor's Ratings Group Percentage
("Fitch") or Inc. ("Moody's") or ("S&P") of Value
AAA Aaa AAA 27.2%
AA Aa AA 26.6
A A A 17.8
BBB Baa BBB 14.6
BB Ba BB 2.5
F-1, F-1+(1) MIG 1, P-1(1) SP-1, A-1(1) 5.2
Not Rated Not Rated Not Rated 6.1(2)
100.0%
____________________________________
(1) Included in these categories are tax exempt notes rated within the
two highest grades by Fitch, Moody's or S&P. Therefore, these
securities, together with Municipal Obligations rated A or better by
Fitch, Moody's or S&P, are taken into account at the time of
purchase to ensure that the Fund's portfolio meets the 75% minimum
quality standard discussed in the Fund's Prospectus.
(2) Included in the Not Rated category are securities comprising 6.1%
of the Fund's market value which, while not rated, have been
determined by the Manager to be of comparable quality to securities
in the following rating categories: Aaa/AAA (.8%), A/A (.9%),
Baa/BBB (3.4%), Ba/BB (.9%) and F-1, F-1+/MIG 1, P-1/SP-1, A-1
(.1%).
The term "Municipal Obligations" generally includes debt obligations
issued to obtain funds for various public purposes, including the
construction of a wide range of public facilities such as airports,
bridges, highways, housing, hospitals, mass transportation, schools,
streets and water and sewer works. Other public purposes for which
Municipal Obligations may be issued include refunding outstanding
obligations, obtaining funds for general operating expenses and lending
such funds to other public institutions and facilities. In addition,
certain types of industrial development bonds are issued by or on behalf of
public authorities to obtain funds to provide for the construction,
equipment, repair or improvement of privately operated housing facilities,
sports facilities, convention or trade show facilities, airport, mass
transit, industrial, port or parking facilities, air or water pollution
control facilities and certain local facilities for water supply, gas,
electricity or sewage or solid waste disposal; the interest paid on such
obligations may be exempt from Federal income tax, although current tax
laws place substantial limitations on the size of such issues. Such
obligations are considered to be Municipal Obligations if the interest paid
thereon qualifies as exempt from Federal income tax in the opinion of bond
counsel to the issuer. There are, of course, variations in the security of
Municipal Obligations, both within a particular classification and between
classifications.
Floating and variable rate demand notes and bonds are tax exempt
obligations ordinarily having stated maturities in excess of one year, but
which permit the holder to demand payment of principal at any time, or at
specified intervals. The issuer of such obligations ordinarily has a
corresponding right, after a given period, to prepay in its discretion the
outstanding principal amount of the obligations plus accrued interest upon
a specified number of days' notice to the holders thereof. The interest
rate on a floating rate demand obligation is based on a known lending rate,
such as a bank's prime rate, and is adjusted automatically each time such
rate is adjusted. The interest rate on a variable rate demand obligation
is adjusted automatically at specified intervals.
For the purpose of diversification under the Investment Company Act of
1940, as amended (the "1940 Act"), the identification of the issuer of
Municipal Obligations depends on the terms and conditions of the security.
When the assets and revenues of an agency, authority, instrumentality or
other political subdivision are separate from those of the government
creating the subdivision and the security is backed only by the assets and
revenues of the subdivision, such subdivision would be deemed to be the
sole issuer. Similarly, in the case of an industrial development bond, if
that bond is backed only by the assets and revenues of the non-governmental
user, then such non-governmental user would be deemed to be the sole
issuer. If, however, in either case, the creating government or some other
entity guarantees a security, such a guaranty would be considered a
separate security and will be treated as an issue of such government or
other entity.
The yields on Municipal Obligations are dependent on a variety of
factors, including general economic and monetary conditions, money market
factors, conditions in the Municipal Obligations market, size of a
particular offering, maturity of the obligation and rating of the issue.
The imposition of the Fund's management fee, as well as other operating
expenses, will have the effect of reducing the yield to investors.
Municipal lease obligations or installment purchase contract
obligations (collectively, "lease obligations") have special risks not
ordinarily associated with Municipal Obligations. Although lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation
ordinarily is backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such
purpose on a yearly basis. Although "non-appropriation" lease obligations
are secured by the leased property, disposition of the property in the
event of foreclosure might prove difficult. The staff of the Securities
and Exchange Commission currently considers certain lease obligations to be
illiquid. Determination as to the liquidity of such securities is made in
accordance with guidelines established by the Fund's Board. Pursuant to
such guidelines, the Board has directed the Manager to monitor carefully
the Fund's investment in such securities with particular regard to (1) the
frequency of trades and quotes for the lease obligation; (2) the number of
dealers willing to purchase or sell the lease obligation and the number of
other potential buyers; (3) the willingness of dealers to undertake to make
a market in the lease obligation; (4) the nature of the marketplace trades
including the time needed to dispose of the lease obligation, the method of
soliciting offers and the mechanics of transfer; and (5) such other factors
concerning the trading market for the lease obligation as the Manager may
deem relevant. In addition, in evaluating the liquidity and credit quality
of a lease obligation that is unrated, the Fund's Board has directed the
Manager to consider (a) whether the lease can be cancelled; (b) what
assurance there is that the assets represented by the lease can be sold;
(c) the strength of the lessee's general credit (e.g., its debt,
administrative, economic, and financial characteristics); (d) the
likelihood that the municipality will discontinue appropriating funding for
the leased property because the property is no longer deemed essential to
the operations of the municipality (e.g., the potential for an "event of
nonappropriation"); (e) the legal recourse in the event of failure to
appropriate; and (f) such other factors concerning credit quality as the
Manager may deem relevant. The Fund will not invest more than 15% of the
value of its net assets in lease obligations that are illiquid and in other
illiquid securities.
The Fund will purchase tender option bonds only when it is satisfied
that the custodial and tender option arrangements, including the fee
payment arrangements, will not adversely affect the tax exempt status of
the underlying Municipal Obligations and that payment of any tender fees
will not have the effect of creating taxable income for the Fund. Based on
the tender option bond agreement, the Fund expects to be able to value the
tender option bond at par; however, the value of the instrument will be
monitored to assure that it is valued at fair value.
Ratings of Municipal Obligations. Subsequent to its purchase by the
Fund, an issue of rated Municipal Obligations may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require the sale of such Municipal Obligations by the
Fund, but the Manager will consider such event in determining whether the
Fund should continue to hold the Municipal Obligations. To the extent that
the ratings given by Moody's, S&P or Fitch for Municipal Obligations may
change as a result of changes in such organizations or their rating
systems, the Fund will attempt to use comparable ratings as standards for
its investments in accordance with the investment policies contained in the
Prospectus and this Statement of Additional Information. The ratings of
Moody's, S&P and Fitch represent their opinions as to the quality of the
Municipal Obligations which they undertake to rate. It should be
emphasized, however, that ratings are relative and subjective and are not
absolute standards of quality. Although these ratings may be an initial
criterion for selection of portfolio investments, the Manager also will
evaluate these securities. See "Appendix."
Illiquid Securities. Where a substantial market of qualified
institutional buyers develops for certain restricted securities purchased
by the Fund pursuant to Rule 144A under the Securities Act of 1933, as
amended, the Fund intends to treat such securities as liquid securities in
accordance with procedures approved by the Fund's Board. Because it is not
possible to predict with assurance how the market for restricted securities
pursuant to Rule 144A will develop, the Fund's Board has directed the
Manager to monitor carefully the Fund's investments in such securities with
particular regard to trading activity, availability of reliable price
information and other relevant information. To the extent that for a
period of time qualified institutional buyers cease purchasing restricted
securities pursuant to Rule 144A, the Fund's investing in such securities
may have the effect of increasing the level of illiquidity in the Fund's
portfolio during such period.
Taxable Investments. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury
securities, which differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government
agencies and instrumentalities are supported by the full faith and credit
of the U.S. Treasury; others by the right of the issuer to borrow from the
U.S. Treasury; others by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others
only by the credit of the agency or instrumentality. These securities bear
fixed, floating or variable rates of interest. While the U.S. Government
provides financial support to such U.S. Government-sponsored agencies or
instrumentalities, no assurance can be given that it will always do so,
since it is not so obligated by law.
Commercial paper consists of short-term, unsecured promissory notes
issued to finance short-term credit needs.
Certificates of deposit are negotiable certificates representing the
obligation of a bank to repay funds deposited with it for a specified
period of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven
days) at a stated interest rate. Investments in time deposits generally
are limited to London branches of domestic banks that have total assets in
excess of one billion dollars. Time deposits which may be held by the Fund
will not benefit from insurance from the Bank Insurance Fund or the Savings
Association Insurance Fund administered by the Federal Deposit Insurance
Corporation.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face
amount of the instrument upon maturity. Other short-term bank obligations
may include uninsured, direct obligations bearing fixed, floating or
variable interest rates.
In a repurchase agreement, the Fund buys, and the seller agrees to
repurchase, a security at a mutually agreed upon time and price (usually
within seven days). The repurchase agreement thereby determines the yield
during the purchaser's holding period, while the seller's obligation to
repurchase is secured by the value of the underlying security. The Fund's
custodian or sub-custodian will have custody of, and will hold in a
segregated account, securities acquired by the Fund under a repurchase
agreement. Repurchase agreements are considered by the staff of the
Securities and Exchange Commission to be loans by the Fund. In an attempt
to reduce the risk of incurring a loss on a repurchase agreement, the Fund
will enter into repurchase agreements only with domestic banks with total
assets in excess of $1 billion, or primary government securities dealers
reporting to the Federal Reserve Bank of New York, with respect to
securities of the type in which the Fund may invest, and will require that
additional securities be deposited with it if the value of
the securities purchased should decrease below resale price. Repurchase
agreements could involve risks in the event of a default or insolvency of
the other party to the agreement, including possible delays or restrictions
upon the Fund's ability to dispose of the underlying securities.
Management Policies
Lending Portfolio Securities. In connection with its securities
lending transactions, the Fund may return to the borrower or a third party
which is unaffiliated with the Fund, and which is acting as a "placing
broker," a part of the interest earned from the investment of collateral
received from securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned:
(1) the Fund must receive at least 100% cash collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value of
the securities rises above the level of such collateral; (3) the Fund must
be able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any interest or other
distributions payable on the loaned securities, and any increase in market
value; and (5) the Fund may pay only reasonable custodian fees in
connection with the loan.
Derivatives. The Fund may invest in Derivatives (as defined in the
Fund's Prospectus) for a variety of reasons, including to hedge certain
market risks, to provide a substitute for purchasing or selling particular
securities or to increase potential income gain. Derivatives may provide a
cheaper, quicker or more specifically focused way for the Fund to invest
than "traditional" securities would.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and
the portfolio as a whole. Derivatives permit the Fund to increase or
decrease the level of risk, or change the character of the risk, to which
its portfolio is exposed in much the same way as the Fund can increase or
decrease the level of risk, or change the character of the risk, of its
portfolio by making investments in specific securities.
Derivatives may be purchased on established exchanges or through
privately negotiated transactions referred to as over-the-counter
Derivatives. Exchange-traded Derivatives generally are guaranteed by the
clearing agency which is the issuer or counterparty to such Derivatives.
This guarantee usually is supported by a daily payment system (i.e.,
variation margin requirements) operated by the clearing agency in order to
reduce overall credit risk. As a result, unless the clearing agency
defaults, there is relatively little counterparty credit risk associated
with Derivatives purchased on an exchange. By contrast, no clearing agency
guarantees over-the-counter Derivatives. Therefore, each party to an over-
the-counter Derivative bears the risk that the counterparty will default.
Accordingly, the Manager will consider the creditworthiness of
counterparties to over-the-counter Derivatives in the same manner as it
would review the credit quality of a security to be purchased by the Fund.
Over-the-counter Derivatives are less liquid than exchange-traded
Derivatives since the other party to the transaction may be the only
investor with sufficient understanding of the Derivative to be interested
in bidding for it.
Futures Transactions--In General. The Fund may enter into futures
contracts in U.S. domestic markets, such as the Chicago Board of Trade.
Engaging in these transactions involves risk of loss to the Fund which
could adversely affect the value of the Fund's net assets. Although the
Fund intends to purchase or sell futures contracts only if there is an
active market for such contracts, no assurance can be given that a liquid
market will exist for any particular contract at any particular time. Many
futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the
daily limit has been reached in a particular contract, no trades may be
made that day at a price beyond that limit or trading may be suspended for
specified periods during the trading day. Futures contract prices could
move to the limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures positions and
potentially subjecting the Fund to substantial losses.
Successful use of futures by the Fund also is subject to the ability
of the Manager to predict correctly movements in the direction of the
relevant market and, to the extent the transaction is entered into for
hedging purposes, to ascertain the appropriate correlation between the
transaction being hedged and the price movements of the futures contract.
For example, if the Fund uses futures to hedge against the possibility of a
decline in the market value of securities held in its portfolio and the
prices of such securities instead increase, the Fund will lose part or all
of the benefit of the increased value of securities which it has hedged
because it will have offsetting losses in its futures positions.
Furthermore, if in such circumstances the Fund has insufficient cash, it
may have to sell securities to meet daily variation margin requirements.
The Fund may have to sell such securities at a time when it may be
disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities
and Exchange Commission, the Fund may be required to segregate permissible
liquid assets in connection with its commodities transactions in an amount
generally equal to the value of the underlying commodity. The segregation
of such assets will have the effect of limiting a Fund's ability otherwise
to invest those assets.
Specific Futures Transactions. The Fund may purchase and sell interest
rate futures contracts. An interest rate future obligates the Fund to
purchase or sell an amount of a specific debt security at a future date at
a specific price.
Options--In General. The Fund may purchase and write (i.e., sell) call or
put options with respect to specific securities. A call option gives the
purchaser of the option the right to buy, and obligates the writer to sell,
the underlying security or securities at the exercise price at any time
during the option period, or at a specific date. Conversely, a put option
gives the purchaser of the option the right to sell, and obligates the
writer to buy, the underlying security or securities at the exercise price
at any time during the option period, or at a specific date.
