Dreyfus
Municipal Bond
Fund, Inc.
ANNUAL REPORT August 31, 1999
(reg.tm)
<PAGE>
The views expressed herein are current to the date of this report. These views
and the composition of the fund's portfolio are subject to change at any time
based on market and other conditions.
* Not FDIC-Insured
* Not Bank-Guaranteed
* May Lose Value
Year 2000 Issues (Unaudited)
The fund could be adversely affected if the computer systems used by The Dreyfus
Corporation and the fund's other service providers do not properly process and
calculate date-related information from and after January 1, 2000. The Dreyfus
Corporation 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>
Contents
THE FUND
2 Letter from the President
3 Discussion of Fund Performance
6 Fund Performance
7 Statement of Investments
21 Statement of Assets and Liabilities
22 Statement of Operations
23 Statement of Changes in Net Assets
24 Financial Highlights
25 Notes to Financial Statements
29 Report of Independent Auditors
30 Important Tax Information
FOR MORE INFORMATION
Back Cover
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The Fund
Dreyfus Municipal
Bond Fund, Inc.
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this annual report for Dreyfus Municipal Bond Fund,
Inc. covering the 12-month period from September 1, 1998 through August 31,
1999. Inside, you' ll find valuable information about how the fund was managed
during the reporting period, including a discussion with the fund's portfolio
manager, Richard Moynihan.
The past year has been mixed for municipal bond investors. Lower short-term
interest rates adopted by the Federal Reserve Board in the fall of 1998 helped
the U.S. economy withstand the effects of economic weakness in Japan, Asia and
Latin America. As interest rates declined, the prices of many municipal bonds
appreciated.
Soon after 1999 began, however, evidence emerged that the U.S. economy was
growing strongly in an environment characterized by high levels of consumer
spending. Concerns that inflationary pressures might re-emerge caused the
Federal Reserve Board to raise short-term interest rates twice during the summer
of 1999. Higher interest rates led to some erosion of municipal bond prices,
especially toward the end of the reporting period.
In this environment, however, the yields of tax-exempt bonds have recently been
quite attractive compared to the after-tax yields of taxable bonds of comparable
maturity and credit quality. This is especially true for investors in the higher
federal income tax brackets.
We appreciate your confidence over the past year, and we look forward to your
continued participation in Dreyfus Municipal Bond Fund, Inc.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
September 14, 1999
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DISCUSSION OF FUND PERFORMANCE
Richard Moynihan, Portfolio Manager
How did Dreyfus Municipal Bond Fund, Inc. perform during the period?
The fund produced a -2.60% total return(1) over the 12-month period ended August
31, 1999, compared to a total return of -1.63% for the average fund in the
Lipper General Municipal Debt Funds category.(2 )We attribute the fund's
performance to its lack of a sufficiently defensive posture in a rising interest
rate environment during the second half of the reporting period.
What is the fund's investment approach?
Our goal is to seek a high level of federally tax-exempt income from a
diversified portfolio of municipal bonds. We also seek competitive total
returns.
To achieve these objectives, we employ two primary strategies. First, we attempt
to add value by searching the national marketplace for the tax-exempt bonds that
we believe are most likely to provide high returns. This search involves a
thorough analysis of individual securities' characteristics -- such as maturity,
yield, price and redemption features. When we find securities that we believe
are more attractive than existing holdings, we typically add them to the fund.
Second, we tactically manage the fund' s average duration -- a measure of
sensitivity to changes in interest rates -- in anticipation of interest-rate and
supply-and-demand changes. If we expect interest rates to rise or the supply of
newly issued bonds to increase, for example, we may reduce the fund's average
duration to make cash available for the purchase of higher-yielding securities.
Conversely, if we expect interest rates to decline or the demand for municipal
bonds to surge, we may increase the fund' s duration to take advantage of
potential opportunities for capital appreciation.
The Fund
<PAGE>
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
What other factors influenced the fund's performance?
The fund was affected by changing interest rates over the past year. When the
reporting period began on September 1, 1998, investors were concerned about the
potentially adverse economic effects of the global currency and credit crises,
which had spread from Asia to Russia and were threatening Latin America. To
cushion the effects on prospective economic growth in the U.S. of increasing
weakness in foreign economies and of less accommodative financial conditions
domestically, the Federal Reserve Board reduced short-term interest rates last
fall.
The Federal Reserve's strategy apparently was productive. Economies in Japan and
Southeast Asia appear to have halted their deterioration early in 1999, and the
growth of the U.S. economy was stronger than most analysts expected. Municipal
bond yields and prices stabilized in this environment. In the second quarter,
however, strong economic growth raised concerns among fixed-income investors
that inflationary pressures might re-emerge. The Federal Reserve Board increased
short-term interest rates twice during the summer of 1999 in an attempt to
forestall a reacceleration of inflation. This change in monetary policy -- and
the increased attractiveness of taxable bonds with higher yields -- generally
caused municipal bond prices to fall in July and August.
As the market declined, this fully invested fund experienced market losses that
were greater than those felt by several of the funds in our comparative Lipper
peer group. The fund's duration (a measurement of interest-rate sensitivity) was
longer than the durations of many of our peers, and that detracted from the
fund' s relative performance. The sector of the fund that is invested in
high-coupon premium-priced bonds and produces a high level of income fell from
favor and hurt our comparative performance.
In addition, because of strong economic conditions throughout the country,
municipalities have had less need to borrow. Yet demand remained high from
individual and institutional investors seeking to
<PAGE>
reduce their income tax liabilities. This imbalance between supply and demand
constrained the rise of municipal bond yields relative to the yields of taxable
bonds. As a result, the municipal bond market generally outperformed the U.S.
Treasury securities market over the first eight months of 1999.
What is the fund's current strategy?
We have continued to search for the most attractive values in the municipal bond
market. We have found such values, in our opinion, in bonds from a diverse array
of issuers. Early in the reporting period, we focused on bonds selling at a
discount to their face values. This strategy enabled the fund to benefit from
rising bond prices as interest rates fell. When interest rates reversed course
during the second quarter of 1999 and began to rise, we shifted our emphasis to
higher-yielding bonds. This strategy enabled us to take advantage of the higher
income payments provided by bonds that are secured by the revenues generated by
housing, health care and pollution control facilities, for example.
In anticipation of higher interest rates during the second quarter, we changed
the fund' s average duration from being longer than its benchmark to being
shorter than its benchmark. This change enabled us to make more funds available
for the purchase of higher-yielding bonds. As of August 31, the fund's duration
was at 8.85 years. We currently intend to maintain this relatively defensive
position until the direction of economic growth, interest rates and monetary
policy become clearer.
