File Nos. 2-56878
811-2653
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [-]
Post-Effective Amendment No. 41 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 41 [X]
(Check appropriate box or boxes.)
Dreyfus Municipal Bond Fund, Inc.
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922- 6000
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
---- immediately upon filing pursuant to paragraph (b)
---- on (DATE) pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a)(1)
---- on (DATE) pursuant to paragraph (a)(1)
---- 75 days after filing pursuant to paragraph (a)(2)
---- on (DATE) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
----
<PAGE>
Dreyfus Municipal Bond Fund, Inc.
Investing for income exempt from federal income tax
PROSPECTUS December 30, 1998
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the accuracy or adequacy
of this prospectus. Any representation to the contrary is a criminal offense.
Contents
THE FUND
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2 Goal/Approach
3 Main Risks
4 Past Performance
5 Expenses
6 Management
7 Financial Highlights
YOUR INVESTMENT
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8 Account Policies
11 Distributions and Taxes
12 Services for Fund Investors
14 Instructions for Regular Accounts
FOR MORE INFORMATION
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Back Cover
What every investor should know about the fund
Information for managing your fund account
Where to learn more about this and other Dreyfus funds
The Fund
Dreyfus Municipal Bond Fund, Inc.
------------------------------
Ticker Symbol: DRTAX
GOAL/APPROACH
The fund seeks to maximize current income exempt from federal income tax, as is
consistent with the preservation of capital. To pursue this goal, the fund
normally invests substantially all of its net assets in municipal bonds the
interest from which is exempt from federal income tax.
The fund will invest at least 75% of its assets in municipal bonds rated A or
better or the unrated equivalent as determined by Dreyfus. For additional
yield, the fund may invest up to 25% of its net assets in bonds rated lower than
A, including junk bonds, or the unrated equivalent as determined by Dreyfus.
The portfolio manager buys and sells bonds based on credit quality, financial
outlook and yield potential. Bonds with deteriorating credit qualities are
potential sell candidates, while comparable bonds offering higher yields are
potential buy candidates.
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT (SEE BACK COVER).
Concepts to understand
MUNICIPAL BONDS: debt securities that provide income free from federal income
taxes. Municipal bonds are typically divided into two types:
* GENERAL OBLIGATION BONDS, which are secured by the full faith and credit of
the issuer and its taxing power
* REVENUE BONDS, which are payable from the revenues derived from a specific
revenue source, such as charges for water and sewer service or highway tolls
MAIN RISKS
Prices of bonds tend to move inversely with changes in interest rates. While a
rise in rates may allow the fund to invest for higher yields, the most immediate
effect is usually a drop in bond prices, and therefore in the fund's share price
as well. As a result, the value of your investment in the fund could go up and
down, which means that you could lose money.
Other risk factors could have an effect on the fund's performance:
* if an issuer fails to make timely interest or principal payments or there is a
decline in the credit quality of a bond, or perception of a decline, the
bond's value could fall, potentially lowering the fund's share price
* changes in economic, business or political conditions relating to a particular
municipal project or state in which the fund invests may have an impact on the
fund's share price
* lower-rated, higher-yielding municipal obligations are subject to greater
credit risk, including the risk of default, than higher-rated obligations;
lower-rated bonds tend to be more volatile and less liquid.
Although the fund's objective is to generate income exempt from federal income
tax, interest from some of its holdings may be subject to the alternative
mimimum tax.
Other potential risks
The fund may invest in certain derivatives. Derivatives range from the
conventional, such as futures and options, to the more exotic, such as inverse
floaters. Derivatives can be illiquid and highly sensitive to changes in their
underlying security, interest rate or index, and as a result can be highly
volatile. A small investment in certain derivatives could have a potentially
large impact on the fund's performance. The fund may use derivatives to:
* increase yield
* adjust the fund's duration
* provide daily liquidity
* hedge against a decline in principal value
* invest with greater efficiency and lower cost than is possible through direct
investment
PAST PERFORMANCE
The two tables below show the fund's annual returns and its long-term
performance. The first table shows you how the fund's performance has varied
from year to year. The second compares the fund's performance over time to that
of the Lehman Brothers Municipal Bond Index, an unmanaged total-return
performance benchmark. Both tables assume reinvestment of dividends and
distributions. As with all mutual funds, the past is not a prediction of the
future.
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Year-by-year total return AS OF 12/31 EACH YEAR (%)
[Exhibit A]
BEST QUARTER: Q1 '95 +6.70%
WORST QUARTER: Q1 '94 -5.93%
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Average annual total return AS OF 12/31/97
1 Year 5 Years 10 Years
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FUND 7.94% 6.33% 7.91%
LEHMAN BROTHERS
MUNICIPAL BOND INDEX 9.19% 7.36% 8.58%
THE FUND'S YEAR-TO-DATE TOTAL RETURN AS OF 9/30/98 WAS 5.66%.
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
EXPENSES
As an investor, you pay certain fees and expenses in connection with the fund,
which are described in the table below. Shareholder transaction fees are paid
from your account. Annual fund operating expenses are paid out of fund assets,
so their effect is included in the share price. The fund has no sales charge
(load) or 12b-1 distribution fees.
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Fee table
SHAREHOLDER TRANSACTION FEES
% OF TRANSACTION AMOUNT
Maximum redemption fee 0.10%
CHARGED ONLY WHEN SELLING SHARES YOU
HAVE OWNED FOR LESS THAN 15 DAYS
ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.60%
Shareholder services fee 0.07%
Other expenses 0.08%
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TOTAL 0.75%
<PAGE>
Expense example
1 Year 3 Years 5 Years 10 Years
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$77 $240 $417 $930
This example shows what you could pay in expenses over time.
It uses the same hypothetical conditions other funds use in
their prospectuses: $10,000 initial investment, 5% total
return each year and no changes in expenses. The figures
shown would be the same whether you sold your shares at the
end of a period or kept them. Because actual return and
expenses will be different, the example is for comparison
only. Concepts to understand
MANAGEMENT FEE: the fee paid to the investment adviser for managing the fund's
portfolio and assisting in all aspects of the fund's operations.
For the fiscal year ended August 31, 1998, a portion of the fee was reduced and
the effective fee paid by the fund was 0.58%, reducing total expenses from 0.75%
to 0.73% (the last year of litigation settlement).
SHAREHOLDER SERVICES FEE: a fee of up to 0.25% used to reimburse Dreyfus Service
Corporation for shareholder account service and maintenance.
OTHER EXPENSES: fees paid by the fund for miscellaneous items such as
shareholder service, transfer agency, custody, professional and registration
fees.
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages one of the nation's
leading mutual fund complexes, with more than $115 billion in more than 160
mutual fund portfolios. Dreyfus is the mutual fund business of Mellon Bank
Corporation, a broad-based financial services company with a bank at its core.
With more than $334 billion of assets under management and $1.64 trillion of
assets under administration and custody, Mellon provides a full range of
banking, investment and trust products and services to individuals, businesses
and institutions. Its mutual fund companies place Mellon as the leading bank
manager of mutual funds. Mellon is headquartered in Pittsburgh, Pennsylvania.
The Dreyfus asset management philosophy is based on the belief that discipline
and consistency are important to investment success. For each fund, the firm
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide each fund
with a distinct, stable identity, and offers the potential for measuring
performance and volatility in consistent ways.
Richard Moynihan has managed the fund since its inception in 1976. He has been a
portfolio manager at Dreyfus since November 1973 and today oversees all
municipal bond fund investing at Dreyfus.
Concepts to understand
YEAR 2000 ISSUES: the fund could be adversely affected if the computer systems
used by Dreyfus and the fund's other service providers do not properly process
and calculate date-related information from and after January 1, 2000.
Dreyfus is working to avoid year 2000-related problems in its systems and to
obtain assurances from other service providers that they are taking similar
steps. In addition, issuers of securities in which the fund invests may be
adversely affected by year 2000-related problems. This could have an impact on
the value of the fund's investments and its share price.
<PAGE>
FINANCIAL HIGHLIGHTS
This table describes the fund's performance for the fiscal periods indicated.
"Total return" shows how much your investment in the fund would have increased
(or decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been independently audited by Ernst & Young
LLP, whose report, along with the fund's financial statements, is included in
the annual report.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1998 1997 1996 1995 1994
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PER-SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 12.55 12.23 12.41 12.39 13.68
Investment operations:
Investment income -- net .64 .67 .69 .72 .75
Net realized and unrealized
gain (loss) on investments .37 .33 (.18) .09 (.96)
Total from investment operations 1.01 1.00 .51 .81 (.21)
Distributions:
Dividends from
investment income -- net (.64) (.67) (.69) (.72) (.75)
Dividends from net realized
gain on investments (.07) (.01) -- (.07) (.33)
Total distributions (.71) (.68) (.69) (.79) (1.08)
Net asset value, end of period 12.85 12.55 12.23 12.41 12.39
Total return (%) 8.36 8.24 4.16 6.93 (1.63)
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RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average
net assets (%) .73 .71 .71 .70 .68
Ratio of net investment income
to average net assets (%) 5.04 5.39 5.57 5.94 5.80
Decrease reflected in above
expense ratios due to actions
by Dreyfus (%) .01 -- -- -- --
Portfolio turnover rate (%) 63.07 66.89 64.48 51.55 36.25
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Net assets, end of
period ($ x 1,000) 3,334,983 3,454,776 3,572,286 3,936,734 4,008,477
</TABLE>
Your Investment
ACCOUNT POLICIES
Buying shares
YOU PAY NO SALES CHARGES to invest in this fund. Your price for fund shares is
the fund's net asset value per share (NAV), which is generally calculated as of
the close of trading on the New York Stock Exchange (usually 4:00 p.m. Eastern
time) every day the exchange is open.
Your order will be priced at the next NAV calculated after your order is
accepted by the fund's transfer agent or other entity authorized to accept
orders on behalf of the fund. Because the fund seeks tax exempt income, it is
not recommended for purchase in IRAs or other qualified retirement plans.
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Minimum investments
Initial Additional
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REGULAR ACCOUNTS $2,500 $100
$500 FOR
TELETRANSFER
INVESTMENTS
DREYFUS AUTOMATIC $100 $100
INVESTMENT PLANS
All investments must be in U.S. dollars. Third-party
checks cannot be accepted. You may be charged a fee for
any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
Concepts to understand
NET ASSET VALUE (NAV): a mutual fund's share price on a given day. A fund's NAV
is calculated by dividing the value of its net assets by the number of existing
shares.
When calculating its NAV, the fund's investments are priced at fair value by an
independent pricing service approved by the fund's board. The pricing service's
procedures are reviewed under the general supervision of the board.
Selling shares
YOU MAY SELL SHARES AT ANY TIME. Your shares will be sold at the next NAV
calculated after your order is accepted by the fund's transfer agent or other
entity authorized to accept orders on behalf of the fund. Any certificates
representing fund shares being sold must be returned with your redemption
request. Your order will be processed promptly and you will generally receive
the proceeds within a week.
BEFORE SELLING RECENTLY PURCHASED SHARES, please note that:
* if the fund has not yet collected payment for the shares you are selling,
it may delay sending the proceeds until it has collected payment, which may
take up to eight business days
* if you are selling or exchanging shares you have owned for less than 15 days,
the fund may deduct a 0.10% redemption fee (not charged on shares sold
through the Automatic Withdrawal Plan or Dreyfus Auto-Exchange dividend
Privilege, or on shares acquired through dividend reinvestment)
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Limitations on selling shares by phone
Proceeds
sent by Minimum Maximum
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CHECK NO MINIMUM $150,000 PER DAY
WIRE $1,000 $250,000 FOR JOINT
ACCOUNTS EVERY 30 DAYS
TELETRANSFER $500 $250,000 FOR JOINT
ACCOUNTS EVERY 30 DAYS
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $1,000 or more on accounts whose address has been changed
within the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
<PAGE>
ACCOUNT POLICIES (CONTINUED)
General policies
IF YOUR ACCOUNT HAS A BALANCE OF FEWER THAN 50 SHARES, the fund may ask you to
increase your balance. If it is still below 50 shares after 45 days, the fund
may close your account and send you the proceeds.
UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
THE FUND RESERVES THE RIGHT TO:
* refuse any purchase or exchange request that could adversely affect the fund
or its operations, including those from any individual or group who, in the
fund's view, is likely to engage in excessive trading (usually defined as
more than four exchanges out of the fund within a calendar year)
* refuse any purchase or exchange request in excess of 1% of the fund's total
assets
* change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions
* change its minimum investment amounts
* delay sending out redemption proceeds for up to seven days (generally applies
only in cases of very large redemptions, excessive trading or during unusual
market conditions)
The fund also reserves the right to make a "redemption in kind" -- payment in
portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect fund operations (for example, if it represents more than
1% of the fund's assets).
Third-party investments
If you invest through a third party (rather than directly with Dreyfus), the
policies and fees may be different than those described here. Banks, brokers,
financial advisers, and financial supermarkets may charge transaction fees and
may set different minimum investments or limitations on buying or selling
shares. Consult a representative of your financial representative if in
doubt.
DISTRIBUTIONS AND TAXES
THE FUND USUALLY PAYS ITS SHAREHOLDERS dividends from its net investment income
once a month, and distributes any net capital gains that it has realized once a
year. Your distributions will be reinvested in the fund unless you instruct the
fund otherwise. There are no fees or sales charges on reinvestments.
THE FUND ANTICIPATES THAT VIRTUALLY ALL OF ITS INCOME DIVIDENDS will be exempt
from federal income tax. You will, however, have to pay state or local taxes.
However, any dividends and capital gains from taxable investments are taxable as
ordinary income, whether or not you reinvested them. The tax status of any
distribution is the same regardless of how long you have been in the fund and
whether you reinvest your distributions or take them in cash.
-----------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
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INCOME GENERALLY GENERALLY
DIVIDENDS TAX EXEMPT TAX EXEMPT
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund.
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Except in tax-advantaged accounts, any sale or exchange of fund shares,
including through the checkwriting privilege, may generate a tax liability.
The table at right also can provide a guide for your potential tax liability
when selling or exchanging fund shares. "Short-term capital gains" applies to
fund shares sold up to 12 months after buying them. "Long-term capital gains"
applies to shares sold after 12 months.
SERVICES FOR FUND INVESTORS
Automatic services
BUYING OR SELLING SHARES AUTOMATICALLY is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services with your application or by
calling 1-800-645-6561.
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For investing
DREYFUS AUTOMATIC For making automatic investments
ASSET BUILDER((reg.tm)) from a designated bank account.
DREYFUS PAYROLL For making automatic investments
SAVINGS PLAN through a payroll deduction.
DREYFUS GOVERNMENT For making automatic investments
DIRECT DEPOSIT from your federal employment,
PRIVILEGE Social Security or other regular
federal government check.
DREYFUS DIVIDEND For automatically reinvesting the
SWEEP dividends and distributions from
one Dreyfus fund into another.
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For exchanging shares
DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into another.
- --------------------------------------------------------
For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds.
Dreyfus Financial Centers
Through a nationwide network of Dreyfus Financial Centers, Dreyfus offers a full
array of investment services and products. This includes information on mutual
funds, brokerage services, tax-advantaged products and retirement planning.
Our experienced financial consultants can help you make informed choices and
provide you with personalized attention in handling account transactions. The
Financial Centers also offer informative seminars and events. To find the
Financial Center nearest you, call 1-800-499-3327.
Checkwriting privilege
YOU MAY WRITE REDEMPTION CHECKS against your account in amounts of $500 or more.
These checks are free; however, a fee may be charged if you request a stop
payment or if the transfer agent cannot honor a redemption check due to
insufficient funds or another valid reason. Please do not postdate your checks
or use them to close your account.
Exchange privilege
YOU CAN EXCHANGE $500 OR MORE from one Dreyfus fund into another. You can
request your exchange in writing or by phone. Be sure to read the current
prospectus for any fund into which you are exchanging. Any new account
established through an exchange will have the same privileges as your original
account (as long as they are available). There is currently no fee for
exchanges, although you may be charged a sales load when exchanging into any
fund that has one.
Dreyfus TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the Dreyfus TeleTransfer privilege. You can set up TeleTransfer
on your account by providing bank account information and following the
instructions on your application.
The Dreyfus Touch((reg.tm))
FOR 24-HOUR AUTOMATED ACCOUNT ACCESS, use Dreyfus Touch. With a touch-tone
phone, you can easily manage your Dreyfus accounts, obtain information on other
Dreyfus mutual funds and get current stock market quotes.
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
The Dreyfus Family of Funds
P.O. Box 9387, Providence, RI 02940-9387
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to: The Dreyfus Family of Funds P.O. Box 105,
Newark, NJ 07101-0105
By Telephone
WIRE Have your bank send your investment to The Bank of New York, with these
instructions:
* DDA# 8900051825
* the fund name
* your Social Security or tax ID number
* name(s) of investor(s)
Call us to obtain an account number. Return your application.
WIRE Have your bank send your investment to The Bank of New York, with these
instructions:
* DDA# 8900051825
* the fund name
* your account number
* name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but insert "1111" before your account number and
add ABA# 021000018
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate on your application which automatic
service(s) you want. Return your application with your investment.
WITHOUT ANY INITIAL INVESTMENT Check the Dreyfus Step Program option on your
application. Return your application, then complete the additional materials
when they are sent to you.
ALL SERVICES Call us to request a form to add any automatic investing service
(see "Services for Fund Investors"). Complete and return the forms along with
any other required materials.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
TO SELL SHARES
Write a redemption check or letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see "Account
Policies -- Selling Shares").
Mail your request to: The Dreyfus Family of Funds P.O. Box 9671, Providence, RI
02940-9671
WIRE Be sure the fund has your bank account information on file. Call us to
request your transaction. Proceeds will be wired to your bank.
TELETRANSFER Be sure the fund has your bank account information on file. Call us
to request your transaction. Proceeds will be sent to your bank by electronic
check.
CHECK Call us to request your transaction. A check will be sent to the address
of record.
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request a form to add the plan.
Complete the form, specifying the amount and frequency of withdrawals you would
like.
Be sure to maintain an account balance of $5,000 or more.
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS FAMILY OF FUNDS
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
NOTES
<PAGE>
For More Information
Dreyfus Municipal Bond Fund, Inc.
-----------------------------
SEC file number: 811-2653
More information on this fund is available free upon request, including the
following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio holdings and contains
a letter from the fund's manager discussing recent market conditions,
economic trends and fund strategies that significantly affected the
fund's performance during the last fiscal year.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A current SAI is
on file with the Securities and Exchange Commission (SEC) and is
incorporated by reference (is legally considered part of this
prospectus).
To obtain information:
BY TELEPHONE Call 1-800-645-6561
BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from:
SEC
http://www.sec.gov
DREYFUS
http://www.dreyfus.com
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 1998, Dreyfus Service Corporation
<PAGE>
DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 30, 1998
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus Municipal Bond Fund, Inc. (the "Fund"), dated December 30, 1998, as it
may be revised from time to time. To obtain a copy of the Fund's Prospectus,
please write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York
11556-0144, or call one of the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452
The Fund's most recent Annual Report and Semi-Annual Report to
Shareholders are separate documents supplied with this Statement of Additional
Information, and the financial statements, accompanying notes and report of
independent auditors appearing in the Annual Report are incorporated by
reference into this Statement of Additional Information.
TABLE OF CONTENTS
PAGE
Description of the Fund.......................................... B- 2
Management of the Fund........................................... B-16
Management Arrangements.......................................... B-20
How to Buy Shares................................................ B-23
Shareholder Services Plan........................................ B-25
How to Redeem Shares............................................. B-26
Shareholder Services............................................. B-28
Determination of Net Asset Value................................. B-32
Dividends, Distributions and Taxes............................... B-32
Portfolio Transactions........................................... B-35
Performance Information.......................................... B-35
Information About the Fund....................................... B-37
Counsel and Independent Auditors................................. B-38
Appendix......................................................... B-39
<PAGE>
DESCRIPTION OF THE FUND
The Fund is a Maryland corporation formed on July 12, 1976. The Fund
is an open-end management investment company, known as a municipal bond fund.
