Dreyfus Municipal Bond Fund, Inc.
Investing for income exempt from federal income tax
PROSPECTUS December 30, 1998
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
Contents
THE FUND
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2 Goal/Approach
3 Main Risks
4 Past Performance
5 Expenses
6 Management
7 Financial Highlights
YOUR INVESTMENT
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8 Account Policies
11 Distributions and Taxes
12 Services for Fund Investors
14 Instructions for Regular Accounts
FOR MORE INFORMATION
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Back Cover
What every investor should know about the fund
Information for managing your fund account
Where to learn more about this and other Dreyfus funds
<PAGE>
The Fund
Dreyfus Municipal Bond Fund, Inc.
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Ticker Symbol: DRTAX
GOAL/APPROACH
The fund seeks to maximize current income exempt from federal income tax, as is
consistent with the preservation of capital. To pursue this goal, the fund
normally invests substantially all of its net assets in municipal bonds the
interest from which is exempt from federal tax.
The fund will invest at least 75% of its assets in municipal bonds rated A or
better or the unrated equivalent as determined by Dreyfus. For additional yield,
the fund may invest up to 25% of its net assets in bonds rated lower than A,
including junk bonds, or the unrated equivalent as determined by Dreyfus.
The portfolio manager buys and sells bonds based on credit quality, financial
outlook and yield potential. Bonds with deteriorating credit qualities are
potential sell candidates, while comparable bonds offering higher yields are
potential buy candidates.
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT (SEE BACK COVER).
Concepts to understand
MUNICIPAL BONDS: debt securities that provide income free from federal income
taxes. Municipal bonds are typically divided into two types:
(pound) GENERAL OBLIGATION BONDS, which are secured by the full faith and credit
of the issuer and its taxing power
(pound) REVENUE BONDS, which are payable from the revenues derived from a
specific revenue source, such as charges for water and sewer service or highway
tolls
<PAGE>
MAIN RISKS
Prices of bonds tend to move inversely with changes in interest rates. While a
rise in rates may allow the fund to invest for higher yields, the most immediate
effect is usually a drop in bond prices, and therefore in the fund's share price
as well. To the extent the fund maintains a comparatively longer duration, its
share price will react more to interest rate movements. As a result, the value
of your investment in the fund could go up and down, which means that you could
lose money.
Other risk factors could have an effect on the fund's performance:
(pound) if an issuer fails to make timely interest or
principal payments or there is a decline in the credit
quality of a bond, or perception of a decline, the
bond's value could fall, potentially lowering the fund's
share price
(pound) changes in economic, business or political
conditions relating to a particular municipal project or
state in which the fund invests may have an impact on
the fund's share price
(pound) lower-rated, higher-yielding municipal
obligations are subject to greater credit risk,
including the risk of default, than higher-rated
obligations; lower-rated bonds tend to be more volatile
and less liquid
Although the fund's objective is to generate income exempt from federal income
tax, interest from some of its holdings may be subject to the alternative
minimum tax.
Other potential risks
The fund may invest in certain derivatives. Derivatives range from the
conventional, such as futures and options, to the more exotic, such as inverse
floaters. Derivatives can be illiquid and highly sensitive to changes in their
underlying security, interest rate or index, and as a result can be highly
volatile. A small investment in certain derivatives could have a potentially
large impact on the fund's performance. The fund may use derivatives to:
(pound) increase yield
(pound) adjust the fund's duration
(pound) provide daily liquidity
(pound) hedge against a decline in principal value
(pound) invest with greater efficiency and lower cost than is possible through
direct investment
The Fund
<PAGE>
PAST PERFORMANCE
The two tables below show the fund's annual returns and its long-term
performance. The first table shows you how the fund's performance has varied
from year to year. The second compares the fund's performance over time to that
of the Lehman Brothers Municipal Bond Index, an unmanaged total-return
performance benchmark. Both tables assume reinvestment of dividends and
distributions. As with all mutual funds, the past is not a prediction of the
future.
<TABLE>
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Year-by-year total return AS OF 12/31 EACH YEAR (%)
BEST QUARTER: Q1 '95 +6.70%
WORST QUARTER: Q1 '94 -5.93%
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Average annual total return AS OF 12/31/97
1 Year 5 Years 10 Years
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<S> <C> <C> <C>
FUND 7.94% 6.33% 7.91%
LEHMAN BROTHERS
MUNICIPAL
BOND INDEX 9.19% 7.36% 8.58%
</TABLE>
THE FUND'S YEAR-TO-DATE TOTAL RETURN AS OF 9/30/98 WAS 5.66%.