A covered call option written by the Fund is a call option with
respect to which the Fund owns the underlying security or otherwise covers
the transaction by segregating cash or other securities. A put option
written by the Fund is covered when, among other things, cash or liquid
securities having a value equal to or greater than the exercise price of
the option are placed in a segregated account with the Fund's custodian to
fulfill the obligation undertaken. The principal reason for writing
covered call and put options is to realize, through the receipt of
premiums, a greater return than would be realized on the underlying
securities alone. The Fund receives a premium from writing covered call or
put options which it retains whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options no such
secondary market may exist. A liquid secondary market in an option may
cease to exist for a variety of reasons. In the past, for example, higher
than anticipated trading activity or order flow, or other unforeseen
events, at times have rendered certain of the clearing facilities
inadequate and resulted in the institution of special procedures, such as
trading rotations, restrictions on certain types of orders or trading halts
or suspensions in one or more options. There can be no assurance that
similar events, or events that may otherwise interfere with the timely
execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If,
as a covered call option writer, the Fund is unable to effect a closing
purchase transaction in a secondary market, it will not be able to sell the
underlying security until the option expires or it delivers the underlying
security upon exercise or it otherwise covers its position.
Successful use by the Fund of options will be subject to the ability
of the Manager to predict correctly movements in interest rates. To the
extent the Manager's predictions are incorrect, the Fund may incur losses.
Future Developments. The Fund may take advantage of opportunities in
the area of options and futures contracts and options on futures contracts
and any other Derivatives which are not presently contemplated for use by
the Fund or which are not currently available but which may be developed,
to the extent such opportunities are both consistent with the Fund's
investment objective and legally permissible for the Fund. Before entering
into such transactions or making any such investment, the Fund will provide
appropriate disclosure in its Prospectus or Statement of Additional
Information.
Forward Commitments. Municipal Obligations and other securities
purchased on a forward commitment or when-issued basis are subject to
changes in value (generally changing in the same way, i.e., appreciating
when interest rates decline and depreciating when interest rates rise)
based upon the public's perception of the creditworthiness of the issuer
and changes, real or anticipated, in the level of interest rates.
Securities purchased on a forward commitment or when-issued basis may
expose the Fund to risks because they may experience such fluctuations
prior to their actual delivery. Purchasing securities on a when-issued
basis can involve the additional risk that the yield available in the
market when the delivery takes place actually may be higher than that
obtained in the transaction itself. Purchasing securities on a forward
commitment or when-issued basis when the Fund is fully or almost fully
invested may result in greater potential fluctuation in the value of the
Fund's net assets and its net asset value per share.
Investment Considerations and Risks
Lower Rated Bonds. The Fund is permitted to invest in securities
rated below Baa by Moody's and below BBB by S&P and Fitch and as low as the
lowest rating assigned by Moody's, S&P or Fitch. Such bonds, though high
yielding, are characterized by risk. See "Description of the
Fund--Investment Considerations and Risks--Lower Rated Bonds" in the
Prospectus for a discussion of certain risks and "Appendix" for a general
description of Moody's, S&P and Fitch ratings of Municipal Obligations.
Although ratings may be useful in evaluating the safety of the interest and
principal payments, they do not evaluate the market value risk of these
bonds. The Fund will rely on the Manager's judgment, analysis and
experience in evaluating the creditworthiness of an issuer.
Investors should be aware that the market values of many of these
bonds tend to be more sensitive to economic conditions than are higher
rated securities. These bonds generally are considered by Moody's, S&P and
Fitch to be predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation
and generally will involve more credit risk than securities in the higher
rating categories.
Because there is no established retail secondary market for many of
these securities, the Fund anticipates that such securities could be sold
only to a limited number of dealers or institutional investors. To the
extent a secondary trading market for these bonds does exist, it generally
is not as liquid as the secondary market for higher rated securities. The
lack of a liquid secondary market may have an adverse impact on market
price and yield and the Fund's ability to dispose of particular issues when
necessary to meet the Fund's liquidity needs or in response to a specific
economic event such as a deterioration in the creditworthiness of the
issuer. The lack of a liquid secondary market for certain securities also
may make it more difficult for the Fund to obtain accurate market
quotations for purposes of valuing the Fund's portfolio and calculating net
asset value. Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may decrease the values and liquidity of
these securities. In such cases, judgment may play a greater role in
valuation because less reliable, objective data may be available.
These bonds may be particularly susceptible to economic downturns. It
is likely that an economic recession could disrupt severely the market for
such securities and may have an adverse impact on the value of such
securities. In addition, it is likely that any such economic downturn
could adversely affect the ability of the issuers of such securities to
repay principal and pay interest thereon and increase the incidence of
default of such securities.
The Fund may acquire these bonds during an initial offering. Such
securities may involve special risks because they are new issues. The Fund
has no arrangement with any persons concerning the acquisition of such
securities, and the Manager will review carefully the credit and other
characteristics pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also
apply to lower rated zero coupon bonds and pay-in-kind bonds, in which the
Fund may invest up to 5% of the value its net assets. Zero coupon,
pay-in-kind or delayed interest bonds carry an additional risk in that,
unlike bonds which pay interest throughout the period to maturity, the Fund
will realize no cash until the cash payment date unless a portion of such
securities are sold and, if the issuer defaults, the Fund may obtain no
return at all on its investment. See "Dividends, Distributions and Taxes."
Investment Restrictions
The Fund has adopted investment restrictions numbered 1 through 8 as
fundamental policies, which cannot be changed without approval by the
holders of a majority (as defined in the 1940 Act) of the Fund's
outstanding voting shares. Investment restrictions numbered 9 through 14
are not fundamental policies and may be changed by vote of a majority of
the Fund's Board members at any time. The Fund may not:
1. Invest more than 5% of its assets in the obligations of any
single issuer, except that up to 25% of the value of the Fund's total
assets may be invested, and securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities may be purchased, without
regard to any such limitation.
2. Hold more than 10% of the voting securities of any single issuer.
This Investment Restriction applies only with respect to 75% of the Fund's
total assets.
3. Invest more than 25% of its total assets in the securities of
issuers in any single industry; provided that there shall be no limitation
on the purchase of Municipal Obligations and, for temporary defensive
purposes, obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
4. Borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowing to no more than 33-1/3% of the value of
the Fund's total assets). For purposes of this investment restriction, the
entry into options, forward contracts, futures contracts, including those
relating to indices, and options on futures contracts or indices shall not
constitute borrowing.
5. Purchase or sell real estate, commodities or commodity contracts,
or oil and gas interests, but this shall not prevent the Fund from
investing in Municipal Obligations secured by real estate or interests
therein, or prevent the Fund from purchasing and selling options, forward
contracts, futures contracts, including those relating to indices, and
options on futures contracts or indices.
6. Underwrite the securities of other issuers, except that the Fund
may bid separately or as part of a group for the purchase of Municipal
Obligations directly from an issuer for its own portfolio to take advantage
of the lower purchase price available, and except to the extent the Fund
may be deemed an underwriter under the Securities Act of 1933, as amended,
by virtue of disposing of portfolio securities.
7. Make loans to others except through the purchase of debt
obligations and the entry into repurchase agreements; however, the Fund may
lend its portfolio securities in an amount not to exceed 33-1/3% of the
value of its total assets. Any loans of portfolio securities will be made
according to guidelines established by the Securities and Exchange
Commission and the Fund's Board.
8. Issue any senior security (as such term is defined in Section
18(f) of the 1940 Act), except to the extent that the activities permitted
in Investment Restrictions numbered 4, 5 and 12 may be deemed to give rise
to a senior security.
9. Sell securities short or purchase securities on margin, but the
Fund may make margin deposits in connection with transactions in futures
contracts, including those relating to indices, and options on futures
contracts or indices.
10. Purchase securities other than Municipal Obligations and Taxable
Investments and those arising out of transactions in futures and options or
as otherwise provided in the Fund's Prospectus.
11. Invest in securities of other investment companies, except to the
extent permitted under the 1940 Act.
12. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to the extent necessary to secure permitted borrowings and to the
extent related to the deposit of assets in escrow in connection with the
purchase of securities on a when-issued or delayed-delivery basis and
collateral and initial or variation margin arrangements with respect to
options, forward contracts, futures contracts, including those related to
indices, and options on futures contracts or indices.
13. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid
(which securities could include participation interests (including
municipal lease/purchase agreements) that are not subject to the demand
feature described in the Fund's Prospectus, and floating and variable rate
demand obligations as to which the Fund cannot exercise the demand feature
described in the Fund's Prospectus on less than seven days' notice and as
to which there is no secondary market) if, in the aggregate, more than 15%
of its net assets would be so invested.
14. Invest in companies for the purpose of exercising control.
For purposes of Investment Restriction No. 3, industrial development
bonds, where the payment of principal and interest is the ultimate
responsibility of companies within the same industry, are grouped together
as an "industry."
If a percentage restriction is adhered to at the time of an
investment, a later increase in percentage resulting from a change in
values or assets will not constitute a violation of that restriction.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states.
Should the Fund determine that a commitment is no longer in the best
interests of the Fund and its shareholders, the Fund reserves the right to
revoke the commitment by terminating the sale of Fund shares in the state
involved.
MANAGEMENT OF THE FUND
Board members and officers of the Fund, together with information as
to their principal business occupations during at least the last five
years, are shown below. Each Board member who is deemed to be an
"interested person" of the Fund, as defined in the 1940 Act, is indicated
by an asterisk.
Board Members of the Fund
*DAVID W. BURKE, Board Member. Chairman of the Board of Governors, an
independent board within the United States Information Agency, since
August 1995. From August 1994 to December 1994, Mr. Burke was a
Consultant to the Manager and, from October 1990 to August 1994, he
was Vice President and Chief Administrative Officer of the Manager.
From 1977 to 1990, Mr. Burke was involved in the management of
national television news, as Vice President and Executive Vice
President of ABC News, and subsequently as President of CBS News. He
is 60 years old and his address is Box 654, Eastham, Massachusetts
02642.
HODDING CARTER, III, Board Member. Chairman of MainStreet, a television
production company. Since 1995, Knight Professor of public affairs
journalism at the University of Maryland. From 1985 to 1986, he was
editor and chief correspondent of "Capitol Journal," a weekly Public
Broadcasting System ("PBS") series on Congress. From 1981 to 1984, he
was anchorman and chief correspondent for PBS' "Inside Story," a
regularly scheduled half-hour critique of press performance. From
1977 to July 1980, Mr. Carter served as Assistant Secretary of State
for Public Affairs and as Department of State spokesman. He is 61
years old and his address is c/o MainStreet, 918 Sixteenth Street,
N.W., Washington, D.C. 20006.
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman
of the Board of various funds in the Dreyfus Family of Funds. He is
also Chairman of the Board of Directors of Noel Group, Inc., a venture
capital company; and a director of the Muscular Dystrophy Association,
HealthPlan Services Corporation, Belding Heminway, Inc., a
manufacturer and marketer of industrial threads, specialty yarns, home
furnishings, and fabrics, Curtis Industries, Inc., a national
distributor of security products, chemicals and automotive and other
hardware, and Staffing Resources, Inc. For more than five years prior
to January 1995, he was President, a director and, until August 1994,
Chief Operating Officer of the Manager and Executive Vice President
and a director of Dreyfus Service Corporation, a wholly-owned
subsidiary of the Manager and, until August 24, 1994, the Fund's
distributor. From August 1994 to December 31, 1994, he was a director
of Mellon Bank Corporation. He is 53 years old and his address is c/o
Noel Group, Inc., 667 Madison Avenue, 25th Floor, New York, New York
10022.
EHUD HOUMINER, Board Member. Since July 1991, Professor and Executive-in-
Residence at the Columbia Business School, Columbia University. From
1991 to 1995, he was a Consultant to Bear, Stearns & Co. Inc.,
investment bankers. He was President and Chief Executive Officer of
Philip Morris USA, manufacturers of consumer products, from December
1988 until September 1990. He also is a Director of Avnet Inc. He is
56 years old and his address is c/o Columbia Business School, Columbia
University, Uris Hall, Room 526, New York, New York 10027.
RICHARD C. LEONE, Board Member. President of The Twentieth Century Fund,
Inc., a tax exempt research foundation engaged in the study of
economic, foreign policy and domestic issues. From April 1990 to
March 1994, he was Chairman and, from April 1988 to March 1994, a
Commissioner of The Port Authority of New York and New Jersey. A
member in 1985, and from January 1986 to January 1989, Managing
Director of Dillon, Read & Co. Inc. Mr. Leone is also a director of
Resource Mortgage Capital, Inc. He is 56 years old and his address is
41 East 70th Street, New York, New York 10021.
HANS C. MAUTNER, Board Member. Chairman, Trustee and Chief Executive
Officer of Corporate Property Investors, a real estate investment
company. Since January 1986, a Director of Julius Baer Investment
Management, Inc., a wholly-owned subsidiary of Julius Baer Securities,
Inc. He is 56 years old and his address is 305 East 47th Street, New
York, New York 10017.
ROBIN A. SMITH, Board Member. Since 1993, Vice President, and from March
1992 to October 1993, Executive Director, of One to One Partnership,
Inc., a national non-profit organization that seeks to promote
mentoring and economic empowerment for at-risk youths. From June 1986
to February 1992, she was an investment banker with Goldman, Sachs, &
Co. She is also a Trustee of Westover School and a Board member of
the Jacobs A. Riis Settlement House. She is 33 years old and her
address is 375 Park Avenue, Suite 1705, New York, New York 10152.
JOHN E. ZUCCOTTI, Board Member. President and Chief Executive Officer of
Olympia & York Companies (U.S.A.), and of member of its Board of
Directors since the inception of a Board on July 27, 1993. From 1986
to 1990, he was partner in the law firm of Brown & Wood and from 1978
to 1986 a partner in the law firm of Tufo & Zuccotti. First Deputy
Mayor of the City of New York from December 1975 to June 1977, and
Chairman of the City Planning Commission for the City of New York from
1973 to 1975. Mr. Zuccotti is also a Director of Starrett Housing
Corporation, a construction, development and real estate properties
corporation, and Capstone Pharmacy Services, Inc. He is 59 years old
and his address is 237 Park Avenue, New York, New York 10017.
For so long as the Fund's Plan described in the section captioned
"Shareholder Services Plan" remains in effect, the Board members of the
Fund who are not "interested persons" (as defined in the 1940 Act) will be
selected and nominated by the Board members who are not "interested
persons" of the Fund.