September 14, 1999
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND
INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION FUND SHARES MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST. INCOME MAY BE SUBJECT TO STATE AND LOCAL
TAXES, AND SOME INCOME MAY BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX
(AMT) FOR CERTAIN INVESTORS. CAPITAL GAINS, IF ANY, ARE FULLY TAXABLE.
(2) SOURCE: LIPPER ANALYTICAL SERVICES, INC.
The Fund
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FUND PERFORMANCE
Comparison of change in value of $10,000 investment in Dreyfus Municipal Bond
Fund and the Lehman Brothers Municipal Bond Index
Average Annual Total Returns AS OF 8/31/99
1 Year 5 Years 10 Years
FUND -2.60% 4.94% 6.24%
((+)) SOURCE: LEHMAN BROTHERS
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN DREYFUS MUNICIPAL BOND
FUND, INC. ON 8/31/89 TO A $10,000 INVESTMENT MADE IN THE LEHMAN BROTHERS
MUNICIPAL BOND INDEX ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
ARE REINVESTED.
THE FUND INVESTS PRIMARILY IN MUNICIPAL SECURITIES AND ITS PERFORMANCE SHOWN IN
THE LINE GRAPH TAKES INTO ACCOUNT FEES AND EXPENSES. THE LEHMAN BROTHERS
MUNICIPAL BOND INDEX, UNLIKE THE FUND, IS AN UNMANAGED TOTAL RETURN PERFORMANCE
BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE TAX EXEMPT BOND MARKET, CALCULATED
BY USING MUNICIPAL BONDS SELECTED TO BE REPRESENTATIVE OF THE MUNICIPAL MARKET
OVERALL. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES
WHICH CAN CONTRIBUTE TO THE INDEX POTENTIALLY OUTPERFORMING OR UNDERPERFORMING
THE FUND. FURTHER INFORMATION RELATING TO FUND PERFORMANCE, INCLUDING EXPENSE
REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION
OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT.
$20,307
Lehman Brothers Municipal Bond Index((+)
$18,313
Dreyfus Municipal Bond Fund
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<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS
August 31, 1999
Principal
LONG-TERM MUNICIPAL INVESTMENTS--99.0% Amount ($) Value ($)
ALABAMA--2.8%
Alabama Housing Finance Authority, SFMR:
<S> <C> <C>
6.45%, 10/1/2025 6,645,000 6,853,188
6.10%, 10/1/2027 9,800,000 9,996,000
Alabama Industrial Development Authority,
SWDR (Pine City Fiber Co.):
6.45%, 12/1/2023 23,000,000 23,157,550
6.45%, 12/1/2023 3,345,000 3,367,913
Alabama Public School and College Authority,
Capital Improvement 4.25%, 11/1/2018 (Insured; FSA) 20,000,000 16,250,400
Industrial Development Board of the Town of Courtland, SWDR
(Champion International Corp. Project)
7%, 11/1/2022 8,100,000 8,577,009
The Industrial Development Board of the Town of McIntosh,
Environmental Facilities Revenue
(Ciba Specialty Chemicals Corp. Project)
5.375%, 6/1/2028 4,000,000 3,734,080
Jefferson County, Sewer Revenue, Capital Improvement
Warrants 5%, 2/1/2033 (Insured; FGIC) 8,000,000 7,032,880
ALASKA--.5%
Alaska Housing Finance Corp.
(Collateralized Veterans Mortgage Program)
6.375%, 12/1/2027 6,875,000 7,100,844
Anchorage, Electric Utility Revenue
6.50%, 12/1/2015 (Insured; MBIA) 6,135,000 6,854,758
ARIZONA--1.7%
The Industrial Development Authority of the County of Apache,
PCR (Tucson Electric Power Co. Project):
5.85%, 3/1/2028 14,000,000 12,894,000
5.875%, 3/1/2033 37,050,000 34,513,557
ARKANSAS--.8%
Little River County, Revenue (Georgia-Pacific Corp. Project)
5.60%, 10/1/2026 24,850,000 22,700,972
CALIFORNIA--9.2%
Airport Commission City and County of San Francisco
(San Francisco International Airport):
6.50%, 5/1/2015 (Insured; FGIC) 10,100,000 10,881,033
4.50%, 5/1/2023 (Insured; MBIA) 20,000,000 16,776,000
4.50%, 5/1/2028 (Insured; MBIA) 6,000,000 4,962,960
Alameda Corridor Transportation Authority,
Revenue, Senior Lien:
Zero Coupon, 10/1/2033 9,605,000 1,343,643
Zero Coupon, 10/1/2035 23,545,000 2,934,649
The Fund
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STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
CALIFORNIA (CONTINUED)
California 4.50%, 12/1/2021 (Insured; FGIC) 14,435,000 12,176,789
California Department of Water System Revenue
(Central Valley Project) 5%, 12/1/2029 10,000,000 9,015,300
California Higher Education Loan Authority, Inc.,
Student Loan Revenue 6.50%, 6/1/2005 19,250,000 20,209,035
California Statewide Communities Development Authority:
COP (The Internext Group) 5.375%, 4/1/2030 25,000,000 22,468,500
LR 7.327%, 10/1/2033 20,750,000 (a) 17,902,270
Special Facilities Revenue 7.178%, 10/1/2034 24,500,000 (a) 20,584,900
Department of Water and Power of The City of Los Angeles,