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
<PAGE>
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the table below. Shareholder transaction fees are paid
from your account. Annual fund operating expenses are paid out of fund assets,
so their effect is included in the share price. The fund has no sales charge
(load) or 12b-1 distribution fees.
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Fee table
SHAREHOLDER TRANSACTION FEES
% OF TRANSACTION AMOUNT
Maximum redemption fee
0.10%
CHARGED ONLY WHEN SELLING SHARES YOU
HAVE OWNED FOR LESS THAN 15 DAYS
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ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees
0.60%
Shareholder services fee
0.07%
Other expenses
0.08%
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TOTAL
0.75%
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<TABLE>
Expense example
1 Year 3 Years 5 Years
10 Years
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<S> <C> <C>
$77 $240 $417
$930
</TABLE>
This example shows what you could pay in expenses over
time. It uses the same hypothetical conditions other
funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in
expenses. The figures shown would be the same whether
you sold your shares at the end of a period or kept
them. Because actual return and expenses will be
different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to the investment adviser for managing the fund's
portfolio and assisting in all aspects of the fund's operations.
For the fiscal year ended August 31, 1998, a portion of the fee was reduced and
the effective fee paid by the fund was 0.58%, reducing total expenses from 0.75%
to 0.73% (the last year of litigation settlement).
SHAREHOLDER SERVICES FEE: a fee of up to 0.25% used to reimburse Dreyfus Service
Corporation for shareholder account service and maintenance.
OTHER EXPENSES: fees paid by the fund for miscellaneous items such as
shareholder service, transfer agency, custody, professional and registration
fees.
The Fund
<PAGE>
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages one of the nation's
leading mutual fund complexes, with more than $117 billion in more than 160
mutual fund portfolios. Dreyfus is the mutual fund business of Mellon Bank
Corporation, a broad-based financial services company with a bank at its core.
With more than $350 billion of assets under management and $1.7 trillion of
assets under administration and custody, Mellon provides a full range of
banking, investment and trust products and services to individuals, businesses
and institutions. Its mutual fund companies place Mellon as the leading bank
manager of mutual funds. Mellon is headquartered in Pittsburgh, Pennsylvania.
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, the firm
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity, and offers the potential for measuring
performance and volatility in consistent ways.
Richard Moynihan has managed the fund since its inception in 1976. He has been a
portfolio manager at Dreyfus since November 1973 and today oversees all
municipal bond fund investing at Dreyfus.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
<PAGE>
FINANCIAL HIGHLIGHTS
This table describes the fund's performance for the fiscal periods indicated.
"Total return" shows how much your investment in the fund would have increased
(or decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been independently audited by Ernst & Young
LLP, whose report, along with the fund's financial statements, is included in
the annual report.
<TABLE>
YEAR ENDED AUGUST 31,
1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C>
PER-SHARE DATA ($)
Net asset value, beginning of period 12.55 12.23 12.41 12.39 13.68
Investment operations:
Investment income -- net .64 .67 .69 .72 .75
Net realized and unrealized gain
(loss) on investments .37 .33 (.18) .09 (.96)
Total from investment operations 1.01 1.00 .51 .81 (.21)
Distributions:
Dividends from investment
income -- net (.64) (.67) (.69) (.72) (.75)
Dividends from net realized gain
on investments (.07) (.01) -- (.07) (.33)
Total distributions (.71) (.68) (.69) (.79) (1.08)
Net asset value, end of period 12.85 12.55 12.23 12.41 12.39
Total return (%) 8.36 8.24 4.16 6.93 (1.63)
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RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average
net assets (%) .73 .71 .71 .70 .68
Ratio of net investment income
to average net assets (%) 5.04 5.39 5.57 5.94 5.80
Decrease reflected in above expense
ratios due to actions by Dreyfus (%) .01 -- -- -- --
Portfolio turnover rate (%) 63.07 66.89 64.48 51.55 36.25
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Net assets, end of period
($ x 1,000) 3,334,983 3,454,776 3,572,286 3,936,734 4,008,477
</TABLE>
The Fund
<PAGE>
Your Investment
ACCOUNT POLICIES
Buying shares
YOU PAY NO SALES CHARGES to invest in this fund. Your price for fund shares is
the fund's net asset value per share (NAV), which is generally calculated as of
the close of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern
time) every day the exchange is open.
