Dreyfus
Municipal Bond
Fund, Inc.
ANNUAL REPORT August 31, 2000
(reg.tm)
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
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
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Back Cover
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, 1999 through August 31,
2000. 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 U.S. economy grew strongly over the past year in an environment
characterized by high levels of consumer spending and low levels of
unemployment. Concerns that inflationary pressures might reemerge caused the
Federal Reserve Board to raise short-term interest rates four times during the
reporting period before signs of moderation began to appear in the summer of
2000.
Although higher interest rates led to lower municipal bond prices during the
first half of the reporting period, supply-and-demand factors unique to the
municipal bond market helped promote price improvement over the last six months
of the period. Because of robust economic growth, many municipalities had little
need to borrow during the reporting period, creating a reduced supply of new
issues, while demand from individual investors strengthened.
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 15, 2000
DISCUSSION OF FUND PERFORMANCE
Richard Moynihan, Portfolio Manager
How did Dreyfus Municipal Bond Fund, Inc. perform during the period?
For the 12-month period ended August 31, 2000 the fund achieved a 5.28% total
return.(1) In comparison, the Lipper General Municipal Debt Funds category
average return was 5.10% for the same period.(2)
We attribute the fund's good overall performance to our security selection and
duration management strategies, which emphasized investments -- such as longer
term, deep discount bonds -- that performed particularly well during the second
half of the reporting period as the overall municipal bond market rallied
What is the fund's investment approach?
The fund' s 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.
In pursuit of 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 the highest 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 and sell bonds we consider less attractive.
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. For example, if we expect interest rates to rise or
the supply of newly issued bonds to increase, we may reduce the fund's average
duration by maintaining a cash position The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
which may later be reinvested in other securities, or by swapping into bonds
with more defensive characteristics and shorter durations. Conversely, if we
expect interest rates to decline or the demand for municipal bonds to surge, we
may increase the portfolio's average duration to take advantage of opportunities
for capital appreciation.
What other factors influenced the fund's performance?
When the reporting period began on September 1, 1999 the U.S. economy was
growing strongly, raising concerns that long-dormant inflationary pressures
might reemerge. In response, the Federal Reserve Board raised short-term
interest rates once in late 1999 and three times during the first half of 2000
for a total increase of 1.25 percentage points, during the reporting period.
Higher interest rates and inflation concerns eroded the prices of many municipal
bonds during the first half of the reporting period.
Despite higher interest rates, the municipal bond market generally rallied
during the second half of the period. The market rally was largely the result of
a reduced supply of newly issued bonds. Ongoing strength in the national, state
and local economies enabled many states and municipalities to enjoy higher tax
revenues and budget surpluses, curtailing their need to borrow. At the same
time, demand for municipal bonds has been strong from individuals seeking to
protect wealth created by the strong economy and a rising stock market. When
demand rises and supply falls, prices of existing bonds generally tend to move
higher.
What is the fund's current strategy?
We have been preparing for a time of greater general uncertainty regarding the
economy and interest rates. Recent signs of an economic slowdown suggest that
the Federal Reserve's restrictive monetary policies could be near an end. On the
other hand, any threat of resurgent inflationary pressures could lead to more
interest-rate hikes, which have the potential to derail a municipal bond market
that we believe
is fully valued after the recent rally. We expect this economic uncertainty to
persist through November's presidential election, at which point the Fed may be
more comfortable signaling their intentions for monetary policy.
Accordingly, we have recently been selling some of the lower coupon bonds that
rallied most strongly over the past six months, locking in gains. When
appropriate, we have redeployed the proceeds of those sales to high quality
bonds with structures that we believe will help ensure their liquidity if and
when we decide to sell them. In fact, as of August 31, 2000, more than
two-thirds of the fund' s holdings were rated double-A or better by the major
bond rating agencies.
In addition, we have modestly reduced the fund's average duration. This change
is intended to increase our flexibility, which should enable us to act fast when
the future direction of economic growth, inflation and interest rates becomes
clearer.
September 15, 2000
(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 INC.
The Fund
<TABLE>
<CAPTION>
FUND PERFORMANCE
Comparison of change in value of $10,000 investment in Dreyfus Municipal Bond
Fund, Inc. and the Lehman Brothers Municipal Bond Index
--------------------------------------------------------------------------------
Average Annual Total Returns AS OF 8/31/00
1 Year 5 Years 10 Years
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FUND 5.28% 4.61% 6.21%
((+)) SOURCE: LIPPER INC.
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN DREYFUS MUNICIPAL BOND
FUND, INC. ON 8/31/90 TO A $10,000 INVESTMENT MADE IN THE LEHMAN BROTHERS
MUNICIPAL BOND INDEX ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
ARE REINVESTED.
THE FUND INVESTS PRIMARILY IN MUNICIPAL SECURITIES AND ITS PERFORMANCE SHOWN IN
THE LINE GRAPH TAKES INTO ACCOUNT FEES AND EXPENSES. THE LEHMAN BROTHERS
MUNICIPAL BOND INDEX, UNLIKE THE FUND, IS AN UNMANAGED TOTAL RETURN PERFORMANCE
BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, TAX-EXEMPT BOND MARKET,
CALCULATED BY USING MUNICIPAL BONDS SELECTED TO BE REPRESENTATIVE OF THE
MUNICIPAL MARKET OVERALL. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND
OTHER EXPENSES WHICH CAN CONTRIBUTE TO THE INDEX POTENTIALLY OUTPERFORMING OR
UNDERPERFORMING THE FUND. FURTHER INFORMATION RELATING TO FUND PERFORMANCE,
INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN THE FINANCIAL
HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT.