Water Works Revenue 4.50%, 10/15/2024 15,000,000 12,359,250
Foothill/Eastern Transportation Corridor Agency,
Toll Road Revenue:
Zero Coupon, 1/1/2025 43,860,000 10,355,346
Zero Coupon, 1/1/2029 54,830,000 10,224,698
5.75%, 1/15/2040 25,870,000 24,908,153
Los Angeles, Wastewater System Revenue
4%, 6/1/2014 (Insured; MBIA) 7,465,000 6,339,726
Sacramento County, COP, Crossover
(Public Facilities Project - Coroner/Crime Lab)
4.75%, 10/1/2027 (Insured; AMBAC) 20,750,000 17,913,475
San Diego County, COP (Interim Justice Facilities Project)
6.50%, 8/1/2007 9,805,000 10,318,586
San Joaquin Hills Transportation Corridor Agency,
Toll Road Revenue:
Zero Coupon, 1/15/2034 (Insured; MBIA) 120,000,000 16,290,000
Zero Coupon, 1/15/2035 (Insured; MBIA) 100,000,000 12,809,000
COLORADO--1.7%
City of Colorado Springs, Utilities System Subordinate Lien
Improvement Revenue 4.75%, 11/15/2026 9,250,000 7,888,955
City and County of Denver:
Airport Revenue:
7.25%, 11/15/2023 (Prerefunded 11/15/2002) 6,390,000 (b) 7,061,397
7.25%, 11/15/2023 19,375,000 20,845,562
Special Facilities Airport Revenue (United Airlines Project)
6.875%, 10/1/2032 11,250,000 11,677,500
CONNECTICUT--1.8%
Connecticut Development Authority, PCR
(The Connecticut Light and Power Co. Project)
5.85%, 9/1/2028 15,000,000 14,124,900
<PAGE>
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
CONNECTICUT (CONTINUED)
Connecticut Housing Finance Authority
(Housing Mortgage Finance Program):
6.70%, 11/15/2012 3,295,000 3,521,037
6.30%, 5/15/2024 7,240,000 7,455,390
Connecticut Resource Recovery Authority
(American Fuel Co. Project) 6.45%, 11/15/2022 7,325,000 7,173,226
Mashantucket Western Pequot Tribe, Special Revenue:
6.40%, 9/1/2011 (Prerefunded 9/1/2007) 9,170,000 (b,c) 10,233,537
6.40%, 9/1/2011 9,330,000 (c) 9,791,555
DELAWARE--.6%
Delaware Economic Development Authority,
Water Development Revenue (Wilmington Suburban Water
Corp. Project) 6.80%, 12/1/2023 8,000,000 8,364,480
Delaware Housing Authority, Senior SFMR 6.45%, 1/1/2026 7,890,000 8,123,386
DISTRICT OF COLUMBIA--2.4%
Metropolitan Washington Airports Authority,
Airport System Revenue:
6.625%, 10/1/2012 (Insured; MBIA) 40,400,000 43,179,924
6.625%, 10/1/2019 (Insured; MBIA) 23,600,000 25,132,820
FLORIDA--6.1%
Brevard County Housing Finance Authority, SFMR
6.80%, 3/1/2028 5,845,000 6,124,099
Florida Community Services Corp. Walton County,
Water and Sewer Revenue
(South Walton County Regional Utility) 7%, 3/1/2018 3,500,000 3,762,780
Florida State Board of Education, Public Education
Capital Outlay:
4.50%, 6/1/2021 13,065,000 10,944,550
4.50%, 6/1/2023 (Insured; FGIC) 12,000,000 9,980,880
4.50%, 6/1/2027 12,000,000 9,838,440
4.50%, 6/1/2028 (Insured; MBIA) 7,520,000 6,146,096
Florida State Department Juvenile Justice Lease Certificate
(185 Bed Juvenile Residential) 5.20%, 6/15/2019
(Insured; MBIA) 14,000,000 13,921,880
Florida, Department of Management Services,
Florida Facilites Pool Revenue
4.50%, 9/1/2028 (Insured; FSA) 9,620,000 7,777,097
Gulf Breeze, Revenue (Capital Funding)
4.50%, 10/1/2027 (Insured; MBIA) 34,080,000 27,912,542
Orlando Utilities Commission, Water and Electric Revenue
6.75%, 10/1/2017 15,875,000 18,172,906
The Fund
<PAGE>
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
FLORIDA (CONTINUED)
Palm Beach County, Solid Waste IDR:
(Okeelanta Power Limited Partnership Project)
6.70%, 2/15/2015 23,400,000 (d) 14,742,000
(Osceola Power Limited Partnership) 6.95%, 1/1/2022 33,800,000 (d) 20,956,000
Polk County Industrial Development Authority, IDR
(IMC Fertilizer) 7.525%, 1/1/2015 15,200,000 16,032,200
South Lake County Hospital District, Revenue
(South Lake Hospital, Inc.) 5.80%, 10/1/2034 8,350,000 7,954,043
GEORGIA--.6%
City of Atlanta, Water and Wastewater Revenue
5.50%, 11/1/2022 (Insured; FGIC) 7,500,000 7,465,350
Georgia Housing and Finance Authority,
Single Family Mortgage 6.55%, 12/1/2027 9,440,000 9,726,410
IDAHO--.4%
Idaho Housing Agency, Multi-Family Housing
6.70%, 7/1/2024 10,050,000 10,628,679
ILLINOIS--4.5%
Chicago Board of Education:
(Chicago School Reform) Zero Coupon,
12/1/2028 (Insured; FGIC) 13,000,000 2,270,190
Refunding:
Zero Coupon, 12/1/2017 (Insured; FGIC) 10,000,000 3,448,200
Zero Coupon, 12/1/2018 (Insured; FGIC) 25,000,000 8,086,500
Zero Coupon, 12/1/2024 (Insured: FGIC) 31,050,000 6,921,045
Chicago O'Hare International Airport, Revenue
Special Facilities (United Airlines Inc. Project)
5.35%, 9/1/2016 9,685,000 8,908,554
Illinois Development Finance Authority, Revenue Pollution
Control, Refunding (Central Illinois Public Service Co.)