The Fund is a diversified fund, which means that, with respect to 75% of its
total assets, the Fund will not invest more than 5% of its assets in the
securities of any single issuer.
The Dreyfus Corporation (the "Manager") serves as the Fund's
investment adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
CERTAIN PORTFOLIO SECURITIES
The following information supplements and should be read in
conjunction with the Fund's Prospectus.
MUNICIPAL OBLIGATIONS. The Fund will invest at least 80% of the value
of its net assets (except when maintaining a temporary defensive position) in
Municipal Obligations. Municipal Obligations are debt obligations issued by
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities, or
multistate agencies of authorities, the interest from which, in the opinion of
bond counsel to the issuer, is exempt from Federal income tax. Municipal
Obligations generally include debt obligations issued to obtain funds for
various public purposes as well as certain industrial development bonds issued
by or on behalf of public authorities. Municipal Obligations are classified as
general obligation bonds, revenue bonds and notes. General obligation bonds are
secured by the issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest. Revenue bonds are payable from the revenue
derived from a particular facility or class of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source, but not
from the general taxing power. Tax exempt industrial development bonds, in most
cases, are revenue bonds that do not carry the pledge of the credit of the
issuing municipality, but generally are guaranteed by the corporate entity on
whose behalf they are issued. Notes are short-term instruments which are
obligations of the issuing municipalities or agencies and are sold in
anticipation of a bond sale, collection of taxes or receipt of other revenues.
Municipal Obligations include municipal lease/purchase agreements which are
similar to installment purchase contracts for property or equipment issued by
municipalities. Municipal Obligations bear fixed, floating or variable rates of
interest, which are determined in some instances by formulas under which the
Municipal Obligation's interest rate will change directly or inversely to
changes in interest rates or an index, or multiples thereof, in many cases
subject to a maximum and minimum. Certain Municipal Obligations are subject to
redemption at a date earlier than their stated maturity pursuant to call
options, which may be separated from the related Municipal Obligation and
purchased and sold separately.
For the purpose of diversification under the Investment Company Act of
1940, as amended (the "1940 Act"), the identification of the issuer of Municipal
Obligations depends on the terms and conditions of the security. When the assets
and revenues of an agency, authority, instrumentality or other political
subdivision are separate from those of the government creating the subdivision
and the security is backed only by the assets and revenues of the subdivision,
such subdivision would be deemed to be the sole issuer. Similarly, in the case
of an industrial development bond, if that bond is backed only by the assets and
revenues of the non-governmental user, then such non-governmental user would be
deemed to be the sole issuer. If, however, in either case, the creating
government or some other entity guarantees a security, such a guaranty would be
considered a separate security and will be treated as an issue of such
government or other entity.
The yields on Municipal Obligations are dependent on a variety of
factors, including general economic and monetary conditions, money market
factors, conditions in the Municipal Obligations market, size of a particular
offering, maturity of the obligation and rating of the issue. The imposition of
the Fund's management fee, as well as other operating expenses, will have the
effect of reducing the yield to investors.
CERTAIN TAX EXEMPT OBLIGATIONS. The Fund may purchase floating and variable rate
demand notes and bonds, which are tax exempt obligations ordinarily having
stated maturities in excess of one year, but which permit the holder to demand
payment of principal at any time or at specified intervals. Variable rate demand
notes include master demand notes which are obligations that permit the Fund to
invest fluctuating amounts, at varying rates of interest, pursuant to direct
arrangements between the Fund, as lender, and the borrower. These obligations
permit daily changes in the amount borrowed. Because these obligations are
direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there generally
is no established secondary market for these obligations, although they are
redeemable at face value, plus accrued interest. Accordingly, where these
obligations are not secured by letters of credit or other credit support
arrangements, the Fund's right to redeem is dependent on the ability of the
borrower to pay principal and interest on demand. Each obligation purchased by
the Fund will meet the quality criteria established for the purchase of
Municipal Obligations.
TAX EXEMPT PARTICIPATION INTERESTS. The Fund may purchase from financial
institutions participation interests in Municipal Obligations (such as
industrial development bonds and municipal lease/purchase agreements). A
participation interest gives the Fund an undivided interest in the Municipal
Obligation in the proportion that the Fund's participation interest bears to the
total principal amount of the Municipal Obligation. These instruments may have
fixed, floating or variable rates of interest. If the participation interest is
unrated, it will be backed by an irrevocable letter of credit or guarantee of a
bank that the Fund's Board has determined meets prescribed quality standards for
banks, or the payment obligation otherwise will be collateralized by U.S.
Government securities. For certain participation interests, the Fund will have
the right to demand payment, on not more than seven days' notice, for all or any
part of the Fund's participation interest in the Municipal Obligation, plus
accrued interest. As to these instruments, the Fund intends to exercise its
right to demand payment only upon a default under the terms of the Municipal
Obligation, as needed to provide liquidity to meet redemptions, or to maintain
or improve the quality of its investment portfolio.
Municipal lease obligations or installment purchase contract
obligations (collectively, "lease obligations") have special risks not
ordinarily associated with Municipal Obligations. Although lease obligations do
not constitute general obligations of the municipality for which the
municipality's taxing power is pledged, a lease obligation ordinarily is backed
by the municipality's covenant to budget for, appropriate and make the payments
due under the lease obligation. However, certain lease obligations contain
"non-appropriation" clauses which provide that the municipality has no
obligation to make lease or installment purchase payments in future years unless
money is appropriated for such purpose on a yearly basis. Although "non-
appropriation" lease obligations are secured by the leased property, disposition
of the property in the event of foreclosure might prove difficult. The staff of
the Securities and Exchange Commission currently considers certain lease
obligations to be illiquid. Determination as to the liquidity of such securities
is made in accordance with guidelines established by the Fund's Board. Pursuant
to such guidelines, the Board has directed the Manager to monitor carefully the
Fund's investment in such securities with particular regard to (1) the frequency
of trades and quotes for the lease obligation; (2) the number of dealers willing
to purchase or sell the lease obligation and the number of potential buyers; (3)
the willingness of dealers to undertake to make a market in the lease
obligation; (4) the nature of the marketplace trades including the time needed
to dispose of the lease obligation, the method of soliciting offers and the
mechanics of transfer; and (5) such other factors concerning the trading market
for the lease obligation as the Manager may deem relevant. In addition, in
evaluating the liquidity and credit quality of a lease obligation that is
unrated, the Fund's Board has directed the Manager to consider (a) whether the
lease can be cancelled; (b) what assurance there is that the assets represented
by the lease can be sold; (c) the strength of the lessee's general credit (e.g.,
its debt, administrative, economic, and financial characteristics); (d) the
likelihood that the municipality will discontinue appropriating funding for the
leased property because the property is no longer deemed essential to the
operations of the municipality (e.g., the potential for an "event of
nonappropriation"); (e) the legal recourse in the event of failure to
appropriate; and (f) such other factors concerning credit quality as the Manager
may deem relevant.
TENDER OPTION BONDS. The Fund may purchase tender option bonds. A tender option
bond is a Municipal Obligation (generally held pursuant to a custodial
arrangement) having a relatively long maturity and bearing interest at a fixed
rate substantially higher than prevailing short-term tax exempt rates, that has
been coupled with the agreement of a third party, such as a bank, broker-dealer
or other financial institution, pursuant to which such institution grants the
security holders the option, at periodic intervals, to tender their securities
to the institution and receive the face value thereof. As consideration for
providing the option, the financial institution receives periodic fees equal to
the difference between the Municipal Obligation's fixed coupon rate and the
rate, as determined by a remarketing or similar agent at or near the
commencement of such period, that would cause the securities, coupled with the
tender option, to trade at par on the date of such determination. Thus, after
payment of this fee, the security holder effectively holds a demand obligation
that bears interest at the prevailing short-term tax exempt rate. The Manager,
on behalf of the Fund, will consider on an ongoing basis the creditworthiness of
the issuer of the underlying Municipal Obligation, of any custodian and of the
third party provider of the tender option. In certain instances and for certain
tender option bonds, the option may be terminable in the event of a default in
payment of principal or interest on the underlying Municipal Obligation and for
other reasons.
The Fund will purchase tender option bonds only when it is satisfied
that the custodial and tender option arrangements, including the fee payment
arrangements, will not adversely affect the tax exempt status of the underlying
Municipal Obligations and that payment of any tender fees will not have the
effect of creating taxable income for the Fund. Based on the tender option bond
agreement, the Fund expects to be able to value the tender option bond at par;
however, the value of the instrument will be monitored to assure that it is
valued at fair value.
CUSTODIAL RECEIPTS. The Fund may purchase custodial receipts representing the
right to receive certain future principal and interest payments on Municipal
Obligations which underlie the custodial receipt. A number of different
arrangements are possible. In a typical custodial receipt arrangement, an issuer
or a third party owner of Municipal Obligations deposits such obligations with a
custodian in exchange for two classes of custodial receipts. The two classes
have different characteristics, but, in each case, payments on the two classes
are based on payment received on the underlying Municipal Obligations. One class
has the characteristics of a typical auction rate security, where at specified
intervals its interest rate is adjusted, and ownership changes, based on an
auction mechanism. This class's interest rate generally is expected to be below
the coupon rate of the underlying Municipal Obligations and generally is at a
level comparable to that of a Municipal Obligation of similar quality and having
a maturity equal to the period between interest rate adjustments. The second
class bears interest at a rate that exceeds the interest rate typically borne by
a security of comparable quality and maturity; this rate also is adjusted, but
in this case inversely to changes in the rate of interest of the first class. In
no event will the aggregate interest paid with respect to the two classes exceed
the interest paid by the underlying Municipal Obligations. The value of the
second class and similar securities should be expected to fluctuate more than
the value of a Municipal Obligation of comparable quality and maturity and their
purchase by the Fund should increase the volatility of its net asset value and,
thus, its price per share. These custodial receipts are sold in private
placements. The Fund also may purchase directly from issuers, and not in a
private placement, Municipal Obligations having characteristics similar to
custodial receipts. These securities may be issued as part of a multi-class
offering and the interest rate on certain classes may be subject to a cap or
floor.
STAND-BY COMMITMENTS. The Fund may acquire "stand-by commitments" with respect
to Municipal Obligations held in its portfolio. Under a stand-by commitment, the
Fund obligates a broker, dealer or bank to repurchase, at the Fund's option,
specified securities at a specified price and, in this respect, stand-by
commitments are comparable to put options. The exercise of a stand-by
commitment, therefore, is subject to the ability of the seller to make payment
on demand. The Fund will acquire stand-by commitments solely to facilitate its
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The Fund may pay for stand-by commitments if such action is
deemed necessary, thus increasing to a degree the cost of the underlying
Municipal Obligation and similarly decreasing such security's yield to
investors. Gains realized in connection with stand-by commitments will be
taxable. The Fund also may acquire call options on specific Municipal
Obligations. The Fund generally would purchase these call options to protect the
Fund from the issuer of the related Municipal Obligation redeeming, or other
holder of the call option from calling away, the Municipal Obligation before
maturity. The sale by the Fund of a call option that it owns on a specific
Municipal Obligation could result in the receipt of taxable income by the Fund.
RATINGS OF MUNICIPAL OBLIGATIONS. The Fund will invest at least 75% of the value
of its net assets in Municipal Obligations which, in the case of bonds, are
rated no lower than A by Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Ratings Group ("S&P") or Fitch IBCA, Inc. ("Fitch"). The Fund may invest
up to 25% of the value of its net assets in Municipal Obligations which, in the
case of bonds, are rated lower than A by Moody's, S&P and Fitch and as low as
the lowest rating assigned by Moody's, S&P or Fitch. The Fund also may invest in
securities which, while not rated, are determined by the Manager to be of
comparable quality to the rated securities in which the Fund may invest; for
purposes of the 75% requirement described in this paragraph, such unrated
securities will be considered to have the rating so determined.
The average distribution of investments (at value) in Municipal
Obligations (including notes) by ratings for the fiscal year ended August 31,
1998, computed on a monthly basis, was as follows:
Percentage of
FITCH or MOODY'S or S&P VALUE
AAA Aaa AAA 30.4%
AA Aa AA 24.0
A A A 20.1
BBB Baa BBB 17.1
BB Ba BB 1.2
B B B .7
F-1, F-1+ MIG 1, P-1 SP-1, A-1 1.9 (1)
Not Rated Not Rated Not Rated 4.6 (2)
--------
100.0%
Subsequent to its purchase by the Fund, an issue of rated Municipal
Obligations may cease to be rated or its rating may be reduced below the minimum
required for purchase by the Fund. Neither event will require the sale of such
Municipal Obligations by the Fund, but the Manager will consider such event in
determining whether the Fund should continue to hold the Municipal Obligations.
To the extent that the ratings given by Moody's, S&P or Fitch for Municipal
Obligations may change as a result of changes in such organizations or their
rating systems, the Fund will attempt to use comparable ratings as standards for
its investments in accordance with the investment policies contained in the
Prospectus and this Statement of Additional Information. The ratings of Moody's,
S&P and Fitch represent their opinions as to the quality of the Municipal
Obligations which they undertake to rate. It should be emphasized, however, that
ratings are relative and subjective and are not absolute standards of quality.
Although these ratings may be an initial criterion for selection of portfolio
investments, the Manager also will evaluate these securities and the
creditworthiness of the issuers of such securities.
(1) Includes tax exempt ntes rates in one of the two highest rating categories
by Moody's, S&P or Fitch. These securites, together with Municipal Obligations
rated A or better by Moody's, S&P or Fitch, are taken into account at the time
of a pruchase for purposes fo determining that the Fund's portfolio meets the
75% minimum quality standard discussed above.
(2) Included in the Not Rated category are securities comprising 4.6% of the
Fund's market value which, while not rated, have been determined by the Manager
to be of comparable quality to securities in the following rating categories:
Aaa/AAA (1.1%), A/A (.2%), Baa/BBB (1.4%), Ba/BB (.4%), B/B (.6%), Caa/CCC (.2%)
and C/C (.7%
<PAGE>
TAXABLE INVESTMENTS. From time to time, on a temporary basis other
than for temporary defensive purposes (but not to exceed 20% of the value of the
Fund's net assets) or for temporary defensive purposes, the Fund may invest in
taxable short-term investments ("Taxable Investments") consisting of: notes of
issuers having, at the time of purchase, a quality rating within the two highest
grades of Moody's, S&P or Fitch; obligations of the U.S. Government, its
agencies or instrumentalities; commercial paper rated not lower than P-1 by
Moody's, A-1 by S&P or F-1 by Fitch; certificates of deposit of U.S. domestic
banks, including foreign branches of domestic banks, with assets of one billion
dollars or more; time deposits; bankers' acceptances and other short-term bank
obligations; and repurchase agreements in respect of any of the foregoing.
Dividends paid by the Fund that are attributable to income earned by the Fund
from Taxable Investments will be taxable to investors. Except for temporary
defensive purposes, at no time will more than 20% of the value of the Fund's net
assets be invested in Taxable Investments. Under normal market conditions, the
Fund anticipates that not more than 5% of the value of its total assets will be
invested in any one category of Taxable Investments.
ZERO COUPON SECURITIES. The Fund may invest in zero coupon securities
which are debt securities issued or sold at a discount from their face value
which do not entitle the holder to any periodic payment of interest prior to
maturity or a specified redemption date (or cash payment date) and pay-in-kind
bonds (bonds which pay interest through the issuance of additional bonds). The
amount of the discount varies depending on the time remaining until maturity or
cash payment date, prevailing interest rates, liquidity of the security and
perceived credit quality of the issuer. Zero coupon securities also may take the
form of debt securities that have been stripped of their unmatured interest
coupons, the coupons themselves and receipts or certificates representing
interest in such stripped debt obligations and coupons. The market prices of
zero coupon securities generally are more volatile than the market prices of
securities that pay interest periodically and are likely to respond to a greater
degree to changes in interest rates than non-zero coupon securities having
similar maturities and credit qualities. Federal income tax law requires the
holder of a zero coupon security or of certain pay-in-kind bonds to accrue
income with respect to these securities prior to the receipt of cash payments.
To maintain its qualification as a regulated investment company and avoid
liability for Federal income taxes, the Fund may be required to distribute such
income accrued with respect to these securities and may have to dispose of
portfolio securities under disadvantageous circumstances in order to generate
cash to satisfy these distribution requirements.
ILLIQUID SECURITIES. The Fund may invest up to 15% of the value of its
net assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment objective.
These securities may include securities that are not readily marketable, such as
certain securities that are subject to legal or contractual restrictions on
resale, and repurchase agreements providing for settlement in more than seven
days after notice. As to these securities, the Fund is subject to a risk that
should the Fund desire to sell them when a ready buyer is not available at a
price that the Fund deems representative of their value, the value of the Fund's
net assets could be adversely affected.
INVESTMENT TECHNIQUES
The following information supplements and should be read in
conjunction with the Fund's Prospectus. The Fund's use of certain of the
investment techniques described below may give rise to taxable income.
DERIVATIVES. The Fund may invest in, or enter into, derivatives, such
as options and futures, for a variety of reasons, including to hedge certain
market risks, to provide a substitute for purchasing or selling particular
securities or to increase potential income gain. Derivatives may provide a
cheaper, quicker or more specifically focused way for the Fund to invest than
"traditional" securities would.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular derivative and the
portfolio as a whole. Derivatives permit the Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level of
risk, or change the character of the risk, of its portfolio by making
investments in specific securities.
Derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in derivatives could
have a large potential impact on the Fund's performance.
If the Fund invests in derivatives at inopportune times or judges
market conditions incorrectly, such investments may lower the Fund's return or
result in a loss. The Fund also could experience losses if its derivatives were
poorly correlated with its other investments, or if the Fund were unable to
liquidate its position because of an illiquid secondary market. The market for
many derivatives is, or suddenly can become, illiquid. Changes in liquidity may
result in significant, rapid and unpredictable changes in the prices for
derivatives.
Although the Fund will not be a commodity pool, certain derivatives
subject the Fund to the rules of the Commodity Futures Trading Commission which
limit the extent to which the Fund can invest in such derivatives. The Fund may
invest in futures contracts and options with respect thereto for hedging
purposes without limit. However, the Fund may not invest in such contracts and
options for other purposes if the sum of the amount of initial margin deposits
and premiums paid for unexpired options with respect to such contracts, other
than for bona fide hedging purposes, exceeds 5% of the liquidation value of the
Fund's assets, after taking into account unrealized profits and unrealized
losses on such contracts and options; provided, however, that in the case of an
option that is in-the-money at the time of purchase, the in-the-money amount
may be excluded in calculating the 5% limitation.
Derivatives may be purchased on established exchanges or through
privately negotiated transactions referred to as over-the-counter derivatives.
Exchange-traded derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such derivatives. This guarantee usually
is supported by a daily payment system (i.e., variation margin requirements)
operated by the clearing agency in order to reduce overall credit risk. As a
result, unless the clearing agency defaults, there is relatively little
counterparty credit risk associated with derivatives purchased on an exchange.
By contrast, no clearing agency guarantees over-the-counter derivatives.
Therefore, each party to an over-the-counter derivative bears the risk that the
counterparty will default. Accordingly, the Manager will consider the
creditworthiness of counterparties to over-the-counter derivatives in the same
manner as it would review the credit quality of a security to be purchased by
the Fund. Over-the-counter derivatives are less liquid than exchange-traded
derivatives since the other party to the transaction may be the only investor
with sufficient understanding of the derivative to be interested in bidding for
it.
FUTURES TRANSACTIONS--IN GENERAL. The Fund may enter into futures contracts in
U.S. domestic markets, such as the Chicago Board of Trade. Engaging in these
transactions involves risk of loss to the Fund which could adversely affect the
value of the Fund's net assets. Although the Fund intends to purchase or sell
futures contracts only if there is an active market for such contracts, no
assurance can be given that a liquid market will exist for any particular
contract at any particular time. Many futures exchanges and boards of trade
limit the amount of fluctuation permitted in futures contract prices during a
single trading day. Once the daily limit has been reached in a particular
contract, no trades may be made that day at a price beyond that limit or trading
may be suspended for specified periods during the trading day. Futures contract
prices could move to the limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions and
potentially subjecting the Fund to substantial losses.