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS
August 31, 2000
Principal
LONG-TERM MUNICIPAL INVESTMENTS--96.4% Amount ($) Value ($)
--------------------------------------------------------------------------------
ALABAMA--3.3%
Alabama Housing Finance Authority, SFMR:
<S> <C> <C>
6.45%, 10/1/2025 6,090,000 6,260,155
6.10%, 10/1/2027 7,570,000 7,744,186
Alabama Industrial Development Authority,
SWDR (Pine City Fiber Co.)
6.45%, 12/1/2023 23,000,000 22,536,320
Alabama Public School and College Authority,
Capital Improvement:
5.50%, 7/1/2015 23,520,000 24,028,502
4.25%, 11/1/2018 (Insured; FSA) 20,000,000 16,914,600
Industrial Development Board of the Town of Courtland, SWDR
(Champion International Corp. Project)
7%, 11/1/2022 8,100,000 8,357,742
ALASKA--.7%
Alaska Energy Authority, Power Revenue (Bradley Lake)
6%, 7/1/2017 (Insured; FSA) 5,730,000 6,109,784
Alaska Housing Finance Corp.
(Collateralized Veterans Mortgage Program)
6.375%, 12/1/2027 5,830,000 6,030,843
Anchorage, Electric Utility Revenue
6.50%, 12/1/2015 (Insured; MBIA) 6,135,000 6,984,513
ARIZONA--1.8%
The Industrial Development Authority of the
County of Apache, PCR
(Tucson Electric Power Co. Project):
5.85%, 3/1/2028 14,000,000 12,449,920
5.875%, 3/1/2033 37,050,000 33,382,791
ARKANSAS--.1%
Little River County, Revenue (Georgia-Pacific Corp. Project)
5.60%, 10/1/2026 3,350,000 3,091,548
CALIFORNIA--8.0%
Airport Commission City and County of San Francisco
(San Francisco International Airport):
6.50%, 5/1/2015 (Insured; FGIC) 10,100,000 10,884,265
4.50%, 5/1/2023 (Insured; MBIA) 20,000,000 17,484,000
Alameda Corridor Transportation Authority,
Revenue, Senior Lien:
Zero Coupon, 10/1/2033 (Insured; MBIA) 9,605,000 1,513,076
Zero Coupon, 10/1/2035 (Insured; MBIA) 23,545,000 3,302,422
California 5%, 2/1/2013 (Insured; FGIC) 9,000,000 9,194,940
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA (CONTINUED)
California Health Facilities Financing Authority, Revenue
(Sutter Health)
5.35%, 8/15/2028 15,000,000 14,690,700
California Public Works Board, LR
(Various University of California Projects)
5.50%, 6/1/2014 9,750,000 10,445,662
California Statewide Communities Development Authority:
COP (The Internext Group) 5.375%, 4/1/2030 25,000,000 21,853,750
LR 6.984%, 10/1/2033 20,750,000 (a) 17,090,115
Special Facilities Revenue 6.835%, 10/1/2034 24,500,000 (a) 19,630,135
Department of Water and Power of The City of Los Angeles,
Water Works Revenue 4.50%, 10/15/2024 15,000,000 12,981,600
Foothill/Eastern Transportation Corridor Agency,
Toll Road Revenue
Zero Coupon, 1/1/2025 43,860,000 11,344,828
San Joaquin Hills Transportation Corridor Agency,
Toll Road Revenue:
Zero Coupon, 1/15/2025 (Insured; MBIA) 43,535,000 11,077,916
Zero Coupon, 1/15/2034 (Insured; MBIA) 139,000,000 21,130,780
Zero Coupon, 1/15/2035 (Insured; MBIA) 113,500,000 16,264,550
Santa Ana Financing Authority, Revenue
(South Harbor Boulevard) 5%, 9/1/2019 (Insured; MBIA) 10,000,000 9,766,300
COLORADO--1.0%
City and County of Denver, Airport Revenue:
7.25%, 11/15/2023 (Prerefunded 11/15/2002) 6,390,000 (b) 6,883,627
7.25%, 11/15/2023 19,375,000 20,521,806
CONNECTICUT--1.4%
Connecticut Resource Recovery Authority
(American Fuel Co. Project) 6.45%, 11/15/2022 7,325,000 6,772,841
Mashantucket Western Pequot Tribe, Special Revenue:
6.40%, 9/1/2011 (Prerefunded 9/1/2007) 9,170,000 (b,c) 10,270,583
6.40%, 9/1/2011 9,330,000 (c) 9,873,752
DELAWARE--.6%
Delaware Economic Development Authority,
Water Development Revenue
(Wilmington Suburban Water Corp. Project)
6.80%, 12/1/2023 8,000,000 8,133,920
Delaware Housing Authority, Senior SFMR 6.45%, 1/1/2026 7,130,000 7,251,067
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA--3.0%
District of Columbia Water and Sewer Authority,
Public Utility Revenue
5.50%, 10/1/2018 (Insured; FSA) 10,065,000 10,208,829
Metropolitan Washington Airports Authority,
Airport System Revenue:
