File No. 33-7498
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. 16 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 16 [X]
(Check appropriate box or boxes.)
PREMIER CALIFORNIA MUNICIPAL BOND FUND
(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
Daniel C. Maclean III, 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)
__X__ immediately upon filing pursuant to paragraph (b)
____ on (date) pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a) (i)
____ on (date) pursuant to paragraph (a) (i)
____ 75 days after filing pursuant to paragraph (a) (ii)
____ on (date) pursuant to paragraph (a) (ii) of Rule 485.
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
____ previously filed amendment.
Registrant has registered an indefinite number of shares of beneficial
interest under the Securities Act of 1933 pursuant to Section 24(f) of the
Investment Company Act of 1940. Registrant's Rule 24f-2 Notice for the fiscal
year ended January 31, 1995 was filed on March 23, 1995.
PREMIER CALIFORNIA MUNICIPAL BOND FUND
Cross-Reference Sheet Pursuant to Rule 495(a)
Items in
Part A of
Form N-1A Caption Page
1 Cover Page Cover
2 Synopsis 3
3 Condensed Financial Information 4
4 General Description of Registrant 6, 35
5 Management of the Fund 18
5(a) Management's Discussion of Fund's Performance *
6 Capital Stock and Other Securities 35
7 Purchase of Securities Being Offered 19
8 Redemption or Repurchase 26
9 Pending Legal Proceedings *
Items in
Part B of
Form N-1A
10 Cover Page Cover
11 Table of Contents Cover
12 General Information and History B-29
13 Investment Objectives and Policies B-2
14 Management of the Fund B-10
15 Control Persons and Principal B-14
Holders of Securities
16 Investment Advisory and Other B-14
Services
NOTE: * Omitted since answer is negative or inapplicable.
PREMIER CALIFORNIA MUNICIPAL BOND FUND
Cross-Reference Sheet Pursuant to Rule 495(a) (continued)
Items in
Part B of
Form N-1A Caption Page
17 Brokerage Allocation and Other Securities B-26
18 Capital Stock and Other Securities B-29
19 Purchase, Redemption and Pricing B-16, B-19, B-24
of Securities Being Offered
20 Tax Status B-24
21 Underwriters Cover, B-16
22 Calculations of Performance Data B-27
23 Financial Statements B-52
Items in
Part C of
Form N-1A
24 Financial Statements and Exhibits C-1
25 Persons Controlled by or Under C-3
Common Control with Registrant
26 Number of Holders of Securities C-3
27 Indemnification C-3
28 Business and Other Connections of C-4
Investment Adviser
29 Principal Underwriters C-11
30 Location of Accounts and Records C-14
31 Management Services C-14
32 Undertakings C-14
NOTE: * Omitted since answer is negative or inapplicable.
- ---------------------------------------------------------------------------
PREMIER CALIFORNIA MUNICIPAL BOND FUND
(LION LOGO)
PROSPECTUS JUNE 1, 1995
- ---------------------------------------------------------------------------
Premier California Municipal Bond Fund (the "Fund") is an
open-end, diversified, management investment company, known as a mutual
fund. Its goal is to maximize current income exempt
from Federal and State of California personal income taxes to the extent
consistent with the preservation of capital.
By this Prospectus, Class A, Class B and Class C shares of
the Fund are being offered. Class A shares are subject to a sales charge
imposed at the time of purchase; Class B shares are subject to a
contingent deferred sales charge imposed on redemptions made within five
years of purchase; and Class C shares are subject to a contingent
deferred sales charge imposed on redemptions made within one year of
purchase. Other differences among the three Classes include the services
offered to and the expenses borne by each Class and certain voting
rights, as described herein. The Fund offers these alternatives to permit
an investor to choose the method of purchasing shares that is most
beneficial given the amount of the purchase, the length of time the
investor expects to hold the shares and other circumstances.
The Fund provides free redemption checks with respect to
Class A, which you can use in amounts of $500 or more for cash or to pay
bills. You continue to earn income on the amount of the check until it
clears. You can purchase or redeem shares by telephone using the
TELETRANSFER Privilege.
The Dreyfus Corporation professionally manages the Fund's
portfolio.
This Prospectus sets forth concisely information about the
Fund that you should know before investing. It should be read and
retained for future reference.
The Statement of Additional Information, dated June 1, 1995,
which may be revised from time to time, provides a further discussion of
certain areas in this Prospectus and other matters which may be of
interest to some investors. It has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. For a free
copy, write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New
York 11556-0144, or call 1-800-554-4611. When telephoning, ask for
Operator 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
- ---------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ---------------------------------------------------------------------------
TABLE OF CONTENTS
Fee Table.......................................... 3
Condensed Financial Information.................... 4
Alternative Purchase Methods....................... 5
Description of the Fund............................ 6
Management of the Fund............................. 18
How to Buy Fund Shares............................. 19
Shareholder Services............................... 23
How to Redeem Fund Shares.......................... 26
Distribution Plan and Shareholder Services Plan.... 31
Dividends, Distributions and Taxes................. 31
Performance Information............................ 34
General Information................................ 35
Page 2
<TABLE>
<CAPTION>
FEE TABLE
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)......... 4.50% none none
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge) none* 3.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees........................... .55% .55% .55%
12b-1 Fees................................ none .50% .75%
Other Expenses ........................... .37% .39% .37%
Total Fund Operating Expenses............. .92% 1.44% 1.67%
EXAMPLE
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) except where noted, redemption
at the end of each time period: CLASS A CLASS B CLASS C
1 Year...................................... $ 54 $ 45/$15** $27/$17**
3 Years..................................... $ 73 $ 66/$46** $53
5 Years..................................... $ 94 $ 89/$79** $91
10 Years.................................... $153 $ 145*** $199
* A contingent deferred sales charge of 1.00% may be assessed on
certain redemptions of Class A shares purchased without an initial sales
charge as part of an investment of $1 million or more.
** Assuming no redemption of shares.
***Ten-year figures assume conversion of Class B shares to Class A
shares at the end of the sixth year following the date of purchase.
</TABLE>
- ---------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL
PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN GREATER OR LESS THAN
5%.
- ---------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in
understanding the various costs and expenses that investors will bear,
directly or indirectly, the payment of which will reduce investors'
return on an annual basis. Total Fund Operating Expenses are limited to
the expense limitation provisions of the Management Agreement. Other
Expenses for Class C are based on amounts for Class A for the Fund's last
fiscal year. Long-term investors in Class B or Class C shares could pay
more in 12b-1 fees than the economic equivalent of paying a front-end
sales charge. The information in the foregoing table does not reflect any
fee waivers or expense reimbursement arrangements that may be in effect.
Certain Service Agents (as defined below) may charge their clients direct
fees for effecting transactions in Fund shares; such fees are not
reflected in the foregoing table. See "Management of the Fund," "How to
Buy Fund Shares" and "Distribution Plan and Shareholder Services Plan."
Page 3
CONDENSED FINANCIAL INFORMATION
The information in the following tables has been audited by
Ernst & Young LLP, the Fund's independent auditors, whose report thereon
appears in the Statement of Additional Information. Further financial
data and related notes for Class A and Class B are included in the
Statement of Additional Information, available upon request. No financial
information is available for Class C shares, which had not been offered
as of the date of this Prospectus.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for
Class A and Class B shares of beneficial interest outstanding, total
investment return, ratios to average net assets and other supplemental
data for each year indicated. This information has been derived from the
Fund's financial statements.
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------------------------------
Year Ended January 31,
-------------------------------------------------------------------------
1987(1) 1988 1989 1990 1991 1992 1993 1994 1995
--------- ----- ----- ----- ----- ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning
of year..... $12.50 $12.92 $11.82 $12.00 $12.02 $12.23 $12.58 $12.80 $13.64
------ ------ ------ ------ ------ ------ ------ ----- ------
INVESTMENT OPERATIONS:
Investment income-net.... .20 .84 .89 .89 .89 .82 .80 .77 .72
Net realized and
unrealized gain (loss)
on investments...... .42 (1.10) .18 .02 .21 .36 .39 .94 (.80)
------ ------ ------ ------ ------ ------ ------ ----- ------
TOTAL FROM
INVESTMENT OPERATIONS.... .62 (.26) 1.07 .91 1.10 1.18 1.19 1.71 (.08)
------ ------ ------ ------ ------ ------ ------ ----- ------
DISTRIBUTIONS:
Dividends from investment
income-net..... (.20) (.84) (.89) (.89) (.89) (.82) (.80) (.77) (.72)
Dividends from net realized
gain on investments.... -- -- -- -- -- (.01) (.17) (.10) (.60)
------ ------ ------ ------ ------ ------ ------ ----- ------
TOTAL DISTRIBUTIONS...... (.20) (.84) (.89) (.89) (.89) (.83) (.97) (.87) (1.32)
------ ------ ------ ------ ------ ------ ------ ----- ------
Net asset value,
end of year...... $12.92 $11.82 $12.00 $12.02 $12.23 $12.58 $12.80 $13.64 $12.24
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN 21.90%(2) (1.61%) 9.52% 7.82% 9.45% 10.02% 9.78% 13.62% (4.34%)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets..... -- -- -- -- .11% .47% .65% .78% .90%
Ratio of net investment
income to average net
assets...... 5.60%(2) 7.22% 7.41% 7.20% 7.19% 6.62% 6.30% 5.71% 5.72%
Decrease reflected in
above expense ratios
due to undertakings by
The Dreyfus Corporation
(limited to the expense
limitation provision of the
Management Agreement)..... 1.50%(2) 1.50% 1.50% 1.26% .91% .48% .28% .15% .02%
Portfolio Turnover Rate... -- 2.77% 33.68% 28.64% 5.95% 10.29% 36.54% 26.69% 37.39%
Net Asssets, end of year
(000's omitted)....... $1,010 $2,713 $12,063 $58,714 $166,095 $218,703 $224,555 $245,435 $191,939
- ---------------
(1)From November 10, 1986 (commencement of operations) to January 31, 1987.
(2)Annualized.
</TABLE>
Page 4
<TABLE>
<CAPTION>
Class B Shares
---------------------------
Year Ended January 31,
---------------------------
1993(1) 1994 1995
------- ---- ----
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year................ $12.69 $12.81 $13.64
------ ------ -------
INVESTMENT OPERATIONS:
Investment income-net............................. .03 .69 .65
Net realized and unrealized gain (loss) on investments..... .12 .93 (.79)
------ ------ -------
TOTAL FROM INVESTMENT OPERATIONS................. .15 1.62 (.14)
------ ------ -------
DISTRIBUTIONS:
Dividends from investment income-net.............. (.03) (.69) (.65)
Dividends from net realized gain on investments... -- (.10) (.60)
------ ------ -------
TOTAL DISTRIBUTIONS.............................. (.03) (.79) (1.25)
------ ------ -------
Net asset value, end of year...................... $12.81 $13.64 $12.25
====== ====== ======
TOTAL INVESTMENT RETURN................................... 25.98%(2) 12.91% (4.77%)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets........... 1.07%(2) 1.31% 1.42%
Ratio of net investment income to average net assets 4.92%(2) 4.90% 5.17%
Decrease reflected in above expense ratios due to undertakings
by The Dreyfus Corporation (limited to the expense limitation
provision of the Management Agreement)........... .13%(2) .13% .02%
Portfolio Turnover Rate........................... 36.54% 26.69% 37.39%
Net Asssets, end of year
(000's omitted)................................... $325 $16,906 $18,981
- ------------------
(1)From January 15, 1993 (commencement of initial offering) to January 31, 1993.
(2)Annualized.
</TABLE>
Further information about the Fund's performance is contained in
its annual report, which may be obtained without charge by writing to the
address or calling the number set forth on the cover page of this
Prospectus.
ALTERNATIVE PURCHASE METHODS
The Fund offers you three methods of purchasing Fund shares;
you may choose the Class of shares that best suits your needs, given the
amount of your purchase, the length of time you expect to hold your
shares and any other relevant circumstances. Each Fund share represents
an identical pro rata interest in the Fund's investment portfolio.
Class A shares are sold at net asset value per share plus a
maximum initial sales charge of 4.50% of the public offering price
imposed at the time of purchase. The initial sales charge may be reduced
or waived for certain purchases. See "How to Buy Fund Shares - Class A
Shares." These shares are subject to an annual service fee at the rate of
.25 of l% of the value of the average daily net assets of Class A. See
"Distribution Plan and Shareholder Services Plan - Shareholder Services
Plan."
Class B shares are sold at net asset value per share with no
initial sales charge at the time of purchase; as a result, the entire
purchase price is immediately invested in the Fund. Class B shares are
subject to a maximum 3% contingent deferred sales charge ("CDSC"), which
is assessed only if you redeem Class B shares within the first five years
of their purchase. See "How to Buy Fund Shares - Class B Shares" and "How
to Redeem Fund Shares - Contingent Deferred Sales Charge - Class B
Shares." These shares also are subject to an annual service fee at the
rate of .25 of 1% of the value of the average daily net assets of Class
B. In addition, Class B shares are subject to an annual distribution fee
at the rate of .50 of l% of the value of the average daily net assets of
Class B. See "Distribution Plan and Shareholder Services Plan." The
distribution fee paid by Class B will cause such Class to have a higher
expense ratio and to pay lower dividends than Class A. Approximately six
years after the date of purchase, Class B shares automatically will
convert to Class A shares, based on the relative net asset
Page 5
values for shares of each Class, and will no longer be subject to the
distribution fee. Class B shares that have been acquired through the
reinvestment of dividends and distributions will be converted on a pro
rata basis together with other Class B shares, in the proportion that a
shareholder's Class B shares converting to Class A shares bears to the
total Class B shares not acquired through the reinvestment of dividends
and distributions.
Class C shares are sold at net asset value per share with no
initial sales charge at the time of purchase; as result, the entire
purchase price is immediately invested in the Fund. Class C shares are
subject to a 1% CDSC, which is assessed only if you redeem Class C shares
within one year of purchase. See "How to Buy Fund Shares - Class C
Shares" and "How to Redeem Fund Shares - Contingent Deferred Sales Charge
- Class C Shares." These shares also are subject to an annual service fee
at the rate of .25 of 1%, and an annual distribution fee at the rate of
.75 of 1%, of the value of the average daily net assets of Class C. See
"Distribution Plan and Shareholder Services Plan." The distribution fee
paid by Class C will cause such Class to have a higher expense ratio and
to pay lower dividends than Class A.
The decision as to which Class of shares is more beneficial
to you depends on the amount and the intended length of your investment.
You should consider whether, during the anticipated life of your
investment in the Fund, the accumulated distribution fee and CDSC, if
any, on Class B or Class C shares would be less than the initial sales
charge on Class A shares purchased at the same time, and to what extent,
if any, such differential would be offset by the return of Class A.