6.375%, 1/1/2028 14,000,000 14,511,700
Illinois Educational Facilities Authority, Revenue
(Illinois Institute of Technology) 6.875% 12/1/2015 7,250,000 7,890,683
Illinois Health Facilities Authority, Revenue:
(Evangelical Hospitals) 6.50%, 4/15/2009 (Insured; FSA) 5,000,000 5,544,800
(Mercy Hospital and Medical Center) 7%, 1/1/2015 7,500,000 7,799,025
Illinois Housing Development Authority:
Homeowner Mortgage Revenue:
6.70%, 8/1/2025 2,270,000 2,348,360
6.625%, 8/1/2026 13,235,000 13,670,299
Multi-Family Housing (Lawndale Redevelopment Project)
6.90%, 12/1/2026 8,750,000 9,325,750
Multi-Family Program 6.75%, 9/1/2021 8,750,000 9,078,475
<PAGE>
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
ILLINOIS (CONTINUED)
Illinois Housing Development Authority (continued):
Section 8 Elderly Housing Revenue
(Morningside North Development)
6.85%, 1/1/2021 (Prerefunded 1/1/2003) 11,220,000 (b) 12,207,472
Metropolitan Pier and Exposition Authority,
Dedicated Tax Revenue
(McCormick Place Expansion Project)
5.375%, 12/15/2016 (Insured; FGIC) 17,130,000 (e) 16,640,425
INDIANA--1.9%
Brownsburg School Building Corp., First Mortgage
6.10%, 2/1/2013 (Insured; FSA)
(Prerefunded 2/1/2005) 7,500,000 (b) 8,152,800
Indiana Health Facility Financing Authority, HR
(Clarian Health Partners, Inc.) 6%, 2/15/2021 18,000,000 18,252,000
Indiana Transportation Finance Authority, Airport Facility LR
6.50%, 11/1/2007 5,635,000 6,020,152
IPS School Building Corp., First Mortgage
6.10%, 1/15/2020 (Prerefunded 7/15/2004) 11,000,000 (b) 11,946,330
Logansport Multi-Purpose School Building Corp.,
First Mortgage 6%, 1/1/2009 7,645,000 7,989,025
IOWA--.4%
Iowa Finance Authority, SFMR (Mortgage Backed
Securities Program) 6.65%, 7/1/2028 10,570,000 10,946,292
KANSAS--1.2%
Wichita, HR 6.464%, 10/1/2022 (Insured; MBIA) 31,300,000 33,257,815
KENTUCKY--2.1%
City of Ashland, Sewage and Solid Waste Revenue
(Ashland Inc. Project) 7.125%, 2/1/2022 13,170,000 13,984,960
Kenton County Airport Board, Airport Revenue,
Special Facilities (Delta Airlines Project):
7.125%, 2/1/2021 8,455,000 8,932,369
6.125%, 2/1/2022 10,000,000 9,790,700
Mount Sterling, LR (Kentucky League Cities Funding)
6.10%, 3/1/2018 7,955,000 8,292,690
Pendleton County, Multi-County LR
(Kentucky Associates Counties Leasing Trust Program)
6.50%, 3/1/2019 18,500,000 19,115,680
LOUISIANA--.5%
Parish of West Feliciana, PCR (Gulf States Utilities-I)
7.70%, 12/1/2014 14,000,000 14,990,220
The Fund
<PAGE>
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
MAINE--.6%
Maine Financial Authority, Solid Waste Revenue
Recycling Facilities (Great Northern Paper, Inc.
Project-Bowater Inc. Obligor) 7.75%, 10/1/2022 8,165,000 8,840,082
Maine Housing Authority, Mortgage Purchase
6.875%, 11/15/2023 7,935,000 8,377,535
MARYLAND--2.3%
Community Development Administration,
Department of Housing and Community Development
State of Maryland:
9.924%, 4/1/2026 4,495,000 (a) 4,858,735
8.160%, 7/1/2039 5,000,000 (a) 5,207,500
(Single Family Program):
6.80%, 4/1/2024 33,040,000 34,230,101
6.75%, 4/1/2026 19,860,000 20,539,212
MASSACHUSETTS--2.3%
Massachusetts Bay Transportation Authority, General
Transportation System 4.50%, 3/1/2026 (Insured; MBIA) 4,250,000 3,455,080
Massachusetts Development Finance Agency,
Revenue (Boston University Issue):
5.45%, 5/15/2059 2,500,000 2,253,400
6%, 5/15/2059 9,000,000 8,962,740
Massachusetts Health and Educational Facilities Authority,
Revenue (Brandeis University)
4.75%, 10/1/2028 (Insured; MBIA) 14,050,000 11,841,199
Massachusetts Housing Finance Agency, Revenue:
Housing:
6.50%, 7/1/2025 (Insured; AMBAC) 4,140,000 4,330,564
6.60%, 1/1/2037 (Insured; AMBAC) 7,100,000 7,448,255
Single Family Housing:
7.125%, 6/1/2025 12,810,000 13,376,458
6.65%, 12/1/2027 7,180,000 7,487,591
Massachusetts Industrial Finance Agency, Revenue
Museum (Norman Rockwell Stockbridge) 8.125%, 7/1/2011 2,695,000 2,804,525
Massachusetts Turnpike Authority, Metropolitan Highway
System Revenue 5%, 1/1/2039 (Insured; AMBAC) 5,000,000 4,338,100
MICHIGAN--2.1%
Charter County of Wayne, Special Airport Facilities Revenue
(Northwest Airlines, Inc., Facilities) 6.75%, 12/1/2015 8,775,000 9,084,757
The Economic Development Corp. of the County of Gratiot,
Limited Obligation EDR (Danly Die Set Project)
7.625%, 4/1/2007 3,200,000 3,380,352
<PAGE>
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
MICHIGAN (CONTINUED)
Michigan Hospital Finance Authority, Revenue
Hospital, (Genesys Health System Obligated Group):
8.125%, 10/1/2021 (Prerefunded 10/1/2005) 15,000,000 (b) 17,961,300
7.50%, 10/1/2027 (Prerefunded 10/1/2005) 15,300,000 (b) 17,599,743
Michigan Housing Development Authority, SFMR
8.955%, 12/1/2027 11,200,000 (a) 11,828,992
MINNESOTA--2.4%
Minneapolis - Saint Paul Metropolitan Airports Commission,
Airport Revenue 5.125%, 1/1/2031 17,000,000 15,683,010
Minnesota Housing Finance Agency, Single Family Mortgage:
6.90%, 7/1/2022 5,350,000 5,588,556
6.50%, 7/1/2024 15,755,000 16,233,952
6.45%, 7/1/2025 30,210,000 31,057,995
MISSOURI--.4%
Missouri Higher Education Loan Authority,
Student Loan Revenue 6.75%, 2/15/2009 11,500,000 12,027,505
NEBRASKA--.8%
Omaha Public Power District, Electric Revenue
7.545%, 2/1/2014 22,400,000 (a) 23,270,464
NEVADA--2.2%
Clark County, Industrial Development Revenue
(Nevada Power Co. Project):
5.60%, 10/1/2030 12,900,000 11,739,387
5.90%, 10/1/2030 15,500,000 14,836,755
Nevada GO (Nevada Municipal Bond Bank Project)