Successful use of futures by the Fund also is subject to the Manager's
ability to predict correctly movements in the direction of the relevant market
and, to the extent the transaction is entered into for hedging purposes, to
ascertain the appropriate correlation between the transaction being hedged and
the price movements of the futures contract. For example, if the Fund uses
futures to hedge against the possibility of a decline in the market value of
securities held in its portfolio and the prices of such securities instead
increase, the Fund will lose part or all of the benefit of the increased value
of securities which it has hedged because it will have offsetting losses in its
futures positions. Furthermore, if in such circumstances the Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. The Fund may have to sell such securities at a time when it may be
disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities
and Exchange Commission, the Fund may be required to set aside permissible
liquid assets in a segregated account to cover its obligations relating to its
transactions in derivatives. To maintain this required cover, the Fund may have
to sell portfolio securities at disadvantageous prices or times since it may not
be possible to liquidate a derivative position at a reasonable price. In
addition, the segregation of such assets will have the effect of limiting the
Fund's ability otherwise to invest those assets.
SPECIFIC FUTURES TRANSACTIONS. The Fund may purchase and sell interest rate
futures contracts. An interest rate future obligates the Fund to purchase or
sell an amount of a specific debt security at a future date at a specific price.
OPTIONS--IN GENERAL. The Fund may invest up to 5% of its assets, represented by
the premium paid, in the purchase of call and put options. The Fund may write
(i.e., sell) covered call and put option contracts to the extent of 20% of the
value of its net assets at the time such option contracts are written. A call
option gives the purchaser of the option the right to buy, and obligates the
writer to sell, the underlying security or securities at the exercise price at
any time during the option period, or at a specific date. Conversely, a put
option gives the purchaser of the option the right to sell, and obligates the
writer to buy, the underlying security or securities at the exercise price at
any time during the option period, or at a specific date.
A covered call option written by the Fund is a call option with
respect to which the Fund owns the underlying security or otherwise covers the
transaction by segregating cash or other securities. A put option written by the
Fund is covered when, among other things, the Fund sets aside in a segregated
account cash or liquid securities having a value equal to or greater than the
exercise price of the option to fulfill the obligation undertaken. The principal
reason for writing covered call and put options is to realize, through the
receipt of premiums, a greater return than would be realized on the underlying
securities alone. The Fund receives a premium from writing covered call or put
options which it retains whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any particular
option or at any particular time, and for some options no such secondary market
may exist. A liquid secondary market in an option may cease to exist for a
variety of reasons. In the past, for example, higher than anticipated trading
activity or order flow, or other unforeseen events, at times have rendered
certain of the clearing facilities inadequate and resulted in the institution of
special procedures, such as trading rotations, restrictions on certain types of
orders or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options.
Successful use by the Fund of options will be subject to the Manager's
ability to predict correctly movements in interest rates. To the extent the
Manager's predictions are incorrect, the Fund may incur losses.
FUTURE DEVELOPMENTS. The Fund may take advantage of opportunities in
the area of options and futures contracts and options on futures contracts and
any other derivatives which are not presently contemplated for use by the Fund
or which are not currently available but which may be developed, to the extent
such opportunities are both consistent with the Fund's investment objective and
legally permissible for the Fund. Before entering into such transactions or
making any such investment, the Fund will provide appropriate disclosure in its
Prospectus or Statement of Additional Information.
LENDING PORTFOLIO SECURITIES. The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to borrow
securities to complete certain transactions. The Fund continues to be entitled
to payments in amounts equal to the interest or other distributions payable on
the loaned securities which affords the Fund an opportunity to earn interest on
the amount of the loan and on the loaned securities' collateral. Loans of
portfolio securities may not exceed 33-1/3% of the value of the Fund's total
assets, and the Fund will receive collateral consisting of cash, U.S. Government
securities or irrevocable letters of credit which will be maintained at all
times in an amount equal to at least 100% of the current market value of the
loaned securities. Such loans are terminable by the Fund at any time upon
specified notice. The Fund might experience risk of loss if the institution with
which it has engaged in a portfolio loan transaction breaches its agreement with
the Fund. In connection with its securities lending transactions, the Fund may
return to the borrower or a third party which is unaffiliated with the Fund, and
which is acting as a "placing broker," a part of the interest earned from the
investment of collateral received from securities loaned.
BORROWING MONEY. The Fund is permitted to borrow to the extent
permitted under the 1940 Act, which permits an investment company to borrow in
an amount up to 33-1/3% of the value of its total assets. The Fund currently
intends to borrow money only for temporary or emergency (not leveraging)
purposes, in an amount up to 15% of the value of its total assets (including the
amount borrowed) valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) at the time the borrowing is made. While
borrowings exceed 5% of the Fund's total assets, the Fund will not make any
additional investments.
FORWARD COMMITMENTS. The Fund may purchase Municipal Obligations and
other securities on a forward commitment or when-issued basis, which means that
delivery and payment take place a number of days after the date of the
commitment to purchase. The payment obligation and the interest rate receivable
on a forward commitment or when-issued security are fixed when the Fund enters
into the commitment, but the Fund does not make payment until it receives
delivery from the counterparty. The Fund will commit to purchase such securities
only with the intention of actually acquiring the securities, but the Fund may
sell these securities before the settlement date if it is deemed advisable. The
Fund will set aside in a segregated account permissible liquid assets at least
equal at all times to the amount of the Fund's purchase commitments.
Municipal Obligations and other securities purchased on a forward
commitment or when-issued basis are subject to changes in value (generally
changing in the same way, i.e., appreciating when interest rates decline and
depreciating when interest rates rise) based upon the public's perception of the
creditworthiness of the issuer and changes, real or anticipated, in the level of
interest rates. Securities purchased on a forward commitment or when-issued
basis may expose the Fund to risks because they may experience such fluctuations
prior to their actual delivery. Purchasing securities on a forward commitment or
when-issued basis can involve the additional risk that the yield available in
the market when the delivery takes place actually may be higher than that
obtained in the transaction itself. Purchasing securities on a when-issued basis
when the Fund is fully or almost fully invested may result in greater potential
fluctuation in the value of the Fund's net assets and its net asset value per
share.
INVESTMENT CONSIDERATIONS AND RISKS
INVESTING IN MUNICIPAL OBLIGATIONS. The Fund may invest more than 25%
of the value of its total assets in Municipal Obligations which are related in
such a way that an economic, business or political development or change
affecting one such security also would affect the other securities; for example,
securities the interest upon which is paid from revenues of similar types of
projects, or securities whose issuers are located in the same state. As a
result, the Fund may be subject to greater risk as compared to a fund that does
not follow this practice.
Certain municipal lease/purchase obligations in which the Fund may
invest may contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease payments in future years unless
money is appropriated for such purpose on a yearly basis. Although
"non-appropriation" lease/purchase obligations are secured by the leased
property, disposition of the leased property in the event of foreclosure might
prove difficult. In evaluating the credit quality of a municipal lease/purchase
obligation that is unrated, the Manager will consider, on an ongoing basis, a
number of factors including the likelihood that the issuing municipality will
discontinue appropriating funding for the leased property.
Certain provisions in the Internal Revenue Code of 1986, as amended
(the "Code"), relating to the issuance of Municipal Obligations may reduce the
volume of Municipal Obligations qualifying for Federal tax exemption. One effect
of these provisions could be to increase the cost of the Municipal Obligations
available for purchase by the Fund and thus reduce available yield. Shareholders
should consult their tax advisers concerning the effect of these provisions on
an investment in the Fund. Proposals that may restrict or eliminate the income
tax exemption for interest on Municipal Obligations may be introduced in the
future. If any such proposal were enacted that would reduce the availability of
Municipal Obligations for investment by the Fund so as to adversely affect Fund
shareholders, the Fund would reevaluate its investment objective and policies
and submit possible changes in the Fund's structure to shareholders for their
consideration. If legislation were enacted that would treat a type of Municipal
Obligation as taxable, the Fund would treat such security as a permissible
Taxable Investment within the applicable limits set forth herein.
LOWER RATED BONDS. The Fund may invest up to 25% of the value of its
net assets in higher yielding (and, therefore, higher risk) debt securities,
such as those rated below investment grade by Moody's, S&P and Fitch (commonly
known as junk bonds). They may be subject to certain risks with respect to the
issuing entity and to greater market fluctuations than certain lower yielding,
higher rated Municipal Obligations. See "Appendix" for a general description of
Moody's, S&P and Fitch ratings of Municipal Obligations. Although ratings may be
useful in evaluating the safety of interest and principal payments, they do not
evaluate the market value risk of these bonds. The Fund will rely on the
Manager's judgment, analysis and experience in evaluating the creditworthiness
of an issuer.
You should be aware that the market values of many of these bonds tend
to be more sensitive to economic conditions than are higher rated securities and
will fluctuate over time. These bonds generally are considered by S&P, Moody's
and Fitch to be, on balance, predominantly speculative with respect to capacity
to pay interest and repay principal in accordance with the terms of the
obligation and generally will involve more credit risk than securities in the
higher rating categories.
Because there is no established retail secondary market for many of
these securities, the Fund anticipates that such securities could be sold only
to a limited number of dealers or institutional investors. To the extent a
secondary trading market for these bonds does exist, it generally is not as
liquid as the secondary market for higher rated securities. The lack of a liquid
secondary market may have an adverse impact on market price and yield and the
Fund's ability to dispose of particular issues when necessary to meet the Fund's
liquidity needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. The lack of a liquid
secondary market for certain securities also may make it more difficult for the
Fund to obtain accurate market quotations for purposes of valuing the Fund's
portfolio and calculating its net asset value. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of these securities. In such cases, judgment may play a
greater role in valuation because less reliable objective data may be available.
These bonds may be particularly susceptible to economic downturns. It
is likely that any economic recession could disrupt severely the market for such
securities and may have an adverse impact on the value of such securities. In
addition, it is likely that any such economic downturn could adversely affect
the ability of the issuers of such securities to repay principal and pay
interest thereon and increase the incidence of default for such securities.
The Fund may acquire these bonds during an initial offering. Such
securities may involve special risks because they are new issues. The Fund has
no arrangement with the Distributor or any other persons concerning the
acquisition of such securities, and the Manager will review carefully the credit
and other characteristics pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also
apply to lower rated zero coupon bonds and pay-in-kind bonds, in which the Fund
may invest up to 5% of its net assets. Zero coupon, pay-in-kind or delayed
interest bonds carry an additional risk in that, unlike bonds which pay interest
throughout the period to maturity, the Fund will realize no cash until the cash
payment date unless a portion of such securities are sold and, if the issuer
defaults, the Fund may obtain no return at all on its investment. See
"Dividends, Distributions and Taxes."
SIMULTANEOUS INVESTMENTS. Investment decisions for the Fund are made
independently from those of other investment companies advised by the Manager.
If, however, such other investment companies desire to invest in, or dispose of,
the same securities as the Fund, available investments or opportunities for
sales will be allocated equitably to each investment company. In some cases,
this procedure may adversely affect the size of the position obtained for or
disposed of by the Fund or the price paid or received by the Fund.
INVESTMENT RESTRICTIONS
The Fund's investment objective is a fundamental policy, which cannot
be changed without approval by the holders of a majority (as defined in the 1940
Act) of the Fund's outstanding voting shares. In addition, the Fund has adopted
investment restrictions numbered 1 through 8 as fundamental policies. Investment
restrictions numbered 9 through 14 are not fundamental policies and may be
changed by a vote of a majority of the Fund's Board members at any time. The
Fund may not:
1. Invest more than 5% of its assets in the obligations of any single
issuer, except that up to 25% of the value of the Fund's total assets may be
invested, and securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities may be purchased, without regard to any such
limitation.
2. Hold more than 10% of the voting securities of any single issuer.
This Investment Restriction applies only with respect to 75% of the Fund's total
assets.
3. Invest more than 25% of its total assets in the securities of
issuers in any single industry; provided that there shall be no limitation on
the purchase of Municipal Obligations and, for temporary defensive purposes,
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
4. Borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowing to no more than 33-1/3% of the value of the
Fund's total assets). For purposes of this investment restriction, the entry
into options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices shall not constitute
borrowing.
5. Purchase or sell real estate, commodities or commodity contracts,
or oil and gas interests, but this shall not prevent the Fund from investing in
Municipal Obligations secured by real estate or interests therein, or prevent
the Fund from purchasing and selling options, forward contracts, futures
contracts, including those relating to indices, and options on futures contracts
or indices.
6. Underwrite the securities of other issuers, except that the Fund
may bid separately or as part of a group for the purchase of Municipal
Obligations directly from an issuer for its own portfolio to take advantage of
the lower purchase price available, and except to the extent the Fund may be
deemed an underwriter under the Securities Act of 1933, as amended, by virtue of
disposing of portfolio securities.
7. Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements; however, the Fund may lend
its portfolio securities in an amount not to exceed 33-1/3% of the value of its
total assets. Any loans of portfolio securities will be made according to
guidelines established by the Securities and Exchange Commission and the Fund's
Board.
8. Issue any senior security (as such term is defined in Section 18(f)
of the 1940 Act), except to the extent that the activities permitted in
Investment Restrictions numbered 4, 5 and 12 may be deemed to give rise to a
senior security.
9. Sell securities short or purchase securities on margin, but the
Fund may make margin deposits in connection with transactions in options,
forward contracts, futures contracts, including those relating to indices, and
options on futures contracts or indices.
10. Purchase securities other than Municipal Obligations and Taxable
Investments and those arising out of transactions in futures and options or as
otherwise provided in the Fund's Prospectus.
11. Invest in securities of other investment companies, except to the
extent permitted under the 1940 Act.
12. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to the extent necessary to secure permitted borrowings and to the extent
related to the deposit of assets in escrow in connection with the purchase of
securities on a when-issued or delayed-delivery basis and collateral and
initial or variation margin arrangements with respect to options, forward
contracts, futures contracts, including those related to indices, and options on
futures contracts or indices.
13. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid (which
securities could include participation interests (including municipal
lease/purchase agreements) that are not subject to the demand feature described
in the Fund's Prospectus, and floating and variable rate demand obligations as
to which the Fund cannot exercise the demand feature described in the Fund's
Prospectus on less than seven days' notice and as to which there is no secondary
market), if, in the aggregate, more than 15% of its net assets would be so
invested.
14. Invest in companies for the purpose of exercising control.
For purposes of Investment Restriction No. 3, industrial development
bonds, where the payment of principal and interest is the ultimate
responsibility of companies within the same industry, are grouped together as an
"industry."
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from a change in values or assets will not
constitute a violation of such restriction.
MANAGEMENT OF THE FUND
The Fund's Board is responsible for the management and supervision of
the Fund. The Board approves all significant agreements between the Fund and
those companies that furnish services to the Fund. These companies are as
follows:
The Dreyfus Corporation.....................Investment Adviser
Premier Mutual Fund Services, Inc...........Distributor
Dreyfus Transfer, Inc.......................Transfer Agent
The Bank of New York........................Custodian
Board members and officers of the Fund, together with information as
to their principal business occupations during at least the last five years, are
shown below.
BOARD MEMBERS OF THE FUND
JOSEPH S. DiMARTINO, CHAIRMAN OF THE BOARD. Since January 1995, Chairman of
the Board of various funds in the Dreyfus Family of Funds. He also is
a director of The Noel Group, Inc., a venture capital company (for
which, from February 1995 until November 1997, he was Chairman of the
Board), The Muscular Dystrophy Association, HealthPlan Services
Corporation, a provider of marketing, administrative and risk
management services to health and other benefit programs, Carlyle
Industries, Inc. (formerly, Belding Heminway, Inc.), a button packager
and distributor, Career Blazers, Inc. (formerly, Staffing Resources,
Inc.), a temporary placement agency, and Century Business Services,
Inc., a provider of various outsourcing functions for small and medium
sized companies. For more than five years prior to January 1995, he
was President, a director and, until August 1994, Chief Operating
Officer of the Manager and Executive Vice President and a director of
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager
and, until August 24, 1994, the Fund's distributor. From August 1994
until December 31, 1994, he was a director of Mellon Bank Corporation.
He is 55 years old and his address is 200 Park Avenue, New York, New
York 10166.
DAVID W. BURKE, BOARD MEMBER. Chairman of the Broadcasting Board of
Governors, an independent board within the United States Information
Agency, since August 1995. From August 1994 to December 31, 1994, Mr.
Burke was a Consultant to the Manager, and from October 1990 to August
1994, he was Vice President and Chief Administrative Officer of the
Manager. From 1977 to 1990, Mr. Burke was involved in the management
of national television news, as Vice President and Executive Vice
President of ABC News, and subsequently as President of CBS News. He
is 61 years old and his address is 197 Eighth Street, Charleston,
Massachusetts 02109.
HODDING CARTER, III, BOARD MEMBER. President and Chief Executive Officer of
the John S. and James L. Knight Foundation. From 1985 to 1998 he was
President and Chairman of MainStreet TV. From 1995 to 1998, he was
Knight Professor in Journalism at the University of Maryland. From
1980 to 1991, he was "OpEd" Columnist for The Wall Street Journal,
Correspondent of "Capital Journal," a weekly public Broadcasting
System ("PBS") series on Congress. From 1981 to 1984, he was anchorman
and chief correspondent of PBS' "Inside Story," a regulary scheduled
half-hour critique of press performance. From 1977 to July 1, 1980,
Mr. Carter served as Assistant Secretary of State for Public Affairs
and as Department of State spokesman. He is 63 years old and his
address is c/o Knight Foundation, South Biscayne Boulevard, Suite
3800, Miami, FL 33131.
EHUD HOUMINER, BOARD MEMBER. Professor and Executive-in-Residence at the
Columbia Business School, Columbia University. Since January 1996,
Principal of Lear, Javits, and Associates, a management consultant
firm. He also is a Director of Avnet Inc. and Five Star Food Service,
Inc. He is 58 years old and his address is c/o Columbia Business
School, Columbia University, Uris Hall, Room 526, New York, New York
10027.
RICHARD C. LEONE, BOARD MEMBER. President of The Twentieth Century Fund, Inc.,
a tax exempt research foundation engaged in the study of economic,
foreign policy and domestic issues. From April 1990 to March 1994, he
was Chairman and, from April 1988 to March 1994, a Commissioner of The
Port Authority of New York and New Jersey. A member in 1985, and from
January 1986 to January 1989, Managing Director of Dillon, Read & Co.
Inc. Mr. Leone is also a director of Dynex, Inc. He is 58 years old
and his address is 41 East 70th Street, New York, New York 10021.
HANS C. MAUTNER, BOARD MEMBER. Vice Chairman and a Director of Simon
Property Group Inc., a real estate investment company. From 1977 to
1998, Chairman and Chief Executive Officer of Corporate Property
Investors, which merged into Simon Property Group Inc. in September
1998. Since January 1986, a Director of Julius Baer Investment
Management, Inc., a wholly-owned subsidiary of Julius Baer Securities,
Inc. He is 61 years old and his address is 305 East 47th Street, New
York, New York 10017.
ROBIN A. PRINGLE, BOARD MEMBER. President of The Boisi Family Foundation, a
private family foundation devoted to youths and higher education
located in New York City. Also, Assistant to the Chief Executive
Officer of The Beacon Group, LLC, a private equity firm and advisory
partnership. Since 1993, Vice President, and from March 1992 to
October 1993, Executive Director, of One to One Partnership, Inc., a
national non-profit organization that seeks to promote mentoring and
economic empowerment for at-risk youths. From June 1986 to February
1992, she was an investment banker with Goldman, Sachs & Co. She is 35
years old and her address is 2107 Lenore Park Circle, Atlanta, Georgia
30319.
