File No. 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. 43 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 43 [X]
(Check appropriate box or boxes.)
DREYFUS MUNICIPAL BOND FUND, INC.
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(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)
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X on January 1, 2001 pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(1)
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on (date) pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on (date) pursuant to paragraph (a)(2) of Rule 485
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If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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Dreyfus Municipal Bond Fund, Inc.
Investing for income that is exempt from federal income tax
PROSPECTUS January 1, 2001
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
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.
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Ticker Symbol: DRTAX
GOAL/APPROACH
The fund seeks to maximize current income exempt from federal income tax, to the
extent consistent with the preservation of capital. To pursue this goal, the
fund normally invests substantially all of its net assets in municipal bonds
that provide income 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. The fund may invest
up to 25% of its assets in municipal bonds rated below A or the unrated
equivalent as determined by Dreyfus, including bonds of below investment grade
credit quality ("high yield" or "junk" bonds). The dollar-weighted average
maturity of the fund is not restricted, but normally exceeds ten years.
Municipal bonds are typically of 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
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 federal
alternative minimum tax. In addition, the fund occasionally may invest in
taxable bonds.
INFORMATION ON THE FUND'S RECENT STRATEGIES AND HOLDINGS CAN BE FOUND IN THE
CURRENT ANNUAL/SEMIANNUAL REPORT (SEE BACK COVER).
Concepts to understand
INVESTMENT GRADE BONDS: independent rating organizations analyze and evaluate a
bond issuer's credit history and ability to repay debts. Based on their
assessment, they assign letter grades that reflect the issuer's
creditworthiness. AAA or Aaa represents the highest credit rating, AA/Aa the
second highest, and so on down to D, for bonds in default (the inability to make
timely interest or principal payments). Bonds rated BBB or Baa and above are
considered investment grade.
AVERAGE MATURITY: an average of the stated maturities of the bonds held in the
fund, based on their dollar-weighted proportions in the fund.
<PAGE 2>
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. The longer the fund's average maturity or duration, the more its share
price will react to interest rate movements. As a result, the value of your
investment in the fund could go up and down, which means that you could lose
money.
Other risk factors could have an effect on the fund's performance:
* if an issuer defaults on a bond, or there is a credit downgrade on
the bond, the bond's value, and the fund's share price, could fall
* 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
* if the municipal bond market becomes less liquid, typically when
there are many more sellers than buyers for the securities, the
value of such securities, (particularly those purchased at a
discounted price), and the fund's share price, may fall dramatically
Other potential risks
The fund, at times, may invest in certain derivatives, such as futures and
options that may produce taxable income, and in inverse floaters. Derivatives
are used primarily to hedge the fund's portfolio or for daily liquidity. They
also may be used to increase returns. However, these practices may lower returns
or increase volatility. Derivatives can be illiquid and highly sensitive to
changes in their underlying security, interest rate or index. A small investment
in certain derivatives could have a potentially large impact on the fund's
performance.
The Fund
<PAGE 3>
PAST PERFORMANCE
The bar chart and table below show some of the risks of investing in the fund.
The bar chart shows the changes in the fund's performance from year to year.
The table compares the fund's average annual total return to that of the Lehman
Brothers Municipal Bond Index, an unmanaged total return municipal bond
performance benchmark. Of course, past performance is no guarantee of future
results.
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Year-by-year total return AS OF 12/31 EACH YEAR (%)
6.43 11.95 8.42 12.71 -7.00 15.69 3.82 7.95 5.67 -5.96
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: Q1 '95 +6.70%
WORST QUARTER: Q1 '94 -5.93%
THE FUND'S YEAR-TO-DATE TOTAL RETURN AS OF 9/30/00 WAS 6.99%.
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
Average annual total return AS OF 12/31/99
1 Year 5 Years 10 Years
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FUND -5.96% 5.20% 5.72%
LEHMAN BROTHERS
MUNICIPAL
BOND INDEX -2.06% 6.91% 6.89%
</TABLE>
What this fund is -- and isn't
This fund is a mutual fund: a pooled investment that is professionally managed
and gives you the opportunity to participate in financial markets. It strives to
reach its stated goal, although as with all mutual funds, it cannot offer
guaranteed results.
An investment in this fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in this fund, but you also have the
potential to make money.
<PAGE 4>
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 Rule 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 30 DAYS
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ANNUAL FUND OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.60%
Shareholder services fee 0.08%
Other expenses 0.09%
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TOTAL 0.77%
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
Expense example
1 Year 3 Years 5 Years 10 Years
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$79 $246 $428 $954
</TABLE>
This example shows what you could pay in expenses over
time. It uses the same hypothetical conditions other
funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in
expenses. The figures shown would be the same whether
you sold your shares at the end of a period or kept
them. Because actual return and expenses will be
different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to Dreyfus for managing the fund's portfolio and
assisting in all aspects of the fund's operations. During the past fiscal year,
Dreyfus waived a portion of its fee so that the effective management fee paid by
the fund was 0.59%, reducing total expenses to 0.76%. This waiver was voluntary
SHAREHOLDER SERVICES FEE: a fee of up to 0.25% used to reimburse the fund's
distributor for shareholder account service and maintenance.
OTHER EXPENSES: fees paid by the fund for miscellaneous items such as
shareholder service, transfer agency, custody, professional and registration
fees.
The Fund
<PAGE 5>
MANAGEMENT
The investment adviser for the fund is The Dreyfus Corporation, 200 Park Avenue,
New York, New York 10166. Founded in 1947, Dreyfus manages more than $149
billion in over 190 mutual fund portfolios. For the past fiscal year, the fund
paid Dreyfus a management fee at the annual rate of 0.59% of the fund's average
daily net assets. Dreyfus is the primary mutual fund business of Mellon
Financial Corporation, a global financial services company with approximately
$2.8 trillion of assets under management, administration or custody, including
approximately $540 billion under management. Mellon provides wealth management,
global investment services and a comprehensive array of banking services for
individuals, businesses and institutions. Mellon is headquartered in Pittsburgh,
Pennsylvania.
The fund, Dreyfus and Dreyfus Service Corporation (the fund's distributor) each
has adopted a code of ethics that permits its personnel, subject to such code,
to invest in securities, including securities that may be purchased or held by
the fund. The Dreyfus code of ethics restricts the personal securities
transactions of its employees, and requires portfolio managers and other
investment personnel to comply with the code's preclearance and disclosure
procedures. Its primary purpose is to ensure that personal trading by Dreyfus
employees does not disadvantage any Dreyfus-managed fund.
Portfolio manager
Richard Moynihan has been the primary portfolio manager of the fund since its
inception in October 1976. He has been a portfolio manager at Dreyfus since
November 1973 and today oversees all municipal bond fund investing at Dreyfus.
<PAGE 6>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
This table describes the fund's performance for the fiscal periods indicated.
"Total return" shows how much your investment in the fund would have increased
(or decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been independently audited by Ernst & Young
LLP, whose report, along with the fund's financial statements, is included in
the annual report.
YEAR ENDED AUGUST 31,
2000 1999 1998 1997 1996
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PER-SHARE DATA ($)
Net asset value, beginning of period 11.70 12.85 12.55 12.23 12.41
Investment operations:
Investment income -- net .60 .62 .64 .67 .69
Net realized and unrealized gain
(loss) on investments (.02) (.93) .37 .33 (.18)
Total from investment operations .58 (.31) 1.01 1.00 .51
Distributions:
Dividends from investment
income -- net (.60) (.62) (.64) (.67) (.69)
Dividends from net realized gain
on investments .00(1) (.22) (.07) (.01) --
Total distributions (.60) (.84) (.71) (.68) (.69)
Net asset value, end of period 11.68 11.70 12.85 12.55 12.23
Total return (%) 5.28 (2.60) 8.36 8.24 4.16
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RATIOS/SUPPLEMENTAL DATA
Ratio of expenses
to average net assets (%) .76 .73 .73 .71 .71
Ratio of net investment income
to average net assets (%) 5.32 4.98 5.04 5.39 5.57
Decrease reflected in above expense
ratios due to actions by Dreyfus (%) .01 .00(2) .01 -- --
Portfolio turnover rate (%) 40.51 55.77 63.07 66.89 64.48
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Net assets, end of period
($ x 1,000) 2,599,644 2,839,207 3,334,983 3,454,776 3,572,286
(1) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE.
(2) AMOUNT REPRESENTS LESS THAN .01%.
</TABLE>
The Fund
<PAGE 7>
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 authorized entity. 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 based
primarily on information furnished by an independent pricing service approved by
the fund's board. The pricing service's procedures are reviewed under the
general supervision of the board.