The Fund typically pays its Board members an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the
Board receives an additional 25% of such compensation. Emeritus Board
members are entitled to receive an annual retainer and a per meeting fee of
one-half the amount paid to them as Board members. The aggregate amount of
compensation paid to each Board member by the Fund for the fiscal year
ended August 31, 1996, and by all other funds in the Dreyfus Family of
Funds for which such person is a Board member (the number of which is set
forth in parenthesis next to each Board member's total compensation) for
the year ended December 31, 1995, is as follows:
Total
Compensation from
Aggregate Fund and Fund
Name of Board Compensation from Complex Paid to
Member Fund* Board Member
David W. Burke $7,500 $253,654 (49)
Hodding Carter, III $7,500 $ 49,500 (7)
Joseph S. DiMartino $9,375 $448,618 (94)
Ehud Houminer $7,500 $ 55,405 (8)
Richard C. Leone $7,500 $ 49,000 (7)
Hans C. Mautner $7,500 $ 47,000 (7)
Robin A. Smith $7,000 $ 27,526 (7)
John E. Zuccotti $7,500 $ 49,500 (7)
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $5,784 for all Board members as a group.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive
Officer and a director of the Distributor and an officer of other
investment companies advised or administered by the Manager. From
December 1991 to July 1994, she was President and Chief Compliance
Officer of Funds Distributor, Inc., the ultimate parent of which is
Boston Institutional Group, Inc. Prior to December 1991, she served
as Vice President and Controller, and later as Senior Vice President,
of The Boston Company Advisors, Inc. She is 39 years old.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President and
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From February 1992
to July 1994, he served as Counsel for The Boston Company Advisors,
Inc. From August 1990 to February 1992, he was employed as an
Associate at Ropes & Gray. He is 32 years old.
ELIZABETH A. BACHMAN, Vice President and Assistant Secretary. Assistant
Vice President of the Distributor and an officer of other investment
companies advised or administered by the Manager. She is 27 years
old.
DOUGLAS C. CONROY, Vice President and Assistant Secretary. Supervisor of
Treasury Services and Administration of the Distributor and an officer
of other investment companies advised or administered by the Manager.
From April 1993 to January 1995, he was a Senior Fund Accountant for
Investors Bank and Trust Company. From December 1991 to March 1993,
he was employed as a Fund Accountant at The Boston Company, Inc. He
is 27 years old.
RICHARD W. INGRAM, Vice President and Assistant Secretary. Senior Vice
President and Director of Client Services and Treasury Operations of
the Distributor and an officer of other investment companies advised
or administered by the Manager. From March 1994 to November 1995, he
was Vice President and Division Manager for First Data Investor
Services Group. From 1989 to 1994, Mr. Ingram was Vice President,
Assistant Treasurer and Tax Director - Mutual Funds at The Boston
Company, Inc. He is 41 years old.
MARK A. KARPE, Vice President and Assistant Secretary. Senior Paralegal of
the Distributor and an officer of other investment companies advised
or administered by the Manager. Prior to August 1993, he was employed
as an Associate Examiner at the National Association of Securities
Dealers. He is 28 years old.
MARY A. NELSON, Vice President and Assistant Treasurer. Vice President and
Manager of Treasury Services and Administration of the Distributor and
an officer of other investment companies advised or administered by
the Manager. From September 1989 to July 1994, she was an Assistant
Vice President and Client Manager for The Boston Company, Inc. She is
32 years old.
JOSEPH F. TOWER, III, Vice President and Assistant Treasurer. Senior Vice
President, Treasurer and Chief Financial Officer of the Distributor
and an officer of other investment companies advised or administered
by the Manager. From July 1988 to August 1994, he was employed by The
Boston Company, Inc. where he held various management positions in the
Corporate Finance and Treasury areas. He is 34 years old.
The address of each of the Fund's officers is 200 Park Avenue, New
York, New York 10166.
The Fund's Board members and officers as a group, owned less than 1%
of the Fund's voting securities outstanding on December 13, 1996.
MANAGEMENT AGREEMENT
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Management
of the Fund."
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") with the Fund dated August 24, 1994, which is
subject to annual approval by (i) the Fund's Board or (ii) vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities
of the Fund, provided that in either event the continuance also is approved
by a majority of the Board members who are not "interested persons" (as
defined in the 1940 Act) of the Fund or the Manager, by vote cast in person
at a meeting called for the purpose of voting on such approval. The
Agreement was approved by shareholders on August 4, 1994. The Agreement
was last approved by the Fund's Board, including a majority of the Board
members who are not "interested persons" of any party to the Agreement, at
a meeting held on October 28, 1996. The Agreement is terminable without
penalty, on 60 days' notice, by the Fund's Board or by vote of the holders
of a majority of the Fund's outstanding voting shares or, on not less than
90 days' notice, by the Manager. The Agreement will terminate
automatically in the event of its assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of the Manager:
W. Keith Smith, Chairman of the Board; Christopher M. Condron, President,
Chief Executive Officer, Chief Operating Officer and a director; Stephen E.
Canter, Vice Chairman, Chief Investment Officer and a director; Lawrence S.
Kash, Vice Chairman-Distribution and a director; Philip L. Toia, Vice
Chairman-Operations and Administration and a director; William T. Sandalls,
Jr., Senior Vice President and Chief Financial Officer; William F. Glavin,
Jr., Vice President-Corporate Development; Mark N. Jacobs, Vice President,
General Counsel and Secretary; Patrice M. Kozlowski, Vice President-
Corporate Communications; Mary Beth Leibig, Vice President-Human Resources;
Jeffrey N. Nachman, Vice President-Mutual Fund Accounting; Andrew S.
Wasser, Vice President-Information Systems; Elvira Oslapas, Assistant
Secretary; and Mandell L. Berman, Burton C. Borgelt and Frank V. Cahouet,
directors.
The Manager manages the Fund's portfolio of investments in accordance
with the stated policies of the Fund, subject to the approval of the Fund's
Board. The Manager is responsible for investment decisions and provides
the Fund with portfolio managers who are authorized by the Fund's Board to
execute purchases and sales of securities. The Fund's portfolio managers
are Joseph P. Darcy, A. Paul Disdier, Karen M. Hand, Stephen C. Kris,
Richard J. Moynihan, Jill C. Shaffro, L. Lawrence Troutman, Samuel J.
Weinstock and Monica S. Wieboldt. The Manager also maintains a research
department with a professional staff of portfolio managers and securities
analysts who provide research services for the Fund as well as for other
funds advised by the Manager. All purchases and sales are reported for the
Board members' review at the meeting subsequent to such transactions.
The Manager maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time
deems appropriate.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The
expenses borne by the Fund include without limitation: taxes, interest,
loan commitment fees, interest and distributions paid on securities sold
short, brokerage fees and commissions, if any, fees of Board members who
are not officers, directors, employees or holders of 5% or more of the
outstanding voting securities of the Manager, Securities and Exchange
Commission fees, state Blue Sky qualification fees, advisory fees, charges
of custodians, transfer and dividend disbursing agents' fees, certain
insurance premiums, industry association fees, outside auditing and legal
expenses, costs of independent pricing services, costs of maintaining
corporate existence, costs attributable to investor services (including,
without limitation, telephone and personnel expenses), costs of
shareholders' reports and corporate meetings, costs of preparing and
printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders, and any
extraordinary expenses.
As compensation for the Manager's services, the Fund has agreed to pay
the Manager a monthly management fee at the annual rate of .60 of 1% of the
value of the Fund's average daily net assets. This amount is reduced,
pursuant to the terms of a Stipulation of Settlement of Litigation, which
became effective on October 15, 1988, by annual amounts ranging from
$90,000 per year to $1 million per year, depending on the size of the
Fund's average daily net assets, for a period of 10 years from the
effective date. For the fiscal years ended August 31, 1994, 1995 and 1996,
the management fees payable by the Fund amounted to $25,447,556,
$22,188,564 and $22,580,334, respectively, which fees were reduced by
$350,000 in each year pursuant to the Stipulation of Settlement of
Litigation. All fees and expenses are accrued daily and deducted before
the declaration of dividends to investors.
The Manager has agreed that if in any fiscal year the aggregate
expenses of the Fund, exclusive of taxes, brokerage, interest on borrowings
and (with the prior written consent of the necessary state securities
commissions) extraordinary expenses, but including the management fee,
exceed 1-1/2% of the value of the Fund's average net assets for the fiscal
year, the Fund may deduct from the payment to be made to the Manager under
the Agreement, or the Manager will bear, such excess expense. Such
deduction or payment, if any, will be estimated, reconciled and effected or
paid, as the case may be, on a monthly basis. During the fiscal year ended
August 31, 1996, no expense reimbursements were made pursuant to such
limitation.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of the Fund's net assets increases.
PURCHASE OF SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Shares."
The Distributor. The Distributor serves as the Fund's distributor on
a best efforts basis pursuant to an agreement which is renewable annually.
The Distributor also acts as distributor for the other funds in the Dreyfus
Family of Funds and for certain other investment companies. In some
states, certain financial institutions effecting transactions in Fund
shares may be required to register as dealers pursuant to state law.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 p.m., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York
Stock Exchange are open for business will be credited to the shareholder's
Fund account on the next bank business day following such purchase order.
Purchase orders made after 4:00 p.m., New York time, on any business day
the Transfer Agent and the New York Stock Exchange are open for business,
or orders made on Saturday, Sunday or any Fund holiday (e.g., when the New
York Stock Exchange is not open for business), will be credited to the
shareholder's Fund account on the second business day following such
purchase order. To qualify to use the Dreyfus TeleTransfer Privilege, the
initial payment for purchase of Fund shares must be drawn on, and
redemption proceeds paid to, the same bank and account as are designated on
the Account Application or Shareholder Services Form on file. If the
proceeds of a particular redemption are to be wired to an account at any
other bank, the request must be in writing and signature-guaranteed. See
"Redemption of Shares--Dreyfus TeleTransfer Privilege."
Transactions Through Securities Dealers. Fund shares may be purchased
and redeemed through securities dealers which may charge a fee for such
services. Some dealers will place the Fund's shares in an account with
their firm. Dealers also may require that the customer invest more than
the $1,000 minimum investment; the customer not take physical delivery of
share certificates; the customer not request redemption checks to be issued
in the customer's name; fractional shares not be purchased; or other
conditions. There are no sales or service charges by the Fund or the
Distributor although investment dealers, banks and other financial
institutions may make reasonable charges to investors for their services.
The services provided and fees therefor are established by each institution
acting independently of the Fund. The Fund has been given to understand
that these fees may be charged for customer services including, but not
limited to, same-day investment of client funds; same-day access to client
funds; advice to customers about the status of their accounts, yield
currently being paid or income earned to date; provision of periodic
account statements showing security and money market positions; other
services available from the dealer, bank or other financial institution;
and assistance with inquiries related to their investments. Any such fees
will be deducted monthly from the investor's account, which on smaller
accounts could constitute a substantial portion of distributions. Small,
inactive, long-term accounts involving monthly service charges may not be
in the best interest of investors. Investors should be aware that they may
purchase shares of the Fund directly from the Fund without the imposition
of any maintenance or service charges, other than those already described
herein.
Reopening an Account. An investor may reopen an account with a
minimum investment of $100 without filing a new Account Application during
the calendar year the account is closed or during the following calendar
year, provided the information on the old Account Application is still
applicable.
SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Shareholder
Services Plan."
The Fund has adopted a Shareholder Services Plan (the "Plan") pursuant
to which the Fund reimburses Dreyfus Service Corporation for certain
allocated expenses of providing personal services and/or maintaining
shareholder accounts. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder inquiries
regarding the Fund and providing reports and other information, and
services related to the maintenance of shareholder accounts.
A quarterly report of the amounts expended under the Plan, and the
purposes for which such expenditures were incurred, must be made to the
Fund's Board for its review. In addition, the Plan provides that material
amendments of the Plan must be approved by the Fund's Board, and by the
Board members who are not "interested persons" (as defined in the 1940 Act)
of the Fund and have no direct or indirect financial interest in the
operation of the Plan by vote cast in person at a meeting called for the
purpose of considering such amendments. The Plan is subject to annual
approval by such vote cast in person at a meeting called for the purpose of
voting on the Plan. The Plan was last so approved on April 29, 1996. The
Plan is terminable at any time by vote of a majority of the Board members
who are not "interested persons" and have no direct or indirect financial
interest in the operation of the Plan.
For the fiscal year ended August 31, 1996, $2,087,233 was chargeable
to the Fund under the Plan.
REDEMPTION OF SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Redeem Shares."
Redemption Fee. For shares acquired by purchase or exchange after May
9, 1997, 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 fifteen days following the
issuance of such shares. The redemption fee will be deducted from the
redemption proceeds and retained by the Fund.
No redemption fee will be charged upon the redemption 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. An investor may indicate on the Account
Application, Shareholder Services Form or by later written request that the
Fund provide Redemption Checks ("Checks") drawn on the investor's Fund
account. Checks will be sent only to the registered owner(s) of the account
and only to the address of record. The Account Application, Shareholder
Services Form or later written request must be manually signed by the
registered owner(s). Checks may be made payable to the order of any person
in an amount of $500 or more. When a Check is presented to the Transfer
Agent for payment, the Transfer Agent, as the investor's agent, will cause
the Fund to redeem a sufficient number of shares in the investor's account
to cover the amount of the Check. Dividends are earned until the Check
clears. After clearance, a copy of the Check will be returned to the
investor. Investors generally will be subject to the same rules and
regulations that apply to checking accounts, although election of this
Privilege creates only a shareholder-transfer agent relationship with the
Transfer Agent.
If the amount of the Check is greater than the value of the shares in
an investor's account, the Check will be returned marked insufficient
funds. Checks should not be used to close an account.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, and reasonably believed by the Transfer Agent to be genuine.
Ordinarily, the Fund will initiate payment for shares redeemed pursuant to
this Privilege on the next business day after receipt by the Transfer Agent
of the redemption request in proper form. Redemption proceeds ($1,000
minimum) will be transferred by Federal Reserve wire only to the commercial
bank account specified by the investor on the Account Application or
Shareholder Services Form, or to a correspondent bank if the investor's
bank is not a member of the Federal Reserve System. Fees ordinarily are
imposed by such bank and usually borne by the investor. Immediate
notification by the correspondent bank to the investor's bank is necessary
to avoid a delay in crediting the funds to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
--------------------- -------------------------
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at
1-800-654-7171, toll free. Investors should advise the operator that the
above transmittal code must be used and should also inform the operator of
the Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
Dreyfus TeleTransfer Privilege. Investors should be aware that if
they have also selected the Dreyfus TeleTransfer Privilege, any request for
a wire redemption will be effected as a Dreyfus TeleTransfer transaction
through the Automated Clearing House ("ACH") system unless more prompt
transmittal specifically is requested. Redemption proceeds will be on
deposit in the investor's account at an ACH member bank ordinarily two
business days after receipt of the redemption request. See "Purchase of
Shares--Dreyfus TeleTransfer Privilege."