JOHN E. ZUCCOTTI, BOARD MEMBER. Since November 1996, Chairman and Chief
Executive Officer of World Financial Properties, Inc. He is also a
Director of Starrett Housing Corporation, a construction development
and real estate properties corporation and Capstone Pharmacy Services,
Inc. From 1990 to November 1996, he was President and Chief Executive
Officer of Olympia & York Companies (U.S.A.) and a member of its Board
of Directors since November 1996. From 1986 to 1990, he was partner in
the law firm of Brown & Wood and from 1978 to 1986 a partner in the
law firm of Tufo & -------- ) Includes tax exempt notes rated in one
of the two highest rating categories by Moody's, S&P or Fitch. These
securities, together with Municipal Obligations rated A or better by
Moody's, S&P or Fitch, are taken into account at the time of a
purchase for purposes of determining that the Fund's portfolio meets
the 75% minimum quality standard discussed above. ) Included in the
Not Rated category are securities comprising 4.6% of the Fund's market
value which, while not rated, have been determined by the Manager to
be of comparable quality to securities in the following rating
categories: Aaa/AAA (1.1%), A/A (.2%), Baa/BBB (1.4%), Ba/BB (.4%),
B/B (.6%), Caa/CCC (.2%) and C/C (.7%). Zuccotti. He was First Deputy
Mayor of the City of New York from December 1975 to June 1977, and
Chairman of the City Planning Commission for the City of New York from
1973 to 1975. He is 61 years old and his address is One Liberty Plaza,
New York, New York 10006.
For so long as the Fund's plan described in the section "Shareholder
Services Plan" remains in effect, the Board members of the Fund who are not
"interested persons" of the Fund (as defined in the 1940 Act) will be selected
and nominated by the Board members who are not "interested persons" of the Fund.
The Fund typically pays its Board members an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the Board
receives an additional 25% of such compensation. Emeritus Board members are
entitled to receive an annual retainer and a per meeting fee of one-half the
amount paid to them as Board members. The aggregate amount of compensation paid
by the Fund to each Board member for the fiscal year ended August 31, 1998, and
by all other funds in the Dreyfus Family of Funds for which such person is a
Board member (the number of which is set forth in parenthesis next to each Board
member's total compensation) for the year ended December 31, 1997, were as
follows:
Total Compensation
Aggregate From Fund and
Name of Board Compensation Fund Complex
Member From Fund* Paid to Board Member
Joseph S. DiMartino $9,375 $ 597,128 (93)
David W. Burke $7,500 $ 239,000 (51)
Hodding Carter, III $6,000 $ 42,750 (7)
Ehud Houminer $7,500 $ 68,250 (11)
Richard C. Leone $7,000 $ 38,500 (7)
Hans C. Mautner $6,500 $ 41,750 (7)
Robin A. Pringle $7,000 $ 41,750 (7)
John E. Zuccotti $7,000 $ 36,000 (7)
- -----------------
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $981 for all Board members as a group.
OFFICERS OF THE FUND
MARIE E. CONNOLLY, PRESIDENT AND TREASURER. President, Chief Executive
Officer, Chief Compliance Officer and a director of the Distributor
and Funds Distributor, Inc., the ultimate parent of which is Boston
Institutional Group, Inc., and an officer of other investment
companies advised or administered by the Manager. She is 41 years old.
MARGARET W. CHAMBERS, VICE PRESIDENT AND SECRETARY. Senior Vice President and
General Counsel of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
August 1996 to March 1998, she was Vice President and Assistant
General Counsel for Loomis, Sayles & Company, L.P. From January 1986
to July 1996, she was an associate with the law firm of Ropes & Gray.
She is 38 years old.
MICHAEL S. PETRUCELLI, VICE PRESIDENT, ASSISTANT SECRETARY AND ASSISTANT
TREASURER. Senior Vice President of Funds Distributor, Inc., and an
officer of other investment companies advised or administered by the
Manager. From December 1989 through November 1996, he was employed by
GE Investment Services where he held various financial, business
development and compliance positions. He also served as Treasurer of
the GE Funds and as a Director of GE Investment Services. He is 36
years old.
STEPHANIE D. PIERCE, VICE PRESIDENT, ASSISTANT SECRETARY AND ASSISTANT TREASURER
Vice President and Client Development Manager of Funds Distributor,
Inc., and an officer of other investment companies advised or
administered by the Manager. From April 1997 to March 1998, she was
employed as a Relationship Manager with Citibank, N.A. From August
1995 to April 1997, she was an Assistant Vice President with Hudson
Valley Bank, and from September 1990 to August 1995, she was Second
Vice President with Chase Manhattan Bank. She is 30 years old.
MARY A. NELSON, VICE PRESIDENT AND ASSISTANT TREASURER. Vice President of
the Distributor and Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
September 1989 to July 1994, she was an Assistant Vice President and
Client Manager for The Boston Company, Inc. She is 34 years old.
GEORGE A. RIO, VICE PRESIDENT AND ASSISTANT TREASURER. Executive Vice
President and Client Service Director of Funds Distributor, Inc., and
an officer of other investment companies advised or administered by
the Manager. From June 1995 to March 1998, he was Senior Vice
President and Senior Key Account Manager for Putnam Mutual Funds. From
May 1994 to June 1995, he was Director of Business Development for
First Data Corporation. From September 1983 to May 1994, he was Senior
Vice President and Manager of Client Services and Director of Internal
Audit at The Boston Company, Inc. He is 43 years old.
JOSEPH F. TOWER, III, VICE PRESIDENT AND ASSISTANT TREASURER. Senior Vice
President, Treasurer, Chief Financial Officer and a director of the
Distributor and Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From July
1988 to August 1994, he was employed by The Boston Company, Inc. where
he held various management positions in the Corporate Finance and
Treasury areas. He is 35 years old.
DOUGLAS C. CONROY, VICE PRESIDENT AND ASSISTANT SECRETARY. Assistant Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
April 1993 to January 1995, he was a Senior Fund Accountant for
Investors Bank & Trust Company. He is 29 years old.
CHRISTOPHER J. KELLEY, VICE PRESIDENT AND ASSISTANT SECRETARY. Vice President
and Senior Associate General Counsel of Funds Distributor, Inc., and
an officer of other investment companies advised or administered by
the Manager. From April 1994 to July 1996, he was Assistant Counsel at
Forum Financial Group. From October 1992 to March 1994, he was
employed by Putnam Investments in legal and compliance capacities. He
is 33 years old.
KATHLEEN K. MORRISEY, VICE PRESIDENT AND ASSISTANT SECRETARY. Manager of
Treasury Services Administration of Funds Distributor, Inc., and an
officer of other investment companies advised or administered by the
Manager. From July 1994 to November 1995, she was a Fund Accountant
for Investors Bank & Trust Company. She is 26 years old.
ELBA VASQUEZ, VICE PRESIDENT AND ASSISTANT SECRETARY. Assistant Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
March 1990 to May 1996, she was employed by U.S. Trust Company of New
York where she held various sales and marketing positions. She is 37
years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
The Fund's Board members and officers, as a group, owned less than 1%
of the Fund's outstanding shares on November 20, 1998.
MANAGEMENT ARRANGEMENTS
INVESTMENT ADVISER. The Manager is a wholly-owned subsidiary of Mellon
Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international markets.
Mellon is among the twenty-five largest bank holding companies in the United
States based on total assets.
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") dated August 24, 1994 with the Fund, which is
subject to annual approval by (i) the Fund's Board or (ii) vote of a majority
(as defined in the 1940 Act) of the outstanding voting securities of the Fund,
provided that in either event the continuance also is approved by a majority of
the Board members who are not "interested persons" (as defined in the 1940 Act)
of the Fund or the Manager, by vote cast in person at a meeting called for the
purpose of voting on such approval. The Agreement was approved by shareholders
on August 4, 1994, and was last approved by the Fund's Board, including a
majority of the Board members who are not "interested persons" of any party to
the Agreement, at a meeting held on October 26, 1998. The Agreement is
terminable without penalty, on 60 days' notice, by the Fund's Board or by vote
of the holders of a majority of the Fund's outstanding voting shares, or, upon
not less than 90 days' notice, by the Manager. The Agreement will terminate
automatically in the event of its assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of the Manager: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E. Canter,
Vice Chairman, Chief Investment Officer and a director; Lawrence S. Kash, Vice
Chairman--Distribution and a director; J. David Officer, Vice Chairman and a
director; Ronald P. O'Hanley III, Vice Chairman; William T. Sandalls, Jr.,
Executive Vice President; Mark N. Jacobs, Vice President, General Counsel and
Secretary; Patrice M. Kozlowski, Vice President--Corporate Communications; Mary
Beth Leibig, Vice President--Human Resources; Andrew S. Wasser, Vice
President--Information Systems; Theodore A. Schachar, Vice President; Wendy
Strutt, Vice President; Richard Terres, Vice President; William H. Maresca,
Controller; James Bitetto, Assistant Secretary; Steven F. Newman, Assistant
Secretary; and Mandell L. Berman, Burton C. Borgelt, Frank V. Cahouet and
Richard F. Syron, directors.
The Manager manages the Fund's portfolio of investments in accordance
with the stated policies of the Fund, subject to the approval of the Fund's
Board. The Manager is responsible for investment decisions and provides the Fund
with portfolio managers who are authorized by the Fund's Board to execute
purchases and sales of securities. The Fund's portfolio managers are Joseph P.
Darcy, A. Paul Disdier, Douglas J. Gaylor, Karen M. Hand, Stephen C. Kris,
Richard J. Moynihan, W. Michael Petty, Jill C. Shaffro, Samuel J. Weinstock, and
Monica S. Wieboldt. The Manager also maintains a research department with a
professional staff of portfolio managers and securities analysts who provide
research services for the Fund and for other funds advised by the Manager.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The expenses
borne by the Fund include: taxes, interest, loan commitment fees and
distributions paid on securities sold short, brokerage fees and commissions, if
any, fees of Board members who are not officers, directors, employees or holders
of 5% or more of the outstanding voting securities of the Manager, Securities
and Exchange Commission fees, state Blue Sky qualification fees, advisory fees,
charges of custodians, transfer and dividend disbursing agents' fees, certain
insurance premiums, industry association fees, outside auditing and legal
expenses, costs of independent pricing services, costs of maintaining corporate
existence, costs attributable to investor services (including, without
limitation, telephone and personnel expenses), costs of shareholders' reports
and corporate meetings, costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders, and any extraordinary expenses.
The Manager maintains office facilities on behalf of the Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager may pay the Distributor for shareholder
services from the Manager's own assets, including past profits but not including
the management fee paid by the Fund. The Distributor may use part or all of such
payments to pay securities dealers, banks or other financial institutions in
respect of these services. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time deems
appropriate.
As compensation for the Manager's services, the Fund has agreed to pay
the Manager a monthly management fee at the annual rate of .60 of 1% of the
value of the Fund's average daily net assets. This fee was reduced, pursuant to
the terms of a Stipulation of Settlement of Litigation, which became effective
on October 15, 1988, by annual amounts ranging from $90,000 per year, if the
Fund's average daily net assets are between $1 billion and $2 billion, to $1
million per year, if the Fund's average daily net assets are in excess of $10
billion, for a period of 10 years from the effective date. For the fiscal years
ended August 31, 1996, 1997 and 1998, the management fees payable by the Fund
amounted to $22,580,334, $21,009,416 and $20,191,724, respectively, which fees
were reduced by $350,000, $300,000 and $200,000, respectively, pursuant to the
Stipulation of Settlement of Litigation, and other undertakings which may have
been in effect, resulting in net fees paid of $22,230,334 in fiscal 1996,
$20,709,416 in fiscal 1997 and $19,777,324 in fiscal 1998. All fees and expenses
are accrued daily and deducted before the declaration of dividends to investors.
The Manager has agreed that if in any fiscal year the aggregate
expenses of the Fund, exclusive of taxes, brokerage fees, interest on borrowings
and (with the prior written consent of the necessary state securities
commissions) extraordinary expenses, but including the management fee, exceed 1
1/2% of the value of the Fund's average net assets for the fiscal year, the Fund
may deduct from the payment to be made to the Manager under the Agreement, or
the Manager will bear, such excess expense. Such deduction or payment, if any,
will be estimated, reconciled and effected or paid, as the case may be, on a
monthly basis.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of the Fund's net assets increases.
DISTRIBUTOR. The Distributor, located at 60 State Street, Boston,
Massachusetts 02109, serves as the Fund's distributor on a best efforts basis
pursuant to an agreement which is renewable annually.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN. Dreyfus
Transfer, Inc. (the "Transfer Agent"), a wholly-owned subsidiary of the Manager,
P.O. Box 9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Fund, the
Transfer Agent arranges for the maintenance of shareholder account records for
the Fund, the handling of certain communications between shareholders and the
Fund and the payment of dividends and distributions payable by the Fund. For
these services, the Transfer Agent receives a monthly fee computed on the basis
of the number of shareholder accounts it maintains for the Fund during the
month, and is reimbursed for certain out-of-pocket expenses.
The Bank of New York (the "Custodian"), 90 Washington Street, New
York, New York 10286, is the Fund's custodian. The Custodian has no part in
determining the investment policies of the Fund or which securities are to be
purchased or sold by the Fund. Under a custody agreement with the Fund, the
Custodian holds the Fund's securities and keeps all necessary accounts and
records. For its custody services, the Custodian receives a monthly fee based on
the market value of the Fund's assets held in custody and receives certain
securities transactions charges.
HOW TO BUY SHARES
GENERAL. Fund shares are sold without a sales charge. You may be
charged a fee if you effect transactions in Fund shares through a securities
dealer, bank or other financial institution. Stock certificates are issued only
upon your written request. No certificates are issued for fractional shares. The
Fund reserves the right to reject any purchase order.
The minimum initial investment is $2,500, or $1,000 if you are a
client of a securities dealer, bank or other financial institution which
maintains an omnibus account in the Fund and has made an aggregate minimum
initial purchase for its customers of $2,500. Subsequent investments must be at
least $100. The initial investment must be accompanied by the Account
Application. For full-time or part-time employees of the Manager or any of its
affiliates or subsidiaries, directors of the Manager, Board members of a fund
advised by the Manager, including members of the Fund's Board, or the spouse or
minor child of any of the foregoing, the minimum initial investment is $1,000.
For full-time or part-time employees of the Manager or any of its affiliates or
subsidiaries who elect to have a portion of their pay directly deposited into
their Fund accounts, the minimum initial investment is $50. The Fund reserves
the right to vary the initial and subsequent investment minimum requirements at
any time.
Fund shares also are offered without regard to the minimum initial
investment requirements through DREYFUS-AUTOMATIC Asset Builder(R), Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan pursuant to
the Dreyfus Step Program described under "Shareholder Services." These services
enable you to make regularly scheduled investments and may provide you with a
convenient way to invest for long-term financial goals. You should be aware,
however, that periodic investment plans do not guarantee a profit and will not
protect an investor against loss in a declining market.
Shares are sold on a continuous basis at the net asset value per share
next determined after an order in proper form is received by the Transfer Agent
or other entity authorized to receive orders on behalf of the Fund. Net asset
value per share is determined as of the close of trading on the floor of the New
York Stock Exchange (currently 4:00 p.m., New York time) on each day the New
York Stock Exchange is open for business. For purposes of computing net asset
value per share, options and futures will be valued 15 minutes after the close
of trading on the floor of the New York Stock Exchange. Net asset value per
share is computed by dividing the value of the Fund's net assets (i.e., the
value of its assets less liabilities) by the total number of shares outstanding.
The Fund's investments are valued each business day by an independent pricing
service approved by the Fund's Board and are valued at fair value as determined
by the pricing service. The pricing service's procedures are reviewed under the
general supervision of the Fund's Board. For further information regarding the
methods employed in valuing the Fund's investments, see "Determination of Net
Asset Value."
DREYFUS TELETRANSFER PRIVILEGE. You may purchase shares by telephone
if you have checked the appropriate box and supplied the necessary information
on the Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The proceeds will be transferred between the bank account
designated in one of these documents and your Fund account. Only a bank account
maintained in a domestic financial institution which is an Automated Clearing
House member may be so designated.
Dreyfus TELETRANSFER purchase orders may be made at any time. Purchase
orders received by 4:00 p.m., New York time, on any business day that the
Transfer Agent and the New York Stock Exchange are open for business will be
credited to the shareholder's Fund account on the next bank business day
following such purchase order. Purchase orders made after 4:00 p.m., New York
time, on any business day the Transfer Agent and the New York Stock Exchange are
open for business, or orders made on Saturday, Sunday or any Fund holiday (e.g.,
when the New York Stock Exchange is not open for business), will be credited to
the shareholder's Fund account on the second business day following such
purchase order. To qualify to use Dreyfus TELETRANSFER Privilege, the initial
payment for purchase of Fund shares must be drawn on, and redemption proceeds
paid to, the same bank and account as are designated on the Account Application
or Shareholder Services Form on file. If the proceeds of a particular redemption
are to be wired to an account at any other bank, the request must be in writing
and signature-guaranteed. See "How to Redeem Shares--Dreyfus TELETRANSFER
Privilege."
TRANSACTIONS THROUGH SECURITIES DEALERS. Fund shares may be purchased
and redeemed through securities dealers which may charge a fee for such
services. Some dealers will place the Fund's shares in an account with their
firm. Dealers also may require the following: that the customer invest more than
the $1,000 minimum investment; the customer not take physical delivery of stock
certificates; the customer not request redemption checks to be issued in the
customer's name; fractional shares not be purchased; monthly income
distributions be taken in cash; or other conditions.
There is no sales or service charge by the Fund or the Distributor,
although investment dealers, banks and other institutions may make reasonable
charges to investors for their services. The services provided and the
applicable fees are established by each dealer or other institution acting
independently of the Fund. The Fund has been given to understand that these fees
may be charged for customer services including, but not limited to, same-day
investment of client funds; same-day access to client funds; advice to customers
about the status of their accounts, yield currently being paid or income earned
to date; provision of periodic account statements showing security and money
market positions; other services available from the dealer, bank or other
institution; and assistance with inquiries related to their investment. Any such
fees will be deducted from your account monthly and on smaller accounts could
constitute a substantial portion of the distribution. Small, inactive, long-term
accounts involving monthly service charges may not be in the best interest of
investors. You should be aware that you may purchase shares of the Fund directly
from the Fund without imposition of any maintenance or service charges, other
than those already described herein.
REOPENING AN ACCOUNT. You may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar
year the account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan pursuant to which the
Fund reimburses Dreyfus Service Corporation an amount not to exceed an annual
rate of .25% 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.
A quarterly report of the amounts expended under the Shareholder
Services Plan, and the purposes for which such expenditures were incurred, must
be made to the Fund's Board for its review. In addition, the Shareholder
Services Plan provides that material amendments of the Plan must be approved by
the Fund's Board and by the Board members who are not "interested persons" (as
defined in the 1940 Act) of the Fund and have no direct or indirect financial
interest in the operation of the Shareholder Services Plan, by vote cast in
person at a meeting called for the purpose of considering such amendments. The
Shareholder Services Plan is subject to annual approval by such vote of the
Board members cast in person at a meeting called for the purpose of voting on
the Plan. The Shareholder Services Plan was last so approved on October 26,
1998. The Shareholder Services Plan is terminable at any time by vote of a
majority of the Board members who are not "interested persons" and have no
direct or indirect financial interest in the operation of the Shareholder
Services Plan.
For the fiscal year ended August 31, 1998, the Fund was charged
$2,643,704 pursuant to the Shareholder Services Plan.
HOW TO REDEEM SHARES
REDEMPTION FEE. The Fund will deduct a redemption fee equal to .10% of
the net asset value of Fund shares redeemed (including redemptions through the
use of the Fund Exchanges service) less than 15 days following the issuance of
such shares. The redemption fee will be deducted from the redemption proceeds
and retained by the Fund. For the fiscal year ended August 31, 1998, the Fund
retained $116,859 in redemption fees.