<PAGE 8>
Selling shares
YOU MAY SELL (REDEEM) 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 authorized entity. 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 OR WRITING A CHECK against shares recently purchased by check,
TeleTransfer or Dreyfus Automatic Asset Builder((reg.tm)), please note that:
* if you send a written request to sell such shares, the fund may
delay sending the proceeds for up to eight business days following
the purchase of those shares
* the fund will not honor redemption checks, or process wire,
telephone or TeleTransfer redemption requests, for up to eight
business days following the purchase of those shares
IF YOU ARE SELLING OR EXCHANGING SHARES you have owned for less than 30 days,
the fund may deduct a 0.10% redemption fee (not charged on shares sold
through the Checkwriting Privilege, Automatic Withdrawal Plan or Dreyfus
Auto-Exchange Privilege, or on shares acquired through dividend reinvestment)
.
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Limitations on selling shares by phone
Proceeds
sent by Minimum Maximum
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CHECK NO MINIMUM $250,000 PER DAY
WIRE $1,000 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $500 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $10,000 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.
Your Investment
<PAGE 9>
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 institution if in doubt.
<PAGE 10>
DISTRIBUTIONS AND TAXES
THE FUND USUALLY PAYS ITS SHAREHOLDERS DIVIDENDS from its net investment income
once a month, and distributes any net capital gains 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 may, however, have to pay state or local taxes.
Also, any dividends paid from interest on taxable investments or short-term
capital gains will be taxed as ordinary income. Any distributions of long-term
capital gains will be taxable as such. 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. In general, distributions are federally
taxable as follows:
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Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
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INCOME GENERALLY GENERALLY
DIVIDENDS TAX EXEMPT TAX EXEMPT
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund.
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
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 or exchanged up to 12 months after buying them. "Long-term
capital gains" applies to shares sold or exchanged after 12 months.
Your Investment
<PAGE 11>
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
(not available for IRAs).
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For exchanging shares
DREYFUS AUTO- For making regular exchanges
EXCHANGE PRIVILEGE from one Dreyfus fund into
another.
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For selling shares
DREYFUS AUTOMATIC For making regular withdrawals
WITHDRAWAL PLAN from most Dreyfus funds.
Dreyfus Financial Centers
Through a nationwide network of Dreyfus Financial Centers, Dreyfus offers a full
array of investment services and products. This includes information on mutual
funds, brokerage services, tax-advantaged products and retirement planning.
Experienced financial consultants can help you make informed choices and provide
you with personalized attention in handling account transactions. The Financial
Centers also offer informative seminars and events. To find the Financial Center
nearest you, call 1-800-499-3327.
<PAGE 12>
Checkwriting privilege
YOU MAY WRITE REDEMPTION CHECKS against your account in amounts of $500 or more.
These checks are free; however, a fee will 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 SHARES WORTH $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 before investing.
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.
24-hour automated account access
YOU CAN EASILY MANAGE YOUR DREYFUS ACCOUNTS, check your account balances,
transfer money between your Dreyfus funds, get price and yield information and
much more -- when it's convenient for you -- by calling 1-800-645-6561.
Your Investment
<PAGE 13>
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:
* ABA# 021000018
* 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:
* ABA# 021000018
* 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.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate
on your application which automatic service(s) you want. Return your application
with your investment.
WITHOUT ANY INITIAL INVESTMENT Check the Dreyfus Step Program option on your
application. Return your application, then complete the additional materials
when they are sent to you.
ALL SERVICES Call us to request a form to add any automatic investing service
(see "Services for Fund Investors"). Complete and return the forms along with
any other required materials.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
<PAGE 14>
TO SELL SHARES
Write a redemption check OR write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see "Account
Policies -- Selling Shares").
Mail your request to: The Dreyfus Family of Funds P.O. Box 9671, Providence, RI
02940-9671
WIRE Be sure the fund has your bank account information on file. Call us to
request your transaction. Proceeds will be wired to your bank.
TELETRANSFER Be sure the fund has your bank account information on file. Call
us to request your transaction. Proceeds will be sent to your bank by electronic
check.
CHECK Call us to request your transaction. A check will be sent to the address
of record.
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request a form to add the plan.
Complete the form, specifying the amount and frequency of withdrawals you would
like.
Be sure to maintain an account balance of $5,000 or more.
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS FAMILY OF FUNDS
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$1,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
Your Investment
<PAGE 15>
NOTES
<PAGE>
<PAGE>
For More Information
Dreyfus Municipal Bond Fund, Inc.
-----------------------------
SEC file number: 811-2653
More information on this fund is available free upon
request, including the following:
Annual/Semiannual Report
Describes the fund's performance, lists portfolio
holdings and contains a letter from the fund's manager
discussing recent market conditions, economic trends and
fund strategies that significantly affected the fund's
performance during the last fiscal year.
Statement of Additional Information (SAI)
Provides more details about the fund and its policies. A
current SAI is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference (is
legally considered part of this prospectus).
To obtain information:
BY TELEPHONE Call 1-800-645-6561
BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Text-only versions of certain fund documents can be viewed
online or downloaded from:
SEC
http://www.sec.gov
DREYFUS
http://www.dreyfus.com
You can also obtain copies, after paying a duplicating fee, by visiting the
SEC's Public Reference Room in Washington, DC (for information, call
1-202-942-8090) or, by E-mail request to [email protected], or by writing to
the SEC's Public Reference Section, Washington, DC 20549-0102.
(c) 2001 Dreyfus Service Corporation 054P0101
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DREYFUS MUNICIPAL BOND FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 1, 2001
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This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus Municipal Bond Fund, Inc. (the "Fund"), dated January 1, 2001, as it may
be revised from time to time. To obtain a copy of the Fund's Prospectus, Annual
Report or Semi-Annual Report 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-15
Management Arrangements.............................................B-19
How to Buy Shares...................................................B-22
Shareholder Services Plan...........................................B-23
How to Redeem Shares................................................B-24
Shareholder Services................................................B-27
Determination of Net Asset Value....................................B-30
Dividends, Distributions and Taxes..................................B-30
Portfolio Transactions..............................................B-32
Performance Information.............................................B-33
Information About the Fund..........................................B-34
Counsel and Independent Auditors....................................B-36
Appendix............................................................B-37
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.
Dreyfus Service Corporation (the "Distributor") is the distributor of the
Fund's shares.
Certain Portfolio Securities.
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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 or authorities, the interest from which is, in the opinion
of bond counsel to the issuer, 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 full 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.
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. Certain lease obligations may 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 Obligations, 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 Obligations and for
other reasons.
The Fund will purchase tender option bonds only when the Manager 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 receipts. 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 payments 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. The aggregate interest paid with respect to the two classes will
not exceed the interest paid by the underlying Municipal Obligations. The value
of the second class and similar securities typically fluctuates more than the
value of a Municipal Obligation of comparable quality and maturity, which would
increase the volatility of the Fund's net asset value. 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 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.
Rating 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 Services ("S&P") or Fitch IBCA, Inc. ("Fitch" and,
together with Moody's and S&P, the "Rating Agencies") or, if unrated, deemed to
be of comparable quality by the Manager. 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 the Rating Agencies and as low as the lowest rating
assigned by the Rating Agencies. For purposes of the 75% requirement described
in this paragraph, 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 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,
2000, computed on a monthly basis, was as follows:
Percentage of
Fitch or Moody's or S&P Value
------ ------- --- -----
AAA Aaa AAA 43.8%
AA Aa AA 19.9%
A A A 11.4%
BBB Baa BBB 11.6%
BB Ba BB 3.8%
B B B .8%
F-1, F-1+ MIG 1, P-1 SP-1, A-1 2.3%(1)
Not Rated Not Rated Not Rated 6.4%(2)
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100.0%
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(1)Includes tax exempt notes rated in one of the two highest rating categories
by the Rating Agencies. These securities, together with Municipal Obligations
rated A or better by a Rating Agency, are taken into account at the time of
purchase for purposes of determining that the Fund's portfolio meets the 75%
minimum quality standard discussed above.
(2)Included in the Not Rated category are securities comprising 6.4% 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: Aa/AA (.9%), A/A (.2%), Baa/BBB (1.8%), Ba/BB (1.6%), B/B (.6%),
Caa/CCC (.1%) and C/C (1.2%).
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 a Rating Agency for Municipal
Obligations may change as a result of changes in such organization or its rating
system, the Fund will attempt to use comparable ratings as standards for its
investments in accordance with the investment policies described in the
Prospectus and this Statement of Additional Information. The ratings of the
Rating Agencies 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.
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 a Rating Agency; 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. See "Dividends, Distributions and Taxes." 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, Pay-In-Kind and Step-Up 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); pay-in-kind bonds which are bonds that pay interest through the issuance
of additional bonds; and step-up coupon bonds which are debt securities which do
not pay interest for a specified period of time and then pay interest at a
series of different rates. The amount of any discount on these securities 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 interests in such stripped debt
obligations and coupons. The market prices of these securities generally are
more volatile than the market prices of securities that pay cash interest
periodically and are likely to respond to a greater degree to changes in
interest rates than securities having similar maturities and credit qualities.