Stock Certificates; Signatures. Any stock certificate representing
Fund shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New York
Stock Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP"), and the Stock Exchanges Medallion Program.
Guarantees must be signed by an authorized signatory of the guarantor and
"Signature-Guaranteed" must appear with the signature. The Transfer Agent
may request additional documentation from corporations, executors,
administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular
verification. For more information with respect to signature-guarantees,
please call one of the telephone numbers listed on the cover.
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of
the Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Securities and Exchange
Commission. In the case of requests for redemption in excess of such
amount, the Fund's Board reserves the right to make payments in whole or in
part in securities (which may include non-marketable securities) or other
assets of the Fund in case of an emergency or any time a cash distribution
would impair the liquidity of the Fund to the detriment of the existing
shareholders. In such event, the securities would be valued in the same
manner as the Fund's portfolio is valued. If the recipient sold such
securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended
or the date of payment postponed (a) during any period when the New York
Stock Exchange is closed (other than customary weekend and holiday
closings), (b) when trading in the markets the Fund ordinarily utilizes is
restricted, or when an emergency exists as determined by the Securities and
Exchange Commission so that disposal of the Fund's investments or
determination of its net asset value is not reasonably practicable, or (c)
for such other periods as the Securities and Exchange Commission by order
may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Shareholder
Services."
Fund Exchanges. Shares of other funds purchased by exchange will be
purchased on the basis of relative net asset value per share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load,
and the applicable sales load will be deducted.
C. Shares of any funds purchased with a sales load may be
exchanged without a sales load for shares of other funds
sold without a sales load.
D. Shares of any funds purchased with a sales load, shares of
any funds acquired by a previous exchange from shares
purchased with a sales load, and additional shares acquired
through reinvestment of dividends or distributions of any
such funds (collectively referred to herein as "Purchased
Shares") may be exchanged for shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered
Shares exceeds the maximum sales load that could have been
imposed in connection with the Purchased Shares (at the time
the Purchased Shares were acquired), without giving effect
to any reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their
account number.
To request an exchange, an investor must give exchange instructions to
the Transfer Agent in writing or by telephone. The ability to issue
exchange instructions by telephone is given to all Fund shareholders
automatically, unless the investor checks the applicable "No" box on the
Account Application, indicating that the investor specifically refuses this
Privilege. By using the Telephone Exchange Privilege, the investor
authorizes the Transfer Agent to act on telephonic instructions (including
over The Dreyfus 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.
For Dreyfus-sponsored Keogh Plans, IRAs and SEP-IRAs with only one
participant, the minimum initial investment is $750. To exchange shares
held in corporate plans, 403(b)(7) Plans and SEP-IRAs with more than one
participant, the minimum initial investment is $100 if the plan has at
least $2,500 invested among the funds in the Dreyfus Family of Funds. To
exchange shares held in personal retirement plans, the shares exchanged
must have a current value of at least $100.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund, shares
of another fund in the Dreyfus Family of Funds. This Privilege is
available only for existing accounts. Shares will be exchanged on the
basis of relative net asset value as described above under "Fund
Exchanges." Enrollment in or modification or cancellation of this
Privilege is effective three business days following notification by the
investor. An investor will be notified if his account falls below the
amount designated to be exchanged under this Privilege. In this case, an
investor's account will fall to zero unless additional investments are made
in excess of the designated amount prior to the next Auto-Exchange
Transaction. Shares held under IRA and other retirement plans are eligible
for this Privilege. Exchanges of IRA shares may be made between IRA
accounts and from regular accounts to IRA accounts, but not from IRA
accounts to regular accounts. With respect to all other retirement
accounts, exchanges may be made only among those accounts.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available
to shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between
accounts having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchanges service or
Dreyfus Auto-Exchange Privilege may be modified or terminated at any time
upon notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends
and distributions, the investor's shares will be reduced and eventually may
be depleted. Automatic Withdrawal may be terminated at any time by the
investor, the Fund or the Transfer Agent. Shares for which stock
certificates have been issued may not be redeemed through the Automatic
Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest automatically their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of another fund in the
Dreyfus Family of Funds of which the investor is a shareholder. Shares of
other funds purchased pursuant to this privilege will be purchased on the
basis of relative net asset value per share as follows:
A. Dividends and distributions paid by a fund may be
invested without imposition of a sales load in shares
of other funds that are offered without a sales load.
B. Dividends and distributions paid by a fund which
does not charge a sales load may be invested in shares
of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a
sales load may be invested in shares of other funds sold
with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered
Shares exceeds the maximum sales load charged by the fund
from which dividends or distributions are being swept,
without giving effect to any reduced loads, the difference
will be deducted.
D. Dividends and distributions paid by a fund may be invested
in shares of other funds that impose a contingent deferred
sales charge ("CDSC") and the applicable CDSC, if any, will
be imposed upon redemption of such shares.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Shares."
Valuation of Portfolio Securities. The Fund's investments are valued
each business day by an independent pricing service (the "Service")
approved by the Fund's Board. When, in the judgment of the Service, quoted
bid prices for investments are readily available and are representative of
the bid side of the market, these investments are valued at the mean
between the quoted bid prices (as obtained by the Service from dealers in
such securities) and asked prices (as calculated by the Service based upon
its evaluation of the market for such securities). Other investments
(which constitute a majority of the portfolio securities) are carried at
fair value as determined by the Service, based on methods which include
consideration of: yields or prices of municipal bonds of comparable
quality, coupon, maturity and type; indications as to values from dealers;
and general market conditions. The Service may employ electronic data
processing techniques and/or a matrix system to determine valuations. The
Service's procedures are reviewed by the Fund's officers under the general
supervision of the Fund's Board. Expenses and fees, including the
management fee (reduced by the expense limitation, if any), are accrued
daily and are taken into account for the purpose of determining the net
asset value of Fund shares.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased from and sold to parties
acting as either principal or agent. Newly-issued securities ordinarily
are purchased directly from the issuer or from an underwriter; other
purchases and sales usually are placed with those dealers from which it
appears that the best price or execution will be obtained. Usually no
brokerage commissions, as such, are paid by the Fund for such purchases and
sales, although the price paid usually includes an undisclosed compensation
to the dealer acting as agent. The prices paid to underwriters of
newly-issued securities usually include a concession paid by the issuer to
the underwriter, and purchases of after-market securities from dealers
ordinarily are executed at a price between the bid and asked price.
Transactions are allocated to various dealers by the Fund's portfolio
managers in their best judgment. The primary consideration is prompt and
effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected for research, statistical or
other services to enable the Manager to supplement its own research and
analysis with the views and information of other securities firms.
Research services furnished by brokers through which the Fund effects
securities transactions may be used by the Manager in advising other funds
it advises and, conversely, research services furnished to the Manager by
brokers in connection with other funds the Manager advises may be used by
the Manager in advising the Fund. Although it is not possible to place a
dollar value on these services, it is the opinion of the Manager that the
receipt and study of such services should not reduce the overall expenses
of its research department.
The Fund's portfolio turnover rate for the fiscal years ended August
31, 1995 and 1996 was 51.55% and 64.48%, respectively. The Fund anticipates
that its annual portfolio turnover rate generally will not exceed 100%, but
the turnover rate will not be a limiting factor when the Fund deems it
desirable to sell or purchase securities. Therefore, depending upon market
conditions, the Fund's annual portfolio turnover rate may exceed 100% in
particular years.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Dividends,
Distributions and Taxes."
Management believes that the Fund has qualified as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended
(the "Code"), for the fiscal year ended August 31, 1996, and the Fund
intends to continue to so qualify if such qualification is in the best
interests of its shareholders. As a regulated investment company, the Fund
will pay no Federal income tax on net investment income and net realized
capital gains to the extent that such income and gains are distributed to
shareholders in accordance with applicable provisions of the Code. The
term "regulated investment company" does not imply the supervision of
management or investment practices or policies by any government agency.
Any dividend or distribution paid shortly after an investor's purchase
may have the effect of reducing the net asset value of his shares below the
cost of his investment. Such a distribution would be a return on the
investment in an economic sense although taxable as stated in "Dividends,
Distributions and Taxes" in the Prospectus. In addition, the Code provides
that if a shareholder has not held his Fund shares for more than six months
(or such shorter period as the Internal Revenue Service may prescribe by
regulation) and has received an exempt-interest dividend with respect to
such shares, any loss incurred on the sale of such shares will be
disallowed to the extent of the exempt-interest dividend received.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gains or losses. However, all or a portion of any
gains realized from the sale or other disposition of certain market
discount bonds will be treated as ordinary income under Section 1276 of the
Code. In addition, all or a portion of the gain realized from engaging in
"conversion transactions" may be treated as ordinary income under Section
1258 of the Code. "Conversion transactions" are defined to include certain
forward, futures, options and "straddles" transactions, transactions
marketed or sold to produce capital gains, or transactions described in
Treasury regulations to be issued in the future.
Under Section 1256 of the Code, gain or loss the Fund realizes from
certain futures and options transactions will be treated as 60% long-term
capital gain or loss and 40% short-term capital gain or loss. Gain or loss
will arise upon exercise or lapse of such futures and options as well as
from closing transactions. In addition, any such futures or options
remaining unexercised at the end of the Fund's taxable year will be treated
as sold for their then fair market value, resulting in additional gain or
loss to the Fund characterized in the manner described above.
Offsetting positions held by the Fund involving certain futures and
options transactions may be considered, for tax purposes, to constitute
"straddles." "Straddles" are defined to include "offsetting positions" in
actively traded personal property. The tax treatment of "straddles" is
governed by Sections 1092 and 1258 of the Code, which, in certain
circumstances, overrides or modifies the provisions of Section 1256 of the
Code. As such, all or a portion of any short- or long-term capital gain
from certain "straddle" transactions may be recharacterized to ordinary
income.
If the Fund were treated as entering into "straddles" by reason of its
engaging in certain futures or options transactions, such "straddles" could
be characterized as "mixed straddles" if the futures or options
transactions comprising a part of such "straddles" were governed by Section
1256 of the Code. The Fund may make one or more elections with respect to
"mixed straddles." Depending on which election is made, if any, the
results to the Fund may differ. To the extent the "straddle" rules apply
to positions established by the Fund, losses realized by the Fund will be
deferred to the extent of unrealized gain in the offsetting position.
Moreover, as a result of the "straddle" and conversion transaction rules,
short-term capital losses on "straddle" positions may be recharacterized as
long-term capital losses, and long-term capital gains may be treated as
short-term capital gains or ordinary income.
Investment by the Fund in securities issued at a discount or providing
for deferred interest or for payment of interest in the form of additional
obligations could, under special tax rules, affect the amount, timing and
character of distributions to shareholders. For example, the Fund could be
required to take into account annually a portion of the discount (or deemed
discount) at which such securities were issued and to distribute such
portion in order to maintain its qualification as a regulated investment
company. In such case, the Fund may have to dispose of securities which it
might otherwise have continued to hold in order to generate cash to satisfy
these distribution requirements.
PERFORMANCE INFORMATION
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Performance
Information."
The Fund's current yield for the 30-day period ended August 31, 1996
was 5.26%. Current yield is computed pursuant to a formula which operates
as follows: The amount of the Fund's expenses accrued for the 30-day
period (net of reimbursements) is subtracted from the amount of the
dividends and interest earned (computed in accordance with regulatory
requirements) by the Fund during the period. That result is then divided
by the product of: (a) the average daily number of shares outstanding
during the period that were entitled to receive dividends, and (b) the net
asset value per share on the last day of the period less any undistributed
earned income per share reasonably expected to be declared as a dividend
shortly thereafter. The quotient is then added to 1, and that sum is
raised to the 6th power, after which 1 is subtracted. The current yield is
then arrived at by multiplying the result by 2.
Based upon a 1996 Federal income tax rate of 39.60%, the Fund's tax
equivalent yield for the 30-day period ended August 31, 1996 was 8.71%.
Tax equivalent yield is computed by dividing that portion of the current
yield (calculated as described above) which is tax exempt by 1 minus a
stated tax rate and adding the quotient to that portion, if any, of the
yield of the Fund that is not tax exempt.
The tax equivalent yield noted above represents the application of the
highest Federal marginal personal income tax rate presently in effect. The
tax equivalent figure, however, does not include the potential effect of
any state or local (including, but not limited to, county, district or
city) taxes, including applicable surcharges. In addition, there may be
pending legislation which could affect such stated tax rate or yield. Each
investor should consult its tax adviser, and consider its own factual
circumstances and applicable tax laws, in order to ascertain the relevant
tax equivalent yield.
The Fund's average annual total return for the 1, 5 and 10 year
periods ended August 31, 1996 was 4.16%, 6.46% and 6.88%, respectively.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number
of years in the period) and subtracting 1 from the result.
The Fund's total return for the period from October 4, 1976
(commencement of operations) to August 31, 1996 was 268.79%. Total return
is calculated by subtracting the amount of the Fund's net asset value per
share at the beginning of a stated period from the net asset value per
share at the end of the period (after giving effect to the reinvestment of
dividends and distributions during the period), and dividing the result by
the net asset value per share at the beginning of the period.
The Fund may use hypothetical tax equivalent yields or charts in its
advertising. These hypothetical yields or charts will be used for
illustrative purposes only and are not indicative of the Fund's past or
future performance.
Advertising materials for the Fund also may refer to or discuss then-
current or past economic conditions, developments and/or events, including
those relating to actual or proposed tax legislation, and may refer to
statistical or other information concerning trends relating to investment
companies, as compiled by industry associations such as the Investment
Company Institute, and may refer to Morningstar ratings and related
analysis supporting the rating.
The Fund may advertise that it was established in 1976 as the first
incorporated tax exempt fund, and may discuss historical events and
circumstances surrounding its formation. 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 period December 1, 1995 (effective
date of transfer agency agreement) through August 31, 1996, the Fund paid
the Transfer Agent $837,480.