4.75%, 5/15/2026 (Insured; MBIA) 10,000,000 8,528,000
Nevada Housing Division (Single Family Program)
6.80%, 4/1/2027 9,455,000 9,829,513
Washoe County:
Gas Facilities Revenue (Sierra Pacific Power Co. Project)
6.70%, 11/1/2032 (Insured; MBIA) 10,000,000 10,624,500
Gas and Water Facilities Revenue (Sierra Pacific)
6.30%, 12/1/2014 (Insured; AMBAC) 5,375,000 5,678,634
NEW HAMPSHIRE--4.1%
Business Finance Authority of the State of New Hampshire:
PCR (Public Service Co. of New Hampshire Project)
6%, 5/1/2021 15,500,000 14,638,510
State Guaranteed Airport Revenue
(Manchester Airport Project):
6.50%, 1/1/2019 12,600,000 13,224,834
6.375%, 1/1/2022 8,650,000 9,039,855
The Fund
<PAGE>
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
NEW HAMPSHIRE (CONTINUED)
New Hampshire Housing Finance Authority:
Multi-Family Housing:
7.55%, 7/1/2013 4,205,000 4,643,960
(Mariners Village Project)
6.60%, 1/1/2038 (Insured; FHA) 7,365,000 7,698,708
Single Family Mortgage:
7.25%, 1/1/2016 2,225,000 2,362,082
6.55%, 7/1/2026 18,295,000 18,844,582
Single Family Residential Mortgage:
7.10%, 1/1/2023 16,945,000 17,508,591
7.75%, 7/1/2023 10,555,000 11,018,048
6.85%, 1/1/2025 8,450,000 8,753,439
6.95%, 1/1/2026 8,005,000 8,343,451
NEW JERSEY--3.5%
New Jersey Economic Development Authority, PCR
(Public Service Electric and Gas Co. Project)
6.40%, 5/1/2032 (Insured; MBIA) 32,040,000 34,109,464
New Jersey Housing and Mortgage Finance Agency, Revenue:
6%, 11/1/2002 4,405,000 4,507,592
6.45%, 11/1/2007 7,260,000 7,638,028
New Jersey Transportation Trust Fund Authority,
Transportation System 5.75%, 6/15/2020 8,645,000 (e) 8,857,926
Pollution Control Financing Authority of Salem County, PCR,
(Public Service Electric and Gas Co. Project)
6.25%, 6/1/2031 (Insured; MBIA) 6,500,000 6,810,310
NEW MEXICO--.6%
Albuquerque, HR (Presbyterian Health Care Services)
6.375%, 8/1/2007 (Insured; MBIA) 4,500,000 4,808,340
New Mexico Educational Assistance Foundation,
Student Loan Revenue 7.45%, 3/1/2010 6,550,000 6,940,642
New Mexico Mortgage Financing Authority 6.80%, 1/1/2026 5,500,000 6,081,240
NEW YORK--11.9%
Long Island Power Authority, Electric System General Revenue
5.50%, 12/1/2029 10,465,000 9,968,645
New York City:
7.50%, 2/1/2003 9,000,000 9,724,950
7.25%, 8/15/2007 13,790,000 15,805,684
6.375%, 8/15/2011 (Prerefunded 8/15/2005) 6,565,000 (b) 7,221,369
6.375%, 8/15/2011 24,720,000 26,728,500
5.75%, 2/1/2014 25,055,000 25,361,673
5.75%, 2/1/2015 18,145,000 18,391,591
5.75%, 2/1/2017 22,500,000 22,655,250
<PAGE>
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
NEW YORK (CONTINUED)
New York City (continued):
5.875%, 3/15/2018 23,000,000 23,245,180
5.875%, 2/15/2019 23,715,000 23,934,127
6%, 2/1/2022 12,750,000 12,955,913
6.125%, 8/1/2025 22,625,000 23,180,896
5%, 3/15/2029 13,755,000 12,111,277
New York State Dormitory Authority, Revenue:
(City University) 7.50%, 7/1/2010 10,000,000 11,494,000
(New York and Presbyterian Hospital)
4.75%, 8/1/2027 (Insured; AMBAC) 47,750,000 40,884,505
New York State Housing Finance Agency, Revenue (Housing
Project Mortgage) 6.125%, 11/1/2020 (Insured; FSA) 11,960,000 12,502,266
New York State Local Government Assistance Corp.
4.375%, 4/1/2018 (Insured; FGIC) 11,175,000 9,305,199
New York State Mortgage Agency, Revenue
(Homeowner Mortgage) 6.65%, 10/1/2025 21,160,000 22,275,132
New York State Thruway Authority, General Revenue
5%, 1/1/2025 10,000,000 8,974,500
Port Authority of New York and New Jersey
4.25%, 10/1/2026 (Insured; FGIC) 47,105,000 37,271,360
NORTH CAROLINA--2.2%
City of Charlotte, Charlotte/Douglas International Airport,
Special Facility Revenue (US Airways, Inc. Project)
5.60%, 7/1/2027 12,280,000 10,872,221
North Carolina Housing Finance Agency, Single Family Revenue
6.50%, 9/1/2026 5,815,000 6,023,991
North Carolina Public School Building:
4.60%, 4/1/2015 4,115,000 3,735,762
4.60%, 4/1/2016 27,720,000 24,896,441
Pitt County, Revenue (Pitt County Memorial Hospital)
6.90%, 12/1/2021 (Prerefunded 12/1/2001) 12,000,000 (b) 12,926,400
Winston Salem, COP 6.90%, 6/1/2011
(Prerefunded 6/1/2001) 4,000,000 (b) 4,259,920
NORTH DAKOTA--.2%
North Dakota Housing Finance Agency
(Housing Mortgage Finance Program) 6.75%, 7/1/2025 5,805,000 6,045,501
OHIO--1.8%
Cleveland, Airport Revenue Special (Continental Airlines Inc.
Project) 5.375%, 9/15/2027 27,600,000 23,950,452
Cuyahoga County, HR (Meridia Health System)
7%, 8/15/2023 (Prerefunded 8/15/2001) 7,000,000 (b) 7,508,970
The Fund
<PAGE>
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
OHIO (CONTINUED)
Ohio Turnpike Commission, Turnpike Revenue
4.50%, 2/15/2024 (Insured; FGIC) 23,580,000 19,399,973
OKLAHOMA--1.0%
Claremore Industrial and Redevelopment Authority, EDR
(Yuba Project) 8.375%, 7/1/2011 7,500,000 7,875,675
Southern Oklahoma Memorial Hospital Authority, HR
6.60%, 12/1/2012 (Prerefunded 12/1/2002) 5,725,000 (b) 6,211,797
Tulsa Municipal Airport Trust, Revenue
(AMR Corp.) 7.60%, 12/1/2030 14,390,000 15,185,911
PENNSYLVANIA--1.3%
Delaware County Industrial Development Authority,
Water Facilities Revenue (Philadelphia Suburban Water)
6.35%, 8/15/2025 (Insured; FGIC) 10,000,000 10,375,200
Pennsylvania Economic Development Financing Authority,
SWDR (USG Corp. Project) 6%, 6/1/2031 17,800,000 17,390,956
Saint Mary Hospital Authority (Bucks County) Revenue
(Catholic Health Initiatives) 5%, 12/1/2028 8,850,000 7,728,970
RHODE ISLAND--1.2%
Rhode Island Housing and Mortgage Finance Corp.