No redemption fee will be charged on the redemption or exchange of
shares (1) through the Fund's Check Redemption Privilege, Automatic Withdrawal
Plan or Dreyfus Auto-Exchange Privilege, (2) through accounts that are
reflected on the records of the Transfer Agent as omnibus accounts approved by
Dreyfus Service Corporation, (3) through accounts established by securities
dealers, banks or other financial institutions approved by Dreyfus Service
Corporation that utilize the National Securities Clearing Corporation's
networking system, or (4) acquired through the reinvestment of dividends or
capital gains distributions. The redemption fee may be waived, modified or
terminated at any time.
CHECK REDEMPTION PRIVILEGE. The Fund provides Redemption Checks
("Checks") automatically upon opening an account, unless you specifically refuse
the Check Redemption Privilege by checking the applicable "No" box on the
Account Application. The Check Redemption Privilege may be established for an
existing account by a separate signed Shareholder Services Form. Checks will be
sent only to the registered owner(s) of the account and only to the address of
record. The Account Application or Shareholder Services Form must be manually
signed by the registered owner(s). Checks may be made payable to the order of
any person in an amount of $500 or more. When a Check is presented to the
Transfer Agent for payment, the Transfer Agent, as your agent, will cause the
Fund to redeem a sufficient number of shares in your account to cover the amount
of the Check. Dividends are earned until the Check clears. After clearance, a
copy of the Check will be returned to you. You generally will be subject to the
same rules and regulations that apply to checking accounts, although the
election of this Privilege creates only a shareholder-transfer agent
relationship with the Transfer Agent.
You should date your Checks with the current date when you write them.
Please do not postdate your Checks. If you do, the Transfer Agent will honor,
upon presentment, even if presented before the date of the Check, all postdated
Checks which are dated within six months of presentment for payment, if they are
otherwise in good order.
Checks are free, but the Transfer Agent will impose a fee for stopping
payment of a Check upon your request or if the Transfer Agent cannot honor a
Check due to insufficient funds or other valid reason. If the amount of the
Check is greater than the value of the shares in your account, the Check will be
returned marked insufficient funds. Checks should not be used to close an
account.
This Privilege will be terminated immediately, without notice, with
respect to any account which is, or becomes, subject to backup withholding on
redemptions. Any Check written on an account which has become subject to backup
withholding on redemptions will not be honored by the Transfer Agent.
WIRE REDEMPTION PRIVILEGE. By using this Privilege, you authorize the
Transfer Agent to act on wire, telephone or letter redemption instructions from
any person representing himself or herself to be you and reasonably believed by
the Transfer Agent to be genuine. Ordinarily, the Fund will initiate payment for
shares redeemed pursuant to this Privilege on the next business day after
receipt by the Transfer Agent of a redemption request in proper form. Redemption
proceeds ($1,000 minimum) will be transferred by Federal Reserve wire only to
the commercial bank account specified by you on the Account Application or
Shareholder Services Form, or to a correspondent bank if your bank is not a
member of the Federal Reserve System. Fees ordinarily are imposed by such bank
and borne by you. Immediate notification by the correspondent bank to your bank
is necessary to avoid a delay in crediting the funds to your bank account.
If you have access to telegraphic equipment, you may wire
redemption requests to the Transfer Agent by employing the following transmittal
code which may be used for domestic or overseas transmissions:
Transfer Agent's
Trantmittal Code Answer Back Sign
144295 144295 TSSG PREP
If you do not have direct access to telegraphic equipment, you may
have the wire transmitted by contacting a TRT Cables operator at 1-800-654-7171,
toll free. You should advise the operator that the above transmittal code must
be used and should also inform the operator of the Transfer Agent's answer back
sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent. This
request must be signed by each shareholder, with each signature guaranteed as
described below under "Stock Certificates; Signatures."
DREYFUS TELETRANSFER PRIVILEGE. You may request by telephone that
redemption proceeds be transferred between your Fund account and your bank
account. Only a bank account maintained in a domestic financial institution
which is an Automated Clearing House member may be designated. Holders of
jointly registered Fund or bank accounts may redeem through the Dreyfus
TELETRANSFER Privilege for transfer to their bank account not more than $250,000
within any 30-day period. You should be aware that if you have selected the
Dreyfus TELETRANSFER Privilege, any request for a wire redemption will be
effected as a Dreyfus TELETRANSFER transaction through the Automated Clearing
House ("ACH") system unless more prompt transmittal specifically is requested.
Redemption proceeds will be on deposit in the your account at an ACH member bank
ordinarily two business days after receipt of the redemption request. See "How
to Buy Shares--Dreyfus TELETRANSFER Privilege."
STOCK CERTIFICATES; SIGNATURES. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request. Written
redemption requests must be signed by each shareholder, including each holder of
a joint account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations,
as well as from participants in the New York Stock Exchange Medallion Signature
Program, the Securities Transfer Agents Medallion Program ("STAMP") and the
Stock Exchanges Medallion Program. Guarantees must be signed by an authorized
signatory of the guarantor, and "Signature-Guaranteed" must appear with the
signature. The Transfer Agent may request additional documentation from
corporations, executors, administrators, trustees or guardians, and may accept
other suitable verification arrangements from foreign investors, such as
consular verification. For more information with respect to
signature-guarantees, please call one of the telephone numbers listed on the
cover.
REDEMPTION COMMITMENT. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record, limited in amount during
any 90-day period to the lesser of $250,000 or 1% of the value of the Fund's net
assets at the beginning of such period. Such commitment is irrevocable without
the prior approval of the Securities and Exchange Commission and is a
fundamental policy of the Fund which may not be changed without shareholder
approval. In the case of requests for redemption in excess of such amount, the
Board reserves the right to make payments in whole or in part in securities or
other assets of the Fund in case of an emergency or any time a cash distribution
would impair the liquidity of the Fund to the detriment of the existing
shareholders. In such event, the securities would be valued in the same manner
as the Fund's portfolio is valued. If the recipient sold such securities,
brokerage charges might be incurred.
SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (b) when
trading in the markets the Fund ordinarily utilizes is restricted, or when an
emergency exists as determined by the Securities and Exchange Commission so that
disposal of the Fund's investments or determination of its net asset value is
not reasonably practicable, or (c) for such other periods as the Securities and
Exchange Commission by order may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
FUND EXCHANGES. You may purchase, in exchange for shares of the Fund,
shares of certain other funds managed or administered by the Manager, to the
extent such shares are offered for sale in your state of residence. The Fund
will deduct a redemption fee equal to .10% of the net asset value of Fund shares
exchanged where the exchange is made less than 15 days after the issuance of
such shares. Shares of other funds purchased by exchange will be purchased on
the basis of relative net asset value per share as follows:
A. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a s sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a
sales load and additional shares acquired through reinvestment of
dividends or distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect
to any reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, you must notify the
Transfer Agent of your prior ownership of fund shares and your account number.
To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless you check the applicable "No" box on the Account Application, indicating
that you specifically refuse this Privilege. By using the Telephone Exchange
Privilege, you authorize the Transfer Agent to act on telephonic instructions
(including over The Dreyfus Touch(R) automated telephone system) from any person
representing himself or herself to be you and reasonably believed by the
Transfer Agent to be genuine. Telephone exchanges may be subject to limitations
as to the amount involved or the number of telephone exchanges permitted. Shares
issued in certificate form are not eligible for telephone exchange. No fees
currently are charged shareholders directly in connection with exchanges,
although the Fund reserves the right, upon not less than 60 days' written
notice, to charge shareholders a nominal administrative fee in accordance with
rules promulgated by the Securities and Exchange Commission.
To establish a personal retirement plan by exchange, shares of the
fund being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made.
DREYFUS AUTO-EXCHANGE PRIVILEGE. Dreyfus Auto-Exchange Privilege
permits you to purchase, in exchange for shares of the Fund, shares of another
fund in the Dreyfus Family of Funds. This Privilege is available only for
existing accounts. Shares will be exchanged on the basis of relative net asset
value as described above under "Fund Exchanges." Enrollment in or modification
or cancellation of this Privilege is effective three business days following
notification by the investor. You will be notified if your account falls below
the amount designated to be exchanged under this Privilege. In this case, your
account will fall to zero unless additional investments are made in excess of
the designated amount prior to the next Auto-Exchange transaction. Shares held
under IRA and other retirement plans are eligible for this Privilege. Exchanges
of IRA shares may be made between IRA accounts from regular accounts to IRA
accounts, but not from IRA accounts to regular accounts. With respect to all
other retirement accounts, exchanges may be made only among those accounts.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available
to shareholders resident in any state in which shares of the fund being acquired
may legally be sold. Shares may be exchanged only between accounts having
identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund Exchanges service or the Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon notice to
shareholders.
DREYFUS-AUTOMATIC ASSET BUILDER(R). DreyfuS-AUTOMATic Asset Builder
permits you to purchases Fund shares (minimum of $100 and maximum of $150,000
per transaction) at regular intervals selected by you. Fund shares are purchased
by transferring funds from the bank account designated by you.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE. Dreyfus Government Direct
Deposit Privilege enables you to purchase Fund shares (minimum of $100 and
maximum of $50,000 per transaction) by having Federal salary, Social Security,
or certain veterans', military or other payments from the U.S. Government
automatically deposited into your fund account. You may deposit as much of such
payments as you elect.
DREYFUS PAYROLL SAVINGS PLAN. Dreyfus Payroll Savings Plan permits you
to purchase Fund shares (minimum of $100 per transaction) automatically on a
regular basis. Depending upon your employer's direct deposit program, you may
have part or all of your paycheck transferred to your existing Dreyfus account
electronically through the Automated Clearing House system at each pay period.
To establish a Dreyfus Payroll Savings Plan account, you must file an
authorization form with your employer's payroll department. It is the sole
responsibility of your employer, not the Distributor, the Manager, the Fund, the
Transfer Agent or any other person, to arrange for transactions under the
Dreyfus Payroll Savings Plan.
DREYFUS STEP PROGRAM. The Dreyfus Step Program enables you to purchase
Fund shares without regard to the Fund's minimum initial investment requirements
through Dreyfus-AUTOMATIC Asset Builder(R), Dreyfus Government Direct DeposiT
Privilege or Dreyfus Payroll Savings Plan. To establish a Dreyfus Step Program
account, you must supply the necessary information on the Account Application
and file the required authorization form(s) with the Transfer Agent. For more
information concerning this Program, or to request the necessary authorization
form(s), please call toll free 1-800-782-6620. You may terminate your
participation in this Program at any time by discontinuing your participation in
Dreyfus-AUTOMATIC Asset Builder, Dreyfus Government Direct Deposit Privilege or
Dreyfus Payroll Savings Plan, as the case may be, as provided under the terms of
such Privilege(s). The Fund may modify or terminate this Program at any time.
DREYFUS DIVIDEND OPTIONS. Dreyfus Dividend Sweep allows you to invest
automatically your dividends or dividends and capital gain distributions, if
any, from the Fund in shares of another fund in the Dreyfus Family of Funds of
which you are a shareholder. Shares of other funds purchased pursuant to this
privilege will be purchased on the basis of relative net asset value per share
as follows:
A. Dividends and distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that
are offered without a sales load.
B. Dividends and distributions paid by a fund which does not charge
a sales load may be invested in shares of other funds sold with a
sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund that charges a sales
load may be invested in shares of other funds sold with a sales
load (referred to herein as "Offered Shares"), provided that, if
the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any
reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.
Dreyfus Dividend ACH permits you to transfer electronically dividends
or dividends and capital gain distributions, if any, from the Fund to a
designated bank account. Only an account maintained at a domestic financial
institution which is an Automated Clearing House member may be so designated.
Banks may charge a fee for this service.
AUTOMATIC WITHDRAWAL PLAN. The Automatic Withdrawal Plan permits you
to request withdrawal of a specified dollar amount (minimum of $50) on either a
monthly or quarterly basis if you have a $5,000 minimum account. Withdrawal
payments are the proceeds from sales of Fund shares, not the yield on the
shares. If withdrawal payments exceed reinvested dividends and distributions,
your shares will be reduced and eventually may be depleted. Automatic Withdrawal
may be terminated at any time by you, the Fund or the Transfer Agent. Shares for
which certificates have been issued may not be redeemed through the Automatic
Withdrawal Plan.
DETERMINATION OF NET ASSET VALUE
VALUATION OF PORTFOLIO SECURITIES. The Fund's investments are valued
each business day by an independent pricing service (the "Service") approved by
the Fund's Board. When, in the judgment of the Service, quoted bid prices for
investments are readily available and are representative of the bid side of the
market, these investments are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for such
securities). Other investments (which constitute a majority of the portfolio
securities) are carried at fair value as determined by the Service, based on
methods which include consideration of: yields or prices of municipal bonds of
comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions. The Service may employ electronic data
processing techniques and/or a matrix system to determine valuations. The
Service's procedures are reviewed by the Fund's officers under the general
supervision of the Fund's Board. Expenses and fees, including the management fee
(reduced by the expense limitation, if any), are accrued daily and are taken
into account for the purpose of determining the net asset value of Fund shares.
NEW YORK STOCK EXCHANGE CLOSINGS. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Management believes that the Fund has qualified for the fiscal year
ended August 31, 1998 as a "regulated investment company" under the Code. The
Fund intends to continue to so qualify if such qualification is in the best
interests of its shareholders. Such qualification relieves the Fund of any
liability for Federal income tax to the extent its earnings are distributed in
accordance with applicable provisions of the Code. If the Fund did not qualify
as a regulated investment company, it would be treated for tax purposes as an
ordinary corporation subject to Federal income tax.
The Fund ordinarily declares dividends from its net investment income
on each day the New York Stock Exchange is open for business. Fund shares begin
earning income dividends on the day following the date of purchase. The Fund's
earnings for Saturdays, Sundays and holidays are declared as dividends on the
next business day. Dividends usually are paid on the last business day of each
month and are automatically reinvested in additional Fund shares at net asset
value or, at your option, paid in cash. If you redeem all shares in your account
at any time during the month, all dividends to which you are entitled will be
paid to you along with the proceeds of the redemption. If you are an omnibus
accountholder and indicate in a partial redemption request that a portion of any
accrued dividends to which such account is entitled belongs to an underlying
accountholder who has redeemed all shares in his or her account, such portion of
the accrued dividends will be paid to you along with the proceeds of the
redemption.
If you elect to receive dividends and distributions in cash, and your
dividend or distribution check is returned to the Fund as undeliverable or
remains uncashed for six months, the Fund reserves the right to reinvest such
dividends or distributions and all future dividends and distributions payable to
you in additional Fund shares at net asset value. No interest will accrue on
amounts represented by uncashed distribution or redemption checks.
If, at the close of each quarter of its taxable year, at least 50% of
the value of the Fund's total assets consists of Federal tax exempt obligations,
then the Fund may designate and pay Federal exempt-interest dividends from
interest earned on all such tax exempt obligations. Such exempt-interest
dividends may be excluded by shareholders of the Fund from their gross income
for Federal income tax purposes. Dividends derived from Taxable Investments,
together with distributions from any net realized short-term securities gains,
generally are taxable as ordinary income for Federal income tax purposes whether
or not reinvested. Distributions from net realized long-term securities gains
generally are taxable as long-term capital gains to a shareholder who is a
citizen or resident of the United States, whether or not reinvested and
regardless of the length of time the shareholder has held his shares.
Any dividend or distribution paid shortly after an investor's purchase
may have the effect of reducing the net asset value of his shares below the cost
of his investment. Such a distribution would be a return on investment in an
economic sense although taxable as stated under "Distributions and Taxes" in the
Prospectus. In addition, the Code provides that if a shareholder holds Fund
shares for six months or less and has received an exempt-interest dividend with
respect to such shares, any loss incurred on the sale of such shares will be
disallowed to the extent of the exempt-interest dividend received.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain or loss. However, all or a portion of any gains
realized from the sale or other disposition of certain market discount bonds
will be treated as ordinary income under Section 1276 of the Code. In addition,
all or a portion of the gain realized from engaging in "conversion transactions"
may be treated as ordinary income under Section 1258 of the Code. "Conversion
transactions" are defined to include certain forward, futures, option and
"straddle" transactions, transactions marketed or sold to produce capital gains,
or transactions described in Treasury regulations to be issued in the future.
Under Section 1256 of the Code, gain or loss realized by the Fund from
certain financial futures and options transactions will be treated as 60%
long-term capital gain or loss and 40% short-term capital gain or loss. Gain or
loss will arise upon exercise or lapse of such futures and options as well as
from closing transactions. In addition, any such futures or options remaining
unexercised at the end of the Fund's taxable year will be treated as sold for
their then fair market value, resulting in additional gain or loss to the Fund
characterized in the manner described above.
Offsetting positions held by the Fund involving certain financial
futures contracts or options transactions may be considered, for tax purposes,
to constitute "straddles." "Straddles" are defined to include "offsetting
positions" in actively traded personal property. The tax treatment of
"straddles" is governed by Sections 1092 and 1258 of the Code, which, in certain
circumstances, override or modify the provisions of Section 1256 of the Code. As
such, all or a portion of any short or long-term capital gain from certain
"straddle" and/or conversion transactions may be recharacterized as ordinary
income.
If the Fund were treated as entering into "straddles" by reason of its
engaging in financial futures contracts or options transactions, such
"straddles" would be characterized as "mixed straddles" if the futures or
options comprising a part of such "straddles" were governed by Section 1256 of
the Code. The Fund may make one or more elections with respect to "mixed
straddles." If no election is made, to the extent the straddle and conversion
transaction rules apply to positions established by the Fund, losses realized by
the Fund will be deferred to the extent of unrealized gain in the related
offsetting position. Moreover, as a result of the straddle and the conversion
transaction rules, short-term capital loss on straddle positions may be
recharacterized as long-term capital loss, and long-term capital gain on
straddle positions may be recharacterized as short-term capital gain or ordinary
income.
The Taxpayer Relief Act of 1997 included constructive sale provisions
that generally apply if the Fund either (1) holds an appreciated financial
position with respect to stock, certain debt obligations, or partnership
interests ("appreciated financial position") and then enters into a short sale,
futures, forward, or offsetting notional principal contract (collectively, a
"Contract") respecting the same or substantially identical property or (2) holds
an appreciated financial position that is a Contract and then acquires property
that is the same as, or substantially identical to, the underlying property. In
each instance, with certain exceptions, the Fund generally will be taxed as if
the appreciated financial position were sold at its fair market value on the
date the Fund enters into the financial position or acquires the property,
respectively. Transactions that are identified as hedging or straddle
transactions under other provisions of the Code can be subject to the
constructive sale provisions.
Investment by the Fund in securities issued at a discount or providing
for deferred interest or for payment of interest in the form of additional
obligations could, under special tax rules, affect the amount, timing and
character of distributions to shareholders. For example, the Fund could be
required to take into account annually a portion of the discount (or deemed
discount) at which such securities were issued and to distribute such portion in
order to maintain its qualification as a regulated investment company. In such
case, the Fund may have to dispose of securities which it might otherwise have
continued to hold in order to generate cash to satisfy these distribution
requirements.
PORTFOLIO TRANSACTIONS
Portfolio securities are purchased from and sold to parties acting as
either principal or agent. Newly-issued securities ordinarily are purchased
directly from the issuer or from an underwriter; other purchases and sales
usually are placed with those dealers from which it appears that the best price
or execution will be obtained. Usually no brokerage commissions, as such, are
paid by the Fund for such purchases and sales, although the price paid usually
includes an undisclosed compensation to the dealer acting as agent. The prices
paid to underwriters of newly-issued securities usually include a concession
paid by the issuer to the underwriter, and purchases of after-market securities
from dealers ordinarily are executed at a price between the bid and asked price.
No brokerage commissions have been paid by the Fund to date.
Transactions are allocated to various dealers by the Fund's portfolio
managers in their best judgment. The primary consideration is prompt and
effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected for research, statistical or
other services to enable the Manager to supplement its own research and analysis
with the views and information of other securities firms and may be selected
based upon their sales of shares of the Fund or other funds advised by the
Manager or its affilities.