Additionally, investors qualifying for reduced initial sales charges who
expect to maintain their investment for an extended period of time might
consider purchasing Class A shares because the accumulated continuing
distribution fees on Class B or Class C shares may exceed the initial
sales charge on Class A shares during the life of the investment.
Finally, you should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of your own investment
time frame. For example, while Class C shares have a shorter CDSC period
than Class B shares, Class C shares do not have a conversion feature and,
therefore, are subject to an ongoing distribution fee. Thus, Class B
shares may be more attractive than Class C shares to investors with long
term investment outlooks. Generally, Class A shares may be more
appropriate for investors who invest $1,000,000 or more in Fund shares,
and for investors who invest between $250,000 and $999,999 in Fund shares
with long term investment outlooks. Class A shares will not be
appropriate for investors who invest less than $50,000 in Fund shares.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund's goal is to maximize current income exempt from
Federal and State of California personal income taxes to the extent
consistent with the preservation of capital. To accomplish this goal, the
Fund invests primarily in the debt securities of the State of California,
its political subdivisions, authorities and corporations, the interest
from which is, in the opinion of bond counsel to the issuer, exempt from
Federal and State of California personal income taxes (collectively,
"California Municipal Obligations"). To the extent acceptable California
Municipal Obligations are at any time unavailable for investment by the
Fund, the Fund will invest, for temporary defensive purposes, primarily
in other debt securities the interest from which is, in the opinion of
bond counsel to the issuer, exempt from Federal, but not State of
California, income tax. The Fund's investment objective cannot be changed
without approval by the holders of a majority (as defined in the
Investment Company Act of 1940) of the Fund's outstanding voting shares.
There can be no assurance that the Fund's investment objective will be
achieved.
Page 6
MUNICIPAL OBLIGATIONS
Debt securities 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 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.
MANAGEMENT POLICIES
It is a fundamental policy of the Fund that it will invest at
least 80% of the value of its net assets (except when maintaining a
temporary defensive position) in Municipal Obligations. At least 65% of
the value of the Fund's net assets (except when maintaining a temporary
defensive position) will be invested in bonds, debentures and other debt
instruments. At least 65% of the value of the Fund's net assets will be
invested in California Municipal Obligations and the remainder may be
invested in securities that are not California Municipal Obligations and
therefore may be subject to California income tax. See "Risk Factors -
Investing in California Municipal Obligations" below, and "Dividends,
Distributions and Taxes."
At least 70% of the value of the Fund's net assets must
consist of Municipal Obligations which, in the case of bonds, are rated
no lower than Baa by Moody's Investors Service, Inc. ("Moody's") or BBB
by Standard & Poor's Corporation ("S&P") or Fitch Investors Service, Inc.
("Fitch"). The Fund may invest up to 30% of the value of its net assets
in Municipal Obligations which, in the case of bonds, are rated lower
than Baa by Moody's and BBB by S&P and Fitch and as low as the lowest
rating assigned by Moody's, S&P or Fitch. The Fund may invest in
short-term Municipal Obligations which are rated in the two highest
rating categories by Moody's, S&P or Fitch. See "Appendix B" in the
Statement of Additional Information. Municipal Obligations rated BBB by
S&P or Fitch or Baa by Moody's are considered investment grade
obligations; those rated BBB by S&P and Fitch are regarded as having an
adequate capacity to pay principal and interest, while those rated Baa by
Moody's are considered medium grade obligations which lack outstanding
investment characteristics and have speculative characteristics.
Investments rated Ba or lower by Moody's and BB or lower by S&P and Fitch
ordinarily provide higher yields but involve greater risk because of
their speculative characteristics. The Fund may invest in Municipal
Obligations rated C by Moody's or D by S&P or Fitch, which is such rating
organizations' lowest rating and indicates
Page 7
that the Municipal Obligation is in default and interest and/or repayment
of principal is in arrears. See "Risk Factors - Lower Rated Bonds" below
for a further discussion of certain risks. The Fund also may invest in
securities which, while not rated, are determined by The Dreyfus
Corporation to be of comparable quality to the rated securities in which
the Fund may invest; for purposes of the 70% requirement described in
this paragraph, such unrated securities shall be deemed to have the rating
so determined. The Fund also may invest in Taxable Investments of the
quality described below. Under normal market conditions, the weighted
average maturity of the Fund's portfolio is expected to exceed ten years.
In addition to usual investment practices, the Fund may use
speculative investment techniques such as short-selling and lending its
portfolio securities. The Fund also may purchase, hold or deal in futures
contracts and options on futures contracts. Futures and options on
futures transactions involve so-called "derivative securities." See
"Investment Techniques" below.
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. As a result, the Fund may be subject to greater risk as
compared to a fund that does not follow this practice.
From time to time, the Fund may invest more than 25% of the
value of its total assets in industrial development bonds which, although
issued by industrial development authorities, may be backed only by the
assets and revenues of the non-governmental users. Interest on Municipal
Obligations (including certain industrial development bonds) which are
specified private activity bonds, as defined in the Internal Revenue Code
of 1986, as amended (the "Code"), issued after August 7, 1986, while
exempt from Federal income tax, is a preference item for the purpose of
the alternative minimum tax. Where a regulated investment company
receives such interest, a proportionate share of any exempt-interest
dividend paid by the investment company may be treated as such a
preference item to shareholders. The Fund may invest without limitation
in such Municipal Obligations if The Dreyfus Corporation determines that
their purchase is consistent with the Fund's investment objective. See
"Risk Factors - Other Investment Considerations."
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. As mutually agreed, the Fund may increase or decrease the
amounts under these obligations or the borrower may repay the amount
borrowed without penalty. 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. The Dreyfus Corporation, on behalf of
the Fund, will consider
Page 8
on an ongoing basis the creditworthiness of the issuers of the floating
and variable rate demand obligations in the Fund's portfolio.
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 Board of
Trustees has determined meets the prescribed quality standards for banks
set forth below, 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.
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 Dreyfus Corporation, on behalf of the Fund, will consider on an
ongoing basis the creditworthiness of the issuer of the underlying
Municipal Obligation, of any custodian and of the third party provider of
the tender option. In certain instances and for certain tender option
bonds, the option may be terminable in the event of a default in payment
of principal or interest on the underlying Municipal Obligations and for
other reasons. The Fund will not invest more than 15% of the value of its
net assets in illiquid securities, which could include tender option
bonds as to which it cannot exercise the tender feature on not more than
seven days' notice if there is no secondary market available for these
obligations.
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 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. The Fund also may acquire
call options on specific Municipal Obligations. The Fund generally would
purchase these call options to protect the Fund from the issuer of the
related Municipal Obligation redeem-
page 9
ing, 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.
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. If the
interest rate on the first class exceeds the coupon rate of the
underlying Municipal Obligations, its interest rate will exceed the rate
paid on the second class. In no event will the aggregate interest paid
with respect to the two classes exceed the interest paid by the
underlying Municipal Obligations. The value of the second class and
similar securities should be expected to fluctuate more than the value of
a Municipal Obligation of comparable quality and maturity and their
purchase by the Fund should increase the volatility of its net asset
value and, thus, its price per share. These custodial receipts are sold
in private placements. The Fund also may purchase directly from issuers,
and not in a private placement, Municipal Obligations having
characteristics similar to custodial receipts. These securities may be
issued as part of a multi-class offering and the interest rate on certain
classes may be subject to a cap or floor.
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. Such securities may include securities that are not readily
marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, and repurchase agreements providing
for settlement in more than seven days after notice. As to these
securities, the Fund is subject to a risk that should the Fund desire to
sell them when a ready buyer is not available at a price the Fund deems
representative of their value, the value of the Fund's net assets could
be adversely affected.
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). The
amount of the discount varies depending on the time remaining until
maturity or cash payment date, prevailing interest rates, liquidity of
the security and perceived credit quality of the issuer. Zero coupon
securities also may take the form of debt securities that have been
stripped of their unmatured interest coupons, the coupons themselves and
receipts or certificates representing interests in such stripped debt
obligations and coupons. The market prices of zero coupon securities
generally are more volatile than the market prices of interest-bearing
securities and are likely to respond to a greater degree to changes in
interest rates than interest-bearing securities having similar maturities
and credit qualities. The Fund may invest up to 5% of its assets in zero
coupon bonds which are rated below investment grade. See "Risk Factors
Page 10
- Lower Rated Bonds" and "Other Investment Considerations" below, and
"Investment Objective and Management Policies - Risk Factors - Lower
Rated Bonds" and "Dividends, Distributions and Taxes" in the Statement of
Additional Information.
From time to time, on a temporary basis other than for
temporary defensive purposes (but not to exceed 20% of the value of the
Fund's net assets) or for temporary defensive purposes, the Fund may
invest in taxable short-term investments ("Taxable Investments")
consisting of: notes of issuers having, at the time of purchase, a
quality rating within the two highest grades of Moody's, S&P or Fitch;
obligations of the U.S. Government, its agencies or instrumentalities;
commercial paper rated not lower than P-1 by Moody's, A-1 by S&P or F-1
by Fitch; certificates of deposit of U.S. domestic banks, including
foreign branches of domestic banks, with assets of one billion dollars or
more; time deposits; bankers' acceptances and other short-term bank
obligations; and repurchase agreements in respect of any of the
foregoing. Dividends paid by the Fund that are attributable to income
earned by the Fund from Taxable Investments will be taxable to investors.
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. When the Fund has adopted a
temporary defensive position, including when acceptable California
Municipal Obligations are unavailable for investment by the Fund, in
excess of 35% of the Fund's net assets may be invested in securities that
are not exempt from California personal income taxes. 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. Taxable Investments are more fully described in the
Statement of Additional Information, to which reference hereby is made.
INVESTMENT TECHNIQUES
The Fund may employ, among others, the investment techniques
described below. Use of certain of these techniques may give rise to
taxable income.
WHEN-ISSUED SECURITIES - New issues of Municipal Obligations usually
are offered on a when-issued basis, which means that delivery and payment
for such Municipal Obligations ordinarily take place within 45 days after
the date of the commitment to purchase. The payment obligation and the
interest rate that will be received on the Municipal Obligations are
fixed at the time the Fund enters into the commitment. The Fund will make
commitments to purchase such Municipal Obligations 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,
although any gain realized on such sale would be taxable. The Fund will
not accrue income in respect of a when-issued security prior to its
stated delivery date. No additional when-issued commitments will be made
if more than 20% of the value of the Fund's net assets would be so
committed.
Municipal Obligations purchased on a when-issued basis and
the securities held in the Fund's portfolio are subject to changes in
value (both 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. Municipal
Obligations purchased on a when-issued basis may expose the Fund to risk
because they may experience such fluctuations prior to their actual
delivery. Purchasing Municipal Obligations on a 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. A segregated account of the Fund consisting of cash,
cash equivalents or U.S. Government securities or other high quality
liquid debt securities at least equal
Page 11
at all times to the amount of the when-issued commitments will be
established and maintained at the Fund's custodian bank. Purchasing
Municipal Obligations on a when-issued basis when the Fund is fully or
almost fully invested may result in greater potential fluctuation in the
value of the Fund's net assets and its net asset value per share.
FUTURES TRANSACTIONS - IN GENERAL - The Fund is not a commodity
pool. However, as a substitute for a comparable market position in the
underlying securities or for hedging purposes, the Fund may engage in
futures and options on futures transactions, as described below.
The Fund's commodities transactions must constitute bona fide
hedging or other permissible transactions pursuant to regulations
promulgated by the Commodity Futures Trading Commission. In addition, the
Fund may not engage in such transactions if the sum of the amount of
initial margin deposits and premiums paid for unexpired commodity
options, other than for bona fide hedging transactions, would exceed 5%
of the liquidation value of the Fund's assets, after taking into account
unrealized profits and unrealized losses on such contracts it has entered
into; 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%. Pursuant to regulations and/or published
positions of the Securities and Exchange Commission, the Fund may be
required to segregate cash or high quality money market instruments in
connection with its commodities transactions in an amount generally equal
to the value of the underlying commodity. To the extent the Fund engages
in the use of futures and options on futures for other than bona fide
hedging purposes, the Fund may be subject to additional risk.
Initially, when purchasing or selling futures contracts the
Fund will be required to deposit with its custodian in the broker's name
an amount of cash or cash equivalents up to approximately 10% of the
contract amount. This amount is subject to change by the exchange or
board of trade on which the contract is traded and members of such
exchange or board of trade may impose their own higher requirements. This
amount is known as "initial margin" and is in the nature of a performance
bond or good faith deposit on the contract which is returned to the Fund
upon termination of the futures position, assuming all contractual
obligations have been satisfied. Subsequent payments, known as "variation
margin," to and from the broker will be made daily as the price of the
index or securities underlying the futures contract fluctuates, making
the long and short positions in the futures contract more or less
valuable, a process known as "marking-to-market." At any time prior to
the expiration of a futures contract, the Fund may elect to close the
position by taking an opposite position at the then prevailing price,
which will operate to terminate the Fund's existing position in the
contract.
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 the 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. If it is not possible or the
Fund determines not to close a futures position in anticipation of
adverse price movements, the Fund will be required to make daily cash
payments of variation margin. In such circumstances, an increase in the
value of the portion of the Fund's portfolio being hedged, if any, may
offset partially or completely losses on the futures contract. However,
no assurance can be given that the
Page 12
price of the securities being hedged will correlate with the price
movements in a futures contract and thus provide an offset to losses on
the futures contract.
To the extent the Fund is engaging in a futures transaction
as a hedging device, because of the risk of an imperfect correlation
between securities in the Fund's portfolio that are the subject of a
hedging transaction and the futures contract used as a hedging device, it
is possible that the hedge will not be fully effective if, for example,
losses on the portfolio securities exceed gains on the futures contract
or losses on the futures contract exceed gains on the portfolio
securities. For futures contracts based on indices, the risk of imperfect
correlation increases as the composition of the Fund's portfolio varies
from the composition of the index. In an effort to compensate for the
imperfect correlation of movements in the price of the securities being
hedged and movements in the price of futures contracts, the Fund may buy
or sell futures contracts in a greater or lesser dollar amount than the
dollar amount of the securities being hedged if the historical volatility
of the futures contract has been less or greater than that of the
securities. Such "over hedging" or "under hedging" may adversely affect
the Fund's net investment results if the market does not move as
anticipated when the hedge is established.
Successful use of futures by the Fund also is subject to The
Dreyfus Corporation's ability to predict correctly movements in the
direction of the market or interest rates. For example, if the Fund has
hedged against the possibility of a decline in the market adversely
affecting the value of securities held in its portfolio and market prices
increase instead, 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.