The Bank of New York, 90 Washington Street, New York, New York 10286,
is the Fund's custodian.
Neither the Transfer Agent nor The Bank of New York has any part in
determining the investment policies of the Fund or which securities are to
be purchased or sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York
10004-2696, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the
shares being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
APPENDIX
Description of certain S&P, Moody's and Fitch ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the issuer
or obtained by S&P from other sources it considers reliable, and will
include: (1) likelihood of default-capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation; (2) nature of and provisions
of the obligation; and (3) protection afforded by, and relative position
of, the obligation in the event of bankruptcy, reorganization or other
arrangement under the laws of bankruptcy and other laws affecting
creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A
Principal and interest payments on bonds in this category are regarded
as safe. This rating describes the third strongest capacity for payment of
debt service. It differs from the two higher ratings because:
General Obligation Bonds -- There is some weakness in the local
economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse
circumstances, any one such weakness might impair the ability of the issuer
to meet debt obligations at some future date.
Revenue Bonds -- Debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management performance
appears adequate.
BBB
Of the investment grade, this is the lowest.
General Obligation Bonds -- Under certain adverse conditions, several
of the above factors could contribute to a lesser capacity for payment of
debt service. The difference between "A" and "BBB" rating is that the
latter shows more than one fundamental weakness, or one very substantial
fundamental weakness, whereas the former shows only one deficiency among
the factors considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the pledged
revenues could show substantial variations, with the revenue flow possibly
being subject to erosion over time. Basic security provisions are no more
than adequate. Management performance could be stronger.
BB, B, CCC, CC, C
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and
repay principal. BB indicates the least degree of speculation and C the
highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
BB
Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payment.
B
Debt rated B has a greater vulnerability to default but presently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC
Debt rated CCC has a current identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions
to meet timely payments of principal. In the event of adverse business,
financial or economic conditions, it is not likely to have the capacity to
pay interest and repay principal.
CC
The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C
The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating.
D
Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by
the addition of a plus or minus designation to show relative standing
within the major ratings categories.
Municipal Note Ratings
SP-1
The issuers of these municipal notes exhibit very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics are given a plus (+) designation.
SP-2
The issuers of these municipal notes exhibit satisfactory capacity to
pay principal and interest.
Commercial Paper Ratings
The designation A-1 by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those
issues determined to possess overwhelming safety characteristics are
denoted with a plus sign (+) designation. Capacity for timely payment on
issues with an A-2 designation is strong. However, the relative degree of
safety is not as high as for issues designated A-1.
Moody's
Municipal Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa
Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca
Bonds which are rated Ca present obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Generally, Moody's provides either a generic rating or a rating with a
numerical modifier of 1 for bonds in each of the generic rating categories
Aa, A, Baa, Ba and B. Moody's also provides numerical modifiers of 2 and 3
in each of these categories for bond issues in the health care, higher
education and other not-for-profit sectors; the modifier 1 indicates that
the issue ranks in the higher end of its generic category; the modifier 2
indicates that the issue is in the mid-range of the generic category; and
the modifier 3 indicates that the issue is in the low end of the generic
category.
Municipal Note Ratings
Moody's ratings for state municipal notes and other short-term loans
are designated Moody's Investment Grade (MIG). Such ratings recognize the
differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower and short-term cyclical elements
are critical in short-term ratings, while other factors of major importance
in bond risk, long-term secular trends for example, may be less important
over the short run.
A short-term rating may also be assigned on an issue having a demand
feature. Such ratings will be designated as VMIG or, if the demand feature
is not rated, as NR. Short-term ratings on issues with demand features are
differentiated by the use of the VMIG symbol to reflect such
characteristics as payment upon periodic demand rather than fixed maturity
dates and payment relying on external liquidity. Additionally, investors
should be alert to the fact that the source of payment may be limited to
the external liquidity with no or limited legal recourse to the issuer in
the event the demand is not met.
Moody's short-term ratings are designated Moody's Investment Grade as
MIG 1 or VMIG 1 through MIG 4 or VMIG 4. As the name implies, when Moody's
assigns a MIG or VMIG rating, all categories define an investment grade
situation.
MIG 1/VMIG 1
This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2
This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/VMIG 3
This designation denotes favorable quality. All security elements are
accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access
for refinancing is likely to be less well established.
MIG 4/VMIG 4
This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and although not
distinctly or predominantly speculative, there is specific risk.
Commercial Paper Rating
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity
for repayment of short-term promissory obligations, and ordinarily will be
evidenced by leading market positions in well established industries, high
rates of return on funds employed, conservative capitalization structures
with moderate reliance on debt and ample asset protection, broad margins in
earnings coverage of fixed financial charges and high internal cash
generation, and well established access to a wide range of financial
markets and assured sources of alternative liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2) have
a strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but
to a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Fitch
Municipal Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to
meet the obligations of a specific debt issue or class of debt. The
ratings take into consideration special features of the issue, its
relationship to other obligations of the issuer, the current financial
condition and operative performance of the issuer and of any guarantor, as
well as the political and economic environment that might affect the
issuer's financial strength and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A
Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
impact on these bonds, and therefore, impair timely payment. The
likelihood that the ratings of these bonds will fall below investment grade
is higher than for bonds with higher ratings.
BB
Bonds rated BB are considered speculative. The obligor's ability to
pay interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt service
requirements.
B
Bonds rated B are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC
Bonds rated CCC have certain identifiable characteristics, which, if
not remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
CC
Bonds rated CC are minimally protected. Default in payment of
interest and/or principal seems probable over time.
C
Bonds rated C are in imminent default in payment of interest or
principal.
DDD, DD and D
Bonds rated DDD, DD and D are in actual or imminent default of
interest and/or principal payments. Such bonds are extremely speculative
and should be valued on the basis of their ultimate recovery value in
liquidation or reorganization of the obligor. DDD represents the highest
potential for recovery on these bonds and D represents the lowest potential
for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to indicate
the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the DDD, DD, or D categories.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings
on the existence of liquidity necessary to meet the issuer's obligations in
a timely manner.
Fitch short-term ratings are as follows:
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
F-1+.
F-2
Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payments, but the margin of safety is not as
great as the F-1+ and F-1 categories.
Demand Bond or Notes Ratings
Certain demand securities empower the holder at his option to require
the issuer, usually through a remarketing agent, to repurchase the security
upon notice at par with accrued interest. This is also referred to as a
put option. The ratings of the demand provision may be changed or
withdrawn at any time if, in Fitch's judgment, changing circumstances
warrant such action.
Fitch demand provision ratings carry the same symbols and related
definitions as its short-term ratings.
<TABLE>
<CAPTION>
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-93.3% AMOUNT VALUE
________ ________
<S> <C> <C>
ALABAMA-.9%
Alabama Housing Finance Authority, SFMR
6.45%, 10/1/2025........................................................ $ 7,970,000 $8,122,466
Industrial Development Board of the Town of Courtland, SWDR
(Champion International Corp. Project)
7%, 11/1/2022........................................................... 8,100,000 8,379,531
West Jefferson Industrial Development Board, PCR, Refunding
(Alabama Power Co.- Miller Plant) 6.05%, 5/1/2023 (Insured; MBIA)....... 15,000,000 15,088,950
ALASKA-1.6%
Alaska Housing Finance Corp.:
(Collateralized Veterans Mortgage Program)
6.375%, 12/1/2027..................................................... 9,135,000 9,265,174
Refunding 5.875%, 12/1/2030 (Insured; MBIA)............................. 12,475,000 12,054,842
Anchorage, Electric Utility Revenue, Refunding
6.50%, 12/1/2015 (Insured; MBIA)........................................ 6,135,000 6,699,788
Valdez, Marine Terminal Revenue, Refunding:
(BP Pipeline Inc. Project) 5.50%, 10/1/2028............................. 10,000,000 9,231,200
(Mobil Alaska Pipeline) 5.75%, 11/1/2028................................ 22,000,000 21,082,380
CALIFORNIA-4.7%
Airport Commission City and County of San Francisco
(San Francisco International Airport) 6.50%, 5/1/2015 (Insured; FGIC)... 10,100,000 10,605,202
California Department Water Resource, Water System Revenue (Central Valley
Project)
5%, 12/1/2022........................................................... 10,000,000 8,787,000
California Higher Education Loan Authority, Inc.,
Student Loan Revenue, Refunding 6.50%, 6/1/2005......................... 19,250,000 20,387,290
Duarte, COP (City of Hope Medical Center)
6.25%, 4/1/2023......................................................... 26,000,000 25,480,260
Long Beach, Harbor Revenue 5.25%, 5/15/2025 (Insured; MBIA)................. 25,000,000 22,429,500
Orange County, Recovery COP, Refunding:
5.875%, 7/1/2019 (Insured; MBIA)........................................ 21,000,000 20,635,440
6%, 7/1/2026 (Insured; MBIA)............................................ 31,500,000 31,475,115
San Diego County, COP, Refunding (Interim Justice Facilities Project) 6.50%, 8/1/2007 9,805,000 10,359,571
State Public Works Board of the State of California, LR
(Various University of California Projects) 6.375%, 10/1/2019........... 5,000,000 5,149,550
University of California, HR (University of California - Davis Medical
Center)
5.75%, 7/1/2014 (Insured; AMBAC)........................................ 12,160,000 12,085,216
COLORADO-1.8%
Arapahoe County Capital Improvement Trust Fund, Highway Revenue (E-470
Project)
7%, 8/31/2026........................................................... 18,025,000 18,959,957
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
COLORADO (CONTINUED)
City and County of Denver, Airport Revenue:
7.25%, 11/15/2023....................................................... $ 25,765,000 $ 27,168,162
5.50%, 11/15/2025 (Insured; MBIA)....................................... 18,000,000 16,989,300
CONNECTICUT-1.1%
Connecticut Housing Finance Authority (Housing Mortgage Finance Program):
6.70%, 11/15/2012....................................................... 4,000,000 4,178,920
6.30%, 5/15/2024........................................................ 8,000,000 8,089,760
6.50%, 5/15/2027........................................................ 18,480,000 18,662,213
Connecticut Resource Recovery Authority
(American Fuel Co. Project) 6.45%, 11/15/2022........................... 7,325,000 7,520,724
DELAWARE-.5%
Delaware Economic Development Authority, Water Development Revenue
(Wilmington Suburban Water Corp. Project) 6.80%, 12/1/2023.............. 8,000,000 8,324,320
Delaware Housing Authority, Senior SFMR
6.45%, 1/1/2026......................................................... 8,835,000 8,909,391
DISTRICT OF COLUMBIA-1.9%
Metropolitan Washington Airports Authority, Airport System Revenue:
6.625%, 10/1/2012 (Insured; MBIA)....................................... 40,400,000 42,858,744
6.625%, 10/1/2019 (Insured; MBIA) (a)................................... 23,600,000 24,848,912
FLORIDA-4.4%
Brevard County Housing Finance Authority, SFMR 6.80%, 3/1/2028.............. 5,885,000 6,031,360
Collier County School Board, COP 5%, 2/15/2016 (Insured; FSA)............... 6,500,000 5,908,565
Dade County, Water and Sewer System Revenue
5.50%, 10/1/2025 (Insured; FGIC)........................................ 22,445,000 21,276,962
Florida Community Services Corp. Walton County, Water and Sewer Revenue
(South Walton County Regional Utility):
6.95%, 3/1/2012....................................................... 3,000,000 3,278,490
7%, 3/1/2018.......................................................... 3,500,000 3,770,200
Hillsborough County, Capital Improvement Non-Ad Valorem, Refunding Revenue
(County Center Project) 5.125%, 7/1/2022 (Insured; MBIA)................ 17,050,000 15,340,908
Lakeland, Electric and Water Revenue 5.625%, 10/1/2036...................... 18,825,000 17,879,985
Palm Beach County, Solid Waste IDR:
(Okeelanta Power Limited Partnership Project) 6.70%, 2/15/2015.......... 23,400,000 20,218,302
(Osceola Power Limited Partnership) 6.95%, 1/1/2022..................... 33,800,000 29,589,196
Polk County Industrial Development Authority, IDR
(IMC Fertilizer) 7.525%, 1/1/2015....................................... 15,200,000 16,063,968
Saint Johns River Water Management District, Land Acquisition Revenue,
Refunding
5.125%, 7/1/2016 (Insured; FSA)......................................... 19,000,000 17,509,070
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
GEORGIA-.8%
Georgia Housing and Finance Authority:
Homeownership Mortgage
Zero Coupon, 12/1/2031................................................ $ 122,735,000 $ 9,553,692
Single Family Mortgage:
7.125%, 12/1/2026..................................................... 10,000,000 10,364,100
6.55%, 12/1/2027...................................................... 5,495,000 5,590,943
Georgia Residential Finance Authority, Single Family Insured Mortgage
8.30%, 12/1/2019........................................................ 2,000,000 2,099,440
IDAHO-.4%
Idaho Housing Agency:
Multi-Family Housing Refunding 6.70%, 7/1/2024.......................... 10,050,000 10,295,924
Single Family Mortgage 6.60%, 7/1/2027.................................. 4,365,000 4,446,276
ILLINOIS-8.1%
Bryant, PCR, Refunding (Central Illinois Light Co. Project) 5.90%, 8/1/2023. 11,000,000 10,831,700
Chicago:
Refunding 5.125%, 1/1/2016.............................................. 17,250,000 15,654,202
Wastewater Transmission Revenue, Refunding
5.125%, 1/1/2025 (Insured; FGIC)...................................... 23,600,000 20,873,728
Chicago Board of Education (Chicago School Reform)
6%, 12/1/2026 (Insured; MBIA)........................................... 9,425,000 9,321,513
Chicago O'Hare International Airport, Revenue:
Refunding 5%, 1/1/2008 (Insured; MBIA).................................. 12,475,000 11,968,265
Special Facilities (United Airlines Inc. Project):
8.50%, 5/1/2018....................................................... 6,500,000 7,160,140
8.85%, 5/1/2018....................................................... 15,125,000 17,182,454
Illinois, Refunding 5.25%, 12/1/2020 (Insured; FGIC)........................ 26,000,000 23,879,180
Illinois Development Finance Authority, Revenue:
(Community Rehabilitation Providers Facilities) 8.75%, 3/1/2010......... 18,720,000 19,936,426
Pollution Control, Refunding (Central Illinois Public Service Co.):
5.70%, 8/15/2026...................................................... 11,150,000 10,727,415
6.375%, 1/1/2028...................................................... 14,000,000 14,329,000
Illinois Educational Facilities Authority, Revenue
(Illinois Institute of Technology)
Refunding 6.875%, 12/1/2015............................................. 7,250,000 7,619,097