Research services furnished by brokers through which the Fund effects
securities transactions may be used by the Manager in advising other funds it
advises and, conversely, research services furnished to the Manager by brokers
in connection with other funds the Manager advises may be used by the Manager in
advising the Fund. Although it is not possible to place a dollar value on these
services, it is the opinion of the Manager that the receipt and study of such
services should not reduce the expenses of its research department.
PERFORMANCE INFORMATION
The Fund's current yield for the 30-day period ended August 31, 1998
was 4.45%. During the period, the Manager waived a portion of its management
fee, without which the Fund's 30-day yield as of August 31, 1998 would have been
4.44%. Current yield is computed pursuant to a formula which operates as
follows: the amount of the Fund's expenses accrued for the 30-day period (net of
reimbursements) is subtracted from the amount of the dividends and interest
earned (computed in accordance with regulatory requirements) by the Fund during
the period. That result is then divided by the product of: (a) the average daily
number of shares outstanding during the period that were entitled to receive
dividends and distributions, and (b) the net asset value per share on the last
day of the period less any undistributed earned income per share reasonably
expected to be declared as a dividend shortly thereafter. The quotient is then
added to 1, and that sum is raised to the 6th power, after which 1 is
subtracted. The current yield is then arrived at by multiplying the result by 2.
Based upon a 1998 Federal personal income tax rate of 39.60%, the
Fund's tax equivalent yield for the 30-day period ended August 31, 1998 was
7.37%. Without the fee waiver noted above, the Fund's tax equivalent yield for
the 30-day period ended August 31, 1998 would have been 7.35%. Tax equivalent
yield is computed by dividing that portion of the current yield (calculated as
described above) which is tax exempt by 1 minus a stated tax rate and adding the
quotient to that portion, if any, of the yield of the Fund that is not tax
exempt.
The tax equivalent yield quoted above represents the application of
the highest Federal marginal personal tax rate presently in effect. The tax
equivalent figure, however, does not include the potential effect of any state
or local (including, but not limited to, county, district or city) taxes,
including applicable surcharges. In addition, there may be pending legislation
which could affect such stated tax rate or yield. Each investor should consult
its tax adviser, consider its own factual circumstances and applicable tax laws,
in order to ascertain the relevant tax equivalent yield.
The Fund's average annual total return for the 1, 5 and 10 year
periods ended August 31, 1998 was 8.36%, 5.14% and 7.69%, respectively. Average
annual total return is calculated by determining the ending redeemable value of
an investment purchased with a hypothetical $1,000 payment made at the beginning
of the period (assuming the reinvestment of dividends and distributions),
dividing by the amount of the initial investment, taking the "n"th root of the
quotient (where "n" is the number of years in the period) and subtracting 1 from
the result.
The Fund's aggregate total return for the period October 4, 1976
(commencement of operations) through August 31, 1998 was 332.60%. Total return
is calculated by subtracting the amount of the Fund's net asset value per share
at the beginning of a stated period from the net asset value per share at the
end of the period (after giving effect to the reinvestment of dividends and
distributions during the period), and dividing the result by the net asset value
per share at the beginning of the period.
From time to time, the Fund may use hypothetical tax equivalent yields
or charts in its advertising. These hypothetical yields or charts will be used
for illustrative purposes only and are not indicative of the Fund's past or
future performance.
From time to time, advertising materials for the Fund may refer to or
discuss then-current or past economic conditions, developments and/or events,
actual or proposed tax legislation, or to statistical or other information
concerning trends relating to investment companies, as compiled by industry
associations such as the Investment Company Institute. From time to time,
advertising materials for the Fund also may refer to Morningstar ratings and
related analyses supporting such ratings.
The Fund may advertise that it was established in 1976 as the first
incorporated tax exempt fund, and may discuss historical events and
circumstances surrounding its formation. The Fund also may advertise the total
net assets invested in tax exempt funds throughout the investment company
industry.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from CDA
Technologies, Inc., Lipper Analytical Services, Inc., Moody's Bond Survey Bond
Index, Lehman Brothers Municipal Bond Index, Morningstar, Inc. and other
industry publications.
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer to, or
include commentary by the portfolio manager relating to investment strategy,
asset growth, current or past business, political, economic or financial
conditions and other matters of general interest to investors.
INFORMATION ABOUT THE FUND
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Fund shares are of one class and have equal rights as to dividends and in
liquidation. Shares have no preemptive, subscription or conversion rights and
are freely transferable.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Board members or
the appointment of auditors. However, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Fund to hold a special meeting
of shareholders for purposes of removing a Board member from office. Fund
shareholders may remove a Board member by the affirmative vote of a majority of
the Fund's outstanding voting shares. In addition, the Board will call a meeting
of shareholders for the purpose of electing Board members if, at any time, less
than a majority of the Board members then holding office have been elected by
shareholders.
The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculating on short-term market
movements. A pattern of frequent purchases and exchanges can be disruptive to
efficient portfolio management and, consequently, can be detrimental to the
Fund's performance and its shareholders. Accordingly, if the Fund's management
determines that an investor is following a market-timing strategy or is
otherwise engaging in excessive trading, the Fund, with or without prior notice,
may temporarily or permanently terminate the availability of Fund Exchanges, or
reject in whole or part any purchase or exchange request, with respect to such
investor's account. Such investors also may be barred from purchasing other
funds in the Dreyfus Family of Funds. Generally, an investor who makes more than
four exchanges out of the Fund during any calendar year or who makes exchanges
that appear to coincide with a market-timing strategy may be deemed to be
engaged in excessive trading. Accounts under common ownership or control will be
considered as one account for purposes of determining a pattern of excessive
trading. In addition, the Fund may refuse or restrict purchase or exchange
requests by any person or group if, in the judgment of the Fund's management,
the Fund would be unable to invest the money effectively in accordance with its
investment objective and policies or could otherwise be adversely affected or if
the Fund receives or anticipates receiving simultaneous orders that may
significantly affect the Fund (e.g., amounts equal to 1% or more of the Fund's
total assets). If an exchange request is refused, the Fund will take no other
action with respect to the shares until it receives further instructions from
the investor. The Fund may delay forwarding redemption proceeds for up to seven
days if the investor redeeming shares is engaged in excessive trading or if the
amount of the redemption request otherwise would be disruptive to efficient
portfolio management or would adversely affect the Fund. The Fund's policy on
excessive trading applies to investors who invest in the Fund directly or
through financial intermediaries, but does not apply to the Dreyfus Auto-
Exchange Privilege, to any automatic investment or withdrawal privilege
described herein, or to participants in employer-sponsored retirement plans.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange requests
based on their separate components -- redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Fund's next determined net asset value but the
purchase order would be effective only at the net asset value next determined
after the fund being purchased receives the proceeds of the redemption, which
may result in the purchase being delayed.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
COUNSEL AND INDEPENDENT AUDITORS
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038-4982, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the shares
being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as independent auditors of the Fund.
<PAGE>
APPENDIX
Description of certain S&P, Moody's and Fitch ratings:
S&P
MUNICIPAL BOND RATINGS
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the issuer
or obtained by S&P from other sources it considers reliable, and will include:
(1) likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature and provisions of the obligation; and (3)
protection afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A
Principal and interest payments on bonds in this category are regarded
as safe. This rating describes the third strongest capacity for payment of debt
service. It differs from the two higher ratings because:
General Obligation Bonds -- There is some weakness in the local
economic base, in debt burden, in the balance between revenues and expenditures,
or in quality of management. Under certain adverse circumstances, any one such
weakness might impair the ability of the issuer to meet debt obligations at some
future date.
Revenue Bonds -- Debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management performance
appears adequate.
BBB
Of the investment grade, this is the lowest.
General Obligation Bonds -- Under certain adverse conditions, several
of the above factors could contribute to a lesser capacity for payment of debt
service. The difference between A and BBB rating is that the latter shows more
than one fundamental weakness, or one very substantial fundamental weakness,
whereas the former shows only one deficiency among the factors considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the pledged
revenues could show substantial variations with the revenue flow possibly being
subject to erosion over time. Basic security provisions are no more than
adequate. Management performance could be stronger.
BB, B, CCC, CC
Debt rated BB, B, CCC or CC is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the lowest degree of speculation and CC the highest
degree of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
BB
Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payment.
B
Debt rated B has a greater vulnerability to default but presently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC
Debt rated CCC has a current identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions to
meet timely payments of principal. In the event of adverse business, financial
or economic conditions, it is not likely to have the capacity to pay interest
and repay principal.
CC
The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C
The rating C typically is applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating.
D
Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus or
minus sign designation, which is used to show relative standing within the major
rating categories, except in the AAA (Prime Grade) category.
MUNICIPAL NOTE RATINGS
SP-1
The issuers of these municipal notes exhibit very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics are given a plus (+) sign designation.
SP-2
The issuers of these municipal notes exhibit satisfactory capacity to
pay principal and interest.
COMMERCIAL PAPER RATINGS
The rating A is the highest rating and is assigned by S&P to issues
that are regarded as having the greatest capacity for timely payment. Issues in
this category are delineated with the numbers 1, 2 and 3 to indicate the
relative degree of safety. Paper rated A-1 indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted with a
plus (+) sign designation.
MOODY'S
MUNICIPAL BOND RATINGS
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa
Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca
Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
For bond issues in the health care, higher education and other
not-for-profit sectors, Moody's provides numerical modifiers 1, 2 and 3 to the
generic rating categories Aa through B; the modifier 1 indicates that the issue
ranks in the higher end of the generic rating category; the modifier 2 indicates
that the issue is in the mid-range of the generic rating category; and the
modifier 3 indicates that the issue is in the low end of the generic rating
category. For all other municipal bonds, Moody's provides either a generic
rating or a rating with the numerical modifier 1 for the rating categories Aa
through B, with the latter indicating that the issue ranks in the higher end of
the rating category
MUNICIPAL NOTE RATINGS
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade (MIG). Such ratings recognize the
difference between short-term credit risk and long-term risk. Factors affecting
the liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk,
long-term secular trends for example, may be less important over the short run.
A short-term rating may also be assigned on an issue having a demand
feature. Such ratings will be designated as V-MIG or, if the demand feature is
not rated, as NR. Short-term ratings on issues with demand features are
differentiated by the use of the V-MIG symbol to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to the
fact that the source of payment may be limited to the external liquidity with no
or limited legal recourse to the issuer in the event the demand is not met.
Moody's short-term ratings are designated Moody's Investment Grade as
MIG 1 or V-MIG 1 through MIG 4 or V-MIG 4. As the name implies, when Moody's
assigns a MIG or V-MIG rating, all categories define an investment grade
situation.
MIG 1/V-MIG 1
This description denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG 2/V-MIG 2
This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
COMMERCIAL PAPER RATING
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity for
repayment of short-term promissory obligations, and ordinarily will be evidenced
by leading market positions in well established industries, high rates of return
on funds employed, conservative capitalization structures with moderate reliance
on debt and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation and well established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2) have
a strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Fitch
MUNICIPAL BOND RATINGS
The ratings represent Fitch's assessment of the issuer's ability to
meet the obligations of a specific debt issue or class of debt. The ratings take
into consideration special features of the issue, its relationship to other
obligations of the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the political and
economic environment that might affect the issuer's future financial strength
and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1+.
A
Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have an adverse impact on these
bonds and, therefore, impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings.
BB
Bonds rated BB are considered speculative. The obligor's ability to
pay interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.
B
Bonds rated B are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC
Bonds rated CCC have certain identifiable characteristics, which, if
not remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC
Bonds rated CC are minimally protected. Default payment of interest
and/or principal seems probable over time.
C
Bonds rated C are in imminent default in payment of interest or
principal.
DDD, DD and D
Bonds rated DDD, DD and D are in actual or imminent default of
interest and/or principal payments. Such bonds are extremely speculative and
should be valued on the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. DDD represents the highest potential for recovery
on these bonds and D represents lowest potential for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to indicate
the relative position of a credit within the rating category. Plus and minus
signs, however, are not used in the AAA Category covering 12-36 months or the
DDD, DD or D categories.
SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
F-1+
EXCEPTIONALLY STRONG CREDIT QUALITY. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1
VERY STRONG CREDIT QUALITY. Issues assigned this rating reflect as
assurance of timely payment only slightly less in degree than issues rated F-1+.
F-2
GOOD CREDIT QUALITY. Issues carrying this rating have a satisfactory
degree of assurance for timely payments, but the margin of safety is not as
great as the F-1+ and F-1 categories.
<PAGE>
DREYFUS MUNICIPAL BOND FUND, INC.
PART C. OTHER INFORMATION
-------------------------
Item 23. Exhibits
- ------- -----------------------------------------------------
(a)(1) Articles of Incorporation and Articles of Amendment are
incorporated by reference to Exhibit (1)(a) of Post-Effective
Amendment No. 35 to the Registrant Statement on Form N-1A,
filed on October 27, 1995.
(a)(2) The Registrant's Articles of Amendment are incorporated by
reference to Exhibit (1)(c) of Post-Effective Amendment No. 33
to the Registrant Statement on Form N-1A, filed on October 29,
1993.
(b) By-Laws, as amended.
(c) The Registrant's Management Agreement dated August 24, 1994 is
incorporated by reference to Exhibit (5) of Post-Effective
Amendment No. 34 to the Registration Statement on Form N-1A,
filed on October 28, 1994.
(d) The Registrant's Distribution Agreement dated August 24, 1994
is incorporated by reference to Exhibit (6)(a) of
Post-Effective Amendment No. 34 to the Registration
Statement on Form N-1A, filed on October 28, 1994.
(g)(1) Amended and Restated Custody Agreement is incorporated by
reference to Exhibit (8)(a) of Post-Effective Amendment No. 35
to the Registrant on Form N-1A, filed on October 27, 1995.
(g)(2) The Registrant's Sub-Custodian Agreements are incorporated by
reference to Exhibit 8(b) of Post-Effective Amendment No. 34
to the Registration Statement on Form N-1A, filed on October
28, 1994.
(h) The Registrant's Shareholder Services Plan dated October 24,
1994 is incorporated by reference to Exhibit (9) of
Post-Effective Amendment No. 34 to the Registration Statement
on Form N-1A, filed on October 28, 1994.
(i) Opinion and Consent of Registrant's counsel are incorporated by
reference to Exhibit (10) of Post-Effective Amendment No. 35 to
the Registrant Statement on Form N-1A, filed on October 27,
1995.
(j) Consent of Independent Auditors.
(n) Financial Data Schedule.
<PAGE>
Other Exhibits
--------------
(a) Powers of Attorney.
(b) Certificate of Secretary.
Item 24. Persons Controlled by or under Common Control with Registrant.
- ------- --------------------------------------------------------------
Not Applicable
Item 25. Indemnification
- ------- ---------------
The Statement as to the general effect of any contract,
arrangements or statute under which a director, officer,
underwriter or affiliated person of the Registrant is insured or
indemnified in any manner against any liability which may be
incurred in such capacity, other than insurance provided by any
director, officer, affiliated person or underwriter for their own
protection, is incorporated by reference to Item 27 of Part C of
Post-Effective Amendment No. 38 to the Registration Statement on
Form N- 1A, filed on December, 1996.
Reference is also made to the Distribution Agreement attached as
Exhibit (6)(a) of Post-Effective Amendment No. 34 to the
Registration Statement on Form N-1A, filed on October 28, 1994.
Item 26. Business and Other Connections of Investment Adviser.
- ------- ----------------------------------------------------
The Dreyfus Corporation ("Dreyfus") and subsidiary companies
comprise a financial service organization whose business consists
primarily of providing investment management services as the
investment adviser, manager and distributor for sponsored
investment companies registered under the Investment Company Act
of 1940 and as an investment adviser to institutional and
individual accounts. Dreyfus also serves as sub- investment
adviser to and/or administrator of other investment companies.
Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus, serves primarily as a registered broker-dealer of shares
of investment companies sponsored by Dreyfus and of other
investment companies for which Dreyfus acts as investment
adviser, sub-investment adviser or administrator. Dreyfus
Investment Advisors, Inc., another wholly-owned subsidiary,
provides investment management services to various pension plans,
institutions and individuals.
<PAGE>
Item 26. Business and Other Connections of Investment Adviser (continued)
- -------- ----------------------------------------------------------------
Officers and Directors of Investment Adviser
--------------------------------------------
Name and Position
with Dreyfus Other Businesses
- ----------------- ----------------
W. KEITH SMITH Senior Vice Chairman:
Chairman of the Mellon Bank, N.A.*;
Board President and Director:
The Bridgewater Land Co., Inc.**;
Mellon Preferred Capital Corporation**;
TBC Securities Co., Inc.**;
Wellington-Medford II Properties, Inc.**;
Chairman, President and Chief Executive Officer:
Shearson Summit Euromanagement, Inc.*;
Shearson Summit EuroPartners, Inc.*;
Shearson Summit Management, Inc.*;
Shearson Summit Partners, Inc.*;
Shearson Venture Capital, Inc.*;
Chairman and Chief Executive Officer:
The Boston Company, Inc.**;
Boston Safe Deposit and Trust Company**;
Boston Group Holdings, Inc.**;
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405;
The Boston Company Asset Management, Inc.**;
Mellon Europe Limited
London, England;
Mellon Global Investing Corp.*;
Mellon Accounting Services, Inc.*;
MGIC-UK Ltd.;
Mellon Capital Management Corporation***;
Chairman:
Mellon Financial Company*;
Buck Consultants, Inc.
1 Pennsylvania Plaza, 29th Floor
New York, New York 10019;
Director and Vice Chairman:
Mellon Financial Services Corporation*;
Mellon Bank Corporation*;
Trustee:
Laurel Capital Advisors, LLP*;
Mellon Equity Associates, LLP*;
Mellon Bond Associates, LLP*;
Past Director:
Access Capital Strategies Corp.
124 Mount Auburn Street
Suite 200 North
Cambridge, MA 02138
W. KEITH SMITH Past Trustee:
Chairman of the Board Franklin Portfolio Associates Trust
(continued) 2 International Place, 22nd Floor
Boston, MA 02110
MANDELL L. BERMAN Real estate consultant and private investor
Director 29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034
BURTON C. BORGELT Director:
Director Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405;
DeVlieg-Bullard, Inc.
1 Gorham Island
Westport, Connecticut 06880;
Mellon Bank Corporation*;
Mellon Bank, N.A.*
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation*;
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Alleghany Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067;
Past Chairman, President and Chief Executive Officer:
Mellon Bank, N.A.*
STEPHEN E. CANTER Chairman and President:
Vice Chairman, Dreyfus Investment Advisors, Inc.****
Chief Investment Officer, Director:
and a Director The Dreyfus Trust Company+
Acting Chief Executive Officer:
Founders Asset Management, Inc.
2930 E. 3rd Avenue
Denver, CO 80206
CHRISTOPHER M. CONDRON President and Chief Operating Officer:
President, Chief Mellon Bank, N.A.*;
Executive Officer, President and Director:
Chief Operating Boston Safe Advisors, Inc.**;
Officer and a Vice-Chairman and Director:
Director Mellon Bank Corporation*;
The Boston Company, Inc.**;
Director:
Certus Asset Advisors Corporation++;
Mellon Capital Management Corpation***;
Boston Safe Deposit and Trust Company**;
Past President and Director:
The Boston Company Financial Services, Inc.**;
Past President:
The Boston Company Financial Strategies, Inc.**;
Boston Safe Deposit and Trust Company**;
Past Director:
Mellon Preferred Capital Corporation**;
Access Capital Strategies Corp.
124 Mount Auburn Street
Suite 200 North
Cambridge, MA 02138;
Past Chairman, President, and Chief Executive Officer:
The Boston Company Asset Management, Inc.**;
Past Partner Representative:
Pareto Partners
271 Regent Street
London, England W1R 8PP;
Past Trustee:
Franklin Portfolio Associates Trust
2 International Place, 22nd Floor
Boston, MA. 02710;
Mellon Bond Associates, LLP*;
Mellon Equity Associates, LLP*;
LAWRENCE S. KASH Executive Vice President:
Vice Chairman-Distribution Mellon Bank, N.A.*;
and a Director Chairman, President and Director:
The Dreyfus Consumer Credit Corporation****;
Trustee, President and Chief Executive Officer:
Laurel Capital Advisors, LLP*;
Director:
Dreyfus Investment Advisors, Inc.****;
Seven Six Seven Agency, Inc.****;
President and Director:
Dreyfus Service Corporation+;
Dreyfus Precious Metals, Inc.+;
Dreyfus Service Organization, Inc.****;
The Boston Company, Inc.**;
Boston Group Holdings, Inc.**;
Chairman and Chief Executive Officer:
Dreyfus Brokerage Services, Inc.