YOUR ORDER WILL BE PRICED at the next NAV calculated after your order is
accepted by the fund's transfer agent or other entity authorized to accept
orders on behalf of the fund. Because the fund seeks tax exempt income, it is
not recommended for purchase in IRAs or other qualified retirement plans.
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Minimum investments
Initial Additional
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REGULAR ACCOUNTS $2,500 $100
$500 FOR
TELETRANSFER
INVESTMENTS
DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS
All investments must be in U.S. dollars. Third-party
checks cannot be accepted. You may be charged a fee for
any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
Concepts to understand
NET ASSET VALUE (NAV): a mutual fund's share price on a given day. A fund's NAV
is calculated by dividing the value of its net assets by the number of existing
shares.
When calculating its NAV, the fund's investments are priced at fair value by an
independent pricing service approved by the fund's board. The pricing service's
procedures are reviewed under the general supervision of the board.
<PAGE>
Selling shares
YOU MAY SELL SHARES AT ANY TIME. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. Any certificates
representing fund shares being sold must be returned with your redemption
request. Your order will be processed promptly and you will generally receive
the proceeds within a week.
BEFORE SELLING RECENTLY PURCHASED SHARES, please note that:
(pound) if the fund has not yet collected payment for the
shares you are selling, it may delay sending the proceeds for up to eight
business days or until it has collected payment
(pound) if you are selling or exchanging shares
you have owned for less than 15 days, the fund may deduct a 0.10% redemption
fee (not charged on shares sold through the Automatic Withdrawal Plan or
Dreyfus Auto-Exchange Privilege, or on shares acquired through dividend
reinvestment)
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Limitations on selling shares by phone
Proceeds
sent by Minimum Maximum
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CHECK NO MINIMUM $150,000 PER DAY
WIRE $1,000 $250,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $500 $250,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
(pound) amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days
(pound) requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
Your Investment
<PAGE>
ACCOUNT POLICIES (CONTINUED)
General policies
IF YOUR ACCOUNT HAS A BALANCE OF FEWER THAN 50 SHARES, the fund may ask you to
increase your balance. If it is still below 50 shares after 45 days, the fund
may close your account and send you the proceeds.
UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
THE FUND RESERVES THE RIGHT TO:
(pound) refuse any purchase or exchange request that could
adversely affect the fund or its operations, including those from any individual
or group who, in the fund's view, is likely to engage in excessive trading
(usually defined as more than four exchanges out of the fund within a calendar
year)
(pound) refuse any purchase or exchange request in excess of
1% of the fund's total assets
(pound) change or discontinue its exchange privilege, or
temporarily suspend this privilege during unusual market conditions
(pound) change its minimum investment amounts
(pound) delay sending out redemption proceeds for up to
seven days (generally applies only in cases of very large redemptions, excessive
trading or during unusual market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
Third-party investments
If you invest through a third party (rather than directly with Dreyfus), the
policies and fees may be different than those described here. Banks, brokers,
financial advisers, and financial supermarkets may charge transaction fees and
may set different minimum investments or limitations on buying or selling
shares. Consult your financial representative if in doubt.
<PAGE>
DISTRIBUTIONS AND TAXES
THE FUND USUALLY PAYS ITS SHAREHOLDERS dividends from its net investment income
once a month, and distributes any net capital gains that it has realized once a
year. Your distributions will be reinvested in the fund unless you instruct the
fund otherwise. There are no fees or sales charges on reinvestments.
THE FUND ANTICIPATES THAT VIRTUALLY ALL OF ITS INCOME DIVIDENDS will be exempt
from federal income tax. You will, however, have to pay state or local taxes.
However, any dividends and capital gains from taxable investments are taxable as
ordinary income, whether or not you reinvested them. The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash.
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Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
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INCOME GENERALLY GENERALLY
DIVIDENDS TAX EXEMPT TAX EXEMPT
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund.
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except in tax-advantaged accounts, any sale or exchange of fund shares,
including through the checkwriting privilege, may generate a tax liability.
The table at right also can provide a guide for your potential tax liability
when selling or exchanging fund shares. "Short-term capital gains" applies to
fund shares sold up to 12 months after buying them. "Long-term capital gains"
applies to shares sold after 12 months.
