SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (ss.)240.14a-11(c) or (ss.)240.14a-12
Dreyfus Strategic Municipals, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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PRELIMINARY COPY
DREYFUS STRATEGIC MUNICIPALS, INC.
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NOTICE OF A SPECIAL MEETING OF STOCKHOLDERS
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To the Stockholders:
A Special Meeting of Stockholders of Dreyfus Strategic Municipals,
Inc. (the "Fund") will be held at the offices of The Dreyfus Corporation, 200
Park Avenue, 7th Floor, New York, New York, on Friday, October 15, 1999 at
[10:00] a.m., for the following purposes:
1. To approve a change to a fundamental policy of the Fund to permit
the Fund to issue preferred stock.
2. To transact such other business as may properly come before the
meeting, or any adjournment or adjournments thereof.
Stockholders of record at the close of business on September 7, 1999
will be entitled to receive notice of and to vote at the meeting.
By Order of the Board
Margaret W. Chambers
Secretary
New York, New York
September 7, 1999
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WE NEED YOUR PROXY VOTE IMMEDIATELY
A STOCKHOLDER MAY THINK HIS OR HER VOTE IS NOT IMPORTANT, BUT IT
IS VITAL. BY LAW, THE MEETING OF STOCKHOLDERS OF THE FUND WILL
HAVE TO BE ADJOURNED WITHOUT CONDUCTING ANY BUSINESS IF LESS
THAN A QUORUM IS REPRESENTED. IN THAT EVENT, THE FUND WOULD
CONTINUE TO SOLICIT VOTES IN AN ATTEMPT TO ACHIEVE A QUORUM.
CLEARLY, YOUR VOTE COULD BE CRITICAL TO ENABLE THE FUND TO
HOLD THE MEETING AS SCHEDULED, SO PLEASE RETURN YOUR PROXY
CARD IMMEDIATELY. YOU AND ALL OTHER STOCKHOLDERS WILL
BENEFIT FROM YOUR COOPERATION.
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<PAGE>
PRELIMINARY COPY
DREYFUS STRATEGIC MUNICIPALS, INC.
PROXY STATEMENT
A SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, OCTOBER 15, 1999
This proxy statement is furnished in connection with a solicitation of
proxies by the Board of Dreyfus Strategic Municipals, Inc. (the "Fund") to be
used at the Special Meeting of Stockholders (the "Meeting") of the Fund to be
held on Friday, October 15, 1999 at [10:00] a.m., at the offices of The
Dreyfus Corporation, 200 Park Avenue, 7th Floor, New York, New York, for the
purposes set forth in the accompanying Notice of Special Meeting of
Stockholders. Stockholders of record at the close of business on September 7,
1999 are entitled to receive notice of and to vote at the Meeting. Stockholders
are entitled to one vote for each Fund share held and fractional votes for each
fractional Fund share held. Shares represented by executed and unrevoked proxies
will be voted in accordance with the specifications made thereon. If any
enclosed form of proxy is executed and returned, it nevertheless may be revoked
by another proxy or by letter or telegram directed to the Fund, which must
indicate the stockholder's name and account number. To be effective, such
revocation must be received before the Meeting. In addition, any stockholder who
attends the Meeting in person may vote by ballot at the Meeting, thereby
canceling any proxy previously given.
As of _____ __, 1999, the Fund had outstanding __________________
shares.
It is estimated that proxy materials will be mailed to stockholders of
record on or about September 7, 1999. The principal executive offices of the
Fund are located at 200 Park Avenue, New York, New York 10166. COPIES OF THE
FUND'S MOST RECENT ANNUAL AND SEMIANNUAL REPORTS ARE AVAILABLE UPON REQUEST,
WITHOUT CHARGE, BY WRITING TO THE FUND AT 144 GLENN CURTISS BOULEVARD,
UNIONDALE, NEW YORK 11556-0144, OR BY CALLING TOLL-FREE 1-800-645-6561.
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PROPOSAL 1: TO APPROVE A CHANGE TO A FUNDAMENTAL POLICY OF
THE FUND TO PERMIT THE FUND TO ISSUE PREFERRED
STOCK
At a meeting held on July 19, 1999, the Fund's Board authorized the
issuance by the Fund of preferred stock, subject to stockholder approval of a
change to a fundamental policy of the Fund that currently prevents the Fund from
issuing preferred stock, which is a form of financial leverage.