(Homeownership Opportunity):
6.95%, 4/1/2022 9,045,000 9,478,979
6.60%, 10/1/2025 10,210,000 10,546,828
6.50%, 4/1/2027 11,835,000 12,247,095
6.85%, 4/1/2027 2,905,000 2,982,767
SOUTH CAROLINA--1.3%
Piedmont Municipal Power Agency, Electric Revenue:
5.25%, 1/1/2021 5,150,000 4,547,244
6.60%, 1/1/2021 9,635,000 9,642,515
Richland County, Solid Waste Disposal Facilities Revenue
(Union Camp Corp. Project) 7.125%, 9/1/2021 6,250,000 6,621,438
South Carolina Housing Finance and Development Authority,
Mortgage Revenue:
6.55%, 7/1/2015 3,950,000 4,109,817
6.75%, 7/1/2026 5,835,000 6,066,825
6.70%, 7/1/2027 6,200,000 6,460,896
TENNESSEE--.9%
Montgomery County Health, Educational and Housing Facility ,
Board HR, Refunding and Improvement (Clarksville
Regional Health System) 5.375%, 1/1/2028 10,950,000 9,540,845
Tennessee Housing Development Agency, Mortgage Finance
6.55%, 7/1/2026 15,995,000 16,566,981
<PAGE>
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
TEXAS--7.3%
Alliance Airport Authority Inc., Special Facilities Revenue:
8.010%, 4/1/2021 28,035,000 (a) 28,472,907
(American Airlines Inc. Project) 7%, 12/1/2011 12,330,000 13,383,968
Angelina and Neches River Authority, SWDR
(Champion International Corp. Project)
7.375%, 5/1/2015 5,570,000 5,943,747
Austin Independent School District (Permanent School
Fund Guaranteed)
4.50%, 8/1/2018 14,200,000 12,073,976
Bell County Health Facilities Development Corp.,
Retirement Facility Revenue (Buckner Retirement Services,
Inc. Obligated Group Project)
5.25%, 11/15/2028 25,000,000 21,675,500
Gulf Coast Waste Disposal Authority, Revenue:
(Champion International Corp.) 7.375%, 10/1/2025 12,000,000 12,821,760
Solid Waste Disposal (Occidental Petroleum Corp. Project)
7%, 11/1/2020 7,725,000 8,178,767
Harris County Hospital District, Mortgage Revenue
7.40%, 2/15/2010 (Insured; AMBAC) 8,355,000 9,606,412
Houston Hotel Occupancy Tax, Revenue 7%, 7/1/2009
(Insured; FGIC) (Prerefunded 7/1/2001) 12,225,000 (b) 12,842,974
Houston, Water and Sewer System Revenue (Junior Lein)
Zero Coupon, 12/1/2026 (Insured; FSA) 100,520,000 20,546,288
Lower Colorado River Authority, Revenue (Junior Lein -
Seventh Supply)
4.75%, 1/1/2028 (Insured; FSA) 11,000,000 9,341,200
Rio Grande Valley Health Facilities Development Corp., HR
(Valley Baptist Medical Center Project) 6.40%, 8/1/2016 11,200,000 11,828,096
Tarrant County Health Facilities Development Corp.,
Health System Revenue, Refunding
(Texas Health Resources System)
5.75%, 2/15/2014 (Insured; MBIA) 9,470,000 9,746,619
Texas:
8.931%, 12/1/2020 7,605,000 (a) 8,329,757
GO (Veterans Housing Assistance Fund) 7%, 12/1/2025 7,915,000 8,364,335
Texas Public Property Finance Corp., Revenue
(Mental Health and Retardation Project)
8.75%, 11/1/2010
(Prerefunded 11/1/2000) 4,745,000 (b) 5,086,925
Tomball Hospital Authority, HR (Tomball Regional Hospital)
6%, 7/1/2029 10,000,000 9,456,700
The Fund
<PAGE>
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
UTAH--1.7%
Carbon County, SWDR, (Sunnyside Cogeneration)
9.25%, 7/1/2018 20,000,000 (d) 12,000,000
Tooele County, Hazardous Waste Treatment Revenue
(Union Pacific Project) 5.70%, 11/1/2026 22,850,000 21,033,425
Utah Housing Finance Agency, Single Family Mortgage:
6.55%, 1/1/2022 2,650,000 2,736,761
6.40%, 1/1/2027 4,730,000 4,885,097
6.65%, 7/1/2027 5,165,000 5,368,553
7%, 7/1/2027 1,290,000 1,356,151
VERMONT--.4%
Vermont Housing Finance Agency, Single Family Housing
6.875%, 5/1/2025 10,500,000 10,873,590
VIRGINIA--1.2%
Giles County Industrial Development Authority,
Solid Waste Disposal Facility Revenue
(Hoechst Celanese Corp. Project) 6.625%, 12/1/2022 8,715,000 9,119,550
Virginia Housing Development Authority, Commonwealth
Mortgage:
6.70%, 1/1/2022 845,000 849,943
6.40%, 7/1/2022 (Insured; MBIA) 24,000,000 24,938,640
WASHINGTON--2.8%
Central Puget Sound Regional Transit Authority,
Sales Tax Motor Vehicle Excise Tax Revenue
4.75%, 2/1/2028 (Insured; FGIC) 83,100,000 69,951,918
Public Utility District No. 1 of Chelan County,
Chelan Hydro Consolidated System Revenue
6.55%, 7/1/2023 10,000,000 10,499,200
WEST VIRGINIA--.3%
Braxton County, Solid Waste Disposal Revenue
(Weyerhaeuser Co. Project) 6.50%, 4/1/2025 8,000,000 8,442,000
WISCONSIN--1.1%
Madison, IDR (Madison Gas and Electric Co. Project)
6.75%, 4/1/2027 10,000,000 10,531,100
Wisconsin Health and Educational Facilities Authority,
Revenue (Aurora Health Care, Inc.) 5.60%, 2/15/2029 22,000,000 19,665,800
WYOMING--1.2%
Sweetwater County:
PCR (Idaho Power Co. Project) 6.05%, 7/15/2026 17,000,000 17,120,360
SWDR (FMC Corp. Project) 6.90%, 9/1/2024 16,225,000 16,885,520
<PAGE>
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
U.S. RELATED--.7%
Guam Power Authority, Revenue 5.25%, 10/1/2034 15,000,000 13,429,950
Commonwealth of Puerto Rico, Public Improvement
5.25%, 7/1/2016 5,500,000 5,376,415
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $ 2,858,142,657) 2,809,878,981
SHORT-TERM MUNICIPAL INVESTMENTS--2.7%
ALABAMA--.4%
Columbia Industrial Development Board, PCR, VRDN
(Alabama Power Co. Project) 2.70% 7,000,000 (f) 7,000,000
Stevenson Industrial Development Board, Environmental
Improvement Revenue VRDN (Mead Corp. Project)
2.90% (LOC; Toronto - Dominion Bank) 4,900,000 (f) 4,900,000
GEORGIA--1.0%
Appling County Development Authority, PCR, VRDN
(Georgia Power Co. Plant Hatch Project) 2.85% 13,700,000 (f) 13,700,000
Hapeville Development Authority, IDR, VRDN
(Hapeville Hotel Ltd.) 2.80% (LOC; Deutsche Bank) 15,300,000 (f) 15,300,000
MINNESOTA--.0%
Duluth, Tax Increment Revenue, VRDN (Lake Superior Paper)