In addition, unlike bonds which pay interest thoughout 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. Federal income tax law requires the holder of a
zero coupon security or of certain pay-in-kind or step-up 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. See "Dividends, Distributions and
Taxes."
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
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 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.
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 such
borrowings exceed 5% of the Fund's total assets, the Fund will not make any
additional investments.
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.
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. However, 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 variation margin system 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. 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 and options with respect thereto 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
securities being hedged and the price movements of the futures contract. For
example, if the Fund uses futures to hedge against the possibility of a decline
in the market value of securities held in its portfolio and the prices of such
securities instead increase, the Fund will lose part or all of the benefit of
the increased value of securities which it has hedged because it will have
offsetting losses in its futures positions. Furthermore, if in such
circumstances the Fund has insufficient cash, it may have to sell securities to
meet daily variation margin requirements. The Fund may have to sell such
securities at a time when it may be disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities and
Exchange Commission, the Fund may be required to segregate permissible liquid
assets 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 permissible liquid assets. A put option written by the Fund is
covered when, among other things, the Fund segregates permissible liquid assets
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. If, as a
covered call option writer, the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.
Successful use by the Fund of options, including options on futures
contracts, 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
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 this Statement of Additional Information.
Forward Commitments. The Fund may purchase or sell Municipal Obligations
and other securities on a forward commitment, when-issued or delayed delivery
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 segregate 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 forward
commitment or when-issued basis when the Fund is fully or almost fully invested
may result in greater potential fluctuation in the value of the Fund's net
assets and its net asset value per share.
Certain 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 municipal bond
fund that does not follow this practice.
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 the Rating Agencies (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 the
Rating Agencies' 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 the Rating
Agencies 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. An
economic recession could adversely affect the ability of the issuers of lower
rated bonds to repay principal and pay interest thereon which would increase the
incidence of default for such securities. It is likely that any economic
recession also would disrupt severely the market for such securities and have an
adverse impact on their value.
The Fund may acquire these bonds during an initial offering. Such
securities may involve special risks because they are new issues. The Fund has
no arrangement with any person 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, pay-in-kind bonds and step-up bonds, in which the
Fund may invest up to 5% of its total assets. In addition to the risks
associated with the credit rating of the issuers, the market price of these
securities may be very volatile during the period no interest is paid.
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 increase or decrease 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
Dreyfus Service Corporation.........................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 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 Company, Inc.), a button packager and
distributor, Century Business Services, Inc., a provider of various
outsourcing functions for small and medium size companies, The Newark
Group, a privately held company providing a national network of paper
recovery facilities, paperboard mills and paperboard converting plants,
and QuickCAT.com, Inc., a private company engaged in the development of
high speed movement, routing, storage, and encryption of data across all
modes of data transport. 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 the
Distributor. From August 1994 to December 31, 1994, he was a director of
Mellon Financial Corporation. He is 57 years old and his address is 200
Park Avenue, New York, New York 10166.
DAVID W. BURKE, Board Member. Board member of various funds in the Dreyfus
Family of Funds. Chairman of the Broadcasting Board of Governors, an
independent board within the United States Information Agency, from August
1994 to November 1998. From August 1994 to December 1994, Mr. Burke was a
Consultant to the Manager, and from October 1990 to August 1994, he was
Vice President and Chief Administrative Officer of the Manager. From 1977
to 1990, Mr. Burke was involved in the management of national television
news, as Vice President and Executive Vice President of ABC News, and
subsequently as President of CBS News. He is 64 years old and his address
is Box 654, Eastham, Massachusetts 02642.
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 "Op Ed" columnist for The Wall Street Journal. From 1985 to 1986,
he was anchor and Chief Correspondent of "Capital Journal," a weekly
Public Broadcasting System ("PBS") series on Congress. From 1981 to 1984,
he was anchorman and chief correspondent for PBS' "Inside Story," a
regularly scheduled half-hour critique of press performance. From 1977 to
July 1, 1980, Mr. Carter served as Assistant Secretary of State for Public
Affairs and as Department of State spokesman. He is 65 years old and his
address is c/o Knight Foundation, 2 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, Yavitz and Associates, a management consultant firm. He
also is a Director of Avnet Inc. and Super-Sol Limited. He is 60 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 Century Foundation
(formerly, 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 of,
and from April 1988 to March 1994, he was a Commissioner of, The
Port Authority of New York and New Jersey. From 1985 to 1986, he
was a member of, and from January 1986 to January 1989, he was a
Managing Director of, Dillon, Read & Co., Inc. He is 60 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, a real estate investment company, and Chairman of
Simon Global Limited. From 1997 to 1998, Chairman and Chief
Executive Officer of Corporate Property Investors, which merged into
Simon Property Group in September 1998. He is 63 years old and his
address is 33 St. James's Square, London SW1Y 4JS, England.
ROBIN A. PRINGLE, Board Member. Vice President of The National Mentoring
Partnership and President of The Boisi Family Foundation, a private family
foundation devoted to youths and higher education located in New York
City. Since 1993, Vice President of One to One Partnership, Inc., a
national non-profit organization that seeks to promote mentoring and
economic empowerment for at-risk youths and, from March 1992 to October
1993, Executive Director of One to One New York. From August 1984 to June
1986 and from August 1988 to February 1992, she was an investment banker
with Goldman, Sachs & Co. She is 37 years old and her address is 621 South
Plymouth Court, Chicago, Illinois 60605.
JOHN E. ZUCCOTTI, Board Member. Since November 1996, Chairman of Brookfield
Financial Properties, Inc. and, since February 2000, Vice-Chairman of
Brookfield Properties Corporation headquartered in Toronto, Canada (parent
company of Brookfield Financial Properties). From 1990 to November 1996,
he was the President and Chief Executive Officer of Olympia & York
Companies (U.S.A.) and a member of its Board of Directors since its
inception in November 1996. He was First Deputy Mayor of the City of New
York from 1975 to 1977, and Chairman of the City Planning Commission for
the City of New York from 1973 to 1975. Mr. Zuccotti has been a member of
many boards for corporate and not-for-profit entities. He is 63 years old
and his address is 1 Liberty Plaza, 6th Floor, New York, New York 10006.
The Fund has a standing nominating committee comprised of its Board
members who are not "interested persons" of the Fund, as defined in the 1940
Act. The function of the nominating committee is to select and nominate all
candidates who are not "interested persons" of the Fund for election to the
Fund's Board.
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, if any,
are entitled to receive an annual retainer and a per meeting fee of one-half the
amount paid to Board members. The aggregate amount of compensation paid to each
Board member by the Fund for the fiscal year ended August 31, 2000, and by all
funds in the Dreyfus Family of Funds for which such person is a Board member
(the number of portfolios of such funds is set forth in parenthesis next to
each Board member's total compensation)* for the year ended December 31, 1999,
were as follows:
Total Compensation from
Fund and Fund Complex
Name of Board Aggregate Compensation Paid to Board
Member from Fund** Members
Joseph S. DiMartino $ 8,750 $642,177 (189)
David W. Burke $ 7,000 $228,500 (62)
Hodding Carter, III $ 6,500 $39,500 (7)
Ehud Houminer $ 7,000 $61,000 (21)
Richard C. Leone $ 7,000 $39,500 (7)
Hans C. Mautner $ 7,000 $36,000 (7)
Robin A. Pringle $ 7,000 $36,500 (7)
John E. Zuccotti $ 7,000 $39,000 (7)
-----------------
* Represents the number of separate portfolios comprising the investment
companies in the Fund/Complex, including the Fund, for which the Board member
serves.
** Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $6,022 for all Board members as a group.
Officers of the Fund
STEPHEN E. CANTER, President. President, Chief Operating Officer, Chief
Investment Officer and a director of the Manager, and an officer of 93
other investment companies (comprised of 183 portfolios) managed by the
Manager. Mr. Canter also is a Director or Executive Committee Member of
other investment management subsidiaries of Mellon Financial Corporation,
each of which is an affiliate of the Manager. He is 55 years old.
MARK N. JACOBS, Vice President. Vice President, Secretary and General
Counsel of the Manager, and an officer of 106 other investment
companies (comprised of 196 portfolios) managed by the Manager. He is
54 years old.
JOSEPH CONNOLLY, Vice President and Treasurer. Director - Mutual Fund Accounting
of the Manager, and an officer of 106 other investment companies
(comprised of 196 portfolios) managed by the Manager. He is 43 years old.
JOHN B. HAMMALIAN, Secretary. Associate General Counsel of the Manager, and
an officer of 36 other investment companies (comprised of 42
portfolios) managed by the Manager. He is 37 years old.