After consultations with The Dreyfus Corporation ("Dreyfus"), the
Fund's investment adviser, and other financial industry professionals, the Board
determined that under current market conditions it is likely the Fund would be
able to invest the proceeds from a preferred stock offering in securities with a
higher yield than the yield the Fund would be expected to pay on the preferred
stock. Fund management determined that leveraging the Fund's common stock in
this manner should create the opportunity for greater total returns for the
Fund. Over the last ten years, leveraged municipal bond funds typically have
outperformed non-leveraged municipal bond funds. Over 80% of municipal bond
funds employ leverage capital structures through the issuance of preferred
stock.
But, leverage involves certain risks which the Board evaluated prior
to determining to recommend stockholders approve the proposal. These risks
include:
o Leverage could increase the volatility of the net asset
value and market price of the common stock.
o Leverage could reduce the amount distributed to
holders of common stock, if
o the income from securities purchased with the
preferred stock offering proceeds is not sufficient
to cover the costs of issuing the preferred stock,
including dividends payable on the preferred stock.
o the Fund is required to pay holders of preferred
stock additional dividends to compensate them for
any capital gain or other taxable income
allocated to the preferred stock.
Dreyfus will benefit from the issuance of any preferred stock, because
the net proceeds to the Fund of the preferred stock offering will increase the
net assets of the Fund, and, therefore, will increase the dollar amount of the
investment advisory fee payable by the Fund to Dreyfus since the fee is
calculated as a percentage of the Fund's net assets.
Because the preferred stock is considered a senior security under the
Investment Company Act of 1940, as amended (the "1940 Act"), to issue any
preferred stock the Fund must first change its investment restriction number 9
which is a fundamental policy. Fundamental policies may be changed only with
stockholder approval. Accordingly, the Board recommends stockholders vote to
approve changing such investment restriction as follows:
CURRENT PROPOSED
The Fund may not issue any senior security (as The Fund may not issue any
such term is defined in Section 18(f) of the senior security (as such term
Investment Company Act) except as permitted is defined in Section 18(f)
in Investment Restriction Nos. 2, 3, 4 and 7. of the Investment Company
Act) other than preferred
stock. The Fund's permitted
borrowings and transactions
in futures and options, to
the extent permitted under
the 1940 Act, are not
considered senior securities
for purposes of this
investment restriction.
PROPOSED ISSUANCE OF PREFERRED STOCK. The Board has authorized the
issuance of preferred stock in one or more initial series representing up to
approximately 53% of the Fund's current capital (up to 35% of its capital after
the issuance of the preferred stock).
Holders of the proposed initial series of preferred stock would be
entitled to receive cumulative dividends at a variable rate with respect to each
such series that would be set initially and at periodic intervals thereafter,
through auctions, at a level that would be intended to cause the preferred stock
to trade at its original offering price, subject to a ceiling set by reference
to the credit rating assigned to the shares and prevailing rates on certain
short-term securities. The dividends on the initial series would be intended, to
the extent possible, to qualify in their entirety as "exempt-interest dividends"
which are not subject to federal income tax under current law. To the extent
such dividends did not so qualify, additional dividends might be paid or might
accumulate on the preferred stock so that, assuming payment, the net after-tax
return to a holder of the preferred stock would be the same as if all of the
dividends had qualified. Auctions of the proposed initial series of preferred
stock generally would be held, and thereafter the dividend rate generally will
be reset, periodically over short-term periods (generally seven days but, at the
option of the Fund, up to five years).
The Fund, in most circumstances, would have the right to redeem any
initial series of preferred stock on or about any dividend payment date, at a
stated redemption price plus an amount equal to accumulated and unpaid
dividends, plus, under limited circumstances, a redemption premium.
The Fund would have the proceeds of the issuance of the preferred
stock available for investment in accordance with the Fund's investment
objective and policies. The Fund thus would be able to invest the proceeds
principally in longer-term municipal obligations.
Any incremental return available from investing new funds reduced by
expenses attributable thereto ("net incremental return") would be available for
distribution to the holders of the common stock and, if the rate of return on
the Fund's investments exceeds the dividend rate on the preferred stock, should
enhance the return on the common stock. However, there can be no assurance that
the historical relationship between short-term and long-term interest rates will
continue or that the Fund will receive any net incremental return that would be
available to the holders of the common stock. Because the holders of the
preferred stock would be entitled to receive dividends before the holders of the
common stock, if the dividend rate on the preferred stock were greater than the
net rate of return earned by the Fund on its portfolio investments, the amounts
available for distribution to the holders of the common stock could be reduced.