6.625%, 10/1/2012 (Insured; MBIA) 40,400,000 42,638,564
6.625%, 10/1/2019 (Insured; MBIA) 23,600,000 24,733,744
FLORIDA--6.6%
Florida Community Services Corp. Walton County,
Water and Sewer Revenue
(South Walton County Regional Utility) 7%, 3/1/2018 3,500,000 3,706,220
Florida State Board of Education:
Lottery Revenue:
5.25%, 7/1/2018 (Insured; FGIC) 9,330,000 9,259,932
5.25%, 7/1/2019 (Insured; FGIC) 9,875,000 9,752,155
Public Education Capital Outlay
4.50%, 6/1/2021 13,065,000 11,205,851
Florida Department of Environmental Protection, Revenue:
5.75%, 7/1/2012 (Insured; FGIC) 18,925,000 20,370,492
5.75%, 7/1/2013 (Insured; FGIC) 10,270,000 10,982,943
Florida Department of Management Services,
Florida Facilites Pool Revenue
4.50%, 9/1/2028 (Insured; FSA) 9,620,000 8,034,432
Gulf Breeze, Revenue (Capital Funding)
4.50%, 10/1/2027 (Insured; MBIA) 34,080,000 28,721,602
Orlando Utilities Commission, Water and Electric Revenue
6.75%, 10/1/2017 15,875,000 18,404,840
Palm Beach County, Solid Waste IDR:
(Okeelanta Power Limited Partnership Project)
6.70%, 2/15/2015 23,400,000 (d) 13,338,000
(Osceola Power Limited Partnership) 6.95%, 1/1/2022 33,800,000 (d) 19,266,000
Polk County Industrial Development Authority, IDR
(IMC Fertilizer) 7.525%, 1/1/2015 15,200,000 15,722,424
South Lake County Hospital District, Revenue
(South Lake Hospital, Inc.)
5.80%, 10/1/2034 3,450,000 3,276,948
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
GEORGIA--3.9%
City of Atlanta, Water and Wastewater Revenue
5.50%, 11/1/2022 (Insured; FGIC) 10,000,000 10,186,000
Fulton County Facilities Corp., COP
(Fulton County, Georgia Public Purpose Project)
5.50%, 11/1/2018 (Insured; AMBAC) 11,130,000 11,192,885
Georgia:
5.80%, 11/1/2014 19,580,000 21,008,557
5.80%, 11/1/2015 20,000,000 21,361,400
5.75%, 8/1/2016 15,210,000 16,166,861
Georgia Housing and Finance Authority,
Single Family Mortgage
6.55%, 12/1/2027 6,520,000 6,636,773
Municipal Electric Authority of Georgia (Project One)
5.25%, 1/1/2013 (Insured; MBIA) 14,660,000 14,945,870
IDAHO--.4%
Idaho Housing Agency, Multi-Family Housing
6.70%, 7/1/2024 10,050,000 10,435,920
ILLINOIS--4.9%
Chicago Board of Education:
(Chicago School Reform)
Zero Coupon, 12/1/2028 (Insured; FGIC) 13,000,000 2,528,890
Zero Coupon, 12/1/2017 (Insured; FGIC) 10,000,000 3,799,100
Zero Coupon, 12/1/2018 (Insured; FGIC) 25,000,000 8,916,000
Zero Coupon, 12/1/2024 (Insured: FGIC) 31,050,000 7,633,953
5.50%, 12/1/2026 (Insured; FGIC) 29,000,000 29,259,260
Illinois Development Finance Authority, Revenue
Pollution Control, Refunding
(Central Illinois Public Service Co.)
6.375%, 1/1/2028 16,450,000 16,783,606
Illinois Educational Facilities Authority, Revenue
(Illinois Institute of Technology) 6.875%, 12/1/2015 7,250,000 7,903,370
Illinois Health Facilities Authority, Revenue
(Mercy Hospital and Medical Center) 7%, 1/1/2015 7,500,000 5,646,075
Illinois Housing Development Authority:
Multi-Family Housing (Lawndale Redevelopment Project)
6.90%, 12/1/2026 8,750,000 9,174,988
Multi-Family Program 6.75%, 9/1/2021 8,750,000 8,950,200
Section 8 Elderly Housing Revenue
(Morningside North Development)
6.85%, 1/1/2021 (Prerefunded 1/1/2003) 11,220,000 (b) 11,983,970
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
ILLINOIS (CONTINUED)
Metropolitan Pier and Exposition Authority,
Dedicated Tax Revenue
(McCormick Place Expansion Project)
5.375%, 12/15/2016 (Insured; FGIC) 15,880,000 15,918,588
INDIANA--.4%
IPS School Building Corp., First Mortgage
6.10%, 1/15/2020 (Prerefunded 7/15/2004) 11,000,000 (b) 11,838,200
IOWA--.4%
Iowa Finance Authority, SFMR
(Mortgage Backed Securities Program)
6.65%, 7/1/2028 9,385,000 9,582,742
KANSAS--1.3%
Wichita, HR 6.464%, 10/1/2022 (Insured; MBIA) 31,300,000 32,721,959
KENTUCKY--1.9%
City of Ashland, Sewage and Solid Waste Revenue
(Ashland Inc. Project) 7.125%, 2/1/2022 13,170,000 13,693,112
Kenton County Airport Board, Airport Revenue,