Illinois Health Facilities Authority, Revenue:
(Beverly Farm Foundation) 9.125%, 12/15/2015 (Prerefunded 12/15/2000) (b) 3,730,000 4,435,007
Refunding:
(Evangelical Hospitals) 6.50%, 4/15/2009 (Insured; FSA)............... 5,000,000 5,366,500
(Mercy Hospital and Medical Center) 7%, 1/1/2015...................... 7,500,000 7,721,775
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
ILLINOIS (CONTINUED)
Illinois Health Facilities Authority, Revenue (continued):
Refunding (continued):
(Trinity Medical Center) 7%, 7/1/2012................................. $ 3,000,000 $ 3,282,030
Illinois Housing Development Authority:
Homeowner Mortgage Revenue:
6.70%, 8/1/2025....................................................... 4,980,000 5,099,122
6.625%, Subseries B-2, 8/1/2026....................................... 15,385,000 15,707,470
Multi-Family Housing (Lawndale Redevelopment Project) 6.90%, 12/1/2026.. 8,750,000 9,081,713
Multi-Family Program 6.75%, 9/1/2021.................................... 8,750,000 8,948,450
Section 8 Elderly Housing Revenue (Morningside North Development)
6.85%, 1/1/2021....................................................... 11,220,000 11,569,391
Peru, Electric System Revenue 5.75%, 5/1/2025 (Insured; FGIC)............... 6,750,000 6,533,190
Robbins (Resource Recovery Partners) 9.25%, 10/15/2014...................... 32,000,000 31,920,000
Solid Waste Agency of Northern Cook County, Contract Revenue, Refunding
5.50%, 5/1/2015 (Insured; MBIA)......................................... 9,000,000 8,445,150
INDIANA-5.9%
Allen County, COP, Refunding 6.50%, 11/1/2008............................... 5,000,000 5,371,650
Brownsburg School Building Corp., First Mortgage
6.10%, 2/1/2013 (Insured; FSA).......................................... 7,500,000 7,678,425
Carmel High School Building Corp., First Mortgage
5.25%, 1/15/2018 (Insured; MBIA)........................................ 6,525,000 6,016,833
Fort Wayne Hospital Authority, HR (Lutheran Hospital)
8%, 2/15/2003 (Prerefunded 2/15/1998) (b)............................... 7,000,000 7,493,150
Hamilton Southeastern Consolidated School Building Corp., First Mortgage
5.25%, 1/15/2017 (Insured; AMBAC)....................................... 5,000,000 4,620,050
Hammond Multi-School Building Corp., First Mortgage
7.10%, 1/15/2015 (Prerefunded 7/15/2001) (b)............................ 5,585,000 6,252,910
Indiana Transportation Finance Authority, Airport Facility LR
6.50%, 11/1/2007........................................................ 12,500,000 13,132,125
Indianapolis Airport Authority, Special Facility Revenue (United Airlines
Project)
6.50%, 11/15/2031....................................................... 31,510,000 31,298,883
Indianapolis Local Public Improvement Bond Bank:
Refunding 5%, 1/1/2017.................................................. 14,575,000 13,167,784
8.50%, 2/1/2018 (Prerefunded 2/1/1998) (b).............................. 73,000,000 78,558,950
IPS School Building Corp., First Mortgage 6.10%, 1/15/2020.................. 11,000,000 11,182,600
Logansport Multi - Purpose School Building Corp., First Mortgage Refunding
6%, 1/1/2009............................................................ 7,645,000 7,848,357
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
INDIANA (CONTINUED)
New Prairie United School Building Corp., First Mortgage Refunding
5.50%, 7/5/2015 (Insured; FSA).......................................... $ 5,240,000 $ 5,005,929
Westfield High School 1995 Building Corp., First Mortgage
5.80%, 7/15/2018 (Insured; AMBAC)....................................... 10,000,000 9,668,800
IOWA-.4%
Iowa Finance Authority, SFMR
(Mortgage Backed Securities Program)
6.65%, 7/1/2028......................................................... 12,070,000 12,340,006
KANSAS-1.5%
Wichita, HR 6.464%, 10/1/2022 (Insured; MBIA)............................... 51,300,000 53,468,451
KENTUCKY-2.4%
City of Ashland, Sewage and Solid Waste Revenue
(Ashland Inc. Project) 7.125%, 2/1/2022................................. 13,170,000 13,848,123
Kenton County Airport Board, Airport Revenue:
(Greater Cincinnati International Airport)
8.25%, 3/1/2015....................................................... 10,945,000 11,677,658
Special Facilities (Delta Airlines Project):
7.125%, 2/1/2021...................................................... 8,455,000 8,780,179
6.125%, 2/1/2022...................................................... 20,000,000 19,206,000
Mount Sterling, LR (Kentucky League Cities Funding)
6.10%, 3/1/2018......................................................... 7,955,000 7,997,718
Pendleton County, Multi-County LR
(Kentucky Associates Counties Leasing Trust Program) 6.50%, 3/1/2019.... 21,000,000 21,740,880
LOUISIANA-1.1%
Parish of Saint Charles, PCR (Louisiana Power and Lighting Co. Project)
8.25%, 6/1/2014......................................................... 7,500,000 8,176,650
Parish of West Feliciana, PCR:
(Gulf States Utilities Co. Project) 9%, 5/1/2015........................ 13,500,000 15,047,775
(Gulf States Utilities-I) 7.70%, 12/1/2014.............................. 14,000,000 15,049,860
MAINE-.9%
Maine Financial Authority, Solid Waste Revenue
Recycling Facilities (Great Northern Paper, Inc. Project-Bowater Inc.
Obligor)
7.75%, 10/1/2022........................................................ 8,165,000 8,830,529
Maine Housing Authority, Mortgage Purchase
6.875%, 11/15/2023...................................................... 14,000,000 14,414,400
Skowhegan, SWDR (S.D. Warren Co. Project) 8.40%, 10/1/2015.................. 7,700,000 8,631,546
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
MARYLAND-2.2%
Calvert County, PCR, Refunding (Baltimore Gas and Electric Co. Project)
5.55%, 7/15/2014........................................................ $ 8,000,000 $ 7,800,400
Community Development Administration,
Department of Housing and Community Development State of Maryland,
Single Family Program Bonds:
6.80%, 4/1/2024....................................................... 33,690,000 34,446,677
6.55%, 4/1/2026....................................................... 9,190,000 9,386,206
6.75%, 4/1/2026....................................................... 19,990,000 20,541,724
Northeast Waste Disposal Authority, Solid Waste Revenue
(Montgomery County Resource Recovery Project) 6.30%, 7/1/2016........... 7,500,000 7,453,050
MASSACHUSETTS-2.1%
Massachusetts Bay Transportation Authority, General Transportation
5.375%, 3/1/2020 (Insured; AMBAC)....................................... 17,880,000 16,835,093
Massachusetts Housing Finance Agency, Revenue:
Housing:
6.65%, 7/1/2019 (Insured; AMBAC)...................................... 7,275,000 7,469,461
6.50%, 7/1/2025 (Insured; AMBAC)...................................... 4,140,000 4,233,233
6.60%, 1/1/2037 (Insured; AMBAC)...................................... 7,100,000 7,275,867
Single Family Housing:
7.125%, 6/1/2025...................................................... 26,975,000 28,051,842
6.65%, 12/1/2027...................................................... 7,200,000 7,393,752
Massachusetts Industrial Finance Agency, Revenue
Museum (Norman Rockwell Stockbridge) 8.125%, 7/1/2011................... 3,055,000 3,207,506
MICHIGAN-2.4%
Charter County of Wayne, Special Airport Facilities Revenue, Refunding
(Northwest Airlines, Inc., Facilities) 6.75%, 12/1/2015................. 8,800,000 8,867,760
Detroit, Sewage Disposal System Revenue 5.25%, 7/1/2015 (Insured; MBIA)..... 8,700,000 8,131,716
East Grand Rapids Public School District 5%, 5/1/2020 ...................... 8,675,000 7,751,112
The Economic Development Corp. of the County of Gratiot,
Limited Obligation EDR
(Danly Die Set Project) 7.625%, 4/1/2007................................ 3,200,000 3,328,608
Michigan Hospital Finance Authority, Revenue:
Hospital Refunding:
(Genesys Health System Obligated Group):
8.125%, 10/1/2021................................................. 15,000,000 16,417,800
7.50%, 10/1/2027.................................................. 15,300,000 15,942,141
(Henry Ford Health System)
5.25%, 11/15/2025................................................. 10,000,000 8,965,100
(Metropolitan Hospital) 8.125%, 7/1/2018 (Prerefunded 7/1/1999) (b)..... 5,000,000 5,607,150
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
MICHIGAN (CONTINUED)
Western Townships Utilities Authority, Sewer Disposal System
(Limited Tax G.O.) 8.125%, 1/1/2009..................................... $ 8,765,000 $ 9,568,049
MINNESOTA-1.7%
Minneapolis, HR, Refunding (Lifespan Inc. Issue)
9.125%, 12/1/2014 (Prerefunded 12/1/1997) (b)........................... 4,000,000 4,320,600
Minnesota Housing Finance Agency, Single Family Mortgage:
6.90%, 7/1/2022......................................................... 7,205,000 7,449,322
6.50%, 7/1/2024......................................................... 15,870,000 16,130,744
6.45%, 7/1/2025......................................................... 30,210,000 30,570,103
MISSOURI-1.0%
Kansas City Municipal Assistance Corp., Leasehold Refunding Revenue
(H. Roe Bartle Convention Center Project):
5.125%, 4/15/2015 (Insured; MBIA) .................................... 11,055,000 10,348,585
5%, 4/15/2020 (Insured; MBIA)......................................... 5,500,000 4,960,395
Missouri Higher Education Loan Authority, Student Loan Revenue
6.75%, 2/15/2009........................................................ 11,500,000 11,827,060
Sikeston, Electric Revenue, Refunding
5%, 6/1/2022 (Insured; MBIA)............................................ 7,745,000 6,897,387
MONTANA-.2%
Montana Board of Housing (Single Family Program)
6.35%, 12/1/2021........................................................ 7,255,000 7,277,273
NEBRASKA-.6%
Omaha Public Power District, Electric Revenue 5.50%, 2/1/2014............... 20,000,000 19,723,600
NEVADA-1.7%
Clark County, School District 5.50%, 6/15/2016 (Insured; FGIC).............. 28,475,000 27,232,636
Nevada, Refunding (Colorado River Commission)
5.25%, 7/1/2020......................................................... 10,000,000 9,348,600
Nevada Housing Division (Single Family Program)
6.80%, 4/1/2027......................................................... 9,960,000 10,219,956
Washoe County:
Gas Facilities Revenue (Sierra Pacific Power Co. Project)
6.70%, 11/1/2032 (Insured; MBIA)...................................... 10,000,000 10,603,400
Gas and Water Facilities Revenue, Refunding (Sierra Pacific)
6.30%, 12/1/2014 (Insured; AMBAC)..................................... 4,375,000 4,559,406
NEW HAMPSHIRE-4.5%
Business Finance Authority of the State of New Hampshire,
State Guaranteed Airport Revenue (Manchester Airport Project):
6.50%, 1/1/2019....................................................... 12,600,000 13,110,552
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
NEW HAMPSHIRE (CONTINUED)
Business Finance Authority of the State of New Hampshire,
State Guaranteed Airport Revenue (Manchester Airport Project)
(continued):
6.375%, 1/1/2022...................................................... $ 8,650,000 $ 8,903,531
New Hampshire Housing Finance Authority:
Multi-Family Housing:
7.55%, 7/1/2013....................................................... 4,205,000 4,606,872
(Mariners Village Project)
6.60%, 1/1/2038 (Insured; FHA).................................... 7,365,000 7,474,297
Single Family Mortgage:
7.25%, 1/1/2016....................................................... 3,430,000 3,610,452
6.55%, 7/1/2026....................................................... 22,190,000 22,634,688
Single Family Residential Mortgage:
7.10%, 1/1/2023....................................................... 24,860,000 25,947,874
7.75%, 7/1/2023....................................................... 16,930,000 17,785,981
6.85%, 1/1/2025....................................................... 10,515,000 10,772,617
6.95%, 1/1/2026....................................................... 10,210,000 10,553,771
New Hampshire Industrial Development Authority, Revenue
(Pollution Control Public Service Co. Project):
7.65%, Series A, 5/1/2021............................................. 21,450,000 21,766,173
7.65%, Series C, 5/1/2021............................................. 13,550,000 13,749,727
NEW JERSEY-3.6%
Howell Township Municipal Utilities Authority, Revenue
8.60%, 1/1/2014 (Prerefunded 7/1/1998) (b).............................. 4,000,000 4,367,800
New Jersey Economic Development Authority, PCR
(Public Service Electric and Gas Co. Project)
6.40%, 5/1/2032 (Insured; MBIA)......................................... 32,040,000 33,264,248
New Jersey Educational Facilities Authority, Revenue:
(Trenton State College Issue):
5.10%, 7/1/2021 (Insured; MBIA)....................................... 11,000,000 10,039,590
5.125%, 7/1/2024 (Insured; MBIA)...................................... 17,000,000 15,499,240
(University of Medicine and Dentistry of New Jersey Issue)
5.25%, 12/1/2021 (Insured; AMBAC)..................................... 15,000,000 13,958,850
New Jersey Housing and Mortgage Finance Agency, Revenue:
6%, 11/1/2002........................................................... 5,000,000 5,136,750
6.45%, 11/1/2007........................................................ 15,260,000 15,866,432
New Jersey Transportation Trust Fund Authority, Refunding
(Transportation System) 5.25%, 6/15/2014 (Insured; MBIA)................ 18,500,000 17,604,970
New Jersey Wastewater Treatment Trust, Insured Loan Revenue
9%, 9/1/2007 (Prerefunded 9/1/1997) (b)................................. 6,000,000 6,410,040
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
NEW JERSEY (CONTINUED)
Pollution Control Financing Authority of Salem County, PCR, Refunding
(Public Service Electric and Gas Co. Project)
6.25%, 6/1/2031 (Insured; MBIA)......................................... $ 6,500,000 $ 6,731,985
NEW MEXICO-.7%
Albuquerque, HR, Refunding (Presbyterian Health Care Services)
6.375%, 8/1/2007 (Insured; MBIA)........................................ 4,500,000 4,848,165
New Mexico Educational Assistance Foundation, Student Loan Revenue
7.45%, 3/1/2010......................................................... 12,045,000 12,584,496
New Mexico Mortgage Financing Authority
6.80%, 1/1/2026......................................................... 5,500,000 5,811,630
NEW YORK-10.9%
New York City:
7.50%, 2/1/2003......................................................... 9,000,000 9,871,650
5.90%, 2/1/2005......................................................... 11,815,000 11,744,819
8.25%, 6/1/2006......................................................... 2,750,000 3,278,990
5.60%, 8/15/2006........................................................ 23,100,000 22,263,318
5.70%, 8/15/2007........................................................ 13,445,000 12,915,670
7.25%, 8/15/2007........................................................ 13,790,000 15,086,122
6.25%, 8/1/2008......................................................... 10,000,000 9,991,000
6.375%, 8/15/2011....................................................... 31,285,000 31,320,352
5.75%, 2/1/2014......................................................... 15,000,000 13,999,050
5.75%, 2/1/2015......................................................... 12,280,000 11,366,736
5.75%, 2/1/2017......................................................... 20,000,000 18,411,400
5.875%, 3/15/2018....................................................... 20,000,000 18,593,800
5.875%, 2/15/2019....................................................... 23,715,000 21,989,259
5.75%, 2/1/2020......................................................... 9,580,000 8,726,518
6%, 2/15/2025........................................................... 23,375,000 21,824,536
New York City Municipal Water Finance Authority, Water and Sewer System
Revenue:
5.625%, 6/15/2011....................................................... 26,000,000 25,260,820
5.75%, 6/15/2026........................................................ 17,500,000 17,144,050
5.875%, 6/15/2026....................................................... 13,000,000 12,538,760
New York State Dormitory Authority, Revenue:
(City University) 7.50%, 7/1/2010....................................... 10,000,000 11,482,200
Court Facilities Lease 5.70%, 5/15/2022................................. 10,000,000 9,210,100
New York State Energy, Research and Development Authority,
Electric Facilities Revenue
(Con Edison Co. Project) 7.50%, 1/1/2026................................ 16,970,000 18,252,084
New York State Mortgage Agency, Revenue (Homeowner Mortgage)
6.65%, 10/1/2025........................................................ 22,225,000 22,869,525
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
NEW YORK (CONTINUED)
New York State Urban Development Corp., Revenue,
(Correctional Capital Facilities):
5.375%, 1/1/2025...................................................... $ 32,550,000 $ 28,767,365
5.50%, 1/1/2025 (Insured; MBIA)....................................... 9,210,000 8,711,002
NORTH CAROLINA-.7%
North Carolina Housing Finance Agency, Single Family Revenue
6.50%, 9/1/2026......................................................... 6,125,000 6,227,471
Pitt County, Revenue (Pitt County Memorial Hospital)
6.90%, 12/1/2021 (Prerefunded 12/1/2001) (b)............................ 12,000,000 13,423,920
Winston Salem, COP 6.90%, 6/1/2011 (Prerefunded 6/1/2001) (b)............... 5,245,000 5,806,687
NORTH DAKOTA-.2%
North Dakota Housing Finance Agency
(Housing Mortgage Finance Program) 6.75%, 7/1/2025...................... 6,375,000 6,530,614
OHIO-1.1%
Cleveland, Waterworks Revenue, Refunding and Improvement
5.75%, 1/1/2026 (Insured; MBIA)......................................... 18,285,000 17,840,675
Cuyahoga County, HR (Meridia Health System) 7%, 8/15/2023................... 7,000,000 7,461,090
Franklin County, HR (Holy Cross Health System Corp.)