However, the Board does not intend to approve the issuance of any preferred
stock unless it believes, at the time of such issuance, that the return on the
Fund's common stock is likely for the foreseeable future to be enhanced by the
issuance. In addition, if, after a series of preferred stock were issued, the
continuing payment of dividends on the preferred stock had the effect of
reducing the return on the common stock, the Fund expects that it would consider
redeeming the preferred stock, to the extent possible or permitted by the terms
of such preferred stock.
The Fund expects to seek a "AAA" credit rating of the proposed initial
series of preferred stock from a national securities rating agency. There can be
no assurance, however, that such credit rating will be obtained. Obtaining a
credit rating will involve additional costs to the Fund and may require that the
Fund sell certain of its lower quality or unrated portfolio securities and agree
to various financial and operating restraints as a condition of such credit
rating. However, a "AAA" rating should provide the Fund with the lowest cost of
leverage, thereby maximizing the potential incremental earnings to holders of
the Fund's common stock.
Under the 1940 Act, the Fund would not be permitted to issue preferred
stock unless immediately after such issuance the value of the Fund's assets,
less all liabilities and indebtedness not represented by senior securities,
would be at least 200% of (i) the aggregate amount of all debt securities, plus
(ii) the aggregate involuntary liquidation preference of any stock (such as the
preferred stock) having priority as to distribution of assets or payment of
dividends over any other stock.
The 1940 Act also requires that the holders of any preferred stock,
voting separately as a single class, have the right to elect at least two
Directors at all times, and, subject to the prior rights, if any, of the holders
of any other class of senior securities outstanding, to elect a majority of the
Directors at any time two years' dividends on the preferred stock are unpaid.
All other Directors will be elected by the holders of the common stock and the
preferred stock, voting together as a single class. The 1940 Act also requires
that, in addition to any approval by stockholders that might otherwise be
required, the approval of the holders of a majority of any outstanding preferred
stock, voting separately as a class, would be required to (a) adopt any plan of
reorganization that would adversely affect the preferred stock and (b) take any
action requiring a vote of security holders pursuant to Section 13(a) of the
1940 Act, including, among other things, changes in the Fund's classification as
a closed-end investment company, changes in the Fund's sub-classification from a
diversified investment company or changes in its fundamental investment policies
and restrictions. Holders of preferred stock would have such other voting rights
as are required by law or are provided by the Fund's Board at the time of
issuance of the stock, and holders of a particular series of preferred stock may
be entitled to vote as a separate series on certain matters.
Holders of preferred stock would be entitled to receive dividends
before holders of common stock, and would be entitled to receive the liquidation
value of their stock before any distributions are made to holders of common
stock should the Fund ever be dissolved. The dividend rights and liquidation
value of the class or any particular series of preferred stock would be
determined at the time of issuance of stock of the class or series, subject to
the requirement of the 1940 Act that the dividends payable on preferred stock be
cumulative. The Fund would not be permitted to pay or declare dividends (except
a dividend payable in stock of the Fund) or other distributions on the common
stock, or the purchase of any common stock by the Fund, unless the asset
coverage test described above would be met, after giving effect to the dividend
or distribution.
RISKS OF ISSUANCE OF PREFERRED STOCK. The issuance of preferred stock
would create leverage. Leverage creates risks for holders of the common stock,
including the likelihood of greater volatility of net asset value and market
price of the stock. There is a risk that fluctuations in the dividend rates on
any preferred stock may adversely affect the return to the holders of the Fund's
common stock. If the income from the securities purchased with such funds is not
sufficient to cover the cost of leverage, the return on the Fund will be less
than if leverage had not been used, and therefore the amount available for
distribution to stockholders as dividends and other distributions will be
reduced. Successful use of a leveraging strategy may depend on Dreyfus's ability
to predict correctly interest rates and market movements, and there is no
assurance that a leveraging strategy will be successful during any period in
which it is employed.
Capital raised through leverage will be subject to dividend payments
which may exceed the income and appreciation on the assets purchased. The
issuance of preferred stock involves offering expenses and other costs to the
Fund and may limit the Fund's freedom to pay dividends on stock or to engage in
other activities. The issuance of a class of preferred stock having priority
over the Fund's common stock creates an opportunity for greater return per
share, but at the same time such leveraging is a speculative technique in that
it will increase the Fund's exposure to capital risk. Unless the income and
appreciation, if any, on assets acquired with the offering proceeds exceed the
cost of issuing additional classes of securities (and other Fund expenses), the
use of leverage will diminish the investment performance of the Fund's common
stock compared with what it would have been without leverage.