Special Facilities (Delta Airlines Project)
7.125%, 2/1/2021 8,455,000 8,718,035
Mount Sterling, LR (Kentucky League Cities Funding)
6.10%, 3/1/2018 7,955,000 8,491,644
Pendleton County, Multi-County LR
(Kentucky Associates Counties
Leasing Trust Program)
6.50%, 3/1/2019 18,500,000 19,187,645
LOUISIANA--.6%
Parish of West Feliciana, PCR
(Gulf States Utilities-I)
7.70%, 12/1/2014 14,000,000 14,644,700
MAINE--.6%
Maine Financial Authority, Solid Waste Revenue
Recycling Facilities
(Great Northern Paper, Inc. Project-
Bowater Inc. Obligor)
7.75%, 10/1/2022 8,165,000 8,576,516
Maine Housing Authority, Mortgage Purchase
6.875%, 11/15/2023 7,435,000 7,735,448
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
MARYLAND--1.1%
Community Development Administration,
Department of Housing and Community Development
State of Maryland:
8.586%, 4/1/2026 4,410,000 (a) 4,699,076
7.485%, 7/1/2039 5,000,000 (a) 4,976,000
(Single Family Program) 6.75%, 4/1/2026 19,860,000 20,311,219
MASSACHUSETTS--4.6%
Massachusetts, Consolidated Loan:
6%, 2/1/2015 20,000,000 21,431,400
5.25%, 6/1/2017 25,000,000 24,710,000
5%, 8/1/2017 9,000,000 8,627,670
5.25%, 8/1/2017 11,500,000 11,493,100
Massachusetts Development Finance Agency, Revenue
(Boston University Issue)
6%, 5/15/2059 9,000,000 9,166,050
Massachusetts Health and Educational
Facilities Authority, Revenue
(Brandeis University)
4.75%, 10/1/2028 (Insured; MBIA) 14,050,000 12,187,251
Massachusetts Housing Finance Agency, Revenue:
Housing:
6.50%, 7/1/2025 (Insured; AMBAC) 4,140,000 4,277,614
6.60%, 1/1/2037 (Insured; AMBAC) 7,100,000 7,355,316
Single Family Housing:
7.125%, 6/1/2025 12,550,000 12,927,253
6.65%, 12/1/2027 7,120,000 7,380,877
MICHIGAN--3.1%
Charter County of Wayne, Revenue:
Airport (Detroit Metroplitan Wayne County Airport)
5.375%, 12/1/2017 (Insured; MBIA) 21,830,000 21,300,841
Special Airport Facilities
(Northwest Airlines, Inc., Facilities)
6.75%, 12/1/2015 8,760,000 8,771,213
The Economic Development Corp. of the County of Gratiot,
Limited Obligation EDR (Danly Die Set Project)
7.625%, 4/1/2007 3,200,000 3,320,320
Michigan Hospital Finance Authority, Revenue
Hospital, (Genesys Health System Obligated Group):
8.125%, 10/1/2021 (Prerefunded 10/1/2005) 15,000,000 (b) 17,710,950
7.50%, 10/1/2027 (Prerefunded 10/1/2005) 15,300,000 (b) 17,382,789
Michigan Housing Development Authority, SFMR
7.885%, 12/1/2027 11,020,000 (a) 11,516,782
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
MINNESOTA--2.7%
Minnesota Housing Finance Agency, Single Family Mortgage:
6.90%, 7/1/2022 4,695,000 4,837,493
6.50%, 7/1/2024 15,270,000 15,771,161
6.45%, 7/1/2025 27,780,000 28,678,405
Minnesota Public Facilities Authority, Water PCR:
5%, 3/1/2014 12,755,000 12,576,558
5%, 3/1/2015 7,425,000 7,264,026
MISSOURI--.5%
Missouri Higher Education Loan Authority,
Student Loan Revenue
6.75%, 2/15/2009 11,500,000 12,109,155
NEBRASKA--.9%
Omaha Public Power District, Electric Revenue
6.405%, 2/1/2014 22,400,000 (a) 24,101,728
NEVADA--2.3%
Clark County, IDR (Nevada Power Co. Project):
5.50%, 10/1/2030 10,000,000 8,488,900
5.60%, 10/1/2030 12,900,000 11,072,973
5.90%, 10/1/2030 14,700,000 13,185,459
Clark County School District 5.50%, 6/15/2014 (Insured; FSA) 8,000,000 8,285,360
Nevada Housing Division (Single Family Program)
6.80%, 4/1/2027 8,915,000 9,150,891
Washoe County Gas Facilities Revenue
(Sierra Pacific Power Co. Project)
6.70%, 11/1/2032 (Insured; MBIA) 10,000,000 10,558,700
NEW HAMPSHIRE--2.4%
Business Finance Authority of the State of New Hampshire:
PCR (Public Service Co. of New Hampshire Project)
6%, 5/1/2021 15,500,000 14,657,575
State Guaranteed Airport Revenue
(Manchester Airport Project):
6.50%, 1/1/2019 12,600,000 13,002,948
6.375%, 1/1/2022 8,650,000 8,849,123
New Hampshire Housing Finance Authority:
Multi-Family Housing:
7.55%, 7/1/2013 4,205,000 4,554,225
(Mariners Village Project)