An option on a futures contract gives the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract (a long position if the option is a call and a short position if
the option is a put) at a specified exercise price at any time during the
option exercise period. The writer of the option is required upon
exercise to assume an offsetting futures position (a short position if
the option is a call and a long position if the option is a put). Upon
exercise of the option, the assumption of offsetting futures positions by
the writer and holder of the option will be accompanied by delivery of
the accumulated cash balance in the writer's futures margin account which
represents the amount by which the market price of the futures contract,
at exercise, exceeds, in the case of a call, or is less than, in the case
of a put, the exercise price of the option on the futures contract.
Call options sold by the Fund with respect to futures
contracts will be covered by, among other things, entering into a long
position in the same contract at a price no higher than the strike price
of the call option, or by ownership of the instruments underlying, or
instruments the prices of which are expected to move relatively
consistently with the instruments underlying, the futures contract. Put
options sold by the Fund with respect to futures contracts will be
covered when, among other things, cash or liquid securities are placed in
a segregated account to fulfill the obligation undertaken.
The Fund may utilize municipal bond index futures to protect
against changes in the market value of the Municipal Obligations in its
portfolio or which it intends to acquire. Municipal bond index futures
contracts are based on an index of long-term Municipal Obligations. The
index assigns relative values to the Municipal Obligations included in
the index, and fluctuates with changes in the market value of such
Municipal Obligations. The contract is an agreement pursuant to which two
parties agree to take or make delivery of an amount of cash based upon
the difference between the value of the index at the close of the last
trading day of the contract and the price at which the
Page 13
index contract was originally written. The acquisition or sale of a
municipal bond index futures contract enables the Fund to protect its
assets from fluctuations in rates on tax exempt securities without
actually buying or selling such securities.
INTEREST RATE FUTURES CONTRACTS AND OPTIONS ON INTEREST RATE FUTURES
CONTRACTS - The Fund may purchase and sell interest rate futures
contracts and options on interest rate futures contracts as a substitute
for a comparable market position or to hedge against adverse movements in
interest rates.
To the extent the Fund has invested in interest rate futures
contracts or options on interest rate futures contracts as a substitute
for a comparable market position, the Fund will be subject to the
investment risks of having purchased the securities underlying the
contract.
The Fund may purchase call options on interest rate futures
contracts to hedge against a decline in interest rates and may purchase
put options on interest rate futures contracts to hedge its portfolio
securities against the risk of rising interest rates.
The Fund may sell call options on interest rate futures
contracts to partially hedge against declining prices of its portfolio
securities. If the futures price at expiration of the option is below the
exercise price, the Fund will retain the full amount of the option
premium which provides a partial hedge against any decline that may have
occurred in the Fund's portfolio holdings. The Fund may sell put options
on interest rate futures contracts to hedge against increasing prices of
the securities which are deliverable upon exercise of the futures
contract. If the futures price at expiration of the option is higher than
the exercise price, the Fund will retain the full amount of the option
premium which provides a partial hedge against any increase in the price
of securities which the Fund intends to purchase. If a put or call option
sold by the Fund is exercised, the Fund will incur a loss which will be
reduced by the amount of the premium it receives. Depending on the degree
of correlation between changes in the value of its portfolio securities
and changes in the value of its futures positions, the Fund's losses from
existing options on futures may, to some extent, be reduced or increased
by changes in the value of its portfolio securities.
The Fund also may sell options on interest rate futures
contracts as part of closing purchase transactions to terminate its
options positions. No assurance can be given that such closing
transactions can be effected or that there will be a correlation between
price movements in the options on interest rate futures and price
movements in the Fund's portfolio securities which are the subject of the
hedge. In addition, the Fund's purchase of such options will be based
upon predictions as to anticipated interest rate trends, which could
prove to be inaccurate.
SHORT-SELLING - The Fund may make short sales of securities, which
are transactions in which the Fund sells a security it does not own in
anticipation of a decline in the market value of that security. To
complete such a transaction, the Fund must borrow the security to make
delivery to the buyer. The Fund then is obligated to replace the security
borrowed by purchasing it at the market price at the time of replacement.
The Fund will incur a loss as a result of the short sale if the price of
the security increases between the date of the short sale and the date on
which the Fund replaces the borrowed security. The Fund will realize a
gain if the security declines in price between those dates.
No securities will be sold short if, after effect is given to
any such short sale, the total market value of all securities sold short
would exceed 25% of the value of the Fund's net assets. The Fund may not
sell short the securities of any single issuer listed on a national
securities exchange to the extent of more than 5% of the value of the
Fund's net assets. The Fund may not sell short the securities of any
class of an issuer to the extent, at the time of transaction, of more
than 5% of the outstanding securities of that class.
Page 14
In addition to the short sales discussed above, the Fund may
make short sales "against the box," a transaction in which the Fund
enters into a short sale of a security which the Fund owns. At no time
will the Fund have more than 15% of the value of its net assets in
deposits on short sales against the box.
FUTURE DEVELOPMENTS - The Fund may take advantage of opportunities
in the area of options and futures contracts and options on futures
contracts and any other derivative investments 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.
LENDING PORTFOLIO SECURITIES - From time to time, the Fund may lend
securities from its portfolio to brokers, dealers and other financial
institutions needing to borrow securities to complete certain
transactions. Such loans may not exceed 331/3 % of the value of the
Fund's total assets. In connection with such loans, 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. The Fund can increase its income through the investment of
such collateral. However, such income generally would not be tax exempt.
The Fund continues to be entitled to payments in amounts equal to the
interest or other distributions payable on the loaned security and
receives interest on the amount of the loan. Such loans will be
terminable 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.
BORROWING MONEY - As a fundamental policy, the Fund is permitted to
borrow to the extent permitted under the Investment Company Act of 1940.
However, 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 the Fund's total assets (including the amount borrowed) valued at the
lesser of cost or market, less liabilities (not including the amount
borrowed) at the time the borrowing is made. While borrowings exceed 5%
of the Fund's total assets, the Fund will not make any additional
investments.
CERTAIN FUNDAMENTAL POLICIES
The Fund may (i) borrow money to the extent permitted under
the Investment Company Act of 1940, which currently limits borrowing to
no more than 331/3 % of the value of the Fund's total assets; and (ii)
invest up to 25% of its assets in the securities of issuers in any single
industry, provided that there is no such limitation on investments in
Municipal Obligations, and, for temporary defensive purposes, obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. This paragraph describes fundamental policies that
cannot be changed without approval by the holders of a majority (as
defined in the Investment Company Act of 1940) of the Fund's outstanding
voting shares. See "Investment Objective and Management Policies -
Investment Restrictions" in the Statement of Additional Information.
CERTAIN ADDITIONAL NON-FUNDAMENTAL POLICIES
The Fund may (i) pledge, hypothecate, mortgage or otherwise
encumber its assets, but only to secure permitted borrowings; and (ii)
invest up to 15% of the value of its net assets in repurchase agreements
providing for settlement in more than seven days after notice and in
other illiquid securities (which securities could include participation
interests (including municipal lease/purchase agreements) that are not
subject to the demand feature described above, and floating and variable
rate demand obligations as to which the Fund cannot exercise the related
demand feature described above and as
Page 15
to which there is no secondary market). See "Investment Objective and
Management Policies - Investment Restrictions" in the Statement of
Additional Information.
RISK FACTORS
INVESTING IN CALIFORNIA MUNICIPAL OBLIGATIONS - You should consider
carefully the special risks inherent in the Fund's investment in
California Municipal Obligations. These risks result from certain
amendments to the California Constitution and other statutes that limit
the taxing and spending authority of California governmental entities, as
well as from the general financial condition of the State of California.
From mid-1990 to late 1993, the State suffered a recession with the worst
economic, fiscal and budget conditions since the 1930s. As a result, the
State has experienced recurring budget deficits for four of the last five
fiscal years ended 1991-92. The State had an operating surplus of
approximately $109 million in 1992-93, and $836 million in 1993-94.
However, at June 30, 1994, according to California Department of Finance,
the State's Special Fund for Economic Uncertainties had an accumulated
deficit, on a budget basis, of approximately $1.8 billion. A further
consequence of the large budget imbalances has been that the State
depleted its available cash resources and has had to use a series of
external borrowings to meet its cash needs. To meet its cash flow needs
in the 1994-95 fiscal year, the State issued, in July and August 1994,
$4.0 billion of revenue anticipation warrants and $3.0 billion of revenue
anticipation notes. As a result of the deterioration in the State's
budget and cash situation between October 1991 and July 1994, the rating
on the State's general obligation bonds was reduced by S&P from AAA to A,
by Moody's from Aaa to A1 and by Fitch from AAA to A. These and other
factors may have the effect of impairing the ability of the issuers of
California Municipal Obligations to pay interest on, or repay the
principal of, such California Municipal Obligations. You should obtain
and review a copy of the Statement of Additional Information which more
fully sets forth these and other risk factors.
LOWER RATED BONDS - You should carefully consider the relative risks
of investing in the higher yielding (and, therefore, higher risk) debt
securities in which the Fund may invest up to 30% of the value of its net
assets. These are bonds such as those rated Ba by Moody's or BB by S&P or
Fitch or as low as the lowest rating assigned by Moody's, S&P or Fitch.
They generally are not meant for short-term investing and may be subject
to certain risks with respect to the issuing entity and to greater market
fluctuations than certain lower yielding, higher rated fixed-income
securities. Bonds rated Ba by Moody's are judged to have speculative
elements; their future cannot be considered as well assured and often the
protection of interest and principal payments may be very moderate. Bonds
rated BB by S&P are regarded as having predominantly speculative
characteristics and, while such obligations have less near-term
vulnerability to default than other speculative grade debt, they face
major ongoing uncertainties or exposure to adverse business, financial or
economic conditions which could lead to inadequate capacity to meet
timely interest and principal payments. Bonds rated BB by Fitch are
considered speculative and the payment of principal and interest may be
affected at any time by adverse economic changes. Bonds rated C by
Moody's are regarded as having extremely poor prospects of ever attaining
any real investment standing. Bonds rated D by S&P are in default and the
payment of interest and/or repayment of principal is in arrears. Bonds
rated DDD, DD or D by Fitch are in actual or imminent default, are
extremely speculative and should be valued on the basis of their ultimate
recovery value in liquidation or reorganization of the issuer; DDD
represents the highest potential for recovery of such bonds; and D
represents the lowest potential for recovery. Such bonds, though high
yielding, are characterized by great risk. See "Appendix B" in the
Statement of Additional Information for a general description of Moody's,
S&P and
Page 16
Fitch ratings of Municipal Obligations. The ratings of Moody's,
S&P and Fitch represent their opinions as to the quality of the Municipal
Obligations which they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and, 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.
Therefore, although these ratings may be an initial criterion for
selection of portfolio investments, The Dreyfus Corporation also will
evaluate these securities and the ability of the issuers of such
securities to pay interest and principal. The Fund's ability to achieve
its investment objective may be more dependent on The Dreyfus
Corporation's credit analysis than might be the case for a fund that
invested in higher rated securities. Once the rating of a portfolio
security has been changed, the Fund will consider all circumstances
deemed relevant in determining whether to continue to hold the security.
The market price and yield of bonds rated Ba or lower by
Moody's and BB or lower by S&P and Fitch are more volatile than those of
higher rated bonds. Factors adversely affecting the market price and
yield of these securities will adversely affect the Fund's net asset
value. In addition, the retail secondary market for these bonds may be
less liquid than that of higher rated bonds; adverse market conditions
could make it difficult at times for the Fund to sell certain securities
or could result in lower prices than those used in calculating the Fund's
net asset value.
The Fund may invest up to 5% of the value of its net assets
in zero coupon securities and pay-in-kind bonds (bonds which pay interest
through the issuance of additional bonds) rated Ba or lower by Moody's
and BB or lower by S&P and Fitch. These securities may be subject to
greater fluctuations in value due to changes in interest rates than
interest-bearing securities and thus may be considered more speculative
than comparably rated interest-bearing securities. See "Other Investment
Considerations" below, and "Investment Objective and Management Policies
- Risk Factors - Lower Rated Bonds" and "Dividends, Distributions and
Taxes" in the Statement of Additional Information.
OTHER INVESTMENT CONSIDERATIONS - Even though interest-bearing
securities are investments which promise a stable stream of income, the
prices of such securities are inversely affected by changes in interest
rates and, therefore, are subject to the risk of market price
fluctuations. Certain securities that may be purchased by the Fund, such
as those with interest rates that fluctuate directly or indirectly based
on multiples of a stated index, are designed to be highly sensitive to
changes in interest rates and can subject the holders thereof to extreme
reductions of yield and possibly loss of principal. The values of
fixed-income securities also may be affected by changes in the credit
rating or financial condition of the issuing entities. The Fund's net
asset value generally will not be stable and should fluctuate based upon
changes in the value of the Fund's portfolio securities. Securities in
which the Fund invests may earn a higher level of current income than
certain shorter-term or higher quality securities which generally have
greater liquidity, less market risk and less fluctuation in market value.
Federal income tax law requires the holder of a zero coupon
security or of certain pay-in-kind bonds to accrue income with respect to
these securities prior to the receipt of cash payments. To maintain its
qualification as a regulated investment company and avoid liability for
Federal income taxes, the Fund may be required to distribute such income
accrued with respect to these securities and may have to dispose of
portfolio securities under disadvantageous circumstances in order to
generate cash to satisfy these distribution requirements.
Certain municipal lease/purchase obligations in which the
Fund may invest may contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease payments in future
years unless money is appropriated for such purpose on a yearly basis.
Although "non-appropriation" lease/purchase obligations are
Page 17
secured by the leased property, disposition of the leased property in the
event of foreclosure might prove difficult. In evaluating the credit
quality of a municipal lease/purchase obligation that is unrated, The
Dreyfus Corporation will consider, on an ongoing basis, a number of
factors including the likelihood that the issuing municipality will
discontinue appropriating funding for the leased property.
Certain provisions in the 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.
Investment decisions for the Fund are made independently from
those of other investment companies advised by The Dreyfus Corporation.
However, if such other investment companies are prepared to invest in, or
desire to dispose of, Municipal Obligations or Taxable Investments at the
same time 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.
MANAGEMENT OF THE FUND
The Dreyfus Corporation, located at 200 Park Avenue, New
York, New York 10166, was formed in 1947 and serves as the Fund's
investment adviser. The Dreyfus Corporation is a wholly-owned subsidiary
of Mellon Bank Corporation ("Mellon"). As of April 30, 1995, The Dreyfus
Corporation managed or administered approximately $74 billion in assets
for more than 1.8 million investor accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the
Fund, subject to the overall authority of the Fund's Board of Trustees in
accordance with Massachusetts law. The Fund's primary portfolio manager
is A. Paul Disdier. He has held that position since May 1988 and has been
employed by The Dreyfus Corporation since February 1988. The Fund's other
portfolio managers are identified in the Fund's Statement of Additional
Information. The Dreyfus Corporation also provides research services for
the Fund as well as for other Funds advised by The Dreyfus Corporation
through a professional staff of portfolio managers and securities
analysts.