MICHAEL A. ROSENBERG, Assistant Secretary. Associate General Counsel of the
Manager, and an officer of 91 other investment companies (comprised of
190 portfolios) managed by the Manager. He is 40 years old.
STEVEN F. NEWMAN, Assistant Secretary. Associate General Counsel and
Assistant Secretary of the Manager, and an officer of 106 other
investment companies (comprised of 196 portfolios) managed by the
Manager. He is 51 years old.
GREGORY S. GRUBER, Assistant Treasurer. Senior Accounting Manager -
Municipal Bond Funds of the Manager, and an officer of 42 other
investment companies (comprised of 59 portfolios) managed by the
Manager. He is 41 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 shares outstanding on December 15, 2000.
As of December 15, 2000, there were no shareholders known by the Fund to
own of record 5% or more of the outstanding voting securities of the Fund.
MANAGEMENT ARRANGEMENTS
Investment Adviser. The Manager is a wholly-owned subsidiary of Mellon
Bank, N.A., which is a wholly-owned subsidiary of Mellon Financial Corporation
("Mellon"). Mellon is a global multibank financial 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 largest bank holding companies in the United States
based on total assets.
The Manager provides management services pursuant to a Management
Agreement (the "Agreement") between the Fund and the Manager. The Agreement 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 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:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Thomas F. Eggers, Vice Chairman--Institutional and
a director; Lawrence S. Kash, Vice Chairman; J. David Officer, Vice
Chairman and a director; Ronald P. O'Hanley III, Vice Chairman; William T.
Sandalls, Jr., Executive Vice President; Stephen R. Byers, Senior Vice
President; Patrice M. Kozlowski, Senior Vice President--Corporate
Communications; Mark N. Jacobs, Vice President, General Counsel and
Secretary; Diane P. Durnin, Vice President--Product Development; Mary Beth
Leibig, Vice President--Human Resources; Ray Van Cott, Vice
President--Information Systems; Theodore A. Schachar, Vice President--Tax;
Wendy Strutt, Vice President; William H. Maresca, Controller; James
Bitetto, Assistant Secretary; Steven F. Newman, Assistant Secretary; and
Mandell L. Berman, Burton C. Borgelt, Steven G. Elliot, Martin G. McGuinn,
Richard W. Sabo 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, Joseph A. Irace, Colleen A. Meehan, Richard J. Moynihan, W.
Michael Petty, Jill C. Shaffro, Scott Sprauer, 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.
The Manager's Code of Ethics subjects its employees' personal securities
transactions to various restrictions to ensure that such trading does not
disadvantage any fund advised by the Manager. In that regard, portfolio managers
and other investment personnel of the Manager must preclear and report their
personal securities transactions and holdings, which are reviewed for compliance
with the Code of Ethics and are also subject to the oversight of Mellon's
Investment Ethics Committee. Portfolio managers and other investment personnel
of the Manager who comply with the preclearance and disclosure procedures of the
Code of Ethics and the requirements of the Committee may be permitted to
purchase, sell or hold securities which also may be or are held in fund(s) they
manage or for which they otherwise provide investment advice.
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, interest 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
maintaining the Fund's existence, costs of independent pricing services, costs
attributable to investor services (including, without limitation, telephone and
personnel expenses), costs of shareholders' reports and 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 0.60% 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. All fees and expenses are accrued
daily and deducted before the declaration of dividends to shareholders. For the
fiscal years ended August 31, 1998, 1999 and 2000, the management fees payable
by the Fund amounted to $19,991,724, $18,852,292 and $15,806,110, respectively,
which amounts were reduced by $214,400, $67,190 and $135,377, respectively,
pursuant to the Stipulation of Settlement of Litigation, and other undertakings
which may have been in effect, resulting in net fees paid of $19,777,324 in
fiscal 1998, $18,785,102 in fiscal 1999 and $15,670,733 in fiscal 2000.
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, a wholly-owned subsidiary of the Manager
located at 200 Park Avenue, New York, New York 10166, serves as the Fund's
distributor on a best efforts basis pursuant to an agreement with the Fund 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"), 100 Church 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. It is not
recommended that the Fund be used as a vehicle for Keogh, IRA or other qualified
plans. 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 contracts 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. For 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 ("ACH") 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 day 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 day the
Transfer Agent and the New York Stock Exchange are open for business, or orders
made on Saturday, Sunday or any Federal 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 bank business day following such purchase order. To
qualify to use the Dreyfus TeleTransfer Privilege, the initial payment for
purchase of Fund shares must be drawn on, and redemption proceeds paid to, the
same bank and account as are designated on the Account Application or
Shareholder Services Form on file. If the proceeds of a particular redemption
are to be wired to an account at any other bank, the request must be in writing
and signature-guaranteed. See "How to Redeem Shares--Dreyfus TeleTransfer
Privilege."
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 (the "Plan") pursuant to
which the Fund reimburses the Distributor an amount not to exceed an annual rate
of 0.25% 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 Plan, and the
purposes for which such expenditures were incurred, must be made to the Fund's
Board for its review. In addition, the Plan provides that material amendments of
the Plan must be approved by the Fund's Board and by the Board members who are
not "interested persons" (as defined in the 1940 Act) of the Fund and have no
direct or indirect financial interest in the operation of the Plan, by vote cast
in person at a meeting called for the purpose of considering such amendments.
The Plan is subject to annual approval by such vote of the Board members cast in
person at a meeting called for the purpose of voting on the Plan. The Plan is
terminable at any time by vote of a majority of the Board members who are not
"interested persons" and have no direct or indirect financial interest in the
operation of the Plan.
For the fiscal year ended August 31, 2000, the Fund reimbursed the
Distributor $2,010,405 pursuant to the Plan.
HOW TO REDEEM SHARES
General. The Fund ordinarily will make payment for all shares redeemed
within seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. However, if you have purchased Fund shares by check, by Dreyfus
TeleTransfer Privilege or through Dreyfus-Automatic Asset Builder(R) and
subsequently submit a written redemption request to the Transfer Agent, the Fund
may delay sending the redemption proceeds for up to eight business days after
the purchase of such shares. In addition, the Fund will not honor checks under
the Checkwriting Privilege, and will reject requests to redeem shares by wire or
telephone or pursuant to the Dreyfus TeleTransfer Privilege, for a period of up
to eight business days after receipt by the Transfer Agent of the purchase
check, the Dreyfus TeleTransfer purchase or the Dreyfus-Automatic Asset
Builder(R) order against which such redemption is requested. These procedures
will not apply if your shares were purchased by wire payment, or if you
otherwise have a sufficient collected balance in your account to cover the
redemption request. Fund shares may not be redeemed until the Transfer Agent has
received your Account Application.
Redemption Fee. The Fund will deduct a redemption fee equal to 0.10% of
the net asset value of Fund shares redeemed (including redemptions through the
use of the Fund exchanges service) less than 30 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, 2000, the Fund
retained $32,477 in redemption fees.
No redemption fee will be charged on the redemption or exchange of shares
(1) through the Fund's Checkwriting 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 the Distributor,
(3) through accounts established by securities dealers, banks or other financial
institutions approved by the Distributor that utilize the National Securities
Clearing Corporation's networking system, or (4) acquired through the
reinvestment of dividends or distributions. The redemption fee may be waived,
modified or terminated at any time.
Checkwriting Privilege. The Fund provides redemption checks ("Checks")
automatically upon opening an account, unless you specifically refuse the
Checkwriting Privilege by checking the applicable "No" box on the Account
Application. The Checkwriting 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.
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 the investor. 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
Transmittal 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 ACH 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 $500,000 within any 30-day period. You
should be aware that if you have selected the Dreyfus TeleTransfer(R) Privilege,
any request for a wire redemption will be effected as a Dreyfus TeleTransfer
transaction through the 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. In the case of
requests for redemption in excess of such amount, the Fund's Board reserves the
right to make payments in whole or in part in securities 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 sells 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 or Founders
Asset Management LLC ("Founders"), an affiliate of 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 0.10% of the net asset value of Fund shares
exchanged where the exchange is made less than 30 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 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 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"), but 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 to 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 or a fund advised by Founders of which you are a
shareholder. 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 purchase 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 ACH 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 to
arrange for transactions under the Dreyfus Payroll Savings Plan.
Dreyfus Step Program. 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 Option. 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 or a
fund advised by Founders 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 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"), but 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 ACH member may be so designated. Banks may charge a fee for this
service.