6.60%, 1/1/2038 (Insured; FHA) 7,365,000 7,598,102
Single Family Residential Mortgage:
6.85%, 1/1/2025 7,785,000 7,968,103
6.95%, 1/1/2026 6,955,000 7,151,548
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
NEW JERSEY--5.5%
New Jersey Economic Development Authority:
PCR
(Public Service Electric and Gas Co. Project)
6.40%, 5/1/2032 (Insured; MBIA) 32,040,000 33,643,922
Special Facility Revenue (Continental Airlines, Inc. Project)
6.40%, 9/15/2023 15,000,000 14,407,050
6.25%, 9/15/2029 16,000,000 15,005,920
New Jersey Transportation Trust Fund Authority
(Transportation System):
6%, 6/15/2012 (Insured; FSA) 24,665,000 27,128,787
5.75%, 6/15/2018 7,750,000 8,179,970
5.75%, 6/15/2020 12,645,000 13,312,277
New Jersey Turnpike Authority, Turnpike Revenue
5.75%, 1/1/2017 (Insured; MBIA) 30,000,000 31,261,800
NEW MEXICO--.4%
New Mexico Educational Assistance Foundation,
Student Loan Revenue 7.45%, 3/1/2010 5,090,000 5,437,698
New Mexico Mortgage Financing Authority 6.80%, 1/1/2026 5,500,000 6,061,055
NEW YORK--10.5%
Long Island Power Authority, Electric System General Revenue:
5.50%, 12/1/2012 (Insured; FSA) 10,000,000 10,542,200
5.50%, 12/1/2013 (Insured; FSA) 25,860,000 27,138,001
5.125%, 12/1/2022 (Insured; FSA) 20,455,000 19,337,748
New York City:
6.375%, 8/15/2011 (Prerefunded 8/15/2005) 6,565,000 (b) 7,190,973
6.375%, 8/15/2011 24,720,000 26,636,294
5%, 8/1/2014 (Insured; FSA) 10,000,000 9,886,100
5.50%, 5/15/2015 (Insured; MBIA) 11,180,000 11,474,817
5.375%, 8/1/2027 (Insured; MBIA) 10,000,000 9,714,300
5%, 3/15/2029 (Insured; FGIC) 10,000,000 9,143,200
New York City Transitional Finance Authority, Revenue
(Future Tax Secured) 5.50%, 11/1/2018 29,105,000 29,364,617
New York State Dormitory Authority, Revenue:
(City University) 7.50%, 7/1/2010 5,000,000 5,766,850
(New York and Presbyterian Hospital)
4.75%, 8/1/2027 (Insured; AMBAC) 35,200,000 30,838,368
(State University Educational Facilities)
5.875%, 5/15/2011 (Insured; FGIC) 9,100,000 9,898,798
New York State Local Government Assistance Corp.
4.375%, 4/1/2018 (Insured; FGIC) 11,175,000 9,633,074
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
NEW YORK (CONTINUED)
New York State Urban Development Corp. (Corporation Purpose)
5.375%, 7/1/2022 18,550,000 18,175,105
Port Authority of New York and New Jersey
4.25%, 10/1/2026 (Insured; FGIC) 47,105,000 38,297,778
NORTH CAROLINA--2.3%
Charlotte:
5.25%, 2/1/2015 12,130,000 12,282,717
5.25%, 2/1/2016 13,930,000 14,009,958
(Charlotte/Douglas International Airport)
Special Facility Revenue 5.60%, 7/1/2027 20,280,000 16,365,352
North Carolina Housing Finance Agency,
Single Family Revenue
6.50%, 9/1/2026 5,570,000 5,697,052
Pitt County, Revenue (Pitt County Memorial Hospital)
6.90%, 12/1/2021 (Prerefunded 12/1/2001) 12,000,000 (b) 12,604,560
NORTH DAKOTA--.2%
North Dakota Housing Finance Agency
(Housing Mortgage Finance Program) 6.75%, 7/1/2025 5,460,000 5,612,552
OHIO--1.8%
Cleveland:
Airport Special Revenue (Continental Airlines Inc. Project)
5.375%, 9/15/2027 14,100,000 11,378,982
Waterworks Revenue and Improvement:
5%, 1/1/2016 (Insured; FSA) 10,000,000 9,641,300
5%, 1/1/2017 (Insured; FSA) 10,000,000 9,574,000
Cuyahoga County, HR (Meridia Health System)
7%, 8/15/2023 (Prerefunded 8/15/2001) 7,000,000 (b) 7,311,640
Ohio Turnpike Commission, Turnpike Revenue
4.50%, 2/15/2024 (Insured; FGIC) 10,330,000 8,754,675
OKLAHOMA--.5%
Claremore Industrial and Redevelopment Authority, EDR
(Yuba Project) 8.375%, 7/1/2011 7,500,000 7,720,275
Southern Oklahoma Memorial Hospital Authority, HR
6.60%, 12/1/2012 (Prerefunded 12/1/2002) 5,725,000 (b) 6,081,954
PENNSYLVANIA--.4%
Delaware County Industrial Development Authority,
Water Facilities Revenue
(Philadelphia Suburban Water)
6.35%, 8/15/2025 (Insured; FGIC) 10,000,000 10,411,100
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
RHODE ISLAND--1.2%
Rhode Island Housing and Mortgage Finance Corp.