5.875%, 6/1/2021........................................................ 9,000,000 8,758,890
Ohio Air Quality Development Authority, PCR (Ohio Edison)
5.625%, 11/15/2029 (Insured; AMBAC)..................................... 6,750,000 6,400,620
OKLAHOMA-.8%
Claremore Industrial and Redevelopment Authority, EDR
(Yuba Project) 8.375%, 7/1/2011......................................... 7,500,000 7,918,200
Southern Oklahoma Memorial Hospital Authority, HR 6.60%, 12/1/2012.......... 5,725,000 5,853,813
Tulsa Municipal Airport Trust, Revenue
(AMR Corp.) 7.60%, 12/1/2030............................................ 14,390,000 15,346,216
PENNSYLVANIA-3.8%
Allegheny County Hospital Development Authority, Revenue (Health Center - University
of Pittsburgh Medical Center System) 5.375%, 12/1/2025 (Insured; MBIA).. 22,280,000 20,642,643
Delaware County Industrial Development Authority, Water Facilities Revenue
(Philadelphia Suburban Water) 6.35%, 8/15/2025 (Insured; FGIC).......... 10,000,000 10,306,100
Lehigh County Industrial Development Authority, PCR, Refunding
(Pennsylvania Power and Light Co. Project) 5.50%, 2/15/2027 (Insured; MBIA) 8,805,000 8,327,153
Pennsylvania:
5%, 11/15/2014 (Insured; AMBAC)......................................... 8,875,000 8,133,671
5%, 11/15/2015 (Insured; AMBAC)......................................... 8,875,000 8,063,026
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
PENNSYLVANIA (CONTINUED)
Pennsylvania Economic Development Financing Authority,
Exempt Facilities Revenue (MacMillan Ltd. Partnership Project)
7.60%, 12/1/2020........................................................ $ 4,500,000 $ 4,947,840
Pennsylvania Higher Educational Facilities Authority,
Health Services Revenue, Refunding (Allegheny Delaware Valley
Obligation):
5.40%, 11/15/2007 (Insured; MBIA)..................................... 5,000,000 5,030,900
5.60%, 11/15/2009 (Insured; MBIA)..................................... 9,475,000 9,540,093
Philadelphia:
5%, 5/15/2020 (Insured; MBIA)........................................... 7,650,000 6,843,614
Water and Wastewater Revenue, Refunding
5.25%, 6/15/2023 (Insured; MBIA)...................................... 6,000,000 5,436,600
Pittsburgh, Refunding 5.125%, 3/1/2009 (Insured; FGIC)...................... 29,655,000 28,441,814
Quakertown General Authority, Revenue (Community Mental Health/Retardation)
8.875%, 11/1/2010....................................................... 6,420,000 6,976,421
Ridley Park Hospital Authority, Revenue (Taylor Hospital)
8.625%, 12/1/2020 (Prerefunded 12/1/2000) (b)........................... 10,000,000 11,679,100
RHODE ISLAND-1.6%
Rhode Island Health and Educational Building Corp., Revenue:
(Johnson and Wales University) 8.375%, 4/1/2020 (Prerefunded 4/1/2000) (b) 11,000,000 12,516,350
(Landmark Medical Center) 5.60%, 10/1/2012 (Insured; FSA)............... 5,000,000 4,911,400
Rhode Island Housing and Mortgage Finance Corp.
(Homeownership Opportunity):
6.95%, 4/1/2022....................................................... 9,250,000 9,547,943
6.60%, 10/1/2025...................................................... 10,270,000 10,441,201
6.50%, 4/1/2027....................................................... 11,835,000 12,064,836
6.85%, 4/1/2027....................................................... 5,615,000 5,839,207
SOUTH CAROLINA-1.0%
Richland County, Solid Waste Disposal Facilities Revenue
(Union Camp Corp. Project) 7.125%, 9/1/2021............................. 6,250,000 6,666,750
South Carolina Housing Finance and Development Authority,
Mortgage Revenue:
6.55%, 7/1/2015....................................................... 3,950,000 4,046,617
6.75%, 7/1/2026....................................................... 7,000,000 7,170,870
6.70%, 7/1/2027....................................................... 8,000,000 8,175,760
Spartanburg County, Hospital Facilities Improvement Revenue, Refunding
(Mary Black Memorial Project) 8.25%, 10/1/2008 (Prerefunded 10/1/1998) (b) 5,000,000 5,461,800
York County, Industrial Revenue, Exempt Facility (Hoechst Celanese)
5.70%, 1/1/2024......................................................... 5,000,000 4,744,650
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
TENNESSEE-1.2%
Tennessee Housing Development Agency, Mortgage Finance:
6.45%, 7/1/2021......................................................... $ 11,565,000 $ 11,698,460
6.55%, 7/1/2026......................................................... 31,735,000 32,372,874
TEXAS-5.8%
Alliance Airport Authority Inc., Special Facilities Revenue:
(American Airlines Inc. Project)
7%, 12/1/2011......................................................... 12,330,000 13,263,258
(Federal Express Corp. Project)
6.375%, 4/1/2021...................................................... 28,800,000 28,376,352
Angelina and Neches River Authority, SWDR (Champion International Corp.
Project)
7.375%, 5/1/2015........................................................ 5,570,000 5,951,991
Austin, Utility System Revenue, Refunding:
5.25%, 5/15/2016 (Insured; FSA) (c)..................................... 23,645,000 22,087,740
5.60%, 5/15/2025 (Insured; MBIA)........................................ 25,000,000 23,982,500
Gulf Coast Waste Disposal Authority, Revenue:
(Champion International Corp.)
7.375%, 10/1/2025..................................................... 12,000,000 12,764,760
Solid Waste Disposal (Occidental Petroleum Corp. Project) 7%, 11/1/2020. 7,725,000 7,978,225
Harris County Hospital District, Mortgage Revenue, Refunding
7.40%, 2/15/2010 (Insured; AMBAC)....................................... 5,000,000 5,822,000
Houston Hotel Occupancy Tax, Revenue 7%, 7/1/2009 (Insured; FGIC)
(Prerefunded 7/1/2001) (b).............................................. 12,225,000 13,430,507
Rio Grande Valley Health Facilities Development Corp., HR, Refunding
(Valley Baptist Medical Center Project) 6.40%, 8/1/2016 ................ 11,200,000 11,791,808
Texas, GO (Veterans Housing Assistance Fund):
7%, 12/1/2025........................................................... 9,920,000 10,330,886
Refunding 6.45%, 12/1/2020.............................................. 15,210,000 15,346,282
Texas College Student Loan 5%, 8/1/2021..................................... 8,000,000 6,995,200
Texas Municipal Power Agency, Revenue, Refunding
5.25%, 9/1/2012 (Insured; MBIA)......................................... 10,065,000 9,548,062
Texas Public Property Finance Corp., Revenue
(Mental Health and Retardation Project):
8.625%, 11/1/2000..................................................... 1,700,000 1,822,230
8.75%, 11/1/2010...................................................... 4,745,000 5,199,998
University of Texas, Revenue (Financing System)
5%, 8/15/2016........................................................... 10,000,000 9,066,500
UTAH-1.5%
Carbon County, SWDR, Refunding (Sunnyside Cogeneration) 9.25%, 7/1/2018..... 20,000,000 14,221,800
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
UTAH (CONTINUED)
Intermountain Power Agency, Power Supply Revenue, Refunding
5%, 7/1/2021............................................................ $ 15,400,000 $ 13,504,106
Utah Housing Finance Agency, Single Family Mortgage:
6.55%, 1/1/2022......................................................... 5,340,000 5,443,756
6.40%, 1/1/2027......................................................... 6,695,000 6,811,493
6.65%, 7/1/2027......................................................... 10,325,000 10,563,817
7%, 7/1/2027............................................................ 4,025,000 4,207,775
VERMONT-.3%
Vermont Housing Finance Agency, Single Family Housing 6.875%, 5/1/2025...... 10,500,000 10,756,515
VIRGINIA-2.4%
Chesapeake Bay Bridge and Tunnel Commission, General Resolution, Revenue,
Refunding 5%, 7/1/2022 (Insured; MBIA).................................. 12,035,000 10,760,373
Giles County Industrial Development Authority,
Solid Waste Disposal Facility Revenue (Hoechst Celanese Corp. Project)
6.625%, 12/1/2022....................................................... 8,715,000 9,024,295
Henrico County Industrial Development Authority, Revenue
(Maryview Hospital Project) 7.50%, 9/1/2011 (Prerefunded 8/1/2000) (b).. 5,355,000 5,992,406
Virginia Housing Development Authority, Commonwealth Mortgage:
6.20%, 7/1/2021......................................................... 15,000,000 14,941,950
6.70%, 1/1/2022......................................................... 6,950,000 7,105,124
6.40%, 7/1/2022 (Insured; MBIA)......................................... 24,000,000 24,384,240
6.60%, 7/1/2022......................................................... 4,635,000 4,687,700
6.85%, 1/1/2027......................................................... 8,000,000 8,211,920
WASHINGTON-.4%
Public Utility District No. 1 of Chelan County,
Chelan Hydro Consolidated System Revenue 6.55%, 7/1/2023................ 10,000,000 10,326,900
Washington Health Care Facilities Authority, Revenue (Harrison Memorial
Hospital, Bremerton) 5.30%, 8/15/2014 (Insured; AMBAC).................. 5,000,000 4,662,500
WEST VIRGINA-.2%
Braxton County, Solid Waste Disposal Revenue (Weyerhaeuser Co. Project)
6.50%, 4/1/2025......................................................... 8,000,000 8,265,280
WISCONSIN-1.1%
Madison, IDR (Madison Gas and Electric Co. Project)
6.75%, 4/1/2027......................................................... 10,000,000 10,498,800
Wisconsin Health and Educational Facilities Authority, Revenue:
(Aurora Health Care)
5.25%, 8/15/2023 (Insured; MBIA)...................................... 14,000,000 12,528,040
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
WISCONSIN (CONTINUED)
Wisconsin Health and Educational Facilities Authority, Revenue (continued):
(Waukesha Memorial Hospital, Inc.)