Automatic Withdrawal. 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). The value of other investments (which constitute a majority of the
portfolio securities) is 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. These procedures need not be used to determine the value of
securities held by the Fund if, in the opinion of a committee appointed by the
Fund's Board, some other method would more accurately reflect the fair value of
such securities. 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 as a "regulated investment
company" under the Code for the fiscal year ended August 31, 2001. The Fund
intends to continue to so qualify if such qualification is in the best interests
of its shareholders. As a regulated investment company, the Fund will pay no
Federal income tax on net investment income and net realized capital gains to
the extent that such income and gains are distributed to shareholders in
accordance with applicable provisions of the Code. To qualify as a regulated
investment company, the Fund must pay out to its shareholders at least 90% of
its net income (consisting of net investment income from tax exempt obligations
and taxable obligations, if any, and net short-term capital gains), and must
meet certain asset diversification and other requirements. 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 term "regulated
investment company" does not imply the supervision of management or investment
practices or policies by any government agency.
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. Distributions from net realized securities gains, if any, generally
are declared and paid once a year, but the Fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Code, in all
events in a manner consistent with the provisions of the 1940 Act.
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
dividend or distribution 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 or her shares.
Any dividend or distribution paid shortly after an investor's purchase of
Fund shares may have the effect of reducing the aggregate net asset value of the
shares below the cost of his or her investment. Such a distribution would be a
return on investment in an economic sense although taxable as stated in
"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.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gain or loss. However, all or a portion of any gain realized
from the sale or other disposition of certain market discount bonds will be
treated as ordinary income. In addition, all or a portion of the gain realized
from engaging in "conversion transactions" (generally including certain
transactions designed to convert ordinary income into capital gain) may be
treated as ordinary income.
Gain or loss, if any, realized by the Fund from certain financial futures
and options transactions ("Section 1256 contracts") 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 Section 1256 contracts as well as from
closing transactions. In addition, any Section 1256 contracts 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 as described above.
Offsetting positions held by the Fund involving certain futures or forward
contracts or options transactions with respect to actively traded personal
property may be considered, for tax purposes, to constitute "straddles." To the
extent the straddle rules apply to positions established by the Fund, losses
realized by the Fund may be deferred to the extent of unrealized gain in the
offsetting position. In addition, short-term capital loss on straddle positions
may be recharacterized as long-term capital loss, and long-term capital gains on
straddle positions may be treated as short-term capital gains or ordinary
income. Certain of the straddle positions held by a Fund may constitute "mixed
straddles." The Fund may make one or more elections with respect to the
treatment of "mixed straddles," resulting in different tax consequences. In
certain circumstances, the provisions governing the tax treatment of straddles
override or modify certain of the provisions discussed above.
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, 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.
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, such as zero coupon, pay-in-kind and step-up securities 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 ordinarily are purchased from and sold to parties
acting as principal. 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. 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 affiliates.
Research services furnished by brokers through which the Fund effects
securities transactions may be used by the Manager in advising other funds it
advises and, conversely, research services furnished to the Manager by brokers
in connection with other funds the Manager advises may be used by the Manager in
advising the Fund. Although it is not possible to place a dollar value on these
services, it is the opinion of the Manager that the receipt and study of such
services should not reduce the overall expenses of its research department.
PERFORMANCE INFORMATION
The Fund's current yield for the 30-day period ended August 31, 2000 was
5.00%. 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 the highest 2000 Federal personal income tax rate of 39.60%,
the Fund's tax equivalent yield for the 30-day period ended August 31, 2000 was
8.28%. 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 income tax rate presently in effect. The tax
equivalent figure, however, does not include the potential effect of any state
or local (including, but not limited to, county, district or city) taxes,
including applicable surcharges. In addition, there may be pending legislation
which could affect such stated tax rates or yield. Each investor should consult
its tax adviser, and consider its own factual circumstances and applicable tax
laws, in order to ascertain the relevant tax equivalent yield.
The Fund's average annual total return for the 1, 5 and 10 year periods
ended August 31, 2000 was 5.28%, 4.61% and 6.21%, respectively. Absent any
expense absorption and/or fee waiver then in effect, the Fund's total return
would have been lower. 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.
For the period October 4, 1976 (commencement of operations) through August
31, 2000 the Fund's total return was 343.59%. Absent any expense absorption
and/or fee waiver then in effect, the Fund's total return would have been lower.
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.
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 Weisenberger,
Thomson Financial, , Lipper Analytical Services, Inc., Moody's Bond Survey Bond
Index, Lehman Brothers Municipal Bond Index, Morningstar, Inc. and other indices
and industry publications.
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 material for the
Fund may include biographical information relating to one or more of its
portfolio managers and may refer to, or include commentary by a portfolio
manager relating to investment strategy, asset growth, current or past business,
political, economic or financial conditions and other matters of general
interest to investors. Advertising materials for the Fund also may refer to
Morningstar ratings and related analyses supporting such ratings.
From time to time, advertising materials may refer to studies performed by
the manager or its affiliates, such as "The Dreyfus Tax Informed Investing
Study" or "The Dreyfus Gender Investment Comparison Study (1996 & 1997)" or
other such studies.
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.
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 typically is 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 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 noted 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 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 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 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 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 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 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 rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C
Bonds 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.
DREYFUS MUNICIPAL BOND FUND, INC.
PART C. OTHER INFORMATION
--------------------------------
Item 23. Exhibits
------- ----------
(a) Registrant's Articles of Incorporation and Articles of Amendment are
incorporated by reference to Exhibit (1)(a) of Post-Effective
Amendment No. 36 to the Registration Statement on Form N-1A, filed
on October 27, 1995.
(b) Registrant's By-Laws, as amended.
(d) Management Agreement 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.
(e) Distribution Agreement.
(g) Amended and Restated Custody Agreement is incorporated by reference
to Exhibit 8(a) of Post-Effective Amendment No. 36 to the
Registration Statement on Form N-1A, filed on October 27, 1995;
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) Shareholder Services Plan 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 is incorporated by
reference to Exhibit (10) of Post-Effective Amendment No. 36 to the
Registration Statement on Form N-1A, filed on October 27, 1995.
(j) Consent of Independent Auditors.
(p) Code of Ethics.
Item 23. Exhibits. - List (continued)
------- -----------------------------------------------------
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 Board member, 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 Board member, officer,
affiliated person or underwriter for their own protection, is
incorporated by reference to Item 4 of Part II of Post-Effective
Amendment No. 38 to the Registration Statement on Form N-1A, filed
on December 18, 1996.
Reference is also made to the Distribution Agreement attached as
Exhibit (e) hereto.