3.10% (LOC; Wachovia Bank of Georgia) 100,000 (f) 100,000
NEW YORK--.2%
New York City, VRDN 3% (LOC; Chase Manhattan Bank) 4,800,000 (f) 4,800,000
TEXAS--.9%
Harris County Health Facilities Development Corp., HR, VRDN 25,000,000 (f) 25,000,000
(Methodist Hospital) 3%
WYOMING--.2%
Unita County, PCR, VRDN (Chevron USA Inc. Project)
2.70% (LOC; Chevron Corp.) 6,000,000 f 6,000,000
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $76,800,000) 76,800,000
TOTAL INVESTMENTS (cost $2,934,942,657) 101.7% 2,886,678,981
LIABILITIES, LESS CASH AND RECEIVABLES (1.7%) (47,472,481)
NET ASSETS 100.0% 2,839,206,500
The Fund
<PAGE>
STATEMENT OF INVESTMENTS (CONTINUED)
Summary of Abbreviations
AMBAC American Municipal Bond Assurance IDR Industrial Development Revenue
Corporation LOC Letter of Credit
COP Certificate of Participation LR Lease Revenue
EDR Economic Development Revenue MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FHA Federal Housing Administration PCR Pollution Control Revenue
FSA Financial Security Assurance SFMR Single Family Mortgage Revenue
GO General Obligation SWDR Solid Waste Disposal Revenue
HR Hospital Revenue VRDN Variable Rate Demand Notes
Summary of Combined Ratings (Unaudited)
Fitch or Moody's or Standard & Poor's Value (%)
AAA Aaa AAA 34.6
AA Aa AA 19.5
A A A 17.7
BBB Baa BBB 15.7
BB Ba BB 2.1
B B B 1.6
P1 MIG1/P1 SP1/A1 2.7
Not Rated(g) Not Rated(g) Not Rated(g) 6.1
100.0
(A) INVERSE FLOATER SECURITY -- THE INTEREST RATE IS SUBJECT TO CHANGE
PERIODICALLY.
(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) SECURITIES EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT
OF 1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS. AT AUGUST 31, 1999,
THESE SECURITIES AMOUNTED TO $20,025,092 OR .7% OF NET ASSETS.
(D) NON-INCOME PRODUCING SECURITY; INTEREST PAYMENT IN DEFAULT.
(E) PURCHASED ON A DELAYED DELIVERY BASIS.
(F) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE - SUBJECT TO PERIODIC
CHANGE.
(G) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S
HAVE BEEN DETERMINED BY THE MANAGER
TO BE OF COMPARABLE QUALITY TO THOSE RATED SECURITIES IN WHICH THE FUND MAY
INVEST.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1999
STATEMENT OF INVESTMENTS (CONTINUED)
Cost Value
ASSETS ($):
Investments in securities--See Statement of
Investments 2,934,942,657 2,886,678,98
Interest receivable 43,964,384
Prepaid expenses 44,439
2,930,687,804
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 1,650,366
Cash overdraft due to Custodian 60,652,266
Payable for investment securities purchased 29,047,491
Payable for shares of Common Stock redeemed 4,412
Accrued expenses 126,769
91,481,304
NET ASSETS ($) 2,839,206,500
COMPOSITION OF NET ASSETS ($):
Paid-in capital 2,888,482,02
Accumulated distribution in excess of net realized gain on investments
(1,011,848)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 (48,263,676)
NET ASSETS ($) 2,839,206,500
SHARES OUTSTANDING
(600 million shares of $.01 par value Common Stock authorized) 242,601,890
NET ASSET VALUE, offering and redemption price per share--Note 3(d)($) 11.70
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
<PAGE>
STATEMENT OF OPERATIONS
Year Ended August 31, 1999
INVESTMENT INCOME ($):
INTEREST INCOME 179,352,833
EXPENSES:
Management fee--Note 3(a) 18,852,292
Shareholder servicing costs--Note 3(b) 3,678,896
Custodian fees 143,374
Registration fees 86,527
Prospectus and shareholders' reports 68,335
Professional fees 66,451
Directors' fees and expenses--Note 3(c) 65,475
Loan commitment fees--Note 2 14,166
Miscellaneous 65,873
TOTAL EXPENSES 23,041,389
Less--reduction in management fee due to
undertaking--Note 3(a) (67,190)
NET EXPENSES 22,974,199
INVESTMENT INCOME--NET 156,378,634
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments 13,558,522
Net unrealized appreciation (depreciation) on investments (242,364,572
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (228,806,050)
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (72,427,416)
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Year Ended August 31,
1999 1998
OPERATIONS ($):
Investment income--net 156,378,634 169,772,612
Net realized gain (loss) on investments 13,558,522 49,477,334
Net unrealized appreciation (depreciation)
on investments (242,364,572) 53,807,416
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS (72,427,416) 273,057,362
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net (156,378,634) (170,739,421)
Net realized gain on investments (57,678,882) (18,847,051)
TOTAL DIVIDENDS (214,057,516) (189,586,472)
CAPITAL STOCK TRANSACTIONS ($):
Net proceeds from shares sold 1,019,336,546 1,928,492,791
Dividends reinvested 139,183,667 118,802,455
Cost of shares redeemed (1,367,812,152) (2,250,558,450)
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL STOCK TRANSACTIONS (209,291,939) (203,263,204)
TOTAL INCREASE (DECREASE) IN NET ASSETS (495,776,871) (119,792,314)
NET ASSETS ($):
Beginning of Period 3,334,983,371 3,454,775,685
END OF PERIOD 2,839,206,500 3,334,983,371
CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold 81,694,255 152,496,991
Shares issued for dividends reinvested 11,145,811 9,353,598
Shares redeemed (109,685,516) (177,759,994)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (16,845,450) (15,909,405)
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
<PAGE>
FINANCIAL HIGHLIGHTS
The following table describes the 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 derived from the fund's financial
statements.