(Homeownership Opportunity):
6.95%, 4/1/2022 8,105,000 8,525,163
6.60%, 10/1/2025 10,210,000 10,577,764
6.50%, 4/1/2027 11,835,000 12,097,145
SOUTH CAROLINA--1.0%
Piedmont Municipal Power Agency, Electric Revenue
6.60%, 1/1/2021 8,635,000 8,634,223
Richland County, Solid Waste Disposal Facilities Revenue
(Union Camp Corp. Project) 7.125%, 9/1/2021 6,250,000 6,431,688
South Carolina Housing Finance and Development Authority,
Mortgage Revenue:
6.75%, 7/1/2026 4,145,000 4,254,718
6.70%, 7/1/2027 5,660,000 5,819,895
TENNESSEE--.6%
Montgomery County Health, Educational and
Housing Facility Board,
HR, Refunding and Improvement
(Clarksville Regional Health System)
5.375%, 1/1/2028 8,950,000 7,142,637
Tennessee Housing Development Agency,
Mortgage Finance 6.55%, 7/1/2026 7,705,000 7,878,285
TEXAS--6.2%
Alliance Airport Authority Inc., Special Facilities Revenue
7.828%, 4/1/2021 28,035,000 (a) 27,935,756
Angelina and Neches River Authority, SWDR
(Champion International Corp. Project)
7.375%, 5/1/2015 5,570,000 5,772,080
Bell County Health Facilities Development Corp.,
Retirement Facility Revenue
(Buckner Retirement Services, Inc. Obligated Group Project)
5.25%, 11/15/2028 17,500,000 14,484,225
Gulf Coast Waste Disposal Authority, Revenue:
(Champion International Corp.) 7.375%, 10/1/2025 12,000,000 12,494,040
Solid Waste Disposal (Occidental Petroleum Corp. Project)
7%, 11/1/2020 7,725,000 8,006,654
Harris County Hospital District, Mortgage Revenue
7.40%, 2/15/2010 (Insured; AMBAC) 8,355,000 9,553,441
Houston Hotel Occupancy Tax, Revenue 7%, 7/1/2009
(Insured; FGIC) (Prerefunded 7/1/2001) 12,225,000 (b) 12,497,984
Houston, Water and Sewer System Revenue (Junior Lein)
Zero Coupon, 12/1/2026 (Insured; FSA) 88,795,000 19,645,006
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
TEXAS (CONTINUED)
Rio Grande Valley Health Facilities Development Corp., HR
(Valley Baptist Medical Center Project)
6.40%, 8/1/2016 (Insured; MBIA) 11,200,000 11,592,784
Tarrant County Health Facilities Development Corp.,
Health System Revenue
(Texas Health Resources System)
5.75%, 2/15/2014 (Insured; MBIA) 9,470,000 9,607,220
Texas:
8.385%, 12/1/2020 7,605,000 (a) 8,102,975
GO (Veterans Housing Assistance Fund) 7%, 12/1/2025 7,915,000 8,329,904
Texas Public Property Finance Corp., Revenue
(Mental Health and Retardation Project)
8.75%, 11/1/2010 (Prerefunded 11/1/2000) 4,745,000 (b) 4,871,122
Tomball Hospital Authority, HR (Tomball Regional Hospital)
6%, 7/1/2029 10,000,000 8,645,900
UTAH--1.3%
Carbon County, SWDR (Sunnyside Cogeneration):
7.10%, 8/15/2023 9,970,000 9,556,843
Zero Coupon, 8/15/2024 3,090,000 508,058
Tooele County, Hazardous Waste Treatment Revenue
(Union Pacific Project) 5.70%, 11/1/2026 22,600,000 19,876,248
Utah Housing Finance Agency, Single Family Mortgage
6.65%, 7/1/2027 4,555,000 4,672,382
VERMONT--.4%
Vermont Housing Finance Agency, Single Family Housing
6.875%, 5/1/2025 10,500,000 10,743,915
VIRGINIA--.4%
Chesapeake Bay Bridge and Tunnel Commission,
General Resolution Revenue
5.50%, 7/1/2025 (Insured; MBIA) 7,000,000 7,108,990
Giles County Industrial Development Authority,
Solid Waste Disposal Facility Revenue
(Hoechst Celanese Corp. Project)
6.625%, 12/1/2022 4,715,000 4,746,355
WASHINGTON--2.1%
Central Puget Sound Regional Transit Authority,
Sales Tax Motor Vehicle Excise Tax Revenue
4.75%, 2/1/2028 (Insured; FGIC) 50,100,000 43,374,576
Public Utility District No. 1 of Chelan County,
Chelan Hydro Consolidated System Revenue
6.55%, 7/1/2023 10,000,000 10,287,900
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
WEST VIRGINA--.3%
Braxton County, SWDR
(Weyerhaeuser Co. Project) 6.50%, 4/1/2025 8,000,000 8,097,440
WISCONSIN--1.1%
Madison, IDR (Madison Gas and Electric Co. Project)
6.75%, 4/1/2027 10,000,000 10,426,600
Wisconsin Health and Educational Facilities Authority,
Revenue (Aurora Health Care, Inc.) 5.60%, 2/15/2029 22,000,000 18,587,140
WYOMING--.6%
Sweetwater County, SWDR (FMC Corp. Project)
6.90%, 9/1/2024 16,225,000 16,446,958
U.S. RELATED--1.1%
Commonwealth of Puerto Rico, Public Improvement
5.25%, 7/1/2016 (Insured; FSA) 6,500,000 6,636,500
Puerto Rico Highway and Transportation Authority,
Transportation Revenue 6%, 7/1/2039 20,050,000 21,126,284
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $2,521,693,953) 2,506,926,553
------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL INVESTMENTS--2.0%
------------------------------------------------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA--.4%
District of Columbia, General Fund Recovery, VRDN
4.35% (LOC; Bank of America) 10,500,000 (e) 10,500,000
FLORIDA--.1%
Hillsborough County Industrial Development Authority,
PCR, VRDN (Tampa Electric Co. Project) 4.45% 2,500,000 (e) 2,500,000
GEORGIA--.2%
Monroe County Development Authority, PCR, VRDN
(Gulf Power Co. Plant) 4.40% 4,000,000 (e) 4,000,000
KANSAS--.2%
Butler County, Solid Waste Disposal and Cogeneration Revenue,
VRDN (Texaco Refining and Marketing) 4.45% 4,000,000 (e) 4,000,000
KENTUCKY--.2%
Louisville and Jefferson County Regional Airport Authority,
Special Facilities Revenue,VRDN
(United Parcel Service Worldwide Forwarding) 4.30% 6,500,000 (e) 6,500,000
MINNESOTA--.1%
Beltrami County, Environmental Control Revenue, VRDN
(Northwood Panelboard Co. Project)
4.35% (LOC; Union Bank of Switzerland) 1,300,000 (e) 1,300,000
Principal
SHORT-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
OREGON--.2%
Port Morrow EIR, VRDN
(Portland General Electric Co.) 4.50% 5,000,000 (e) 5,000,000
PENNSYLVANIA--.1%
Geisinger Authority Health System, Revenue, VRDN
(Pennsylvania State Geisinger Health)
4.30% (Prerefunded 12/1/2000) 3,200,000 (b,e) 3,200,000
TEXAS--.5%
Brazos River Authority, PCR, VRDN (Texas Utilities Electric Co.)