As noted above, under current federal income tax law, the Fund is
required to allocate a portion of any net realized capital gains or other
taxable income to holders of preferred stock. The terms of preferred stock
offerings typically require the fund to pay to holders of preferred stock
additional dividends intended to compensate them for taxes payable on any
capital gains or other taxable income allocated to the preferred stock. Any such
additional dividends will reduce the amount available for distribution to the
holders of common stock.
To qualify for federal income taxation as a "regulated investment
company," the Fund must distribute in each taxable year at least 90% of its net
investment income (including tax-exempt interest and net short-term gain). The
Fund also will be required to distribute annually substantially all of its
taxable income and capital gain net income, if any, to avoid imposition of a
nondeductible 4% federal excise tax. If the Fund is precluded from making
distributions on the stock because of any applicable asset coverage
requirements, the terms of the proposed preferred stock provide that any amounts
so precluded from being distributed, but required to be distributed for the Fund
to meet the distribution requirements for qualification as a regulated
investment company, be paid to the holders of the preferred stock as a special
dividend. This dividend can be expected to decrease the amount that holders of
preferred stock would be entitled to receive upon redemption or liquidation of
the stock.
<PAGE>
The following table is designed to illustrate the effect on the return
to a holder of the Fund's common stock of leverage in the amount of
approximately [35%] of the Fund's total assets, assuming hypothetical annual
total returns of the Fund's portfolio of minus 10% to plus 10%. As the table
shows, leverage generally increases the return to stockholders when portfolio
return is positive and greater than the cost of leverage and decreases the
return to common stockholders when the portfolio return is negative or less than
the cost of leverage. The figures appearing in the table are hypothetical and
actual returns may be greater or less than those appearing in the table.
Assuming Portfolio Return (net of
expenses) (10)% (5)% (0)% 5% 10%
Corresponding Share Return
Assuming [35%] Leverage (17.11)% (9.42)% (1.72)% 5.97% 13.66%
VOTE REQUIRED AND BOARD'S RECOMMENDATION
Approval of this Proposal requires the affirmative vote of (a) 67% of
the Fund's outstanding voting securities present at the Meeting, if the holders
of more than 50% of the Fund's outstanding voting securities are present or
represented by proxy, or (b) more than 50% of the Fund's outstanding voting
securities, whichever is less.
THE FUND'S BOARD, INCLUDING THE "NON-INTERESTED" BOARD MEMBERS, RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" PROPOSAL 1.
VOTING INFORMATION
The Fund will bear the cost of soliciting proxies. In addition to the
use of the mails, proxies may be solicited personally, by telephone or by
telegraph, and the Fund may pay persons holding Fund shares in their names or
those of their nominees for their expenses in sending soliciting materials to
their principals. The Fund may retain an outside firm to assist in the
solicitation of proxies primarily by contacting stockholders by telephone and
telegram, which would cost approximately $[_____] and would be borne by the
Fund. Authorizations to execute proxies may be obtained by telephonic or
electronically transmitted instructions in accordance with procedures designed
to authenticate the stockholder's identity. In all cases where a telephonic
proxy is solicited, the stockholder will be asked to provide his or her address,
social security number (in the case of an individual) or taxpayer identification
number (in the case of a non-individual) and the number of shares owned and to
confirm that the stockholder has received the Fund's proxy statement and proxy
card in the mail. Within 72 hours of receiving a stockholder's telephonic or
electronically transmitted voting instructions, a confirmation will be sent to
the stockholder to ensure that the vote has been taken in accordance with the
stockholder's instructions and to provide a telephone number to call immediately
if the stockholder's instructions are not correctly reflected in the
confirmation. Any stockholder giving a proxy may revoke it at any time before it
is exercised by submitting to the Fund a written notice of revocation or a
subsequently executed proxy or by attending the Meeting and voting in person.
If a proxy is properly executed and returned accompanied by
instructions to withhold authority to vote, represents a broker "non-vote" (that
is, a proxy from a broker or nominee indicating that such person has not
received instructions from the beneficial owner or other person entitled to vote
Fund shares on a particular matter with respect to which the broker or nominee
does not have a discretionary power) or is marked with an abstention
(collectively, "abstentions"), the Fund shares represented thereby will be
considered to be present at the Meeting for purposes of determining the
existence of a quorum for the transaction of business. Abstentions will not
constitute a vote in favor of a proposal. For this reason, abstentions will have
the effect of a "no" vote for the purpose of obtaining requisite approval for
the Proposal.