401 North Maple Avenue
Beverly Hills, CA 90210;
Chairman, President and Chief Executive Officer:
The Dreyfus Trust Company+;
The Boston Company Advisors, Inc.
Wilmington, DE.
J. DAVID OFFICER Director:
Vice Chairman Dreyfus Financial Services Corporation*****;
and a Director Dreyfus Investment Services Corporation*****;
Mellon Trust of Florida
2875 Northeast 191st Street
North Miami Beach, Florida 33180;
Boston Group Holdings, Inc.**;
Mellon Trust of New York
1301 Avenue of the Americas - 41st Floor
New York, New York 10019;
Mellon Trust of California
400 South Hope Street
Los Angeles, California 90071-2806;
Dreyfus Insurance Agency of Massachusetts, Inc.
53 State Street
Boston, Massachusetts 02109;
Executive Vice President:
Dreyfus Service Corporation****;
Mellon Bank, N.A.*;
Vice Chairman and Director:
The Boston Company, Inc.**;
President and Director:
RECO, Inc.**;
The Boston Company Financial Services, Inc.**;
Boston Safe Deposit and Trust Company**;
RICHARD F. SYRON Chairman of the Board and Chief Executive Officer:
Director American Stock Exchange
86 Trinity Place
New York, New York 10006;
Director:
John Hancock Mutual Life Insurance Company
John Hancock Place, Box 111
Boston, Massachusetts 02117;
Thermo Electron Corporation
81 Wyman Street, Box 9046
Waltham, Massachusetts 02254-9046;
American Business Conference
1730 K Street, NW, Suite 120
Washington, D.C. 20006;
Trustee:
Boston College - Board of Trustees
140 Commonwealth Ave.
Chestnut Hill, Massachusetts 02167-3934
RONALD P. O'HANLEY III Director:
Vice Chairman The Boston Company Asset Management, LLC**;
TBCAM Holding, Inc.**;
Franklin Portfolio Holdings, Inc.
Two International Place - 22nd Floor
Boston, Massachusetts 02110;
Mellon Capital Management Corporation***;
Certus Asset Advisors Corporation++;
Mellon-France Corporation***;
Chairman and Director:
Boston Safe Advisors, Inc.**;
Partner Representative:
Pareto Partners
271 Regent Street
London, England W1R 8PP;
Chairman and Trustee:
Mellon Bond Associates, LLP*;
Mellon Equity Associates, LLP*;
Trustee:
Laurel Capital Advisors, LLP*;
Chairman, President and Chief Executive Officer:
Mellon Global Investing Corp.*;
Partner:
McKinsey & Company, Inc.
Boston, Massachusetts
WILLIAM T. SANDALLS, JR. Chairman and Director:
Executive Vice President Dreyfus Transfer, Inc.
One American Express Plaza
Providence, Rhode Island 02903;
President and Director:
Dreyfus-Lincoln, Inc.
500 New Linden Hill Rd.
Wilmington, DE 19808;
Executive Vice President and Chief Financial Officer:
Dreyfus Service Corporation****;
Executive Vice President, Treasurer and Director:
Dreyfus Service Organization, Inc.****;
Director and Treasurer:
Dreyfus Investment Advisors, Inc.****;
Seven Six Seven Agency, Inc.****;
Dreyfus Precious Metals, Inc.+;
Director, Vice President and Treasurer:
The Dreyfus Consumer Credit Corporation****;
The TruePenny Corporation****
Director, Treasurer and Chief Financial Officer:
The Dreyfus Trust Company+;
Past Director and President:
Lion Management, Inc.****;
Dreyfus Partnership Management, Inc.****;
Past Director and Executive Vice President:
Dreyfus Service Organization, Inc.****;
Past Director and Treasurer:
Dreyfus Personal Management, Inc.****
MARK N. JACOBS Director:
Vice President, Dreyfus Service Organization, Inc.****;
General Counsel The Dreyfus Trust Company+;
and Secretary Dreyfus Investment Advisors, Inc.****;
Director and Secretary:
The TruePenny Corporation****;
Past Director, Vice President and Secretary:
Lion Management, Inc.****
PATRICE M. KOZLOWSKI None
Vice President-
Corporate Communications
MARY BETH LEIBIG None
Vice President-
Human Resources
ANDREW S. WASSER Vice President:
Vice President-Information Mellon Bank Corporation* Services
THEODORE A. SCHACHAR Vice President:
Vice-President Dreyfus Service Corporation****:
Dreyfus Investment Advisers, Inc.****;
Dreyfus Precious Metals, Inc.+;
Dreyfus Service Organization, Inc.****
WENDY STRUTT None
Vice President
RICHARD TERRES None
Vice President
WILLIAM H. MARESCA Director:
Controller The Dreyfus Trust Company+;
Chief Financial Officer:
Dreyfus Transfer, Inc.
One American Express Plaza
Providence, Rhode Island 02903;
Assistant Treasurer:
Dreyfus Service Organization, Inc.****
JAMES BITETTO Secretary:
Assistant Secretary The TruePenny Corporation****:
Assistant Secretary:
Dreyfus Service Corporation****;
Dreyfus Investment Advisers, Inc.****;
Dreyfus Service Organization, Inc.****
STEVEN F. NEWMAN Vice President, Secretary and Director:
Assistant Secretary Dreyfus Transfer, Inc.
One American Express Plaza
Providence, Rhode Island 02903;
Assistant Secretary:
Dreyfus Service Organization, Inc.****
- --------------------------------------
* The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
** The address of the business so indicated is One Mellon Bank Place,
Boston, Massachusetts, 02108.
*** The address of the business so indicated is 595 Market Street, Suite
#3000, San Francisco CA 94105.
**** The address of the business so indicated is 200 Park Avenue, New York,
New York 10166.
***** The address of the business so indicated is Union Trust Building,
501 Grant Street, Pittsburgh, PA 15259.
+ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York, 11556-0144.
++ The address of the business so indicated is One Bush Street, Suite
450, San Francisco, CA. 94104.
<PAGE>
Item 27. Principal Underwriters
- -------- ----------------------
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or exclusive
distributor:
1) Comstock Partners Funds, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC GNMA Fund
7) Dreyfus BASIC Money Market Fund, Inc.
8) Dreyfus BASIC Municipal Fund, Inc.
9) Dreyfus BASIC U.S. Government Money Market Fund
10) Dreyfus California Intermediate Municipal Bond Fund
11) Dreyfus California Tax Exempt Bond Fund, Inc.
12) Dreyfus California Tax Exempt Money Market Fund
13) Dreyfus Cash Management
14) Dreyfus Cash Management Plus, Inc.
15) Dreyfus Connecticut Intermediate Municipal Bond Fund
16) Dreyfus Connecticut Municipal Money Market Fund, Inc.
17) Dreyfus Florida Intermediate Municipal Bond Fund
18) Dreyfus Florida Municipal Money Market Fund
19) The Dreyfus Fund Incorporated
20) Dreyfus Global Bond Fund, Inc.
21) Dreyfus Global Growth Fund
22) Dreyfus GNMA Fund, Inc.
23) Dreyfus Government Cash Management Funds
24) Dreyfus Growth and Income Fund, Inc.
25) Dreyfus Growth and Value Funds, Inc.
26) Dreyfus Growth Opportunity Fund, Inc.
27) Dreyfus Debt and Equity Funds
28) Dreyfus Index Funds, Inc.
29) Dreyfus Institutional Money Market Fund
30) Dreyfus Institutional Preferred Money Market Fund
31) Dreyfus Institutional Short Term Treasury Fund
32) Dreyfus Insured Municipal Bond Fund, Inc.
33) Dreyfus Intermediate Municipal Bond Fund, Inc.
34) Dreyfus International Funds, Inc.
35) Dreyfus Investment Grade Bond Funds, Inc.
36) Dreyfus Investment Portfolios
37) The Dreyfus/Laurel Funds, Inc.
38) The Dreyfus/Laurel Funds Trust
39) The Dreyfus/Laurel Tax-Free Municipal Funds
40) Dreyfus LifeTime Portfolios, Inc.
41) Dreyfus Liquid Assets, Inc.
42) Dreyfus Massachusetts Intermediate Municipal Bond Fund
43) Dreyfus Massachusetts Municipal Money Market Fund
44) Dreyfus Massachusetts Tax Exempt Bond Fund
45) Dreyfus MidCap Index Fund
46) Dreyfus Money Market Instruments, Inc.
47) Dreyfus Municipal Bond Fund, Inc.
48) Dreyfus Municipal Cash Management Plus
49) Dreyfus Municipal Money Market Fund, Inc.
50) Dreyfus New Jersey Intermediate Municipal Bond Fund
51) Dreyfus New Jersey Municipal Bond Fund, Inc.
52) Dreyfus New Jersey Municipal Money Market Fund, Inc.
53) Dreyfus New Leaders Fund, Inc.
54) Dreyfus New York Insured Tax Exempt Bond Fund
55) Dreyfus New York Municipal Cash Management
56) Dreyfus New York Tax Exempt Bond Fund, Inc.
57) Dreyfus New York Tax Exempt Intermediate Bond Fund
58) Dreyfus New York Tax Exempt Money Market Fund
59) Dreyfus U.S. Treasury Intermediate Term Fund
60) Dreyfus U.S. Treasury Long Term Fund
61) Dreyfus 100% U.S. Treasury Money Market Fund
62) Dreyfus U.S. Treasury Short Term Fund
63) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
64) Dreyfus Pennsylvania Municipal Money Market Fund
65) Dreyfus Premier California Municipal Bond Fund
66) Dreyfus Premier Equity Funds, Inc.
67) Dreyfus Premier International Funds, Inc.
68) Dreyfus Premier GNMA Fund
69) Dreyfus Premier Worldwide Growth Fund, Inc.
70) Dreyfus Premier Insured Municipal Bond Fund
71) Dreyfus Premier Municipal Bond Fund
72) Dreyfus Premier New York Municipal Bond Fund
73) Dreyfus Premier State Municipal Bond Fund
74) Dreyfus Premier Value Equity Funds
75) Dreyfus Short-Intermediate Government Fund
76) Dreyfus Short-Intermediate Municipal Bond Fund
77) The Dreyfus Socially Responsible Growth Fund, Inc.
78) Dreyfus Stock Index Fund, Inc.
79) Dreyfus Tax Exempt Cash Management
80) The Dreyfus Third Century Fund, Inc.
81) Dreyfus Treasury Cash Management
82) Dreyfus Treasury Prime Cash Management
83) Dreyfus Variable Investment Fund
84) Dreyfus Worldwide Dollar Money Market Fund, Inc.
85) General California Municipal Bond Fund, Inc.
86) General California Municipal Money Market Fund
87) General Government Securities Money Market Fund, Inc.
88) General Money Market Fund, Inc.
89) General Municipal Bond Fund, Inc.
90) General Municipal Money Market Funds, Inc.
91) General New York Municipal Bond Fund, Inc.
92) General New York Municipal Money Market Fund
<PAGE>
(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
- ------------------ --------------------------- -------------
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Compliance Treasurer
Officer
Joseph F. Tower, III++ Director, Senior Vice President, Vice President
Treasurer and Chief Financial and Assistant
Officer Treasurer
Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer
Paul Prescott+ Vice President None
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
- --------------------------------
+ Principal business address is 60 State Street, Boston, Massachusetts 02109.
++ Principal business address is 200 Park Avenue, New York, New York 10166.
<PAGE>
Item 28. Location of Accounts and Records
--------------------------------
1. Dreyfus Transfer, Inc.,
One American Express Plaza, PVD410
Providence, Rhode Island 02903
2. The Bank of New York
90 Washington Street
New York, NY 10286
3. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 29. Management Services
- ------- -------------------
Not Applicable
Item 30. Undertakings
- -------- ------------
None
<PAGE>
SIGNATURES
------------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly
caused this Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York, and
State of New York on the 11th day of December, 1998.
DREYFUS MUNICIPAL BOND FUND, INC.
BY: /s/Marie E. Connolly
--------------------------------
Marie E. Connolly, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signatures Title Date
- ------------------------ -------------------------- ---------
/s/Marie E. Connolly* President and Treasurer 12/11/98
- ------------------------ (Principal Executive, Acounting
Marie E. Connolly and Financial Officer)
/s/Joseph F. Tower, III* Vice President and Assistant 12/11/98
- ------------------------- Treasurer (Principal Accounting)
Joseph F. Tower, III Officer)
/s/ Joseph S. DiMartino* Chairman of the Board 12/11/98
- -------------------------
Joseph S. DiMartino
/s/David W. Burke * Director 12/11/98
- -------------------------
David W. Burke
/s/Hodding Carter, III Director 12/11/98
- -------------------------
Hodding Carter
/s/Ehud Houminer * Director 12/11/98
- -------------------------
Ehud Houminer
/s/Richard C. Leone* Director 12/11/98
- -------------------------
Richard C. Leone
/s/Hans C. Mautner* Director 12/11/98
- -------------------------
Hans C. Mautner
/s/Robin A. Pringle* Director 12/11/98
- -------------------------
Robin A. Pringle
/s/John E. Zuccotti* Director 12/11/98
- -------------------------
John E. Zuccotti
*BY: /s/ Michael S. Petrucelli
--------------------------
Michael S. Petrucelli,
Attorney-in-Fact
<PAGE>
INDEX OF EXHIBITS
Exhibit No.
23(b) By-laws, as amended
23(j) Consent of Independent Auditors
23(n) Financial Data Schedule
OTHER EXHIBITS
(a) Powers of Attorney
(b) Certificate of Secretary
Exhibit (b)
BY-LAWS
OF
Dreyfus Municipal Bond Fund, Inc.
(A Maryland Corporation)
-----------
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates representing shares
of stock shall set forth thereon the statements prescribed by Section 2-211 of
the Maryland General Corporation Law ("General Corporation Law") and by any
other applicable provision of law and shall be signed by the Chairman of the
Board or the President or a Vice President and countersigned by the Secretary or
an Assistant Secretary or the Treasurer or an Assistant Treasurer and may be
sealed with the corporate seal. The signatures of any such officers may be
either manual or facsimile signatures and the corporate seal may be either
facsimile or any other form of seal. In case any such officer who has signed
manually or by facsimile any such certificate ceases to be such officer before
the certificate is issued, it nevertheless may be issued by the corporation with
the same effect as if the officer had not ceased to be such officer as of the
date of its issue.
No certificate representing shares of stock shall be issued for any
share of stock until such share is fully paid, except as otherwise authorized in
Section 2-206 of the General Corporation Law.
The corporation may issue a new certificate of stock in place of any
certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the Board of Directors may require, in its discretion, the owner
of any such certificate or the owner's legal representative to give bond, with
sufficient surety, to the corporation to indemnify it against any loss or claim
that may arise by reason of the issuance of a new certificate.
2. SHARE TRANSFERS. Upon compliance with provisions restricting the
transferability of shares of stock, if any, transfers of shares of stock of the
corporation shall be made only on the stock transfer books of the corporation by
the record holder thereof or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the corporation or with a
transfer agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares of stock properly endorsed and the payment of all
taxes due thereon.
3. RECORD DATE FOR STOCKHOLDERS. The Board of Directors may fix, in
advance, a date as the record date for the purpose of determining stockholders
entitled to notice of, or to vote at, any meeting of stockholders, or
stockholders entitled to receive payment of any dividend or the allotment of any
rights or in order to make a determination of stockholders for any other proper
purpose. Such date, in any case, shall be not more than 90 days, and in case of
a meeting of stockholders not less than 10 days, prior to the date on which the
meeting or particular action requiring such determination of stockholders is to
be held or taken. In lieu of fixing a record date, the Board of Directors may
provide that the stock transfer books shall be closed for a stated period but
not to exceed 20 days. If the stock transfer books are closed for the purpose of
determining stockholders entitled to notice of, or to vote at, a meeting of
stockholders, such books shall be closed for at least 10 days immediately
preceding such meeting. If no record date is fixed and the stock transfer books
are not closed for the determination of stockholders: (1) The record date for
the determination of stockholders entitled to notice of, or to vote at, a
meeting of stockholders shall be at the close of business on the day on which
the notice of meeting is mailed or the day 30 days before the meeting, whichever
is the closer date to the meeting; and (2) The record date for the determination
of stockholders entitled to receive payment of a dividend or an allotment of any
rights shall be at the close of business on the day on which the resolution of
the Board of Directors declaring the dividend or allotment of rights is adopted,
provided that the payment or allotment date shall not be more than 60 days after
the date on which the resolution is adopted.
4. MEANING OF CERTAIN TERMS. As used herein in respect of the right to
notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share of stock" or "shares of stock" or "stockholder" or
"stockholders" refers to an outstanding share or shares of stock and to a holder
or holders of record of outstanding shares of stock when the corporation is
authorized to issue only one class of shares of stock and said reference also is
intended to include any outstanding share or shares of stock and any holder or
holders of record of outstanding shares of stock of any class or series upon
which or upon whom the Charter confers such rights where there are two or more
classes or series of shares or upon which or upon whom the General Corporation
Law confers such rights notwithstanding that the Charter may provide for more
than one class or series of shares of stock, one or more of which are limited or
denied such rights thereunder.
5. STOCKHOLDER MEETINGS.
ANNUAL MEETINGS. If a meeting of the stockholders of the corporation
is required by the Investment Company Act of 1940, as amended, to elect the
directors, then there shall be submitted to the stockholders at such meeting the
question of the election of directors, and a meeting called for that purpose
shall be designated the annual meeting of stockholders for that year. In other
years in which no action by stockholders is required for the aforesaid election
of directors, no annual meeting need be held.
SPECIAL MEETINGS. Special stockholder meetings for any purpose may be
called by the Board of Directors or the President and shall be called by the
Secretary for the purpose of removing a Director whenever the holders of shares
entitled to at least ten percent of all the votes entitled to be cast at such
meeting shall make a duly authorized request that such meeting be called.
The Secretary shall call a special meeting of stockholders for all
other purposes whenever the holders of shares entitled to at least a majority of
all the votes entitled to be cast at such meeting shall make a duly authorized
request that such meeting be called. Such request shall state the purpose of
such meeting and the matters proposed to be acted on thereat, and no other
business shall be transacted at any such special meeting. The Secretary shall
inform such stockholders of the reasonably estimated costs of preparing and
mailing the notice of the meeting, and upon payment to the corporation of such
costs, the Secretary shall give notice in the manner provided for below.
PLACE AND TIME. Stockholder meetings shall be held at such place,
either within the State of Maryland or at such other place within the United
States, and at such date or dates as the directors from time to time may fix.
NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER OF NOTICE. Written or printed
notice of all meetings shall be given by the Secretary and shall state the time
and place of the meeting. The notice of a special meeting shall state in all
instances the purpose or purposes for which the meeting is called. Written or
printed notice of any meeting shall be given to each stockholder either by mail
or by presenting it to the stockholder personally or by leaving it at his or her
residence or usual place of business not less than 10 days and not more than 90
days before the date of the meeting, unless any provisions of the General
Corporation Law shall prescribe a different elapsed period of time, to each
stockholder at his or her address appearing on the books of the corporation or
the address supplied by the stockholder for the purpose of notice. If mailed,
notice shall be deemed to be given when deposited in the United States mail
addressed to the stockholder at his or her post office address as it appears on
the records of the corporation with postage thereon prepaid. Whenever any notice
of the time, place or purpose of any meeting of stockholders is required to be
given under the provisions of these by-laws or of the General Corporation Law, a
waiver thereof in writing, signed by the stockholder and filed with the records
of the meeting, whether before or after the holding thereof, or actual
attendance or representation at the meeting shall be deemed equivalent to the
giving of such notice to such stockholder. The foregoing requirements of notice
also shall apply, whenever the corporation shall have any class of stock which
is not entitled to vote, to holders of stock who are not entitled to vote at the
meeting, but who are entitled to notice thereof and to dissent from any action
taken thereat.