4.45% (Insured: MBIA) 4,900,000 (e) 4,900,000
Brazos River Harbor Navigation District, Harbor Revenue, VRDN
(BASF Corp. Project) 4.45% 5,000,000 (e) 5,000,000
West Side Calhoun County Navigation District,
Environmental Facilities Revenue
(BP Chemicals Inc. Project) 4.45% 3,500,000 (e) 3,500,000
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $50,400,000) 50,400,000
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $2,572,093,953) 98.4% 2,557,326,553
CASH AND RECEIVABLES (NET) 1.6% 42,316,967
NET ASSETS 100.0% 2,599,643,520
The Fund
</TABLE>
STATEMENT OF INVESTMENTS (CONTINUED)
Summary of Abbreviations
AMBAC American Municipal Bond
Assurance Corporation
COP Certificate of Participation
EDR Economic Development Revenue
EIR Environmental Improvement
Revenue
FGIC Financial Guaranty Insurance
Company
FHA Federal Housing Administration
FSA Financial Security Assurance
GO General Obligation
HR Hospital Revenue
IDR Industrial Development Revenue
LOC Letter of Credit
LR Lease Revenue
MBIA Municipal Bond
Investors Assurance
Insurance Corporation
PCR Pollution Control Revenue
SFMR Single Family Mortgage Revenue
SWDR Solid Waste Disposal Revenue
VRDN Variable Rate Demand Notes
<TABLE>
<CAPTION>
Summary of Combined Ratings (Unaudited)
Fitch or Moody's or Standard & Poor's Value (%)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AAA Aaa AAA 43.8
AA Aa AA 19.9
A A A 11.4
BBB Baa BBB 11.6
BB Ba BB 3.8
B B B .8
F1 MIG1/P1 SP1/A1 2.3
Not Rated (f) Not Rated (f) Not Rated (f) 6.4
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, 2000,
THESE SECURITIES AMOUNTED TO $20,144,335 OR .8% OF NET ASSETS.
(D) NON-INCOME PRODUCING SECURITY; INTEREST PAYMENT IN DEFAULT.
(E) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC
CHANGE.
(F) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S
HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE RATED
SECURITIES IN WHICH THE FUND MAY INVEST.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF ASSETS AND LIABILITIES
August 31, 2000
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 2,572,093,953 2,557,326,55
Cash 4,711,394
Interest receivable 39,199,726
Receivable for investment securities sold 559,395
Prepaid expenses 10,874
2,601,807,942
--------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 1,423,515
Payable for shares of Common Stock redeemed 463,534
Accrued expenses 277,373
2,164,422
--------------------------------------------------------------------------------
NET ASSETS ($) 2,599,643,520
--------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 2,660,946,14
Accumulated net realized gain (loss) on investments (46,535,220)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 (14,767,400)
--------------------------------------------------------------------------------
NET ASSETS ($) 2,599,643,520
--------------------------------------------------------------------------------
SHARES OUTSTANDING
(600 million shares of $.001 par value Common Stock authorized) 222,599,307
NET ASSET VALUE, offering and redemption price per share--Note 3(d) ($)
11.68
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF OPERATIONS
Year Ended August 31, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INTEREST INCOME 160,169,654
EXPENSES:
Management fee--Note 3(a) 15,806,110
Shareholder servicing costs--Note 3(b) 3,220,686
Professional fees 646,486
Custodian fees 120,550
Prospectus and shareholders' reports 76,674
Directors' fees and expenses--Note 3(c) 61,353
Registration fees 29,294
Loan commitment fees--Note 2 26,385
Miscellaneous 50,944
TOTAL EXPENSES 20,038,482
Less--reduction in management fee due to
undertaking--Note 3(a) (135,377)
NET EXPENSES 19,903,105
INVESTMENT INCOME--NET 140,266,549
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (45,475,090)
Net unrealized appreciation (depreciation) on investments 33,496,276
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (11,978,814)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 128,287,735
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF CHANGES IN NET ASSETS
Year Ended August 31,
----------------------------------
2000 1999
--------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 140,266,549 156,378,634
Net realized gain (loss) on investments (45,475,090) 13,558,522
Net unrealized appreciation (depreciation)
on investments 33,496,276 (242,364,572)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 128,287,735 (72,427,416)
--------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net (140,266,549) (156,378,634)
Net realized gain on investments (48,282) (57,678,882)
TOTAL DIVIDENDS (140,314,831) (214,057,516)
--------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS ($):
Net proceeds from shares sold 373,968,838 1,019,336,546
Dividends reinvested 87,765,857 139,183,667
Cost of shares redeemed (689,270,579) (1,367,812,152)
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL STOCK TRANSACTIONS (227,535,884) (209,291,939)
TOTAL INCREASE (DECREASE) IN NET ASSETS (239,562,980) (495,776,871)
--------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 2,839,206,500 3,334,983,371
END OF PERIOD 2,599,643,520 2,839,206,500
--------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold 33,177,785 81,694,255
Shares issued for dividends reinvested 7,734,165 11,145,811
Shares redeemed (60,914,533) (109,685,516)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (20,002,583) (16,845,450)
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
<TABLE>
<CAPTION>
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.