Mellon is a publicly owned multibank holding company
incorporated under Pennsylvania law in 1971 and registered under the
Federal Bank Holding Company Act of 1956, as amended. Mellon provides a
comprehensive range of financial products and services in domestic and
selected international markets. Mellon is among the twenty-five largest
bank holding companies in the United States based on total assets.
Mellon's principal wholly-owned subsidiaries are Mellon Bank, N.A.,
Mellon Bank (DE) National Association, Mellon Bank (MD), The Boston
Company, Inc., AFCOCredit Corporation and a number of companies known as
Mellon Financial Services Corporations. Through its subsidiaries,
including The Dreyfus Corporation, Mellon managed approximately $200
billion in assets as of March 31, 1995, including approximately $72
billion in mutual
Page 18
fund assets. As of March 31, 1995, Mellon, through various subsidiaries,
provided non-investment services, such as custodial or administration
services, for approximately $680 billion in assets, including
approximately $67 billion in mutual fund assets.
Under the terms of the Management Agreement, the Fund has
agreed to pay The Dreyfus Corporation a monthly fee at the annual rate of
.55 of 1% of the value of the Fund's average daily net assets. From time
to time, The Dreyfus Corporation may waive receipt of its fees and/or
voluntarily assume certain expenses of the Fund, which would have the
effect of lowering the overall expense ratio of the Fund and increasing
yield to investors at the time such amounts are waived or assumed, as the
case may be. The Fund will not pay The Dreyfus Corporation at a later
time for any amounts it may waive, nor will the Fund reimburse The
Dreyfus Corporation for any amounts it may assume. For the fiscal year
ended January 31, 1995, the Fund paid The Dreyfus Corporation a
management fee at the effective annual rate of .53 of 1% of the value of
the Fund's average daily net assets pursuant to an undertaking in
effect.
The Dreyfus Corporation may pay the Fund's distributor for
shareholder services from The Dreyfus Corporation's own assets, including
past profits but not including the management fee paid by the Fund. The
Fund's distributor may use part or all of such payments to pay Service
Agents in respect of these services.
The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at One Exchange Place, Boston, Massachusetts
02109. The Distributor is a wholly-owned subsidiary of FDI Distribution
Services, Inc., a provider of mutual fund administration services, which
in turn is a wholly-owned subsidiary of FDI Holdings, Inc., the parent
company of which is Boston Institutional Group, Inc.
The Shareholder Services Group, Inc., a subsidiary of First
Data Corporation, P.O. Box 9671, Providence, Rhode Island 02940-9671, is
the Fund's Transfer and Dividend Disbursing Agent (the "Transfer Agent").
The Bank of New York, 90 Washington Street, New York, New York 10286, is
the Fund's Custodian.
HOW TO BUY FUND SHARES
GENERAL
Fund shares may be purchased only by clients of certain
financial institutions (which may include banks), securities dealers
("Selected Dealers"), and other industry professionals (collectively,
"Service Agents"), except that full-time or part-time employees of The
Dreyfus Corporation or any of its affiliates or subsidiaries, directors
of The Dreyfus Corporation, Board members of a fund advised by The
Dreyfus Corporation, including members of the Fund's Board, or the spouse
or minor child of any of the foregoing may purchase Class A shares
directly through the Distributor. Subsequent purchases may be sent
directly to the Transfer Agent or your Service Agent. Service Agents may
receive different levels of compensation for selling different Classes of
shares. Management understands that some Service Agents may impose
certain conditions on their clients which are different from those
described in this Prospectus, and, to the extent permitted by applicable
regulatory authority, may charge their clients direct fees which would be
in addition to any amounts which might be received under the Shareholder
Services Plan. Each Service Agent has agreed to transmit to its clients a
schedule of such fees. You should consult your Service Agent in this
regard.
When purchasing Fund shares, you must specify which Class is
being purchased. Share 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 retirement plans. The Fund reserves the right to reject any
purchase order.
Page 19
The minimum initial investment is $1,000. Subsequent
investments must be at least $100. The initial investment must be
accompanied by the Fund's Account Application.
You may purchase Fund shares by check or wire, or through the
TELETRANSFER Privilege described below. Checks should be made payable to
"Premier California Municipal Bond Fund." Payments to open new accounts
which are mailed should be sent to Premier California Municipal Bond
Fund, P.O. Box 9387, Providence, Rhode Island 02940-9387, together with
your Account Application indicating which Class of shares is being
purchased. For subsequent investments, your Fund account number should
appear on the check and an investment slip should be enclosed and sent to
Premier California Municipal Bond Fund, P.O. Box 105, Newark, New Jersey
07101-0105. Neither initial nor subsequent investments should be made by
third party check. Wire payments may be made if your bank account is in a
commercial bank that is a member of the Federal Reserve System or any
other bank having a correspondent bank in New York City. Immediately
available funds may be transmitted by wire to The Bank of New York,
DDA#8900119306/Premier California Municipal Bond Fund-Class A shares, or
DDA#8900115025/Premier California Municipal Bond Fund-Class B shares, or
DDA#8900251964/Premier California Municipal Bond Fund-Class C shares, as
the case may be, for purchase of Fund shares in your name. The wire must
include your Fund account number (for new accounts, your Taxpayer
Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If your initial purchase
of Fund shares is by wire, please call 1-800-645-6561 after completing
your wire payment to obtain your Fund account number. Please include your
Fund account number on the Fund's Account Application and promptly mail
the Account Application to the Fund, as no redemptions will be permitted
until the Account Application is received. You may obtain further
information about remitting funds in this manner from your bank. All
payments should be made in U.S. dollars and, to avoid fees and delays,
should be drawn only on U.S. banks. A charge will be imposed if any check
used for investment in your account does not clear. The Fund makes
available to certain large institutions the ability to issue purchase
instructions through compatible computer facilities.
Subsequent investments also may be made by electronic
transfer of funds from an account maintained in a bank or other domestic
financial institution that is an Automated Clearing House member. You
must direct the institution to transmit immediately available funds
through the Automated Clearing House to The Bank of New York with
instructions to credit your Fund account. The instructions must specify
your Fund account registration and your Fund account number PRECEDED BY
THE DIGITS "1111."
Fund shares are sold on a continuous basis. 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
determining net asset value, 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 of each Class is computed by dividing
the value of the Fund's net assets represented by such Class (i.e., the
value of its assets less liabilities) by the total number of shares of
such Class outstanding. The Fund's investments are valued each business
day by an independent pricing service approved by the Board of Trustees
and are valued at fair value as determined by the pricing service. The
pricing service's procedures are reviewed under the general supervision
of the Board of Trustees. For further information regarding the methods
employed in valuing Fund investments, see "Determination of Net Asset
Value" in the Fund's Statement of Additional Information.
Federal regulations require that you provide a certified TIN
upon opening or reopening an account. See "Dividends, Distributions and
Taxes" and the Fund's
Page 20
Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a
$50 penalty imposed by the Internal Revenue Service (the "IRS").
If an order is received by the Transfer Agent by the close of
trading on the floor of the New York Stock Exchange (currently 4:00 p.m.,
New York time) on any business day, Fund shares will be purchased at the
public offering price determined as of the close of trading on the floor
of the New York Stock Exchange on that day. Otherwise, Fund shares will
be purchased at the public offering price determined as of the close of
trading on the floor of the New York Stock Exchange on the next business
day, except where shares are purchased through a dealer as provided
below.
Orders for the purchase of Fund shares received by dealers by
the close of trading on the floor of the New York Stock Exchange on any
business day and transmitted to the Distributor or its designee by the
close of its business day (normally 5:15 p.m., New York time) will be
based on the public offering price per share determined as of the close
of trading on the floor of the New York Stock Exchange on that day.
Otherwise, the orders will be based on the next determined public
offering price. It is the dealers' responsibility to transmit orders so
that they will be received by the Distributor or its designee before the
close of its business day.
CLASS A SHARES - The public offering price for Class A shares is the
net asset value per share of that Class plus a sales load as shown below:
<TABLE>
<CAPTION>
Total Sales Load
--------------------------------
As a % of As a % of Dealers' Reallowance
offering price net asset value as a % of
Amount of Transaction per share per share offering price
--------------------- ------------- ------------- ---------------------
<S> <C> <C> <C>
Less than $50,000......... 4.50 4.70 4.25
$50,000 to less than $100,000...... 4.00 4.20 3.75
$100,000 to less than $250,000..... 3.00 3.10 2.75
$250,000 to less than $500,000..... 2.50 2.60 2.25
$500,000 to less than $1,000,000... 2.00 2.00 1.75
$1,000,000 or more........ -0- -0- -0-
</TABLE>
A CDSC of 1% will be assessed at the time of redemption of
Class A shares purchased without an initial sales
charge as part of an investment of at least $1,000,000 and redeemed
within two years after purchase. The terms contained in the section of
the Fund's Prospectus entitled "How to Redeem Fund shares-Contingent
Deferred Sales Charge" (other than the amount of the CDSC and time
periods pertaining to Class B) are applicable to the Class A shares
subject to a CDSC. Letter of Intent and Right of Accumulation apply to
such purchases of Class A shares.
Full-time employees of NASD member firms and full-time
employees of other financial institutions which have entered into an
agreement with the Distributor pertaining to the sale of Fund shares (or
which otherwise have a brokerage-related or clearing arrangement with an
NASD member firm or other financial institution with respect to sales of
Fund shares) may purchase Class A shares for themselves directly or
pursuant to an employee benefit plan or other program, or for their
spouses or minor children, at net asset value, provided that they have
furnished the Distributor with such information as it may request from
time to time in order to verify eligibility for this privilege. This
privilege also applies to full-time employees of financial institutions
affiliated with NASD member firms whose full-time employees are eligible
to purchase Class A shares at net asset value. In addition, Class A shares
are offered at net asset value to full-time or part-time employees of The
Dreyfus Corporation or any of its affiliates or subsidiaries, directors
of The Dreyfus Corporation, Board members of a fund advised by The
Dreyfus Corporation, including members of the Fund's Board, or the spouse
or minor child of any of the foregoing.
Page 21
The dealer reallowance may be changed from time to time but
will remain the same for all dealers. The Distributor, at its own
expense, may provide additional promotional incentives to dealers that
sell shares of funds advised by The Dreyfus Corporation which are sold
with a sales load, such as the Fund. In some instances, these incentives
may be offered only to certain dealers who have sold or may sell
significant amounts of such shares. For the period from February 1, 1994
through August 23, 1994, Dreyfus Service Corporation, a wholly-owned
subsidiary of The Dreyfus Corporation and distributor of the Fund's
shares until August 24, 1994, retained $17,596 from sales loads on Class
A shares.
CLASS B SHARES
The public offering price for Class B shares is the net asset
value per share of that Class. No initial sales charge is imposed at the
time of purchase. A CDSC is imposed, however, on certain redemptions of
Class B shares as described under "How to Redeem Fund Shares." The
Distributor compensates certain Service Agents for selling Class B or
Class C shares at the time of purchase from the Distributor's own assets.
The proceeds of the CDSC and the distribution fee, in part, are used to
defray these expenses. For the period February 1, 1994 through August 23,
1994, $33,555 was retained by Dreyfus Service Corporation, as former
distributor, from the CDSC on Class B shares.
CLASS C SHARES
The public offering price for Class C shares is the net asset
value per share of that Class. No initial sales charge is imposed at the
time of purchase. A CDSC, however, is imposed on redemptions of Class C
shares made within the first year of purchase. See "Class B Shares" above
and "How to Redeem Fund Shares."
RIGHT OF ACCUMULATION - CLASS A SHARES
Reduced sales loads apply to any purchase of Class A shares,
shares of other funds in the Premier Family of Funds, shares of certain
other funds advised by The Dreyfus Corporation which are sold with a
sales load and shares of certain other funds acquired by a previous
exchange of such shares (hereinafter referred to as "Eligible Funds"), by
you and any related "purchaser" as defined in the Statement of Additional
Information, where the aggregate investment, including such purchase, is
$50,000 or more. If, for example, you have previously purchased and still
hold Class A shares of the Fund, or of any other Eligible Fund or
combination thereof, with an aggregate current market value of $40,000
and subsequently purchase Class A shares of the Fund or an Eligible Fund
having a current value of $20,000, the sales load applicable to the
subsequent purchase would be reduced to 4% of the offering price. All
present holdings of Eligible Funds may be combined to determine the
current offering price of the aggregate investment in ascertaining the
sales load applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of a purchase
you or your Service Agent must notify the Distributor if orders are made
by wire, or the Transfer Agent if orders are made by mail. The reduced
sales load is subject to confirmation of your holdings through a check of
appropriate records.
TELETRANSFER PRIVILEGE
You may purchase Fund shares (minimum $500, maximum $150,000
per day) by telephone if you have checked the appropriate box and
supplied the necessary information on the Fund's 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 such an account maintained
in a domestic financial institution which is an Automated Clearing House
member may be so designated. The Fund may modify or terminate this
Privilege at any time or charge a service fee upon notice to
shareholders. No such fee currently is contemplated.
Page 22
If you have selected the TELETRANSFER Privilege, you may
request a TELETRANSFER purchase of Fund shares by telephoning
1-800-221-4060 or, if you are calling from overseas, call 1-401-455-3306.
SHAREHOLDER SERVICES
The services and privileges described under this heading may
not be available to clients of certain Service Agents and some Service
Agents may impose certain conditions on their clients which are different
from those described in this Prospectus. You should consult your Service
Agent in this regard.
FUND EXCHANGES
Clients of certain Service Agents may purchase, in exchange
for Class A, Class B or Class C shares of the Fund, shares of the same
Class in certain other funds managed or administered by The Dreyfus
Corporation, to the extent such shares are offered for sale in your state
of residence. These funds have different investment objectives which may
be of interest to you. You also may exchange your Fund shares that are
subject to a CDSC for shares of Dreyfus Worldwide Dollar Money Market
Fund, Inc. The shares so purchased will be held in a special account
created solely for this purpose ("Exchange Account"). Exchanges of shares
from an Exchange Account only can be made into certain other funds
managed or administered by The Dreyfus Corporation. No CDSC is charged
when an investor exchanges into an Exchange Account; however, the
applicable CDSC will be imposed when shares are redeemed from an Exchange
Account or other applicable Fund account. Upon redemption, the applicable
CDSC will be calculated without regard to the time such shares were held
in an Exchange Account. See "How to Redeem Fund Shares." Redemption
proceeds for Exchange Account shares are paid by Federal wire or check
only. Exchange Account shares also are eligible for the Auto-Exchange
Privilege, Dividend Sweep and the Automatic Withdrawal Plan. If you
desire to use this service, you should consult your Service Agent or call
1-800-645-6561 to determine if it is available and whether any conditions
are imposed on its use.