STATEMENT OF AFFAIRS. The President of the corporation or, if the
Board of Directors shall determine otherwise, some other executive officer
thereof, shall prepare or cause to be prepared annually a full and correct
statement of the affairs of the corporation, including a balance sheet and a
financial statement of operations for the preceding fiscal year, which shall be
filed at the principal office of the corporation in the State of Maryland.
QUORUM. At any meeting of stockholders, the presence in person or by
proxy of stockholders entitled to cast one-third of the votes thereat shall
constitute a quorum. In the absence of a quorum, the stockholders present in
person or by proxy, by majority vote and without notice other than by
announcement, may adjourn the meeting from time to time, but not for a period
exceeding 120 days after the original record date until a quorum shall attend.
ADJOURNED MEETINGS. A meeting of stockholders convened on the date for
which it was called (including one adjourned to achieve a quorum as provided in
the paragraph above) may be adjourned from time to time without further notice
to a date not more than 120 days after the original record date, and any
business may be transacted at any adjourned meeting which could have been
transacted at the meeting as originally called.
CONDUCT OF MEETING. Meetings of the stockholders shall be presided
over by one of the following officers in the order of seniority and if present
and acting: the President, a Vice President or, if none of the foregoing is in
office and present and acting, by a chairman to be chosen by the stockholders.
The Secretary of the corporation or, in his or her absence, an Assistant
Secretary, shall act as secretary of every meeting, but if neither the Secretary
nor an Assistant Secretary is pres the chairman of the meeting shall appoint a
secretary of the meeting.
PROXY REPRESENTATION. Every stockholder may authorize another person
or persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether for the purposes of determining the
stockholder's presence at a meeting, or whether by waiving notice of any
meeting, voting or participating at a meeting, expressing consent or dissent
without a meeting or otherwise. Every proxy shall be executed in writing by the
stockholder or by his or her duly authorized attorney-in-fact or be in such
other form as may be permitted by the Maryland General Corporation Law,
including documents conveyed by electronic transmission and filed with the
Secretary of the corporation. A copy, facsimile transmission or other
reproduction of the writing or transmission may be substituted for the original
writing or transmission for any purpose for which the original transmission
could be used. No unrevoked proxy shall be valid after 11 months from the date
of its execution, unless a longer time is expressly provided therein. The
placing of a stockholder's name on a proxy pursuant to telephonic or
electronically transmitted instructions obtained pursuant to procedures
reasonably designed to verify that such instructions have been authorized by
such stockholder shall constitute execution of such proxy by or on behalf of
such stockholder.
INSPECTORS OF ELECTION. The directors, in advance of any meeting, may,
but need not, appoint one or more inspectors to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more inspectors. In
case any person who may be appointed as an inspector fails to appear or act, the
vacancy may be filled by appointment made by the directors in advance of the
meeting or at the meeting by person presiding thereat. Each inspector, if any,
before entering upon the discharge of his duties, shall take and sign an oath to
execute faithfully the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares outstanding and the voting power of each,
the shares represented at the meeting, the existence of a quorum and the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
result and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the person presiding at the meeting
or any stockholder, the inspector or inspectors, if any, shall make a report in
writing of any challenge, question or matter determined by him or them and
execute a certificate of any fact found by him or them.
VOTING. Each share of stock shall entitle the holder thereof to one
vote, except in the election of directors, at which each said vote may be cast
for as many persons as there are directors to be elected. Except for election of
directors, a majority of the votes cast at a meeting of stockholders, duly
called and at which a quorum is present, shall be sufficient to take or
authorize action upon any matter which may come before a meeting, unless more
than a majority of votes cast is require by the corporation's Articles of
Incorporation. A plurality of all the votes cast at a meeting at which a quorum
is present shall be sufficient to elect a director.
6. INFORMAL ACTION. Any action required or permitted to be taken at a
meeting of stockholders may be taken without a meeting if a consent in writing,
setting forth such action, is signed by all the stockholders entitled to vote on
the subject matter thereof and any other stockholders entitled to notice of a
meeting of stockholders (but not to vote thereat) have waived in writing any
rights which they may have to dissent from such action and such consent and
waiver are filed with the records of the corporation.
For Funds offered exclusively to insurance products and retirement
plans:
7. LIMITATION ON THE SALE OF SHARES OF STOCK IN THE CORPORATION.
Shares of stock in the corporation shall not be sold to individuals and entities
other than Participating Insurance Companies, as defined by the Board of
Directors, pursuant to variable annuity and variable life insurance contracts,
and Eligible Plans, as defined by the Board of Directors. Sales of shares of
stock in the corporation to individuals or entities other than Participating
Insurance Companies or Eligible Plans are unauthorized and shall be deemed
invalid and void ab ibnitio.
ARTICLE II
BOARD OF DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the
corporation shall be managed under the direction of a Board of Directors. The
use of the phrase "entire board" herein refers to the total number of directors
which the corporation would have if there were no vacancies.
2. QUALIFICATIONS AND NUMBER. Each director shall be a natural person
of full age. A director need not be a stockholder, a citizen of the United
States or a resident of the State of Maryland. The initial Board of Directors
shall consist of one person. Thereafter, the number of directors constituting
the entire board shall never be less than three or the number of stockholders,
whichever is less. At any regular meeting or at any special meeting called for
that purpose, a majority of the entire Board of Directors may increase or
decrease the number of directors, provided that the number thereof shall never
be less than three or the number of stockholders, whichever is less, nor more
than twelve and further provided that the tenure of office of a director shall
not be affected by any decrease in the number of directors.
3. ELECTION AND TERM. The first Board of Directors shall consist of
the director named in the Articles of Incorporation and shall hold office until
the first meeting of stockholders or until his or her successor has been elected
and qualified. Thereafter, directors who are elected at a meeting of
stockholders, and directors who are elected in the interim to fill vacancies and
newly created directorships, shall hold office until their successors have been
elected and qualified, as amended. Newly created directorships and any vacancies
in the Board of Directors, other than vacancies resulting from the removal of
directors by the stockholders, may be filled by the Board of Directors, subject
to the provisions of the Investment Company Act of 1940, as amended. Newly
created directorships filled by the Board of Directors shall be by action of a
majority of the entire Board of Directors then in office. All vacancies to be
filled by the Board of Directors may be filled by a majority of the remaining
members of the Board of Directors, although such majority is less than a quorum
thereof.
4. MEETINGS.
TIME. Meetings shall be held at such time as the Board of Directors
shall fix, except that the first meeting of a newly elected Board of Directors
shall be held as soon after its election as the directors conveniently may
assemble.
PLACE. Meetings shall be held at such place within or without the
State of Maryland as shall be fixed by the Board.
CALL. No call shall be required for regular meetings for which the
time and place have been fixed. Special meetings may be called by or at the
direction of the President or of a majority of the directors in office.
NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. Whenever any notice of the
time, place or purpose of any meeting of directors or any committee thereof is
required to be given under the provisions of the General Corporation Law or of
these by-laws, a waiver thereof in writing, signed by the director or committee
member entitled to such notice and filed with the records of the meeting,
whether before or after the holding thereof, or actual attendance at the meeting
shall be deemed equivalent to the giving of such notice to such director or such
committee member.
QUORUM AND ACTION. A majority of the entire Board of Directors shall
constitute a quorum except when a vacancy or vacancies prevents such majority,
whereupon a majority of the directors in office shall constitute a quorum,
provided such majority shall constitute at least one-third of the entire Board
and, in no event, less than two directors. A majority of the directors present,
whether or not a quorum is present, may adjourn a meeting to another time and
place. Except as otherwise specifically provided by the Articles of
Incorporation, the General Corporation Law or these by-laws, the action of a
majority of the directors present at a meeting at which a quorum is present
shall be the action of the Board of Directors.
CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
present and acting, or the President or any other director chosen by the Board,
shall preside at all meetings.
5. REMOVAL OF DIRECTORS. Any or all of the directors may be removed
for cause or without cause by the stockholders, who may elect a successor or
successors to fill any resulting vacancy or vacancies for the unexpired term of
the removed director or directors.
6. COMMITTEES. The Board of Directors may appoint from among its
members an Executive Committee and other committees composed of one or more
directors and may delegate to such committee or committees, in the intervals
between meetings of the Board of Directors, any or all of the powers of the
Board of Directors in the management of the business and affairs of the
corporation, except the power to amend the by-laws, to approve any merger or
share exchange which does not require stockholder approval, to authorize
dividends, to issue stock (except to the extent permitted by law) or to
recommend to stockholders any action requiring the stockholders' approval. In
the absence of any member of any such committee, the members thereof present at
any meeting, whether or not they constitute a quorum, may appoint a member of
the Board of Directors to act in the place of such absent member.
7. INFORMAL ACTION. Any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if a written consent to such action is signed by all members
of the Board of Directors or any such committee, as the case may be, and such
written consent is filed with the minutes of the proceedings of the Board or any
such committee.
Members of the Board of Directors or any committee designated thereby
may participate in a meeting of such Board or committee by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
ARTICLE III
OFFICERS
The corporation may have a Chairman of the Board and shall have a
President, a Secretary and a Treasurer, who shall be elected by the Board of
Directors, and may have such other officers, assistant officers and agents as
the Board of Directors shall authorize from time to time. Any two or more
offices, except those of President and Vice President, may be held by the same
person, but no person shall execute, acknowledge or verify any instrument in
more than one capacity, if such instrument is required by law to be executed,
acknowledged or verified by two or more officers.
Any officer or agent may be removed by the Board of Directors
whenever, in its judgment, the best interests of the corporation will be served
thereby.
ARTICLE IV
PRINCIPAL OFFICE - RESIDENT AGENT - STOCK LEDGER
The address of the principal office of the corporation in the State of
Maryland prescribed by the General Corporation Law is 32 South Street, c/o The
Corporation Trust Incorporated, Baltimore, Maryland 21202. The name and address
of the resident agent in the State of Maryland prescribed by the General
Corporation Law are: The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202.
The corporation shall maintain, at its principal office in the State
of Maryland prescribed by the General Corporation Law or at the business office
or an agency of the corporation, an original or duplicate stock ledger
containing the names and addresses of all stockholders and the number of shares
of each class held by each stockholder. Such stock ledger may be in written form
or any other form capable of being converted into written form within a
reasonable time for visual inspection.
The corporation shall keep at said principal office in the State of
Maryland the original or a certified copy of the by-laws, including all
amendments thereto, and shall duly file thereat the annual statement of affairs
of the corporation prescribed by Section 2-313 of the General Corporation Law.
ARTICLE V
CORPORATE SEAL
The corporate seal shall have inscribed thereon the name of the
corporation and shall be in such form and contain such other words and/or
figures as the Board of Directors shall determine or the law require.
ARTICLE VI
FISCAL YEAR
The fiscal year of the corporation or any series thereof shall be
fixed, and shall be subject to change, by the Board of Directors.
ARTICLE VII
CONTROL OVER BY-LAWS
The power to make, alter, amend and repeal the by-laws is vested
exclusively in the Board of Directors of the corporation.
ARTICLE VIII
INDEMNIFICATION
1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The corporation shall
indemnify its directors to the fullest extent that indemnification of directors
is permitted by the law. The corporation shall indemnify its officers to the
same extent as its directors and to such further extent as is consistent with
law. The corporation shall indemnify its directors and officers who while
serving as directors or officers also serve at the request of the corporation as
a director, officer, partner, trustee, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust, other enterprise or employee
benefit plan to the same extent as its directors and, in the case of officers,
to such further extent as is consistent with law. The indemnifi-cation and other
rights provided by this Article shall continue as to a person who has ceased to
be a director or officer and shall inure to the benefit of the heirs, executors
and administrators of such a person. This Article shall not protect any such
person against any liability to the corporation or any stockholder thereof to
which such person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office ("disabling conduct").
2. ADVANCES. Any current or former director or officer of the
corporation seeking indemnification within the scope of this Article shall be
entitled to advances from the corporation for payment of the reasonable expenses
incurred by him in connection with the matter as to which he is seeking
indemnification in the manner and to the fullest extent permissible under the
General Corporation Law. The person seeking indemnification shall provide to the
corporation a written affirmation of his good faith belief that the standard of
conduct necessary for indemnification by the corporation has been met and a
written undertaking to repay any such advance if it should ultimately be
determined that the standard of conduct has not been met. In addition, at least
one of the following additional conditions shall be met: (a) the person seeking
indemnification shall provide a security in form and amount acceptable to the
corporation for his or her undertaking; (b) the corporation is insured against
losses arising by reason of the advance; or (c) a majority of a quorum of
directors of the corporation who are neither "interested persons" as defined in
Section 2(a)(19) of the Investment Company Act of 1940, as amended, nor parties
to the proceeding ("disinterested non-party directors"), or independent legal
counsel, in a written opinion, shall have determined, based on a review of facts
readily available to the corporation at the time the advance is proposed to be
made, that there is reason to believe that the person seeking indemnification
will ultimately be found to be entitled to indemnification.
3. PROCEDURE. At the request of any person claiming indemnification
under this Article, the Board of Directors shall determine, or cause to be
determined, in a manner consistent with the General Corporation Law, whether the
standards required by this Article have been met. Indemnification shall be made
only following: (a) a final decision on the merits by a court or other body
before whom the proceeding was brought that the person to be indemnified was not
liable by reason of disabling conduct or (b) in the absence of such a decision,
a reasonable determination, based upon a review of the facts, that the person to
be indemnified was not liable by reason of disabling conduct by (i) the vote of
a majority of a quorum of disinterested non-party directors or (ii) an
independent legal counsel in a written opinion.
4. INDEMNIFICATION OF EMPLOYEES AND AGENTS. Employees and agents who
are not officers or directors of the corporation may be indemnified, and
reasonable expenses may be advanced to such employees or agents, as may be
provided by action of the Board of Directors or by contract, subject to any
limitations imposed by the Investment Company Act of 1940, as amended.
5. OTHER RIGHTS. The Board of Directors may make further provision
consistent with law for indemnification and advance of expenses to directors,
officers, employees and agents by resolution, agreement or otherwise. The
indemnification provided by this Article shall not be deemed exclusive of any
other right, with respect to indemnification or otherwise, to which those
seeking indemnification may be entitled under any insurance or other agreement
or resolution of stockholders or disinterested non-party directors or otherwise.
6. AMENDMENTS. References in this Article are to the General
Corporation Law and to the Investment Company Act of 1940 as from time to time
amended. No amendment of the by-laws shall affect any right of any person under
this Article based on any event, omission or proceeding prior to the amendment.
Dated: February 2, 1998
EXHIBIT (j)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Counsel and Independent Auditors" and to the use of our report
dated October 1, 1998, which is incorported by reference, in this Registration
Statement (Form N-1A 2-56878) of Dreyfus Mincipal Bond Fund, Inc.
ERNST & YOUNG LLP
New York, New York
December 10, 1998
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitute and appoint Margaret W. Chambers, Marie
E. Connolly, Christopher J. Kelly, Kathleen K. Morrisey, Michael S. Petrucelli,
Stephanie Pierce and Elba Vasquez, and each of them, with full power to act
without the other, his or her true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him or her, and in his or her
name, place and stead, in any and all capacities (until revoked in writing) to
sign any and all amendments to the Registration Statement of Dreyfus Municipal
Bond Fund, Inc. (including the post-effective amendments and amendments
thereto), and to file the same, with all exhibit thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Joseph S. DiMartino June 15, 1998
- ------------------------
Joseph S. DiMartino
/s/ David W. Burke June 15, 1998
- ------------------------
David W. Burke
/s/ Hodding Carter, III June 15, 1998
- ------------------------
Hodding Carter, III
/s/ Ehud Houminer June 15, 1998
- ------------------------
Ehud Houminer
/s/ Richard C. Leone June 15, 1998
- ------------------------
Richard C. Leone
/s/ Hans C. Mautner June 15, 1998
- ------------------------
Hans C. Mautner
/s/ Robin A. Pringle June 15, 1998
- ------------------------
Robin A. Pringle
/s/ John E. Zuccotti June 15, 1998
- ------------------------
John E. Zuccotti
<PAGE>
POWER OF ATTORNEY
The undersigned hereby constitute and appoint Margaret W. Chambers,
Christopher J. Kelley, Kathleen K. Morrisey, Michael S. Petrucelli, Stephanie
Pierce and Elba Vasquez, and each of them, with full power to act without the
other, her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for her, and in her name, place and stead, in
any and all capacities (until revoked in writing) to sign any and all amendments
to the Registration Statement of each Fund enumerated on Exhibit A attached
hereto (including post-effective amendments and amendments thereto), and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in- fact and agents, and each of them, full power and authority to do
and perform each and every act and thing ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his or her substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
/s/Marie E. Connolly July 23, 1998
Marie E. Connolly
<PAGE>
EXHIBIT A
DREYFUS NEW LEADERS FUND, INC.
DREYFUS MUNICIPAL BOND FUND, INC.
DREYFUS STRATEGIC MUNICIPALS, INC.
DREYFUS STRATEGIC MUNICIPAL BOND FUND, INC.
DREYFUS INSURED MUNICIPAL BOND FUND, INC.
DREYFUS MUNICIPAL MONEY MARKET FUND, INC.
DREYFUS CALIFORNIA MONEY MARKET FUND, INC.
<PAGE>
ASSISTANT SECRETARY'S CERTIFICATE
The undersigned, Stephanie Pierce, Vice President, Assistant Treasurer, and
Assistant Secretary of Dreyfus Municipal Bond Fund, Inc. (the "Fund"), hereby
certifies that set forth below is a copy of the resolution adopted by the Fund's
Board members by unanimous written consent, dated June 15, 1998, authorizing the
signing by Marie Connolly, Margaret W. Chambers, Michael S. Petrucelli,
Stephanie Pierce, Christopher J. Kelley, Kathleen K. Morrisey, Elba Vasquez on
behalf of the proper officers of the Fund pursuant to a power of attorney:
RESOLVED, that the following person be, and they hereby are, elected to
the offices set forth opposite their respective names, to serve at the
pleasure of the Fund's Board:
President and Treasurer Marie E. Connolly
Vice President and Secretary Margaret W. Chambers
Vice President and Assistant Treasurer Mary A. Nelson
Vice President and Assistant Treasurer George A. Rio
Vice President and Assistant Treasurer Joseph F. Tower III
Vice President, Assistant Treasurer, and Michael S. Petrucelli
Assistant Secretary
Vice President, Assistant Treasurer, and Stephanie Pierce
Assistant Secretary
Vice President and Assistant Treasurer Douglas C. Conroy
Vice President and Assistant Treasurer Christopher J. Kelley
Vice President and Assistant Treasurer Kathleen K. Morrisey
Vice President and Assistant Treasurer Elba Vasquez
RESOLVED, that the Registration Statement and any and all amendments
and supplements thereto may be signed by any one of Margaret W.
Chambers, Marie E. Connolly, Christopher J. Kelly, Kathleen K.
Morrisey, Michael S. Petrucelli, Stephanie Pierce and Elba Vasquez, as
attorney-in-fact for the proper officers of the Fund, with full power
substitution and resubstitution; and that the appointment of each of
such persons as such attorney-in-fact hereby is authorized and
approved; and that such attorneys-in-fact each of them, shall have full
power and authority to do and perform each and every act and thing
requisite and all amendments and supplements thereto, as whom he or she
is acting as attorney-in-fact, might or could do in person.
IN WITNESS THEREOF, I have hereunder signed by name and affixed the seal of
the Fund on November 23, 1998.
/s/Stephanie Pierce
----------------------------
Stephanie Pierce
Vice President, Assistant Treasurer,
and Assistant Secretary
SEAL
Dreyfus Municipal Bond Fund, Inc.
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