Year Ended August 31,
-------------------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 11.70 12.85 12.55 12.23 12.41
Investment Operations:
Investment income--net .60 .62 .64 .67 .69
Net realized and unrealized
gain (loss) on investments (.02) (.93) .37 .33 (.18)
Total from Investment Operations .58 (.31) 1.01 1.00 .51
Distributions:
Dividends from investment income--net (.60) (.62) (.64) (.67) (.69)
Dividends from net realized
gain on investments .00(a) (.22) (.07) (.01) --
Total Distributions (.60) (.84) (.71) (.68) (.69)
Net asset value, end of period 11.68 11.70 12.85 12.55 12.23
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 5.28 (2.60) 8.36 8.24 4.16
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets .76 .73 .73 .71 .71
Ratio of net investment income
to average net assets 5.32 4.98 5.04 5.39 5.57
Decrease reflected in above expense
ratios due to undertakings by
The Dreyfus Corporation .01 .00(b) .01 -- --
Portfolio Turnover Rate 40.51 55.77 63.07 66.89 64.48
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period
($ x 1,000) 2,599,644 2,839,207 3,334,983 3,454,776 3,572,286
(A) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE.
(B) AMOUNT REPRESENTS LESS THAN .01%.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
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., which is a wholly-owned subsidiary
of Mellon Financial Corporation. Effective March 22, 2000, Dreyfus Service
Corporation (" DSC" ), a wholly-owned subsidiary of the Manager, became the
distributor of the fund's shares, which are sold to the public without a sales
charge. Prior to March 22, 2000, Premier Mutual Fund Services, Inc. was the
distributor.
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 The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
traded or at the last sales price on the national securities market on each
business day. Investments not listed on an exchange or the 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 received net earnings credits of $23,293 during the period
ended August 31, 2000 based on available cash balances left on deposit. Interest
earned under this arrangement is included in interest income.
(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, 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.
The fund has an unused capital loss carryover of approximately $13,171,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to August 31, 2000. This amount
is calculated based on Federal income
tax regulations which may differ from financial reporting in accordance with
generally accepted accounting principles. If not applied, the carryover expires
in fiscal 2008.
NOTE 2--Bank Line of Credit:
The fund participates with other Dreyfus-managed funds in a $500 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 charged to the fund at rates based on prevailing
market rates in effect at the time of borrowings. During the period ended August
31, 2000, 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, 1999 through August 31, 2000, 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
fees, interest on borrowings, commitment fees and extraordinary expenses,
exceeded 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 $135,377 during the period ended August 31, 2000.
(b) Under the Shareholder Services Plan, the fund reimburses DSC 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 The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
and providing reports and other information, and services related to the
maintenance of shareholder accounts. During the period ended August 31, 2000,
the fund was charged $2,010,405 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, 2000, the fund was charged $946,352 pursuant to the transfer
agency agreement.
(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.
(d) A .10% redemption fee is charged and retained by the fund on shares redeemed
within thirty days of their issuance, including redemptions made through the use
of the fund's exchange privilege. Prior to June 1, 2000, this fee was chargeable
within fifteen days following the date of issuance of such shares. During the
period ended August 31, 2000, redemption fees charged and retained by the fund
amounted to $32,477.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities, during the period ended August 31, 2000, amounted to
$1,037,001,521 and $1,333,179,353, respectively.
At August 31, 2000, accumulated net unrealized depreciation on investments was
$14,767,400, consisting of $80,879,689 gross unrealized appreciation and
$95,647,089 gross unrealized depreciation.
At August 31, 2000, 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).
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, 2000, 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 auditing standards generally accepted
in the United States. 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, 2000 by correspondence with
the custodian. 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, 2000, 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 accounting principles generally accepted
in the United States.
New York, New York
October 9, 2000
The Fund
IMPORTANT TAX INFORMATION (Unaudited)
In accordance with Federal tax law, the fund hereby designates all the dividends
paid from investment income-net during its fiscal year ended August 31, 2000 as
" exempt-interest dividends" (not generally subject to regular Federal income
tax).
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
gains distributions (if any) paid for the 2000 calendar year on Form 1099-DIV
which will be mailed by January 31, 2001.
The Fund
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
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
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) 2000 Dreyfus Service Corporation 054AR008