To request an exchange, your Service Agent acting on your
behalf must give exchange instructions to the Transfer Agent in writing
or by telephone. Before any exchange, you must obtain and should review a
copy of the current prospectus of the fund into which the exchange is
being made. Prospectuses may be obtained by calling 1-800-645-6561.
Except in the case of Personal Retirement Plans, the shares being
exchanged must have a current value of at least $500; furthermore, when
establishing a new account by exchange, the shares being exchanged must
have a value of at least the minimum initial investment required for the
fund into which the exchange is being made. 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. The Telephone
Exchange Privilege may be established for an existing account by written
request, signed by all shareholders on the account, or by a separate
signed Shareholder Services Form, also available by calling
1-800-645-6561. If you have established the Telephone Exchange Privilege,
you may telephone exchange instructions by calling 1-800-221-4060 or, if
you are calling from overseas, call 1-401-455-3306. See "How to Redeem
Fund Shares_Procedures." Upon an exchange into a new account, the
following shareholder services and privileges, as applicable and where
available, will be automatically carried over to the fund into which the
exchange is made: Telephone Exchange Privilege, Check Redemption
Privilege, TELETRANSFER Privilege and the dividend/capital gain
distribution option (except for Dividend Sweep) selected by the investor.
Shares will be exchanged at the next determined net asset
value; however, a sales load may be charged with respect to exchanges of
Class A shares into funds sold with a
Page 23
sales load. No CDSC will be imposed on Class B or Class C shares at the
time of an exchange; however, Class B or Class C shares acquired through
an exchange will be subject on redemption to the higher CDSC applicable
to the exchanged or acquired shares. The CDSC applicable on redemption of
the acquired Class B or Class C shares will be calculated from the date of
the initial purchase of the Class B or Class C shares exchanged. If you
are exchanging Class A shares into a fund that charges a sales load, you
may qualify for share prices which do not include the sales load or which
reflect a reduced sales load, if the shares of the fund from which you
are exchanging were: (a) purchased with a sales load, (b) acquired by a
previous exchange from shares purchased with a sales load, or (c) acquired
through reinvestment of dividends or distributions paid with respect to
the foregoing categories of shares. To qualify, at the time of your
exchange your Service Agent must notify the Distributor. Any such
qualification is subject to confirmation of your holdings through a check
of appropriate records. See "Shareholder Services" in the Statement of
Additional Information. No fees currently are charged shareholders
directly in connection with exchanges, although the Fund reserves the
right, upon not less than 60 days' written notice, to charge shareholders
a nominal fee in accordance with rules promulgated by the Securities and
Exchange Commission. The Fund reserves the right to reject any exchange
request in whole or in part. The availability of Fund Exchanges may be
modified or terminated at any time upon notice to shareholders.
The exchange of shares of one fund for shares of another is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder may
realize a taxable gain or loss.
AUTO-EXCHANGE PRIVILEGE
Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares
of the Fund, in shares of the same class of other funds in the Premier
Family of Funds or certain other funds in the Dreyfus Family of Funds of
which you are currently an investor. The amount you designate, which can
be expressed either in terms of a specific dollar or share amount ($100
minimum), will be exchanged automatically on the first and/or fifteenth
of the month according to the schedule you have selected. Shares will be
exchanged at the then-current net asset value; however, a sales load may
be charged with respect to exchanges of Class A shares into funds sold
with a sales charge. No CDSC will be imposed on Class B or Class C shares
at the time of an exchange; however, Class B or Class C shares acquired
through an exchange will be subject on redemption to the higher CDSC
applicable to the exchanged or acquired shares. The CDSC applicable on
redemption of the acquired Class B or Class C shares will be calculated
from the date of the initial purchase of the Class B or Class C shares
exchanged. See "Shareholder Services" in the Statement of Additional
Information. The right to exercise this Privilege may be modified or
cancelled by the Fund or the Transfer Agent. You may modify or cancel
your exercise of this Privilege at any time by writing to Premier
California Municipal Bond Fund, P.O. Box 6587, Providence, Rhode Island
02940-6587. The Fund may charge a service fee for the use of this
Privilege. No such fee currently is contemplated. The exchange of shares
of one fund for shares of another is treated for Federal income tax
purposes as a sale of the shares given in exchange by the shareholder
and, therefore, an exchanging shareholder may realize a taxable gain or
loss. For more information concerning this Privilege and the funds in the
Premier Family of Funds or Dreyfus Family of Funds eligible to
participate in this Privilege, or to obtain an Auto-Exchange
Authorization Form, please call toll free 1-800-645-6561.
Page 24
AUTOMATIC ASSET BUILDER
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. At your option, the bank
account designated by you will be debited in the specified amount, and
Fund shares will be purchased, once a month, on either the first or
fifteenth day, or twice a month, on both days. Only an account maintained
at a domestic financial institution which is an Automated Clearing House
member may be so designated. To establish an Automatic Asset Builder
account, you must file an authorization form with the Transfer Agent. You
may obtain the necessary authorization form by calling 1-800-645-6561.
You may cancel your participation in this Privilege or change the amount
of purchase at any time by mailing written notification to Premier
California Municipal Bond Fund, P.O. Box 6587, Providence, Rhode Island
02940-6587, and the notification will be effective three business days
following receipt. The Fund may modify or terminate this Privilege at any
time or charge a service fee. No such fee currently is contemplated.
GOVERNMENT DIRECT DEPOSIT PRIVILEGE
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 Federal government automatically deposited into
your Fund account. You may deposit as much of such payments as you elect.
To enroll in Government Direct Deposit, you must file with the Transfer
Agent a completed Direct Deposit Sign-Up Form for each type of payment
that you desire to include in this Privilege. The appropriate form may be
obtained from your Service Agent or by calling 1-800-645-6561. Death or
legal incapacity will terminate your participation in this Privilege. You
may elect at any time to terminate your participation by notifying in
writing the appropriate Federal agency. Further, the Fund may terminate
your participation upon 30 days' notice to you.
DIVIDEND OPTIONS
Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by the Fund in
shares of the same Class of another fund in the Premier Family of Funds
or the Dreyfus Family of Funds of which you are a shareholder. Shares of
the other fund will be purchased at the then-current net asset value;
however, a sales load may be charged with respect to investments in
shares of a fund sold with a sales load. If you are investing in a fund
that charges a sales load, you may qualify for share prices which do not
include the sales load or which reflect a reduced sales load. If you are
investing in a fund that charges a CDSC, the shares purchased will be
subject on redemption to the CDSC, if any, applicable to the purchased
shares. See "Shareholder Services" in the Statement of Additional
Information. Dividend ACH permits you to transfer electronically
dividends or dividends and capital gain distributions, if any, from the
Fund to a designated bank account. Only an account maintained at a
domestic financial institution which is an Automated Clearing House
member may be so designated. Banks may charge a fee for this service.
For more information concerning these privileges, or to
request a Dividend Options Form, please call toll free 1-800-645-6561.
You may cancel these privileges by mailing written notification to
Premier California Municipal Bond Fund, P.O. Box 6587, Providence, Rhode
Island 02940-6587. To select a new fund after cancellation, you must
submit a new Dividend Options Form. Enrollment in or cancellation of these
privileges is effective three business days following receipt. These
privileges are available only for
Page 25
existing accounts and may not be used to open new accounts. Minimum
subsequent investments do not apply for Dividend Sweep. The Fund may
modify or terminate these privileges at any time or charge a service fee.
No such fee currently is contemplated.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request
withdrawal of a specified dollar amount (minimum of $50) on either a
monthly or quarterly basis if you have a $5,000 minimum account. An
application for the Automatic Withdrawal Plan can be obtained by calling
1-800-645-6561. There is a service charge of 50cents for each withdrawal
check. The Automatic Withdrawal Plan may be ended 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.
Class B or Class C shares withdrawn pursuant to the Automatic
Withdrawal Plan will be subject to any applicable CDSC. Purchases of
additional Class A shares where the sales load is imposed concurrently
with withdrawals of Class A shares generally are undesirable.
LETTER OF INTENT - CLASS A SHARES
By signing a Letter of Intent form, available from the
Distributor, you become eligible for the reduced sales load applicable to
the total number of Eligible Fund shares purchased in a 13-month period
pursuant to the terms and conditions set forth in the Letter of Intent. A
minimum initial purchase of $5,000 is required. To compute the applicable
sales load, the offering price of shares you hold (on the date of
submission of the Letter of Intent) in any Eligible Fund that may be used
toward "Right of Accumulation" benefits described above may be used as a
credit toward completion of the Letter of Intent. However, the reduced
sales load will be applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the amount
indicated in the Letter of Intent for payment of a higher sales load if
you do not purchase the full amount indicated in the Letter of Intent.
The escrow will be released when you fulfill the terms of the Letter of
Intent by purchasing the specified amount. If your purchases qualify for
a further sales load reduction, the sales load will be adjusted to
reflect your total purchase at the end of 13 months. If total purchases
are less than the amount specified, you will be requested to remit an
amount equal to the difference between the sales load actually paid and
the sales load applicable to the aggregate purchases actually made. If
such remittance is not received within 20 days, the Transfer Agent, as
attorney-in-fact pursuant to the terms of the Letter of Intent, will
redeem an appropriate number of Class A shares held in escrow to realize
the difference. Signing a Letter of Intent does not bind you to purchase,
or the Fund to sell, the full amount indicated at the sales load in
effect at the time of signing, but you must complete the intended
purchase to obtain the reduced sales load. At the time you purchase Class
A shares, you must indicate your intention to do so under a Letter of
Intent. Purchases pursuant to a Letter of Intent will be made at the
then-current net asset value plus the applicable sales load in effect at
the time such Letter of Intent was executed.
HOW TO REDEEM FUND SHARES
GENERAL
You may request redemption of your shares at any time.
Redemption requests should be transmitted to the Transfer Agent as
described below. When a request is received in proper form, the Fund will
redeem the shares at the next determined net asset value as described
below. If you hold Fund shares of more than one Class, any request for
redemption must specify the Class of shares being redeemed. If you fail
to specify the Class of shares to be redeemed or if you own fewer shares
of the Class than
Page 26
specified to be redeemed, the redemption request may be
delayed until the Transfer Agent receives further instructions from you
or your Service Agent.
The Fund imposes no charges (other than any applicable CDSC)
when shares are redeemed. Service Agents may charge a nominal fee for
effecting redemptions of Fund shares. Any certificates representing Fund
shares being redeemed must be submitted with the redemption request. The
value of the shares redeemed may be more or less than their original
cost, depending on the Fund's then-current net asset value.
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 THE TELETRANSFER PRIVILEGE OR THROUGH AUTOMATIC ASSET BUILDER
AND SUBSEQUENTLY SUBMIT A WRITTEN REQUEST TO THE TRANSFER AGENT, THE
REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK
CLEARANCE OF YOUR PURCHASE CHECK, TELETRANSFER PURCHASE OR AUTOMATIC ASSET
BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN
ADDITION, THE FUND WILL NOT HONOR REDEMPTION CHECKS UNDER THE CHECK
REDEMPTION PRIVILEGE, AND WILL REJECT REQUESTS TO REDEEM SHARES PURSUANT
TO THE TELETRANSFER PRIVILEGE, FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER
RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE TELETRANSFER
PURCHASE OR THE AUTOMATIC ASSET BUILDER 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. PRIOR
TO THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL
ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER
RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares will not be redeemed until
the Transfer Agent has received your Account Application.
The Fund reserves the right to redeem your account at its
option upon not less than 30 days' written notice if your account's net
asset value is $500 or less and remains so during the notice period.
CONTINGENT DEFERRED SALES CHARGE
CLASS B SHARES - A CDSC payable to the Distributor is imposed on any
redemption of Class B shares which reduces the current net asset value of
your Class B shares to an amount which is lower than the dollar amount of
all payments by you for the purchase of Class B shares of the Fund held
by you at the time of redemption. No CDSC will be imposed to the extent
that the net asset value of the Class B shares redeemed does not exceed
(i) the current net asset value of Class B shares acquired through
reinvestment of dividends or capital gain distributions, plus (ii)
increases in the net asset value of your Class B shares above the dollar
amount of all your payments for the purchase of Class B shares of the
Fund held by you at the time of redemption.
If the aggregate value of the Class B shares redeemed has
declined below their original cost as a result of the Fund's performance,
a CDSC may be applied to the then-current net asset value rather than the
purchase price.
In circumstances where the CDSC is imposed, the amount of the
charge will depend on the number of years from the time you purchased the
Class B shares until the time of redemption of such shares. Solely for
purposes of determining the number of years from the time of any payment
for the purchase of Class B shares, all payments during a month will be
aggregated and deemed to have been made on the first day of the month.
Page 27
<TABLE>
<CAPTION>
The following table sets forth the rates of the CDSC:
Year Since CDSC as a % of Amount
Purchase Payment Invested or Redemption
Was Made Proceeds
--------- ------------------------
<S> <C> <C>
First.................................................... 3.00
Second................................................... 3.00
Third.................................................... 2.00
Fourth................................................... 2.00
Fifth.................................................... 1.00
Sixth.................................................... 0.00
</TABLE>
In determining whether a CDSC is applicable to a redemption,
the calculation will be made in a manner that results in the lowest
possible rate. It will be assumed that the redemption is made first of
amounts representing shares acquired pursuant to the reinvestment of
dividends and distributions; then of amounts representing the increase in
net asset value of Class B shares above the total amount of payments for
the purchase of Class B shares made during the preceding five years; then
of amounts representing the cost of shares purchased five years prior to
the redemption; and finally, of amounts representing the cost of shares
held for the longest period of time within the applicable five-year
period.
For example, assume an investor purchased 100 shares at $10
per share for a cost of $1,000. Subsequently, the shareholder acquired
five additional shares through dividend reinvestment. During the second
year after the purchase the investor decided to redeem $500 of his or her
investment. Assuming at the time of the redemption the net asset value
has appreciated to $12 per share, the value of the investor's shares
would be $1,260 (105 shares at $12 per share). The CDSC would not be
applied to the value of the reinvested dividend shares and the amount
which represents appreciation ($260). Therefore, $240 of the $500
redemption proceeds ($500 minus $260) would be charged at a rate of 3%
(the applicable rate in the second year after purchase) for a total CDSC
of $7.20.
CLASS C SHARES - A CDSC of 1.00% payable to the Distributor is
imposed on any redemption of Class C shares within one year of the date
of purchase. The basis for calculating the payment of any such CDSC will
be the method used in calculating the CDSC for Class B shares. See
"Contingent Deferred Sales Charge _ Class B Shares" above.