<TABLE>
<CAPTION>
Year Ended August 31,
1999 1998 1997 1996 1995
PER SHARE DATA ($):
Net asset value, beginning
<S> <C> <C> <C> <C> <C>
of period 12.85 12.55 12.23 12.41 12.39
Investment Operations:
Investment income--net .62 .64 .67 .69 .72
Net realized and unrealized
gain (loss) on investments (.93) .37 .33 (.18) .09
Total from Investment Operations (.31) 1.01 1.00 .51 .81
Distributions:
Dividends from investment
income--net (.62) (.64) (.67) (.69) (.72)
Dividends from net realized gain
on investments (.22) (.07) (.01) -- (.07)
Total Distributions (.84) (.71) (.68) (.69) (.79)
Net asset value, end of period 11.70 12.85 12.55 12.23 12.41
TOTAL RETURN (%) (2.60) 8.36 8.24 4,16 6.93
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to
average net assets .73 .73 .71 .71 .70
Ratio of net investment income
to average net assets 4.98 5.04 5.39 5.57 5.94
Decrease reflected in above expense
ratios due to undertakings by the
Manager .00(a) .01 -- -- --
Portfolio Turnover Rate 55.77 63.07 66.89 64.48 51.55
Net Assets, end of period
($ x 1,000) 2,839,207 3,334,983 3,454,776 3,572,286 3,936,734
(A) AMOUNT REPRESENTS LESS THAN .01%.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
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, as amended (the "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 (the "Manager") serves as the fund's investment adviser. The Manager
is a direct subsidiary of Mellon Bank, N.A. Premier Mutual Fund Services, Inc.
is 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: Investments in securities (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. Financial futures on municipal and U.S. treasury securities are
valued at the last sales price on the securities exchange on which such
securities are primarily traded or at the last sales price on the national
securities market on each business day. Investments not listed on an exchange or
the The Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
national securities market, or securities for which there were no transactions,
are valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
(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. Under the terms of the custody
agreement, the fund receives net earnings credits based on available cash
balances left on deposit.
(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 of 1986, as amended (the
" 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 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--Bank Line of Credit:
The fund participates with other Dreyfus-managed funds in a $600 million
redemption credit facility (the "Facility" ) to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the fund has agreed to pay commitment fees on its pro rata portion of
the Facility. Interest is
<PAGE>
charged to the fund at rates based on prevailing market rates in effect at the
time of borrowings. During the period ended August 31, 1999, the fund did not
borrow under the Facility.
NOTE 3--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. The Manager had
undertaken from September 1, 1998 through August 31, 1999 to reduce the
management fees paid by, or reimburse such excess expenses of the fund, to the
extent that the fund's aggregate annual expenses (excluding taxes, brokerage,
interest on borrowings, commitment fees and extraordinary expenses) exceed an
annual rate of .74 of 1% of the value of the fund's average daily net assets.
The reduction in management fee, pursuant to the undertaking, amounted to
$67,190 during the period ended August 31, 1999.
(b) Under the 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 period ended
August 31, 1999, the fund was charged $2,323,152 pursuant to the Shareholder
Services Plan.
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. During the period
ended August 31, 1999, the fund was charged $870,776 pursuant to the transfer
agency agreement.
The Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(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.
(d) A .10% redemption fee is charged and retained by the fund on shares redeemed
within fifteen days of their issuance, including redemptions made through the
use of the fund's Exchange privilege. During the period ended August 31, 1999,
redemption fees retained by the fund amounted to $106,330.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities, during the period ended August 31, 1999, amounted to
$1,728,008,787 and $1,961,309,679, respectively.
At August 31, 1999, accumulated net unrealized depreciation on investments was
$48,263,676, consisting of $85,015,492 gross unrealized appreciation and
$133,279,168 gross unrealized depreciation.
At August 31, 1999, 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).
<PAGE>
REPORT OF 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, 1999, 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 and financial highlights. Our procedures included confirmation of
securities owned as of August 31, 1999 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, 1999, 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.
New York, New York
October 4, 1999
The Fund
<PAGE>
IMPORTANT TAX INFORMATION (Unaudited)
In accordance with Federal tax law, the fund hereby makes the following
designations regarding its fiscal year ended August 31, 1999:
--all the dividends paid from investment income-net are "exempt-interest
dividends" (not generally subject to regular Federal income tax), and
- --the fund hereby designates $.1277 per share as a long-term capital gain
distribution of the $.2237 per share paid on December 9, 1998.
As required by Federal tax law rules, shareholders will receive notification of
their portion of the fund's taxable ordinary dividends (if any) and capital gain
distributions (if any) paid for the 1999 calendar year on Form 1099-DIV which
will be mailed by January 31, 2000.
NOTES
For More Information
Dreyfus
Municipal Bond Fund, Inc.
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agent & Dividend Disbursing Agent
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Distributor
Premier Mutual Fund Services, Inc.
60 State Street
Boston, MA 02109
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 Information can be viewed online or downloaded from:
http://www.dreyfus.com
(c) 1999 Dreyfus Service Corporation 054AR998
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN DREYFUS MUNICIPAL BOND FUND, INC. AND THE LEHMAN
BROTHERS MUNICIPAL BOND INDEX
EXHIBIT A:
LEHMAN
BROTHERS DREYFUS
PERIOD MUNICIPAL MUNICIPAL
BOND INDEX * BOND FUND
8/31/89 10,000 10,000
8/31/90 10,642 10,551
8/31/91 11,897 11,723
8/31/92 13,225 12,991
8/31/93 14,838 14,631
8/31/94 14,859 14,392
8/31/95 16,176 15,389
8/31/96 17,024 16,029
8/31/97 18,598 17,352
8/31/98 20,206 18,803
8/31/99 20,307 18,313
* Source: Lehman Brothers