Your Investment
<PAGE>
SERVICES FOR FUND INVESTORS
Automatic services
BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application or by
calling 1-800-645-6561.
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For investing
DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.
DREYFUS PAYROLL For making automatic investments
SAVINGS PLAN through a payroll deduction.
DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.
DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another.
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For exchanging shares
DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
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For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds.
Dreyfus Financial Centers
Through a nationwide network of Dreyfus Financial Centers, Dreyfus offers a full
array of investment services and products. This includes information on mutual
funds, brokerage services, tax-advantaged products and retirement planning.
Our experienced financial consultants can help you make informed choices and
provide you with personalized attention in handling account transactions. The
Financial Centers also offer informative seminars and events. To find the
Financial Center nearest you, call 1-800-499-3327.
<PAGE>
Checkwriting privilege
YOU MAY WRITE REDEMPTION CHECKS against your account in amounts of $500 or more.
These checks are free; however, a fee may be charged if you request a stop
payment or if the transfer agent cannot honor a redemption check due to
insufficient funds or another valid reason. Please do not postdate your checks
or use them to close your account.
Exchange privilege
YOU CAN EXCHANGE $500 OR MORE from one Dreyfus fund into another. You can
request your exchange in writing or by phone. Be sure to read the current
prospectus for any fund into which you are exchanging. Any new account
established through an exchange will have the same privileges as your original
account (as long as they are available). There is currently no fee for
exchanges, although you may be charged a sales load when exchanging into any
fund that has one.
Dreyfus TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the Dreyfus TeleTransfer privilege. You can set up TeleTransfer
on your account by providing bank account information and following the
instructions on your application.
The Dreyfus Touch((reg.tm))
FOR 24-HOUR AUTOMATED ACCOUNT ACCESS, use Dreyfus Touch. With a touch-tone
phone, you can easily manage your Dreyfus accounts, obtain information on other
Dreyfus mutual funds and get current stock market quotes.
Your Investment
<PAGE>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
The Dreyfus Family of Funds
P.O. Box 9387, Providence, RI 02940-9387
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to: The Dreyfus Family of Funds P.O. Box 105,
Newark, NJ 07101-0105
By Telephone
WIRE Have your bank send your
investment to The Bank of New York, with these instructions:
* DDA# 8900051825
* the fund name
* your Social Security or tax ID number
* name(s) of investor(s)
Call us to obtain an account number. Return your application.
WIRE Have your bank send your investment to The Bank of New York, with these
instructions:
* DDA# 8900051825
* the fund name
* your account number
* name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but insert "1111" before your account number and
add ABA# 021000018
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.
WITHOUT ANY INITIAL INVESTMENT Check the Dreyfus Step Program option on your
application. Return your application, then complete the additional materials
when they are sent to you.
ALL SERVICES Call us to request a form to add any automatic investing service
(see "Services for Fund Investors"). Complete and return the forms along with
any other required materials.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
<PAGE>
TO SELL SHARES
Write a redemption check or letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see "Account
Policies -- Selling Shares").
Mail your request to: The Dreyfus Family of Funds P.O. Box 9671, Providence, RI
02940-9671
WIRE Be sure the fund has your bank account information on file. Call us to
request your transaction. Proceeds will be wired to your bank.
TELETRANSFER Be sure the fund has your bank account information on file. Call
us to request your transaction. Proceeds will be sent to your bank by electronic
check.
CHECK Call us to request your transaction. A check will be sent to the address
of record.
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request a form to add the plan.
Complete the form, specifying the amount and frequency of withdrawals you would
like.
Be sure to maintain an account balance of $5,000 or more.
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS FAMILY OF FUNDS
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
Your Investment
<PAGE>
NOTES
<PAGE>
<PAGE>
For More Information
Dreyfus Municipal Bond Fund, Inc.
-----------------------------
SEC file number: 811-2653
More information on this fund is available free upon
request, including the following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio
holdings and contains a letter from the fund's manager
discussing recent market conditions, economic trends and
fund strategies that significantly affected the fund's
performance during the last fiscal year.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A
current SAI is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference (is
legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call 1-800-645-6561
BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from:
SEC
http://www.sec.gov
DREYFUS
http://www.dreyfus.com
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 1998, Dreyfus Service Corporation 054P1298
<PAGE>