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 and manager 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 and distributor of other investment companies advised
and administered by Dreyfus. Dreyfus Investment Advisors, Inc.,
another wholly-owned subsidiary, provides investment management
services to various pension plans, institutions and individuals.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ITEM 26. Business and Other Connections of Investment Adviser (continued)
----------------------------------------------------------------------------------
Officers and Directors of Investment Adviser
Name and Position
With Dreyfus Other Businesses Position Held Dates
CHRISTOPHER M. CONDRON Franklin Portfolio Associates, Director 1/97 - Present
Chairman of the Board and LLC*
Chief Executive Officer
TBCAM Holdings, Inc.* Director 10/97 - Present
President 10/97 - 6/98
Chairman 10/97 - 6/98
The Boston Company Director 1/98 - Present
Asset Management, LLC* Chairman 1/98 - 6/98
President 1/98 - 6/98
The Boston Company President 9/95 - 1/98
Asset Management, Inc.* Chairman 4/95 - 1/98
Director 4/95 - 1/98
Franklin Portfolio Holdings, Inc.* Director 1/97 - Present
Certus Asset Advisors Corp.** Director 6/95 - Present
Mellon Capital Management Director 5/95 - Present
Corporation***
Mellon Bond Associates, LLP+ Executive Committee 1/98 - Present
Member
Mellon Bond Associates+ Trustee 5/95 - 1/98
Mellon Equity Associates, LLP+ Executive Committee 1/98 - Present
Member
Mellon Equity Associates+ Trustee 5/95 - 1/98
Boston Safe Advisors, Inc.* Director 5/95 - Present
President 5/95 - Present
Mellon Bank, N.A. + Director 1/99 - Present
Chief Operating Officer 3/98 - Present
President 3/98 - Present
Vice Chairman 11/94 - 3/98
Mellon Financial Corporation+ Chief Operating Officer 1/99 - Present
President 1/99 - Present
Director 1/98 - Present
Vice Chairman 11/94 - 1/99
Founders Asset Management, Chairman 12/97 - Present
LLC**** Director 12/97 - Present
The Boston Company, Inc.* Vice Chairman 1/94 - Present
Director 5/93 - Present
Laurel Capital Advisors, LLP+ Executive Committee 1/98 - 8/98
Member
Laurel Capital Advisors+ Trustee 10/93 - 1/98
Boston Safe Deposit and Trust Director 5/93 - Present
Company*
The Boston Company Financial President 6/89 - 1/97
Strategies, Inc. * Director 6/89 - 1/97
MANDELL L. BERMAN Self-Employed Real Estate Consultant, 11/74 - Present
Director 29100 Northwestern Highway Residential Builder and
Suite 370 Private Investor
Southfield, MI 48034
BURTON C. BORGELT DeVlieg Bullard, Inc. Director 1/93 - Present
Director 1 Gorham Island
Westport, CT 06880
Mellon Financial Corporation+ Director 6/91 - Present
Mellon Bank, N.A. + Director 6/91 - Present
Dentsply International, Inc. Director 2/81 - Present
570 West College Avenue
York, PA
Quill Corporation Director 3/93 - Present
Lincolnshire, IL
STEPHEN E. CANTER Dreyfus Investment Chairman of the Board 1/97 - Present
President, Chief Operating Advisors, Inc.++ Director 5/95 - Present
Officer, Chief Investment President 5/95 - Present
Officer, and Director
Newton Management Limited Director 2/99 - Present
London, England
Mellon Bond Associates, LLP+ Executive Committee 1/99 - Present
Member
Mellon Equity Associates, LLP+ Executive Committee 1/99 - Present
Member
Franklin Portfolio Associates, Director 2/99 - Present
LLC*
Franklin Portfolio Holdings, Inc.* Director 2/99 - Present
The Boston Company Asset Director 2/99 - Present
Management, LLC*
TBCAM Holdings, Inc.* Director 2/99 - Present
Mellon Capital Management Director 1/99 - Present
Corporation***
Founders Asset Management, Member, Board of 12/97 - Present
LLC**** Managers
Acting Chief Executive 7/98 - 12/98
Officer
The Dreyfus Trust Company+++ Director 6/95 - Present
Chairman 1/99 - Present
President 1/99 - Present
Chief Executive Officer 1/99 - Present
THOMAS F. EGGERS Dreyfus Service Corporation++ Chief Executive Officer 3/00 - Present
Vice Chairman - Institutional and Chairman of the
and Director Board
Executive Vice President 4/96 - 3/00
Director 9/96 - Present
Founders Asset Management, Member, Board of 2/99 - Present
LLC**** Managers
Dreyfus Investment Advisors, Inc. Director 1/00 - Present
Dreyfus Service Organization, Director 3/99 - Present
Inc.++
Dreyfus Insurance Agency of Director 3/99 - Present
Massachusetts, Inc. +++
Dreyfus Brokerage Services, Inc. Director 11/97 - 6/98
401 North Maple Avenue
Beverly Hills, CA.
STEVEN G. ELLIOTT Mellon Financial Corporation+ Senior Vice Chairman 1/99 - Present
Director Chief Financial Officer 1/90 - Present
Vice Chairman 6/92 - 1/99
Treasurer 1/90 - 5/98
Mellon Bank, N.A.+ Senior Vice Chairman 3/98 - Present
Vice Chairman 6/92 - 3/98
Chief Financial Officer 1/90 - Present
Mellon EFT Services Corporation Director 10/98 - Present
Mellon Bank Center, 8th Floor
1735 Market Street
Philadelphia, PA 19103
Mellon Financial Services Director 1/96 - Present
Corporation #1 Vice President 1/96 - Present
Mellon Bank Center, 8th Floor
1735 Market Street
Philadelphia, PA 19103
Boston Group Holdings, Inc.* Vice President 5/93 - Present
APT Holdings Corporation Treasurer 12/87 - Present
Pike Creek Operations Center
4500 New Linden Hill Road
Wilmington, DE 19808
Allomon Corporation Director 12/87 - Present
Two Mellon Bank Center
Pittsburgh, PA 15259
Collection Services Corporation Controller 10/90 - 2/99
500 Grant Street Director 9/88 - 2/99
Pittsburgh, PA 15258 Vice President 9/88 - 2/99
Treasurer 9/88 - 2/99
Mellon Financial Company+ Principal Exec. Officer 1/88 - Present
Chief Executive Officer 8/87 - Present
Director 8/87 - Present
President 8/87 - Present
Mellon Overseas Investments Director 4/88 - Present
Corporation+
Mellon Financial Services Treasurer 12/87 - Present
Corporation # 5+
Mellon Financial Markets, Inc.+ Director 1/99 - Present
Mellon Financial Services Director 1/99 - Present
Corporation #17
Fort Lee, NJ
Mellon Mortgage Company Director 1/99 - Present
Houston, TX
Mellon Ventures, Inc. + Director 1/99 - Present
LAWRENCE S. KASH Dreyfus Investment Director 4/97 - 12/99
Vice Chairman Advisors, Inc.++
Dreyfus Brokerage Services, Inc. Chairman 11/97 - 2/99
401 North Maple Ave. Chief Executive Officer 11/97 - 2/98
Beverly Hills, CA
Dreyfus Service Corporation++ Director 1/95 - 2/99
President 9/96 - 3/99
Dreyfus Precious Metals, Inc.+++ Director 3/96 - 12/98
President 10/96 - 12/98
Dreyfus Service Director 12/94 - 3/99
Organization, Inc.++ President 1/97 - 3/99
Seven Six Seven Agency, Inc. ++ Director 1/97 - 4/99
Dreyfus Insurance Agency of Chairman 5/97 - 3/99
Massachusetts, Inc.++++ President 5/97 - 3/99
Director 5/97 - 3/99
The Dreyfus Trust Company+++ Chairman 1/97 - 1/99
President 2/97 - 1/99
Chief Executive Officer 2/97 - 1/99
Director 12/94 - Present
The Dreyfus Consumer Credit Chairman 5/97 - 6/99
Corporation++ President 5/97 - 6/99
Director 12/94 - 6/99
Founders Asset Management, Member, Board of 12/97 - 12/99
LLC**** Managers
The Boston Company Advisors, Chairman 12/95 - 1/99
Inc. Chief Executive Officer 12/95 - 1/99
Wilmington, DE President 12/95 - 1/99
The Boston Company, Inc.* Director 5/93 - 1/99
President 5/93 - 1/99
Mellon Bank, N.A.+ Executive Vice President 6/92 - Present
Laurel Capital Advisors, LLP+ Chairman 1/98 - 8/98
Executive Committee 1/98 - 8/98
Member
Chief Executive Officer 1/98 - 8/98
President 1/98 - 8/98
Laurel Capital Advisors, Inc. + Trustee 12/91 - 1/98
Chairman 9/93 - 1/98
President and CEO 12/91 - 1/98
Boston Group Holdings, Inc.* Director 5/93 - Present
President 5/93 - Present
Boston Safe Deposit and Trust Director 6/93 - 1/99
Company+ Executive Vice President 6/93 - 4/98
MARTIN G. MCGUINN Mellon Financial Corporation+ Chairman 1/99 - Present
Director Chief Executive Officer 1/99 - Present
Director 1/98 - Present
Vice Chairman 1/90 - 1/99
Mellon Bank, N. A. + Chairman 3/98 - Present
Chief Executive Officer 3/98 - Present
Director 1/98 - Present
Vice Chairman 1/90 - 3/98
Mellon Leasing Corporation+ Vice Chairman 12/96 - Present
Mellon Bank (DE) National Director 4/89 - 12/98
Association
Wilmington, DE
Mellon Bank (MD) National Director 1/96 - 4/98
Association
Rockville, Maryland
J. DAVID OFFICER Dreyfus Service Corporation++ President 3/00 - Present
Vice Chairman Executive Vice President 5/98 - 3/00
and Director Director 3/99 - Present