WAIVER OF CDSC - The CDSC will be waived in connection with (a)
redemptions made within one year after the death or disability, as
defined in Section 72(m)(7) of the Code, of the shareholder, (b)
redemptions by employees participating in qualified or non-qualified
employee benefit plans or other programs where (i) the employers or
affiliated employers maintaining such plans or programs have a minimum of
250 employees eligible for participation in such plans or programs, or
(ii) such plan's or program's aggregate investment in the Dreyfus Family
of Funds or certain other products made available by the Distributor
exceeds one million dollars, (c) redemptions as a result of a combination
of any investment company with the Fund by merger, acquisition of assets
or otherwise, and (d) a distribution following retirement under a
tax-deferred retirement plan or upon attaining age 70 1/2 in the case of
an IRA or Keogh plan or custodial account pursuant to Section 403(b) of
the Code. If the Fund's Trustees determine to discontinue the waiver of
the CDSC, the disclosure in the Fund's prospectus will be appropriately
revised. Any Fund shares subject to a CDSC which were purchased prior to
the termination of such waiver will have the CDSC waived as provided in
the Fund's prospectus at the time of the purchase of such shares.
To qualify for a waiver of the CDSC, at the time of
redemption you must notify the Transfer Agent or your Service Agent must
notify the Distributor. Any such qualification is subject to confirmation
of your entitlement.
Page 28
PROCEDURES
You may redeem Fund shares by using the regular redemption
procedure through the Transfer Agent, the Check Redemption Privilege with
respect to Class A shares only, the TELETRANSFER Privilege or, if you are
a client of a Selected Dealer, through the Selected Dealer. If you have
given your Service Agent authority to instruct the Transfer Agent to
redeem shares and to credit the proceeds of such redemptions to a
designated account at your Service Agent, you may redeem shares only in
this manner and in accordance with the regular redemption procedure
described below. If you wish to use the other redemption methods
described below, you must arrange with your Service Agent for delivery of
the required application(s) to the Transfer Agent. Other redemption
procedures may be in effect for clients of certain Service Agents. The
Fund makes available to certain large institutions the ability to issue
redemption instructions through compatible computer facilities.
Your redemption request may direct that the redemption
proceeds be used to purchase shares of other funds advised or
administered by The Dreyfus Corporation that are not available through
the Exchange Privilege. The applicable CDSC will be charged upon the
redemption of Class B or Class C shares. Your redemption proceeds will be
invested in shares of the other fund on the next business day. Before you
make such a request, you must obtain and should review a copy of the
current prospectus of the fund being purchased. Prospectuses may be
obtained by calling 1-800-645-6561. The prospectus will contain
information concerning minimum investment requirements and other
conditions that may apply to your purchase.
You may redeem Fund shares by telephone if you have checked
the appropriate box on the Fund's Account Application or have filed a
Shareholder Services Form with the Transfer Agent. If you select the
TELETRANSFER redemption privilege or telephone exchange privilege (which
is granted automatically unless you refuse it), you authorize the Transfer
Agent to act on telephone instructions from any person representing
himself or herself to be you, or a representative of your Service Agent,
and reasonably believed by the Transfer Agent to be genuine. The Fund
will require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions
are genuine and, if it does not follow such procedures, the Fund or the
Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Fund nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be
genuine.
During times of drastic economic or market conditions, you
may experience difficulty in contacting the Transfer Agent by telephone
to request a TELETRANSFER redemption or an exchange of Fund shares. In
such cases, you should consider using the other redemption procedures
described herein. Use of these other redemption procedures may result in
your redemption request being processed at a later time than it would
have been if TELETRANSFER redemption had been used. During the delay, the
Fund's net asset value may fluctuate.
REGULAR REDEMPTION - Under the regular redemption procedure, you may
redeem shares by written request mailed to Premier California Municipal
Bond Fund, P.O. Box 6527, Providence, Rhode Island 02940-6527. Written
redemption requests must specify the Class of shares being redeemed.
Redemption requests must be signed by each shareholder, including each
owner of a joint account, and each signature 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
Page 29
Agents Medallion Program ("STAMP") and the Stock Exchanges Medallion
Program. If you have any questions with respect to signature-guarantees,
please contact your Service Agent or call the telephone number listed on
the cover of this Prospectus.
Redemption proceeds of at least $1,000 will be wired to any
member bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
CHECK REDEMPTION PRIVILEGE - CLASS A SHARES - If you hold Class A
shares, you may request on the Account Application, Shareholder Services
Form or by later written request that the Fund provide Redemption Checks
drawn on the Fund's account. Redemption Checks may be made payable to the
order of any person in the amount of $500 or more. Potential fluctuations
in the net asset value of Class A shares should be considered in
determining the amount of the check. Redemption Checks should not be used
to close your account. Redemption Checks are free, but the Transfer Agent
will impose a fee for stopping payment of a Redemption Check upon your
request or if the Transfer Agent cannot honor the Redemption Check due to
insufficient funds or other valid reason. You should date your Redemption
Checks with the current date when you write them. Please do not postdate
your Redemption Checks. If you do, the Transfer Agent will honor, upon
presentment, even if presented before the date of the check, all
postdated Redemption Checks which are dated within six months of
presentment for payment, if they are otherwise in good order. Class A
shares for which certificates have been issued may not be redeemed by
Redemption Check. This Privilege may be modified or terminated at any
time by the Fund or the Transfer Agent upon notice to holders of Class A
shares.
TELETRANSFER PRIVILEGE - You may redeem Fund shares (minimum $500
per day) by telephone if you have checked the appropriate box and
supplied the necessary information on the Fund's Account Application or
have filed a Shareholder Services Form with the Transfer Agent. The
proceeds will be transferred between your Fund account and the bank
account designated in one of these documents. Only such an account
maintained in a domestic financial institution which is an Automated
Clearing House member may be so designated. Redemption proceeds will be
on deposit in your account at an Automated Clearing House member bank
ordinarily two days after receipt of the redemption request or, at your
request, paid by check (maximum $150,000 per day) and mailed to your
address. Holders of jointly registered Fund or bank accounts may redeem
through the TELETRANSFER Privilege for transfer to their bank account not
more than $250,000 within any 30-day period. The Fund reserves the right
to refuse any request made by telephone, including requests made shortly
after a change of address, and may limit the amount involved or the
number of such requests. The Fund may modify or terminate this Privilege
at any time or charge a service fee upon notice to shareholders. No such
fee currently is contemplated.
If you have selected the TELETRANSFER Privilege, you may
request a TELETRANSFER redemption of Fund shares by telephoning
1-800-221-4060 or, if you are calling from overseas, call 1-401-455-3306.
Shares issued in certificate form are not eligible for this Privilege.
REDEMPTION THROUGH A SELECTED DEALER - If you are a customer of a
Selected Dealer, you may make redemption requests to your Selected
Dealer. If the Selected Dealer transmits the redemption request so that
it is received by the Transfer Agent prior to the close of trading on the
floor of the New York Stock Exchange (currently 4:00 p.m., New York
time), the redemption request will be effective on that day. If a
redemption request is received by the Transfer Agent after the close of
trading on the floor of the New York Stock Exchange, the redemption
request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a
Page 30
timely manner. The proceeds of the redemption are credited
to your account with the Selected Dealer. See "How to Buy Fund Shares"
for a discussion of additional conditions or fees that may be imposed
upon redemption.
In addition, the Distributor or its designee will accept
orders from Selected Dealers with which the Distributor has sales
agreements for the repurchase of shares held by shareholders. Repurchase
orders received by dealers by the close of trading on the floor of the
New York Stock Exchange on any business day and transmitted to the
Distributor or its designee prior to the close of its business day
(normally 5:15 p.m., New York time) are effected at the price determined
as of the close of trading on the floor of the New York Stock Exchange on
that day. Otherwise, the shares will be redeemed at the next determined
net asset value. It is the responsibility of the Selected Dealer to
transmit orders on a timely basis. The Selected Dealer may charge the
shareholder a fee for executing the order. This repurchase arrangement is
discretionary and may be withdrawn at any time.
REINVESTMENT PRIVILEGE - CLASS A SHARES
Upon written request, you may reinvest up to the number of
Class A shares you have redeemed, within 30 days of redemption, at the
then-prevailing net asset value without a sales load, or reinstate your
account for the purpose of exercising the Exchange Privilege. The
Reinvestment Privilege may be exercised only once.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
Class A, Class B and Class C shares are subject to a
Shareholder Services Plan and Class B and Class C shares only are subject
to a Distribution Plan.
DISTRIBUTION PLAN
Under the Distribution Plan, adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940, the Fund pays the Distributor
for distributing the Fund's Class B and Class C shares at an annual rate
of .50 of 1% of the value of the average daily net assets of Class B and
.75 of 1% of the value of the average daily net assets of Class C.
SHAREHOLDER SERVICES PLAN
Under the Shareholder Services Plan, the Fund pays the
Distributor for the provision of certain services to the holders of Class
A, Class B and Class C shares a fee at the annual rate of .25 of 1% of
the value of the average daily net assets of each such Class. 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. Under the Shareholder Services Plan,
the Distributor may make payments to Service Agents in respect of these
services. The Distributor determines the amounts to be paid to Service
Agents. Each Service Agent is required to disclose to its clients any
compensation payable to it by the Fund pursuant to the Shareholder
Services Plan and any other compensation payable by their clients in
connection with the investment of their assets in Class A, Class B or
Class C shares.
DIVIDENDS, DISTRIBUTIONS AND TAXES
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
immediately available funds ("Federal Funds" (monies of member banks
within the Federal Reserve System which are held on deposit at a Federal
Reserve Bank) ) are received by the Transfer Agent in written or
telegraphic form. If a purchase order is not accompanied by remittance in
Federal Funds, there may be a delay between the time the purchase order
becomes effective and the time the shares purchased start earning
dividends. If your payment is not made in Federal Funds, it
Page 31
must be converted into Federal Funds. This usually occurs within one
business day of receipt of a bank wire and within two business days of
receipt of a check drawn on a member bank of the Federal Reserve System.
Checks drawn on banks which are not members of the Federal Reserve System
may take considerably longer to convert into Federal Funds.
Dividends usually are paid on the last calendar day of each
month and are automatically reinvested in additional shares of the same
Class from which they were paid at net asset value without a sales load
or, at your option, paid in cash. The Fund's earnings for Saturdays,
Sundays and holidays are declared as dividends on the preceding business
day. 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. 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 Investment Company Act of 1940. The
Fund will not make distributions from net realized securities gains
unless capital loss carryovers, if any, have been utilized or have
expired. You may choose whether to receive distributions in cash or to
reinvest in additional Fund shares of the same Class from which they were
paid at net asset value without a sales load. All expenses are accrued
daily and deducted before declaration of dividends to investors.
Dividends paid by each Class will be calculated at the same time and in
the same manner and will be of the same amount, except that the expenses
attributable solely to a particular Class will be borne exclusively by
that Class. Class B and Class C shares will receive lower per share
dividends than Class A shares because of the higher expenses borne by the
relevant Class. See "Fee Table."
Except for dividends from Taxable Investments, the Fund
anticipates that substantially all dividends paid by the Fund will not be
subject to Federal income tax or California personal income taxes. To the
extent that you are obligated to pay state or local taxes outside of the
State of California, dividends earned by an investment in the Fund may
represent taxable income. Dividends and distributions derived from
Taxable Investments and from income or gain derived from securities
transactions and from the use of certain of the investment techniques
described under "Description of the Fund _ Investment Techniques" will be
subject to Federal income tax. Dividends derived from Taxable
Investments, together with distributions from any net realized short-term
securities gains and all or a portion of any gains realized from the sale
or other dispostion of certain market discount bonds, paid by the Fund
are subject to Federal income tax as ordinary income whether or not
reinvested. No dividend paid by the Fund will qualify for the dividends
received deduction allowable to certain U.S. corporations. Distributions
from net realized long-term securities gains of the Fund generally are
subject to Federal income tax as long-term capital gains if you are a
citizen or resident of the United States. The Code provides that the net
capital gain of an individual generally will not be subject to Federal
income tax at a rate in excess of 28%. Under the Code, interest on
indebtedness incurred or continued to purchase or carry Fund shares which
is deemed to relate to exempt-interest dividends is not deductible.
The Code provides for the "carryover" of some or all of the
sales load imposed on Class A shares if you exchange your Class A shares
for shares of another fund advised or administered by The Dreyfus
Corporation within 91 days of purchase and such other fund reduces or
eliminates its otherwise applicable sales load for the purpose of the
exchange. In this case, the amount of the sales load charge for Class A
shares, up to the amount of the reduction of the sales load charge on the
exchange, is not included in the
Page 32
basis of your Class A shares for purposes of computing gain or loss on the
exchange, and instead is added to the basis of the fund shares received on
the exchange.
Although all or a substantial portion of the dividends paid
by the Fund may be excluded by shareholders of the Fund from their gross
income for Federal income tax purposes, the Fund may purchase specified
private activity bonds, the interest from which may be (i) a preference
item for purposes of the alternative minimum tax, (ii) a component of the
"adjusted current earnings" preference item for purposes of the corporate
alternative minimum tax as well as a component in computing the corporate
environmental tax or (iii) a factor in determining the extent to which a
shareholder's Social Security benefits are taxable. If the Fund purchases
such securities, the portion of the Fund's dividends related thereto will
not necessarily be tax exempt to an investor who is subject to the
alternative minimum tax and/or tax on Social Security benefits and may
cause an investor to be subject to such taxes.
Notice as to the tax status of your dividends and
distributions will be mailed to you annually. You also will receive
periodic summaries of your account which will include information as to
dividends and distributions from securities gains, if any, paid during
the year. These statements set forth the dollar amount of income exempt
from Federal tax and the dollar amount, if any, subject to Federal tax.
These dollar amounts will vary depending on the size and length of time
of your investment in the Fund. If the Fund pays dividends derived from
taxable income, it intends to designate as taxable the same percentage of
the day's dividends as the actual taxable income earned on that day bears
to total income earned on that day. Thus, the percentage of the dividend
designated as taxable, if any, may vary from day to day.
Federal regulations generally require the Fund to withhold
("backup withholding") and remit to the U.S. Treasury 31% of taxable
dividends, distributions from net realized securities gains and the
proceeds of any redemption, regardless of the extent to which gain or
loss may be realized, paid to a shareholder if such shareholder fails to
certify either that the TIN furnished in connection with opening an
account is correct or that such shareholder has not received notice from
the IRS of being subject to backup withholding as a result of a failure
to properly report taxable dividend or interest income on a Federal
income tax return. Furthermore, the IRS may notify the Fund to institute
backup withholding if the IRS determines a shareholder's TIN is incorrect
or if a shareholder has failed to properly report taxable dividend and
interest income on a Federal income tax return.
A TIN is either the Social Security number or employer
identification number of the record owner of the account. Any tax
withheld as a result of backup withholding does not constitute an
additional tax imposed on the record owner of the account, and may be
claimed as a credit on the record owner's Federal income tax return.