If a quorum is not present at the Meeting, or if a quorum is present
but sufficient votes to approve the Proposal are not received, the persons named
as proxies may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. In determining whether to adjourn the Meeting, the
following factors may be considered: the nature of the Proposal, the percentage
of favorable votes actually cast, the percentage of negative votes actually
cast, the nature of any further solicitation and the information to be provided
to stockholders with respect to the reasons for the solicitation. Any
adjournment will require the affirmative vote of a majority of those shares
affected by the adjournment that are represented at the Meeting in person or by
proxy. If a quorum is present for the Fund, the persons named as proxies will
vote those proxies which they are entitled to vote "FOR" the Proposal in favor
of such adjournment, and will vote those proxies required to be voted "AGAINST"
the Proposal against any adjournment of the Meeting.
[As of ____ __, 1999, the following stockholders were known by the
Fund to own of record and beneficially 5% or more of the Fund's outstanding
voting securities: Insert 5% holders]
[The following table sets forth the number of shares of the Fund
beneficially owned as of ____ __, 1999 by the Fund's Board members and officers
owning Fund shares on such date. In each case, such amount constitutes less than
1% of the Fund's outstanding shares.]
OTHER MATTERS
The Fund's Board is not aware of any other matters which may come
before the Meeting. However, should any such matters properly come before the
Meeting, it is the intention of the persons named in the accompanying form of
proxy to vote the proxy in accordance with their judgment on such matters.
Proposals that the stockholders wish to include in the Fund's proxy
statement for the Fund's next Annual Meeting of Stockholders must be sent to and
received by the Fund no later than [January 30], 2000 at the principal executive
offices of the Fund at 200 Park Avenue, New York, New York 10166, Attention:
General Counsel.
<PAGE>
NOTICE TO BANKS, BROKER/DEALERS AND VOTING TRUSTEES
AND THEIR NOMINEES
Please advise the Fund, in care of The Bank of New York, , whether
other persons are the beneficial owners of Fund shares for which proxies are
being solicited from you, and, if so, the number of copies of this Proxy
Statement and other soliciting material you wish to receive in order to supply
copies to the beneficial owners of stock.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS WHO
DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO COMPLETE, SIGN, DATE
AND RETURN THE PROXY CARD IN THE ENCLOSED STAMPED ENVELOPE.
Dated: September 7, 1999
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PRELIMINARY COPY
DREYFUS STRATEGIC MUNICIPALS, INC.
The undersigned stockholder of DREYFUS STRATEGIC MUNICIPALS, INC. (the
"Fund") hereby appoints [Robert R. Mullery and Michael A. Rosenberg] and each of
them, the attorneys and proxies of the undersigned, with full power of
substitution, to vote, as indicated herein, all of the shares of the Fund
standing in the name of the undersigned at the close of business on September
7, 1999 at a Special Meeting of Stockholders to be held at the offices of The
Dreyfus Corporation, 200 Park Avenue, 7th Floor, New York, New York, at [10:00]
a.m. on Friday, October 15, 1999, and at any and all adjournments thereof, with
all of the powers the undersigned possesses and especially (but without limiting
the general authorization and power hereby given) to vote as indicated on the
Proposal, as more fully described in the proxy statement for the Meeting.
If no instructions are indicated, such shares will be voted for
Proposal 1 and, in the discretion of the proxies, in such manner as the proxies
may determine on such other matters as may come before the meeting, or any
adjournments, thereof.
All prior proxies are revoked.
Please mark boxes in blue or black ink.
Proposal 1. To approve a change to a fundamental policy of
the Fund to permit the Fund to issue preferred stock.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
THIS PROXY IS SOLICITED BY THE FUND'S BOARD AND WILL BE VOTED FOR THE ABOVE
PROPOSAL UNLESS OTHERWISE INDICATED.
Signature(s) should be exactly as
name or names appearing on this
form. If shares are held jointly,
each holder should sign. If signing
is by attorney, executor,
administrator, trustee or guardian,
please give full title.
Dated: , 1999
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Signature(s)
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Signature(s)
Sign, Date and Return this Proxy Card
Promptly Using the Enclosed Envelope.