Dreyfus Service Organization, Director 3/99 - Present
Inc.++
Dreyfus Insurance Agency of Director 5/98 - Present
Massachusetts, Inc.++++
Dreyfus Brokerage Services, Inc. Chairman 3/99 - Present
401 North Maple Avenue
Beverly Hills, CA
Seven Six Seven Agency, Inc.++ Director 10/98 - Present
Mellon Residential Funding Corp. + Director 4/97 - Present
Mellon Trust of Florida, N.A. Director 8/97 - Present
2875 Northeast 191st Street
North Miami Beach, FL 33180
Mellon Bank, NA+ Executive Vice President 7/96 - Present
The Boston Company, Inc.* Vice Chairman 1/97 - Present
Director 7/96 - Present
Mellon Preferred Capital Director 11/96 - 1/99
Corporation*
RECO, Inc.* President 11/96 - Present
Director 11/96 - Present
The Boston Company Financial President 8/96 - 6/99
Services, Inc.* Director 8/96 - 6/99
Boston Safe Deposit and Trust Director 7/96 - Present
Company* President 7/96 - 1/99
Mellon Trust of New York Director 6/96 - Present
1301 Avenue of the Americas
New York, NY 10019
Mellon Trust of California Director 6/96 - Present
400 South Hope Street
Suite 400
Los Angeles, CA 90071
Mellon United National Bank Director 3/98 - Present
1399 SW 1st Ave., Suite 400
Miami, Florida
Boston Group Holdings, Inc.* Director 12/97 - Present
Dreyfus Financial Services Corp. + Director 9/96 - Present
Dreyfus Investment Services Director 4/96 - Present
Corporation+
RICHARD W. SABO Founders Asset Management, President 12/98 - Present
Director LLC**** Chief Executive Officer 12/98 - Present
Prudential Securities Senior Vice President 07/91 - 11/98
New York, NY Regional Director 07/91 - 11/98
RICHARD F. SYRON Thermo Electron President 6/99 - Present
Director 81 Wyman Street Chief Executive Officer 6/99 - Present
Waltham, MA 02454-9046
American Stock Exchange Chairman 4/94 - 6/99
86 Trinity Place Chief Executive Officer 4/94 - 6/99
New York, NY 10006
RONALD P. O'HANLEY Franklin Portfolio Holdings, Inc.* Director 3/97 - Present
Vice Chairman
Franklin Portfolio Associates, Director 3/97 - Present
LLC*
Boston Safe Deposit and Trust Executive Committee 1/99 - Present
Company* Member
Director 1/99 - Present
The Boston Company, Inc.* Executive Committee 1/99 - Present
Member 1/99 - Present
Director
Buck Consultants, Inc.++ Director 7/97 - Present
Newton Asset Management LTD Executive Committee 10/98 - Present
(UK) Member
London, England Director 10/98 - Present
Mellon Asset Management Non-Resident Director 11/98 - Present
(Japan) Co., LTD
Tokyo, Japan
TBCAM Holdings, Inc.* Director 10/97 - Present
The Boston Company Asset Director 1/98 - Present
Management, LLC*
Boston Safe Advisors, Inc.* Chairman 6/97 - Present
Director 2/97 - Present
Pareto Partners Partner Representative 5/97 - Present
271 Regent Street
London, England W1R 8PP
Mellon Capital Management Director 2/97 -Present
Corporation***
Certus Asset Advisors Corp.** Director 2/97 - Present
Mellon Bond Associates, LLP+ Trustee 1/98 - Present
Chairman 1/98 - Present
Mellon Equity Associates, LLP+ Trustee 1/98 - Present
Chairman 1/98 - Present
Mellon-France Corporation+ Director 3/97 - Present
Laurel Capital Advisors+ Trustee 3/97 - Present
STEPHEN R. BYERS Dreyfus Service Corporation++ Senior Vice President 3/00 - Present
Director of Investments and
Senior Vice President
Gruntal & Co., LLC Executive Vice President 5/97 - 11/99
New York, NY Partner 5/97 - 11/99
Executive Committee 5/97 - 11/99
Member
Board of Directors 5/97 - 11/99
Member
Treasurer 5/97 - 11/99
Chief Financial Officer 5/97 - 6/99
PATRICE M. KOZLOWSKI None
Senior Vice President - Corporate
Communications
MARK N. JACOBS Dreyfus Investment Director 4/97 - Present
General Counsel, Advisors, Inc.++ Secretary 10/77 - 7/98
Vice President, and
Secretary The Dreyfus Trust Company+++ Director 3/96 - Present
The TruePenny Corporation++ President 10/98 - Present
Director 3/96 - Present
Dreyfus Service Director 3/97 - 3/99
Organization, Inc.++
WILLIAM H. MARESCA The Dreyfus Trust Company+++ Chief Financial Officer 3/99 - Present
Controller Treasurer 9/98 - Present
Director 3/97 - Present
Dreyfus Service Corporation++ Chief Financial Officer 12/98 - Present
Director 8/00 - Present
Dreyfus Consumer Credit Corp. ++ Treasurer 10/98 - Present
Dreyfus Investment Treasurer 10/98 - Present
Advisors, Inc. ++
Dreyfus-Lincoln, Inc. Vice President 10/98 - Present
4500 New Linden Hill Road
Wilmington, DE 19808
The TruePenny Corporation++ Vice President 10/98 - Present
Dreyfus Precious Metals, Inc. +++ Treasurer 10/98 - 12/98
The Trotwood Corporation++ Vice President 10/98 - Present
Trotwood Hunters Corporation++ Vice President 10/98 - Present
Trotwood Hunters Site A Corp. ++ Vice President 10/98 - Present
Dreyfus Transfer, Inc. Chief Financial Officer 5/98 - Present
One American Express Plaza,
Providence, RI 02903
Dreyfus Service Treasurer 3/99 - Present
Organization, Inc.++ Assistant Treasurer 3/93 - 3/99
Dreyfus Insurance Agency of Assistant Treasurer 5/98 - Present
Massachusetts, Inc.++++
WILLIAM T. SANDALLS, JR. Dreyfus Transfer, Inc. Chairman 2/97 - Present
Executive Vice President One American Express Plaza,
Providence, RI 02903
Dreyfus Service Corporation++ Director 1/96 - 8/00
Executive Vice President 2/97 - Present
Chief Financial Officer 2/97 - 12/98
Dreyfus Investment Director 1/96 - Present
Advisors, Inc.++ Treasurer 1/96 - 10/98
Dreyfus-Lincoln, Inc. Director 12/96 - Present
4500 New Linden Hill Road President 1/97 - Present
Wilmington, DE 19808
Seven Six Seven Agency, Inc.++ Director 1/96 - 10/98
Treasurer 10/96 - 10/98
The Dreyfus Consumer Director 1/96 - Present
Credit Corp.++ Vice President 1/96 - Present
Treasurer 1/97 - 10/98
The Dreyfus Trust Company +++ Director 1/96 - Present
Dreyfus Service Organization, Treasurer 10/96 - 3/99
Inc.++
Dreyfus Insurance Agency of Director 5/97 - 3/99
Massachusetts, Inc.++++ Treasurer 5/97 - 3/99
Executive Vice President 5/97 - 3/99
DIANE P. DURNIN Dreyfus Service Corporation++ Senior Vice President - 5/95 - 3/99
Vice President - Product Marketing and Advertising
Development Division
MARY BETH LEIBIG None
Vice President -
Human Resources
THEODORE A. SCHACHAR Dreyfus Service Corporation++ Vice President -Tax 10/96 - Present
Vice President - Tax
The Dreyfus Consumer Credit Chairman 6/99 - Present
Corporation ++ President 6/99 - Present
Dreyfus Investment Advisors, Vice President - Tax 10/96 - Present
Inc.++
Dreyfus Precious Metals, Inc. +++ Vice President - Tax 10/96 - 12/98
Dreyfus Service Organization, Vice President - Tax 10/96 - Present
Inc.++
WENDY STRUTT None
Vice President
RAYMOND J. VAN COTT Mellon Financial Corporation+ Vice President 7/98 - Present
Vice President -
Information Systems
Computer Sciences Corporation Vice President 1/96 - 7/98
El Segundo, CA
JAMES BITETTO The TruePenny Corporation++ Secretary 9/98 - Present
Assistant Secretary
Dreyfus Service Corporation++ Assistant Secretary 8/98 - Present
Dreyfus Investment Assistant Secretary 7/98 - Present
Advisors, Inc.++
Dreyfus Service Assistant Secretary 7/98 - Present
Organization, Inc.++
STEVEN F. NEWMAN Dreyfus Transfer, Inc. Vice President 2/97 - Present
Assistant Secretary One American Express Plaza Director 2/97 - Present
Providence, RI 02903 Secretary 2/97 - Present
Dreyfus Service Secretary 7/98 - Present
Organization, Inc.++ Assistant Secretary 5/98 - 7/98
* The address of the business so indicated is One Boston Place, Boston, Massachusetts, 02108.
** The address of the business so indicated is One Bush Street, Suite 450, San Francisco, California 94104.
*** The address of the business so indicated is 595 Market Street, Suite 3000, San Francisco, California 94105.
**** The address of the business so indicated is 2930 East Third Avenue, Denver, Colorado 80206.
+ The address of the business so indicated is One Mellon Bank Center, Pittsburgh, Pennsylvania 15258.
++ The address of the business so indicated is 200 Park Avenue, New York, New York 10166.
+++ 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 53 State Street, Boston, Massachusetts 02109.
</TABLE>
Item 27. Principal Underwriters
-------- ----------------------
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or exclusive
distributor:
1) Dreyfus A Bonds Plus, Inc.
2) Dreyfus Appreciation Fund, Inc.
3) Dreyfus Balanced Fund, Inc.
4) Dreyfus BASIC GNMA Fund
5) Dreyfus BASIC Money Market Fund, Inc.
6) Dreyfus BASIC Municipal Fund, Inc.