Management of the Fund believes that the Fund has qualified
for the fiscal year ended January 31, 1995 as a "regulated investment
company" under the Code. The Fund intends to continue to so qualify if
such qualification is in the best interests of its shareholders. Such
qualification relieves the Fund of any liability for Federal income taxes
to the extent its earnings are distributed in accordance with applicable
provisions of the Code. In addition, the Fund is subject to a
non-deductible 4% excise tax, measured with respect to certain
undistributed amounts of taxable investment income and capital gains, if
any.
You should consult your tax adviser regarding specific
questions as to Federal, state or local taxes.
Page 33
PERFORMANCE INFORMATION
For purposes of advertising, performance for each Class of
shares may be calculated on several bases, including current yield, tax
equivalent yield, average annual total return and/or total return. These
total return figures reflect changes in the price of the shares and
assume that any income dividends and/or capital gains distributions made
by the Fund during the measuring period were reinvested in shares of the
same Class. Class A total return figures include the maximum initial
sales charge and Class B and Class C total return figures include any
applicable CDSC. These figures also take into account any applicable
service and distribution fees. As a result, at any given time, the
performance of Class B and Class C should be expected to be lower than
that of Class A. Performance for each Class will be calculated
separately.
Current yield refers to the Fund's annualized net investment
income per share over a 30-day period, expressed as a percentage of the
maximum offering price per share in the case of Class A or the net asset
value per share in the case of Class B or Class C at the end of the
period. For purposes of calculating current yield, the amount of net
investment income per share during that 30-day period, computed in
accordance with regulatory requirements, is compounded by assuming that
it is reinvested at a constant rate over a six-month period. An identical
result is then assumed to have occurred during a second six-month period
which, when added to the result for the first six months, provides an
"annualized" yield for an entire one-year period. Calculations of the
Fund's current yield may reflect absorbed expenses pursuant to any
undertaking that may be in effect. See "Management of the Fund."
Tax equivalent yield is calculated by determining the pre-tax
yield which, after being taxed at a stated rate, would be equivalent to a
stated current yield calculated as described above.
Average annual total return is calculated pursuant to a
standardized formula which assumes that an investment in the Fund was
purchased with an initial payment of $1,000 and that the investment was
redeemed at the end of a stated period of time, after giving effect to
the reinvestment of dividends and distributions during the period. The
return is expressed as a percentage rate which, if applied on a
compounded annual basis, would result in the redeemable value of the
investment at the end of the period. Advertisements of the Fund's
performance will include the Fund's average annual total return for Class
A, Class B and Class C for one, five and ten year periods, or for shorter
periods depending upon the length of time during which the Fund has
operated. Computations of average annual total return for periods of less
than one year represent an annualization of the Class's actual total
return for the applicable period.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the
income and principal changes for a specified period and dividing by the
maximum offering price per share in the case of Class A or the net asset
value per share in the case of Class B or Class C at the beginning of the
period. Advertisements may include the percentage rate of total return or
may include the value of a hypothetical investment at the end of the
period which assumes the application of the percentage rate of total
return. Total return may also be calculated by using the net asset value
per share at the beginning of the period instead of the maximum offering
price per share at the beginning of the period for Class A shares or
without giving effect to any applicable CDSC at the end of the period for
Class B or Class C shares. Calculations based on the net asset value per
share do not reflect the deduction of the applicable sales charge which,
if reflected, would reduce the performance quoted.
Page 34
Performance will vary from time to time and past results are
not necessarily representative of future results. Investors should
remember that performance is a function of portfolio management in
selecting the type and quality of portfolio securities and is affected by
operating expenses. Performance information, such as that described
above, may not provide a basis for comparison with other investments or
other investment companies using a different method of calculating
performance.
Comparative performance information may be used from time to
time in advertising or marketing the Fund's shares, including data from
Lipper Analytical Services, Inc., Moody's Bond Survey Bond Index, Lehman
Brothers Municipal Bond Index, Morningstar, Inc. and other industry
publications.
GENERAL INFORMATION
The Fund was organized as an unincorporated business trust
under the laws of the Commonwealth of Massachusetts pursuant to an
Agreement and Declaration of Trust (the "Trust Agreement") dated July 24,
1985, and commenced operations on November 10, 1986. On July 2, 1990, the
Fund's name was changed from Premier California Tax Exempt Bond Fund to
Premier California Municipal Bond Fund. The Fund is authorized to issue
an unlimited number of shares of beneficial interest, par value $.001 per
share. The Fund's shares are classified into three classes _ Class A,
Class B and Class C . Each share has one vote and shareholders will vote
in the aggregate and not by class except as otherwise required by law or
when class voting is permitted by the Board of Trustees. However, only
holders of Class B or Class C shares, as the case may be, will be
entitled to vote on matters submitted to shareholders pertaining to the
Distribution Plan.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Trust Agreement disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be
given in each agreement, obligation or instrument entered into or
executed by the Fund or a Trustee. The Trust Agreement provides for
indemnification from the Fund's property for all losses and expenses of
any shareholder held personally liable for the obligations of the Fund.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Fund
itself would be unable to meet its obligations, a possibility which
management believes is remote. Upon payment of any liability incurred by
the Fund, the shareholder paying such liability will be entitled to
reimbursement from the general assets of the Fund. The Trustees intend to
conduct the operations of the Fund in such a way so as to avoid, as far
as possible, ultimate liability of the shareholders for liabilities of
the Fund. As discussed under "Management of the Fund" in the Statement of
Additional Information, the Fund ordinarily will not hold shareholder
meetings; however, shareholders under certain circumstances may have the
right to call a meeting of shareholders for the purpose of voting to
remove Trustees.
The Transfer Agent maintains a record of your ownership and
sends you confirmations and statements of account.
Shareholder inquiries may be made to your Service Agent or by
writing to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York
11556-0144.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS
AND IN THE FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER
OF THE FUND'S SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH,
OR TO ANY PERSON TO WHOM, SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 35
PCCp17060195
PREMIER CALIFORNIA MUNICIPAL BOND FUND
CLASS A, CLASS B AND CLASS C SHARES
STATEMENT OF ADDITIONAL INFORMATION
JUNE 1, 1995
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Premier California Municipal Bond Fund (the "Fund"), dated June 1, 1995, as
it may be revised from time to time. To obtain a copy of the Fund's
Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144.
The Dreyfus Corporation (the "Manager") serves as the Fund's
investment adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies . . . . . . . . . B-2
Management of the Fund . . . . . . . . . . . . . . . . . . . . B-10
Management Agreement . . . . . . . . . . . . . . . . . . . . . B-14
Purchase of Fund Shares. . . . . . . . . . . . . . . . . . . . B-16
Distribution Plan and Shareholder Services Plan. . . . . . . . B-18
Redemption of Fund Shares. . . . . . . . . . . . . . . . . . . B-19
Shareholder Services . . . . . . . . . . . . . . . . . . . . . B-21
Determination of Net Asset Value . . . . . . . . . . . . . . . B-24
Dividends, Distributions and Taxes . . . . . . . . . . . . . . B-24
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . B-26
Performance Information. . . . . . . . . . . . . . . . . . . . B-27
Information About the Fund . . . . . . . . . . . . . . . . . . B-29
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors . . . . . . . . . . . . . B-29
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . B-31
Appendix B . . . . . . . . . . . . . . . . . . . . . . . . . . B-43
Financial Statements . . . . . . . . . . . . . . . . . . . . . B-52
Report of Independent Auditors . . . . . . . . . . . . . . . . B-63
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Description
of the Fund."
The average distribution of investments (at value) in Municipal
Obligations by ratings for the fiscal year ended January 31, 1995, computed
on a monthly basis, was as follows:
Fitch Moody's Standard
Investors Investors & Poor's
Service, Inc. Service, Inc. Corporation Percentage
("Fitch") or ("Moody's") or ("S&P") Value
AAA Aaa AAA 18.9%
AA Aa AA 14.9
A A A 39.3
BBB Baa BBB 10.8
D D D .5
F-1+\F-1 VMIG1\MIG1, SP-1+, SP-1, 1.8
P-1 A1+\A1
Not Rated Not Rated Not Rated 13.8
----
100.0%
======
________________________
* Included under the Not Rated category are securities comprising 13.8% 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
category: AAA/Aaa (2.8%), A/A (1.3%), Baa/BBB (9.5%) and CC/Ca (.2%).
Municipal Obligations. The term "Municipal Obligations" generally
includes debt obligations issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities
such as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other public
purposes for which Municipal Obligations may be issued include refunding
outstanding obligations, obtaining funds for general operating expenses and
lending such funds to other public institutions and facilities. In
addition, certain types of industrial development bonds are issued by or on
behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated
housing facilities, sports facilities, convention or trade show facilities,
airport, mass transit, industrial, port or parking facilities, air or water
pollution control facilities and certain local facilities for water supply,
gas, electricity or sewage or solid waste disposal; the interest paid on
such obligations may be exempt from Federal income tax, although current
tax laws place substantial limitations on the size of such issues. Such
obligations are considered to be Municipal Obligations if the interest paid
thereon qualifies as exempt from Federal income tax in the opinion of bond
counsel to the issuer. There are, of course, variations in the security of
Municipal Obligations, both within a particular classification and between
classifications.
Floating and variable rate demand notes and bonds 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. The issuer of such obligations ordinarily has a
corresponding right, after a given period, to prepay in its discretion the
outstanding principal amount of the obligations plus accrued interest upon
a specified number of days' notice to the holders thereof. The interest
rate on a floating rate demand obligation is based on a known lending rate,
such as a bank's prime rate, and is adjusted automatically each time such
rate is adjusted. The interest rate on a variable rate demand obligation
is adjusted automatically at specified intervals.
For the purpose of diversification under the Investment Company Act of
1940, as amended (the "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.
Municipal lease obligations or installment purchase contract
obligations (collectively, "lease obligations") have special risks not
ordinarily associated with Municipal Obligations. Although lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation
ordinarily is backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such
purpose on a yearly basis. Although "non-appropriation" lease obligations
are secured by the leased property, disposition of the property in the
event of foreclosure might prove difficult. The staff of the Securities
and Exchange Commission currently considers certain lease obligations to be
illiquid. Determination as to the liquidity of such securities is made in
accordance with guidelines established by the Fund's Board. Pursuant to
such guidelines, the Board has directed the Manager to monitor carefully
the Fund's investment in such securities with particular regard to (1) the
frequency of trades and quotes for the lease obligation; (2) the number of
dealers willing to purchase or sell the lease obligation and the number of
other 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. The Fund will not invest more
than 15% of the value of its net assets in lease obligations that are
illiquid and in other illiquid securities. See "Investment Restriction No.
6" below.
The Fund will purchase tender option bonds only when it is satisfied
that the custodial and tender option arrangements, including the fee
payment arrangements, will not adversely affect the tax exempt status of
the underlying Municipal Obligations and that payment of any tender fees
will not have the effect of creating taxable income for the Fund. Based on
the tender option bond agreement, the Fund expects to be able to value the
tender option bond at par; however, the value of the instrument will be
monitored to assure that it is valued at fair value.
The yields on Municipal Obligations are dependent on a variety of
factors, including general economic and monetary conditions, money market
factors, conditions in the Municipal Obligations market, size of a
particular offering, maturity of the obligation, and rating of the issue.
The imposition of the Fund's management fee, as well as other operating
expenses, including fees paid under the Fund's Shareholder Services Plan
with respect to Class A, Class B and Class C shares and the Distribution
Plan with respect to Class B and Class C shares, will have the effect of
reducing the yield to investors.
Ratings of Municipal Obligations. Subsequent to its purchase by the
Fund, an issue of rated Municipal Obligations may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require the sale of such Municipal Obligations by the
Fund, but the Manager will consider such event in determining whether the
Fund should continue to hold the Municipal Obligations. To the extent that
the ratings given by Moody's, S&P or Fitch for Municipal Obligations may
change as a result of changes in such organizations or their rating
systems, the Fund will attempt to use comparable ratings as standards for
its investments in accordance with the investment policies contained in the
Fund's Prospectus and this Statement of Additional Information. The
ratings of Moody's, S&P and Fitch represent their opinions as to the
quality of the Municipal Obligations which they undertake to rate. It
should be emphasized, however, that ratings are relative and subjective and
are not absolute standards of quality. Although these ratings may be an
initial criterion for selection of portfolio investments, the Manager also
will evaluate these securities.
Futures Contracts and Options on Futures Contracts. Upon exercise of
an option on a futures contract, the writer of the option delivers to the
holder of the option the futures position and the accumulated balance in
the writer's futures margin account, which represents the amount by which
the market price of the futures contract exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of options on
futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the time
of sale, there are no daily cash payments to reflect changes in the value
of the underlying contract; however, the value of the option does change
daily and that change would be reflected in the net asset value of the
Fund.
Lending Portfolio Securities. To a limited extent, the Fund may lend
its portfolio securities to brokers, dealers and other financial
institutions, provided it receives cash collateral which at all times is
maintained in an amount equal to at least 100% of the current market value
of the securities loaned. By lending its portfolio securities, the Fund
can increase its income through the investment of the cash collateral. For
purposes of this policy, the Fund considers collateral consisting of U.S.
Government securities or irrevocable letters of credit issued by banks
whose securities meet the standards for investment by the Fund to be the
equivalent of cash. From time to time, 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 for securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned:
(1) the Fund must receive at least 100% cash collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value of
the securities rises above the level of such collateral; (3) the Fund must
be able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any interest or other
distributions payable on the loaned securities, and any increase in market
value; and (5) the Fund may pay only reasonable custodian fees in
connection with the loan. These conditions may be subject to future
modification.
Taxable Investments. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury
securities, which differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government
agencies and instrumentalities, for example, Government National Mortgage
Association pass-through certificates, are supported by the full faith and
credit of the U.S. Treasury; others, such as those of the Federal Home Loan
Banks, by the right of the issuer to borrow from the U.S. Treasury; others,
such as those issued by the Federal National Mortgage Association, by
discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others, such as those
issued by the Student Loan Marketing Association, only by the credit of the
agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. Principal and interest may fluctuate based on
generally recognized reference rates or the relationship of rates. While
the U.S. Government provides financial support to such U.S. Government -
sponsored agencies or instrumentalities, no assurance can be given that it
will always do so, since it is not so obligated by law. The Fund will
invest in such securities only when it is satisfied that the credit risk
with respect to the issuer is minimal.
Short-Selling. The Fund may engage in short-selling. Until the Fund
replaces a borrowed security in connection with a short sale, the Fund will
(a) maintain daily a segregated account, containing cash or U.S. Government
securities, at such a level that
(i) the amount deposited in the account plus the amount deposited with the
broker as collateral will equal the current value of the securities sold
short and (ii) the amount deposited in the segregated account plus the
amount deposited with the broker as collateral will not be less than the
market value of the security at the time it was sold short; or (b)
otherwise cover its short position.