5.50%, 8/15/2015 (Insured; AMBAC)..................................... $ 8,545,000 $ 8,097,157
Wisconsin Housing and Economic Development Authority,
Homeownership Revenue 6.45%, 3/1/2017................................... 7,000,000 7,149,450
WYOMING-.7%
Sweetwater County, SWDR (FMC Corp. Project)
6.90%, 9/1/2024......................................................... 16,225,000 16,811,534
Uinta County Hospital Facility, Revenue, Refunding
(IHC Hospitals Inc.) 7.25%, 2/15/2019 (Prerefunded 2/15/1999) (b)....... 7,350,000 7,969,458
U.S. RELATED-.5%
Commonwealth of Puerto Rico 5.40%, 7/1/2025................................. 18,115,000 16,666,162
_______
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $3,249,223,710)................................................... $3,304,895,308
=======
SHORT-TERM MUNICIPAL INVESTMENTS-6.7%
CALIFORNIA-.8%
California Pollution Control Financing Authority, PCR, Refunding
VRDN (Pacific Gas and Electric) 3.75% (d)............................... $ 11,500,000 $ 11,500,000
Irvine Ranch Water District, VRDN 3.75% (LOC; Bank of America) (d,e)........ 16,200,000 16,200,000
FLORIDA-.1%
Florida Board of Education, Capital Outlay 3.67% (f,g)...................... 3,000,000 3,000,000
INDIANA-.4%
Petersburg, PCR, Refunding, VRDN (Indiana Power and Light)
3.40% (Insured; AMBAC) (d).............................................. 15,000,000 15,000,000
IOWA-.7%
Iowa Finance Authority, SWDR, VRDN (Cedar River Paper Co. Project)
3.85% (LOC; Swiss Bank Corp.) (d,e)..................................... 25,000,000 25,000,000
MARYLAND-.1%
Prince Georges' Housing Authority, Mortgage Revenue, VRDN (Laurel-Oxford)
3.525% (LOC; Bankers Trust) (d,e)....................................... 2,500,000 2,500,000
MICHIGAN-1.6%
Michigan Strategic Fund, LOR, Refunding
VRDN (Detroit Edison Co.) 3.65% (LOC; Barclays Bank PLC) (d,e).......... 30,900,000 30,900,000
Midland County Economic Development Corp., Economic Development LOR
VRDN (Dow Chemical Co Project) 3.90% (d)................................ 27,000,000 27,000,000
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
SHORT-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
________ ________
MINNESOTA-.2%
Cloquet, PCR, VRDN (Potlatch Corp. Project) 3.60% (LOC; Credit Suisse) (d,e) $ 2,000,000 $ 2,000,000
Golden Valley IDR Refunding, VRDN (Graco Inc. Project)
3.75% (LOC; Fuji Bank Ltd.) (d,e)....................................... 2,380,000 2,380,000
Minnesota Higher Education Coordinating Board, Revenue, VRDN
(Supplement Student Loan Program) 3.70% (d)............................. 1,000,000 1,000,000
MISSISSIPPI-.6%
Jackson County, PCR, Refunding, VRDN (Chevron USA Inc. Project)
3.80% (d)............................................................... 10,000,000 10,000,000
Perry County, PCR, Refunding, VRDN (Leaf River Forest Project)
3.80% (LOC; Credit Suisse) (d,e)........................................ 12,700,000 12,700,000
NEW JERSEY-.5%
New Jersey Sports and Exposition Authority, VRDN
3.15% (Insured; MBIA) (d)............................................... 18,000,000 18,000,000
PENNSYLVANIA-.0%
Bucks County Industrial Development Authority, VRDN
(Oxford Falls Plaza Project) 3.95% (d).................................. 900,000 900,000
Montgomery County Higher Education and Health Authority, HR,
VRDN (Holy Redeemer Hospital) 3.35% (Insured; AMBAC) (d)................ 100,000 100,000
SOUTH CAROLINA-.2%
Charleston County, Industrial Revenue, VRDN (Massey Coal Terminal SC Corp.)
3.80% (LOC; Morgan Guaranty Trust) (d,e)................................ 7,050,000 7,050,000
TEXAS-.4%
Bexar County Health Facilities Development Corp., VRDN
(Air Force Village Foundation Project) 3.40% (LOC; Rabobank Nederland) (d,e) 14,300,000 14,300,000
UTAH-.7%
Salt Lake County, PCR, Refunding, VRDN (Service Station Holdings Project)
3.75% (d)............................................................... 24,200,000 24,200,000
VIRGINIA-.4%
Peninsula Ports Authority, Revenue, Refunding VRDN
(Port Facility - Shell Oil Co. Project) 3.80% (d)....................... 14,000,000 14,000,000
U.S. RELATED-.0%
Commonwealth of Puerto Rico, Government Development Bank, Refunding VRDN
3.10% (LOC; Credit Suisse) (d,e)........................................ 1,000,000 1,000,000
_______
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $238,730,000)..................................................... $ 238,730,000
=======
TOTAL INVESTMENTS-100.0%
(cost $3,487,953,710)................................................... $3,543,625,308
=======
</TABLE>
<TABLE>
<CAPTION>
DREYFUS MUNICIPAL BOND FUND, INC.
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation LOC Letter of Credit
COP Certificate of Participation LOR Limited Obligation Revenue
EDR Economic Development Revenue LR Lease Revenue
FGIC Financial Guaranty Insurance Company MBIA Municipal Bond Investors Assurance
FHA Federal Housing Administration Insurance Corporation
FSA Financial Security Assurance PCR Pollution Control Revenue
GO General Obligation SFMR Single Family Mortgage Revenue
HR Hospital Revenue SWDR Solid Waste Disposal Revenue
IDR Industrial Development Revenue VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
<S> <C> <C> <C>
FITCH (H) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
____ ____ _________ __________
AAA Aaa AAA 33.5%
AA Aa AA 24.1
A A A 18.3
BBB Baa BBB 11.0
BB Ba BB 1.9
F1 MIG1/P1 SP1/A1 5.5
Not Rated (i) Not Rated (i) Not Rated (i) 5.7
____
100.0%
====
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Wholly held by custodian as collateral for delayed-delivery
security.
(b) Bonds which are prerefunded are collateralized by U.S. government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(c) Purchased on a delayed-delivery basis.
(d) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(e) Secured by letters of credit.
(f) Inverse Floater Security - the interest rate is subject to change
periodically.
(g) Security exempt from registration under Rule 144A of the Securities
Act of 1933. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At August 31,
1996, this security amounted to $3,000,000 or .1% of net assets.
(h) Fitch currently provides creditworthiness information for a limited
number of investments.
(i) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable
quality to those rated securities in which the Fund may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $3,487,953,710)-see statement................................... $3,543,625,308
Interest receivable..................................................... 52,990,639
Receivable for investment securities sold............................... 4,095,241
Receivable for subscriptions to Common Stock............................ 94
Prepaid expenses........................................................ 103,432
_______
3,600,814,714
LIABILITIES:
Due to The Dreyfus Corporation and affiliates........................... $ 2,393,810
Due to Custodian........................................................ 3,210,981
Payable for investment securities purchased............................. 22,581,566
Payable for Common Stock redeemed....................................... 150,634
Accrued expenses........................................................ 191,735 28,528,726
______ _______
NET ASSETS.................................................................. $3,572,285,988
=======
REPRESENTED BY:
Paid-in capital......................................................... $3,515,265,600
Accumulated undistributed investment income-net......................... 533,961
Accumulated undistributed net realized gain on investments.............. 814,829
Accumulated net unrealized appreciation on investments-Note 3(b)....... 55,671,598
_______
NET ASSETS at value applicable to 291,979,817 shares outstanding
(600 million shares of $.01 par value Common Stock authorized).......... $3,572,285,988
=======
NET ASSET VALUE, offering and redemption price per share
($3,572,285,988 / 291,979,817 shares)................................... $12.23
===
</TABLE>
<TABLE>
<CAPTION>
See notes to financial statements.
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF OPERATIONS YEAR ENDED AUGUST 31, 1996
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $236,295,788
EXPENSES:
Management fee-Note 2(a).............................................. $22,230,334
Shareholder servicing costs-Note 2(b)................................. 3,690,904
Custodian fees........................................................ 205,462
Prospectus and shareholders' reports.................................. 124,156
Professional fees..................................................... 101,704
Registration fees..................................................... 86,599
Directors' fees and expenses-Note 2(c)................................ 68,022
Miscellaneous......................................................... 210,384
______
TOTAL EXPENSES.................................................. 26,717,565
_______
INVESTMENT INCOME-NET........................................... 209,578,223
_______
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS-Note 3:
Net realized gain on investments........................................ $47,382,435
Net realized (loss) on financial futures................................ (2,211,822)
______
NET REALIZED GAIN..................................................... 45,170,613
Net unrealized (depreciation) on investments............................ (86,386,337)
_______
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS............... (41,215,724)
_______
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $168,362,499
=======
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
______________________________________
1995 1996
_________ _________
<S> <C> <C>
OPERATIONS:
Investment income-net............................................. $ 223,098,936 $ 209,578,223
Net realized gain (loss) on investments........................... (44,338,112) 45,170,613
Net unrealized appreciation (depreciation) on investments for the year 78,567,175 (86,386,337)
________ ________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ 257,327,999 168,362,499
________ ________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net............................................. (223,098,936) (209,044,262)
Net realized gain on investments.................................. (22,638,307) __
________ ________
TOTAL DIVIDENDS................................................. (245,737,243) (209,044,262)
________ ________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold..................................... 4,846,241,789 6,426,888,270
Dividends reinvested.............................................. 155,978,774 128,954,048
Cost of shares redeemed........................................... (5,085,554,561) (6,879,608,434)
________ ________
(DECREASE) IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS........ (83,333,998) (323,766,116)
________ ________
TOTAL (DECREASE) IN NET ASSETS.............................. (71,743,242) (364,447,879)
NET ASSETS:
Beginning of year................................................. 4,008,477,109 3,936,733,867
________ ________
End of year (including accumulated undistributed investment income-net;
$533,961 on August 31, 1996).................................... $ 3,936,733,867 $ 3,572,285,988
======== ========
SHARES SHARES
________ ________
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................................... 400,686,274 519,000,847
Shares issued for dividends reinvested............................ 12,969,173 10,376,060
Shares redeemed................................................... (419,990,511) (554,619,976)
________ ________
NET (DECREASE) IN SHARES OUTSTANDING............................ (6,335,064) (25,243,069)
======== ========
See notes to financial statements.
</TABLE>
DREYFUS MUNICIPAL BOND FUND, INC.
FINANCIAL HIGHLIGHTS
Reference is made to page 4 of the Fund's Prospectus
dated January 2, 1997.
See notes to financial statements.
DREYFUS MUNICIPAL BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Municipal Bond Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a diversified open-end management
investment company. The Fund's investment objective is to provide investors
with as high a level of current income exempt from Federal income tax as is
consistent with the preservation of capital. The Dreyfus Corporation
("Manager") serves as the Fund's investment adviser. The Manager is a direct
subsidiary of Mellon Bank, N.A. Premier Mutual Fund Services, Inc. acts as
the distributor of the Fund's shares, which are sold to the public without a
sales charge.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management
estimates and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: The Fund's investments (excluding financial
futures on municipal and U.S. treasury securities) are valued each business
day by an independent pricing service ("Service") approved by the Board of
Directors. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the
Service are valued at the mean between the quoted bid prices (as obtained by
the Service from dealers in such securities) and asked prices (as calculated
by the Service based upon its evaluation of the market for such securities).
Other investments (which constitute a majority of the portfolio securities)
are carried at fair value as determined by the Service based on methods which
include consideration of: yields or prices of municipal securities of
comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Fund not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .60 of 1% of the value
of the Fund's average daily net assets and is payable monthly. However,
pursuant to the court approved settlement of previously disclosed litigation,
commencing October 15, 1988, the Manager has agreed to make payments to the
Fund for ten years, ranging from $0 to $1 million per year depending on
average daily net assets of the Fund. The management fee during the year
ended August 31, 1996 was reduced by $350,000 pursuant to the settlement
of litigation.
DREYFUS MUNICIPAL BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Agreement provides for an expense reimbursement from the Manager
should the Fund's aggregate expenses, exclusive of taxes, brokerage, interest
on borrowings and extraordinary expenses, exceed 1 1\2% of the value of the
Fund's average daily net assets for any full fiscal year. No expense
reimbursement was required for the year ended August 31, 1996.
(B) Pursuant to the Fund's Shareholder Services Plan, the Fund reimburses
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager, an
amount not to exceed an annual rate of .25 of 1% of the value of the Fund's
average daily net assets for certain allocated expenses of providing personal
services and/or maintaining shareholder accounts. The services provided may
include personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding the Fund and providing reports and other
information, and services related to the maintenance of shareholder accounts.
During the year ended August 31, 1996, the Fund was charged an aggregate of
$2,087,233 pursuant to the Shareholder Services Plan.
Effective December 1, 1995, the Fund compensates Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of the Manager, under a transfer agency agreement
for providing personnel and facilities to perform transfer agency services
for the Fund. Such compensation amounted to $837,480 during the period ended
August 31, 1996.
(C) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $4,500 and an attendance fee of $500
per meeting. The Chairman of the Board receives an additional 25% of such
compensation and the Director Emeritus receives 50% of such compensation.
NOTE 3-SECURITIES TRANSACTIONS:
(A) The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended August 31, 1996
amounted to $2,266,717,419 and $2,602,451,160, respectively.
The Fund may invest in financial futures contracts in order to gain
exposure to or protect against changes in the market. The Fund is exposed to
market risk as a result of changes in the value of the underlying financial
instruments. Investments in financial futures require the Fund to "mark to
market" on a daily basis, which reflects the change in the market value of
the contract at the close of each day's trading. Accordingly, variation
margin payments are received or made to reflect daily unrealized gains or
losses. When the contracts are closed, the Fund recognizes a realized gain or
loss. These investments require initial margin deposits with a custodian,
which consist of cash or cash equivalents, up to approximately 10% of the
contract amount. The amount of these deposits is determined by the exchange
or Board of Trade on which the contract is traded and is subject to change.
At August 31,1996, there were no financial futures contracts outstanding.
(B) At August 31, 1996, accumulated net unrealized appreciation on
investments was $55,671,598, consisting of $90,791,495 gross unrealized
appreciation and $35,119,897 gross unrealized depreciation.
At August 31, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
DREYFUS MUNICIPAL BOND FUND, INC.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS MUNICIPAL BOND FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Dreyfus Municipal Bond Fund, Inc., including the statement of investments, as
of August 31, 1996, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in
the period then ended and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 1996 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Dreyfus Municipal Bond Fund, Inc. at August 31, 1996, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with generally accepted
accounting principles.
[Ernst and Young LLP signature logo]
New York, New York
October 1, 1996