7) Dreyfus BASIC U.S. Government Money Market Fund
8) Dreyfus California Intermediate Municipal Bond Fund
9) Dreyfus California Tax Exempt Bond Fund, Inc.
10) Dreyfus California Tax Exempt Money Market Fund
11) Dreyfus Cash Management
12) Dreyfus Cash Management Plus, Inc.
13) Dreyfus Connecticut Intermediate Municipal Bond Fund
14) Dreyfus Connecticut Municipal Money Market Fund, Inc.
15) Dreyfus Florida Intermediate Municipal Bond Fund
16) Dreyfus Florida Municipal Money Market Fund
17) Dreyfus Founders Funds, Inc.
18) The Dreyfus Fund Incorporated
19) Dreyfus Global Bond Fund, Inc.
20) Dreyfus Global Growth Fund
21) Dreyfus GNMA Fund, Inc.
22) Dreyfus Government Cash Management Funds
23) Dreyfus Growth and Income Fund, Inc.
24) Dreyfus Growth and Value Funds, Inc.
25) Dreyfus Growth Opportunity Fund, Inc.
26) Dreyfus Debt and Equity Funds
27) Dreyfus Index Funds, Inc.
28) Dreyfus Institutional Money Market Fund
29) Dreyfus Institutional Preferred Money Market Fund
30) Dreyfus Institutional Short Term Treasury Fund
31) Dreyfus Insured Municipal Bond Fund, Inc.
32) Dreyfus Intermediate Municipal Bond Fund, Inc.
33) Dreyfus International Funds, Inc.
34) Dreyfus Investment Grade Bond Funds, Inc.
35) Dreyfus Investment Portfolios
36) The Dreyfus/Laurel Funds, Inc.
37) The Dreyfus/Laurel Funds Trust
38) The Dreyfus/Laurel Tax-Free Municipal Funds
39) Dreyfus LifeTime Portfolios, Inc.
40) Dreyfus Liquid Assets, Inc.
41) Dreyfus Massachusetts Intermediate Municipal Bond Fund
42) Dreyfus Massachusetts Municipal Money Market Fund
43) Dreyfus Massachusetts Tax Exempt Bond Fund
44) Dreyfus MidCap Index Fund
45) Dreyfus Money Market Instruments, Inc.
46) Dreyfus Municipal Cash Management Plus
47) Dreyfus Municipal Money Market Fund, Inc.
48) Dreyfus New Jersey Intermediate Municipal Bond Fund
49) Dreyfus New Jersey Municipal Bond Fund, Inc.
50) Dreyfus New Jersey Municipal Money Market Fund, Inc.
51) Dreyfus New Leaders Fund, Inc.
52) Dreyfus New York Municipal Cash Management
53) Dreyfus New York Tax Exempt Bond Fund, Inc.
54) Dreyfus New York Tax Exempt Intermediate Bond Fund
55) Dreyfus New York Tax Exempt Money Market Fund
56) Dreyfus U.S. Treasury Intermediate Term Fund
57) Dreyfus U.S. Treasury Long Term Fund
58) Dreyfus 100% U.S. Treasury Money Market Fund
59) Dreyfus U.S. Treasury Short Term Fund
60) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
61) Dreyfus Pennsylvania Municipal Money Market Fund
62) Dreyfus Premier California Municipal Bond Fund
63) Dreyfus Premier Equity Funds, Inc.
64) Dreyfus Premier International Funds, Inc.
65) Dreyfus Premier GNMA Fund
66) Dreyfus Premier Opportunity Funds
67) Dreyfus Premier Worldwide Growth Fund, Inc.
68) Dreyfus Premier Municipal Bond Fund
69) Dreyfus Premier New York Municipal Bond Fund
70) Dreyfus Premier State Municipal Bond Fund
71) Dreyfus Premier Value Equity Funds
72) Dreyfus Short-Intermediate Government Fund
73) Dreyfus Short-Intermediate Municipal Bond Fund
74) The Dreyfus Socially Responsible Growth Fund, Inc.
75) Dreyfus Stock Index Fund
76) Dreyfus Tax Exempt Cash Management
77) The Dreyfus Premier Third Century Fund, Inc.
78) Dreyfus Treasury Cash Management
79) Dreyfus Treasury Prime Cash Management
80) Dreyfus Variable Investment Fund
81) Dreyfus Worldwide Dollar Money Market Fund, Inc.
82) General California Municipal Bond Fund, Inc.
83) General California Municipal Money Market Fund
84) General Government Securities Money Market Funds, Inc.
85) General Money Market Fund, Inc.
86) General Municipal Bond Fund, Inc.
87) General Municipal Money Market Funds, Inc.
88) General New York Municipal Bond Fund, Inc.
89) General New York Municipal Money Market Fund
<TABLE>
<CAPTION>
<S> <C> <C>
(b)
Positions and
Name and principal Offices with
Business address Positions and offices with the Distributor Registrant
---------------- ------------------------------------------ ----------
Thomas F. Eggers * Chief Executive Officer and Chairman of the None
Board
J. David Officer * President and Director None
Stephen Burke * Executive Vice President and Director None
Charles Cardona * Executive Vice President and Director None
Anthony DeVivio ** Executive Vice President and Director None
Michael Millard ** Executive Vice President and Director None
David K. Mossman ** Executive Vice President None
Jeffrey N. Nachman *** Executive Vice President and Chief Operations Officer None
William T. Sandalls, Jr. * Executive Vice President None
William H. Maresca * Chief Financial Officer and Director None
James Book **** Senior Vice President None
Ken Bradle ** Senior Vice President None
Stephen R. Byers * Senior Vice President None
Joseph Connolly * Senior Vice President Vice President
and Treasurer
Joseph Eck + Senior Vice President None
William Glenn * Senior Vice President None
Bradley Skapyak * Senior Vice President None
Jane Knight * Chief Legal Officer and Secretary None
Stephen Storen * Chief Compliance Officer None
Jeffrey Cannizzaro * Vice President - Compliance None
John Geli ** Vice President None
Maria Georgopoulos * Vice President - Facilities Management None
William Germenis * Vice President - Compliance None
Walter T. Harris * Vice President None
Janice Hayles * Vice President None
Hal Marshall * Vice President - Compliance None
Paul Molloy * Vice President None
B.J. Ralston ** Vice President None
Theodore A. Schachar * Vice President - Tax None
James Windels * Vice President None
James Bitetto * Assistant Secretary None
Ronald Jamison * Assistant Secretary None
</TABLE>
* Principal business address is 200 Park Avenue, New York, NY 10166.
** Principal business address is 144 Glenn Curtiss Blvd., Uniondale, NY
11556-0144.
*** Principal business address is 401 North Maple Avenue, Beverly Hills, CA
90210.
**** Principal business address is One Mellon Bank Center, Pittsburgh, PA 15258
+ Principal business address is One Boston Place, Boston, MA 02108
Item 28. Location of Accounts and Records
------- --------------------------------
1. The Bank of New York
100 Church Street
New York, New York 10286
2. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
3. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 29. Management Services
------- -------------------
Not Applicable
Item 30. Undertakings
------- ------------
None
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirement for effectiveness of this registration statement under Rule
485(b) under the Securities Act and 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 29th day
of December, 2000.
-------------------------------------------
BY: /s/Stephen E. Canter*
---------------------
Stephen E. Canter, 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 date indicated.
Signatures Title Date
--------------------------- ----------------------------- ---------
/s/Stephen E. Canter* President (Principal Executive 12/29/00
------------------------------ Officer)
Stephen E. Canter
/s/Joseph Connolly* Vice President and Treasurer 12/29/00
------------------------------ (Principal Accounting and Financial
Joseph Connolly Officer)
/s/Joseph S. DiMartino* Chairman of the Board 12/29/00
------------------------------
Joseph S. DiMartino
/s/David W. Burke* Board Member 12/29/00
------------------------------
David W. Burke
/s/Hodding Carter, III* Board Member 12/29/00
------------------------------
Hodding Carter, III
/s/Ehud Houminer* Board Member 12/29/00
------------------------------
Ehud Houminer
/s/Richard C. Leone* Board Member 12/29/00
------------------------------
Richard C. Leone
/s/Hans C. Mautner* Board Member 12/29/00
------------------------------
Hans C. Mautner
/s/Robin A. Pringle* Board Member 12/29/00
------------------------------
Robin A. Pringle
/s/John E. Zuccotti* Board Member 12/29/00
------------------------------
John E. Zuccotti
*BY: /s/John B. Hammalian
----------------------
John B. Hammalian,
Attorney-in-Fact
INDEX OF EXHIBITS
Exhibit No.
(b) Amended By-Laws
(e) Distribution Agreement
(j) Consent of Independent Auditors
(p) Code of Ethics
OTHER EXHIBITS
(a) Powers of Attorney
(b) Certificate of Secretary