Illiquid Securities. If a substantial market of qualified
institutional buyers develops pursuant to Rule 144A under the Securities
Act of 1933, as amended, for certain restricted securities held by the
Fund, the Fund intends to treat such securities as liquid securities in
accordance with procedures approved by the Fund's Board of Trustees.
Because it is not possible to predict with assurance how the market for
restricted securities pursuant to Rule 144A will develop, the Fund's Board
of Trustees has directed the Manager to monitor carefully the Fund's
investments in such securities with particular regard to trading activity,
availability of reliable price information and other relevant information.
To the extent that, for a period of time, qualified institutional buyers
cease purchasing restricted securities pursuant to Rule 144A, the Fund's
investing in such securities may have the effect of increasing the level of
illiquidity in its portfolio during such period.
Commercial paper consists of short-term, unsecured promissory notes
issued to finance short-term credit needs.
Certificates of deposit are negotiable certificates representing the
obligation of a bank to repay funds deposited with it for a specified
period of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.
Investments in time deposits generally are limited to London branches of
domestic banks that have total assets in excess of one billion dollars.
Time deposits which may be held by the Fund will not benefit from insurance
from the Bank Insurance Fund or the Savings Association Insurance Fund
administered by the Federal Deposit Insurance Corporation.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face
amount of the instrument upon maturity. Other short-term bank obligations
may include uninsured, direct obligations bearing fixed, floating and
variable rates of interest.
Repurchase agreements involve the acquisition by the Fund of an
underlying debt instrument, subject to an obligation of the seller to
repurchase, and the Fund to resell, the instrument at a fixed price,
usually not more than one week after its purchase. The Fund's custodian or
subcustodian will have custody of, and will hold in a segregated account,
securities acquired by the Fund under a repurchase agreement. Repurchase
agreements are considered by the staff of the Securities and Exchange
Commission to be loans by the Fund. In an attempt to reduce the risk of
incurring a loss on a repurchase agreement, the Fund will enter into
repurchase agreements only with domestic banks with total assets in excess
of one billion dollars or primary government securities dealers reporting
to the Federal Reserve Bank of New York, with respect to securities of the
type in which the Fund may invest, and will require that additional
securities be deposited with it if the value of the securities purchased
should decrease below resale price. The Manager will monitor on an ongoing
basis the value of the collateral to assure that it always equals or
exceeds the repurchase price. Certain costs may be incurred by the Fund in
connection with the sale of the securities if the seller does not
repurchase them in accordance with the repurchase agreement. In addition,
if bankruptcy proceedings are commenced with respect to the seller of the
securities, realization on the securities by the Fund may be delayed or
limited. The Fund will consider on an ongoing basis the creditworthiness
of the institutions with which it enters into repurchase agreements.
Risk Factors
Investing in California Municipal Obligations. Investors should
consider carefully the special risks inherent in the Fund's investment in
California Municipal Obligations. These risks result from certain
amendments to the California Constitution and other statutes that limit the
taxing and spending authority of California governmental entities, as well
as from the general financial condition of the State of California. From
mid-1990 to late 1993, the State suffered a recession with the worst
economic, fiscal and budget conditions since the 1930s. As a result, the
State has experienced recurring budget deficits for four of the last five
fiscal years ending with 1991-92. The State had an operating surplus of
approximately $109 million in 1992-93 and $836 million in 1993-94.
However, at June 30, 1994, according to California's Department of Finance,
the State's Special Fund for Economic Uncertainties had an accumulated
deficit, on a budget basis, of approximately $1.8 billion. A further
consequence of the large budget imbalances has been that the State depleted
its available cash resources and has had to use a series of external
borrowings to meet its cash needs. To meet its cash flow in the 1994-95
fiscal year, the State issued, in July and August 1994, $4.0 billion of
revenue anticipation warrants and $3.0 billion of revenue anticipation
notes. As a result of the deterioration in the State's budget and cash
situation between October 1991 and July 1994, the rating on the State's
general obligation bonds was reduced by S&P from AAA to A, by Moody's from
Aaa to A1, and by Fitch from AAA to A. These and other factors may have
the effect of impairing the ability of the issuers of California Municipal
Obligations to pay interest on, or repay principal of, such California
Municipal Obligations. Investors should review Appendix A which more fully
sets forth these and other risk factors relating to investing in California
Municipal Obligations.
Lower Rated Bonds. The Fund is permitted to invest in securities
rated below Baa by Moody's and below BBB by S&P and Fitch. Such bonds,
though higher yielding, are characterized by risk. See "Description of the
Fund--Risk Factors--Lower Rated Bonds" in the Prospectus for a discussion
of certain risks and "Appendix B" for a general description of Moody's, S&P
and Fitch ratings of Municipal Obligations. Although ratings may be useful
in evaluating the safety of interest and principal payments, they do not
evaluate the market value risk of these bonds. The Fund will rely on the
Manager's judgment, analysis and experience in evaluating the
creditworthiness of an issuer. In this evaluation, the Manager will take
into consideration, among other things, the issuer's financial resources,
its sensitivity to economic conditions and trends, the quality of the
issuer's management and regulatory matters. It also is possible that a
rating agency might not timely change the rating on a particular issue to
reflect subsequent events. As stated above, once the rating of a bond in
the Fund's portfolio has been changed, the Manager will consider all
circumstances deemed relevant in determining whether the Fund should
continue to hold the bond.
Investors 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. These bonds generally are considered by Moody's, S&P and
Fitch to be predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation
and generally will involve more credit risk than securities in the higher
rating categories.
Because there is no established retail secondary market for many of
these securities, the Fund anticipates that such securities could be sold
only to a limited number of dealers or institutional investors. To the
extent a secondary trading market for these bonds does exist, it generally
is not as liquid as the secondary market for higher rated securities. The
lack of a liquid secondary market may have an adverse impact on market
price and yield and the Fund's ability to dispose of particular issues when
necessary to meet the Fund's liquidity needs or in response to a specific
economic event such as a deterioration in the creditworthiness of the
issuer. The lack of a liquid secondary market for certain securities also
may make it more difficult for the Fund to obtain accurate market
quotations for purposes of valuing the Fund's portfolio and calculating its
net asset value. Adverse publicity and investor perceptions, whether or
not based on fundamental analysis, may decrease the values and liquidity of
these securities. In such cases, judgment may play a greater role in
valuation because less reliable objective data may be available.
These bonds may be particularly susceptible to economic downturns.
It is likely that any economic recession could disrupt severely the market for
such securities and may have an adverse impact on the value of such
securities. In addition, it is likely that any such economic downturn
could adversely affect the ability of the issuers of such securities to
repay principal and pay interest thereon and increase the incidence of
default for such securities.
The Fund may acquire these bonds during an initial offering. Such
securities may involve special risks because they are new issues. The Fund
has no arrangement with any persons concerning the acquisition of such
securities, and the Manager will review carefully the credit and other
characteristics pertinent to such new issues.
Lower rated zero coupon securities and pay-in-kind bonds, in which
the Fund may invest up to 5% of its net assets, involve special considerations.
The credit risk factors pertaining to lower rated securities also apply to
lower rated zero coupon bonds and pay-in-kind bonds. Such zero coupon,
pay-in-kind or delayed interest bonds carry an additional risk in that,
unlike bonds which pay interest throughout the period to maturity, the Fund
will realize no cash until the cash payment date unless a portion of such
securities are sold and, if the issuer defaults, the Fund may obtain no
return at all on its investment. See "Dividends, Distributions and Taxes."
Investment Restrictions. The Fund has adopted investment restrictions
numbered 1 through 10 as fundamental policies. These restrictions cannot
be changed without approval by the holders of a majority (as defined in the
Act) of the Fund's outstanding voting shares. Investment restrictions
numbered 11 and 12 are not fundamental policies and may be changed by vote
of a majority of the Trustees at any time. The Fund may not:
1. Purchase securities other than Municipal Obligations and Taxable
Investments as those terms are defined above and in the Prospectus and
those arising out of transactions in futures and options.
2. Borrow money, except to the extent permitted under the Act (which
currently limits borrowing to no more than 33-1/3% of the value of the
Fund's total assets). Transactions in futures and options and the entry
into short sales transactions do not involve any borrowing for purposes of
this restriction.
3. Purchase securities on margin, but the Fund may make margin
deposits in connection with transactions in futures, including those
related to indices, and options on futures or indices.
4. 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.
5. Purchase or sell real estate, real estate investment trust
securities, 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 futures contracts, including those related to
indices, and options on futures contracts or indices.
6. Make loans to others except through the purchase of qualified
debt obligations and the entry into repurchase agreements referred to above
and in the Fund's Prospectus; 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 Trustees.
7. Invest more than 15% of its assets in the obligations of any one
bank for temporary defensive purposes, or invest more than 5% of its assets
in the obligations of any other 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 or its agencies or instrumentalities may
be purchased, without regard to any such limitations. Notwithstanding the
foregoing, to the extent required by the rules of the Securities and
Exchange Commission, the Fund will not invest more than 5% of its assets in
the obligations of any one bank, except that up to 25% of the value of the
Fund's total assets may be invested without regard to such limitation.
8. Invest more than 25% of its total assets in the securities of
issuers in any single industry; provided that there shall be no such
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.
9. Invest in companies for the purpose of exercising control.
10. Invest in securities of other investment companies, except as
they may be acquired as part of a merger, consolidation or acquisition of
assets.
11. Pledge, mortgage, hypothecate or otherwise encumber its assets,
except to the extent necessary to secure permitted borrowings. The deposit
of assets in escrow in connection with the writing of covered put and call
options and the purchase of securities on a when-issued or delayed-delivery
basis and collateral arrangements with respect to initial or variation
margin for futures contracts and options on futures contracts or indices
will not be deemed to be pledges of the Fund's assets.
12. 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 that are not
subject to the demand feature described in the Fund's Prospectus and
floating and variable rate demand obligations as to which no secondary
market exists and the Fund cannot exercise the demand feature described in
the Fund's Prospectus on less than seven days' notice), if, in the
aggregate, more than 15% of the value of its net assets would be so
invested.
For purposes of Investment Restriction No. 8, 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 in percentage resulting from a change in values or assets
will not constitute a violation of such restriction.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states.
Should the Fund determine that a commitment is no longer in the best
interests of the Fund and its shareholders, the Fund reserves the right to
revoke the commitment by terminating the sale of Fund shares in the state
involved.
MANAGEMENT OF THE FUND
Trustees and officers of the Fund, together with information as to
their principal business occupations during at least the last five years,
are shown below. Each Trustee who is deemed to be an "interested person"
of the Fund (as defined in the Act) is indicated by an asterisk.
Trustees of the Fund
CLIFFORD L. ALEXANDER, JR., Trustee. President of Alexander & Associates,
Inc., a management consulting firm. From 1977 to 1981, Mr. Alexander
served as Secretary of the Army and Chairman of the Board of the
Panama Canal Company, and from 1975 to 1977 he was a member of the
Washington, D.C. law firm of Verner, Liipfert, Bernhard, McPherson
and Alexander. He is a director of American Home Products
Corporation, The Dun & Bradstreet Corporation, MCI Communications
Corporation, Mutual of America Life Insurance Company and Equitable
Resources, a producer and distributor of natural gas and crude
petroleum. Mr. Alexander is also a Board member of 17 other funds in
the Dreyfus Family of Funds. He is 61 years old and his address is
400 C Street, N.E., Washington, D.C. 20002.
PEGGY C. DAVIS, Trustee. Shad Professor of Law, New York University School
of Law. Professor Davis has been a member of the New York University
law faculty since 1983. Prior to that time, she served for three
years as a judge in the courts of New York State; was engaged for
eight years in the practice of law, working in both corporate and
non-profit sectors; and served for two years as a criminal justice
administrator in the government of the City of New York. She writes
and teaches in the fields of evidence, constitutional theory, family
law, social sciences and the law, legal process and professional
methodology and training. Professor Davis is also a Board member of
15 other funds in the Dreyfus Family of Funds. She is 52 years old
and her address is c/o New York University School of Law, 249
Sullivan Street, New York, New York 10011.
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman
of the Board of various funds in the Dreyfus Family of Funds. For
more than five years prior thereto, he was President, a director and,
until August 1994, Chief Operating Officer of the Manager and
Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of the Manager and, until
August 24, 1994, the Fund's distributor. From August 1994 to
December 31, 1994, he was a director of Mellon Bank Corporation. He
is Chairman of the Board of Noel Group, Inc., a director of the
Muscular Dystrophy Association, a trustee of Bucknell University, and
a director of HealthPlan Services Corporation, Belding Heminway,
Inc., and Curtis Industries, Inc. Mr. DiMartino is also a Board
member of 92 other funds in the Dreyfus Family of Funds. He is 51
years old and his address is 200 Park Avenue, New York, New York
10166.
ERNEST KAFKA, Trustee. A physician engaged in private practice
specializing in the psychoanalysis of adults and adolescents. Since
1981, he has served as an Instructor at the New York Psychoanalytic
Institute and, prior thereto, held other teaching positions. For
more than the past five years, Dr. Kafka has held numerous
administrative positions and has published many articles on subjects
in the field of psychoanalysis. Dr. Kafka is also a Board member of
15 other funds in the Dreyfus Family of Funds. He is 62 years old
and his address is 23 East 92nd Street, New York, New York 10128.
SAUL B. KLAMAN, Trustee. Chairman and Chief Executive Officer of SBK
Associates, which provides research and consulting services to
financial institutions. Dr. Klaman was President of the National
Association of Mutual Savings Banks until November 1983, President of
the National Council of Savings Institutions until June 1985, Vice
Chairman of Golembe Associates and BEI Golembe, Inc. until 1989 and
Chairman Emeritus of BEI Golembe, Inc. until November 1992. He also
served as an Economist to the Board of Governors of the Federal
Reserve System and on several Presidential Commissions and has held
numerous consulting and advisory positions in the fields of economics
and housing finance. Dr. Klaman is also a Board member of 15 other
funds in the Dreyfus Family of Funds. He is 75 years old and his
address is 431-B Dedham Street, The Gables, Newton Center,
Massachusetts 02159.
NATHAN LEVENTHAL, Trustee. President of Lincoln Center for the Performing
Arts, Inc. Mr. Leventhal was Deputy Mayor for Operations of New York
City from September 1979 to March 1984 and Commissioner of the
Department of Housing Preservation and Development of New York City
from February 1978 to September 1979. Mr. Leventhal was an associate
and then a member of the New York law firm of Poletti Freidin
Prashker Feldman and Gartner from 1974 to 1978. He was Commissioner
of Rent and Housing Maintenance for New York City from 1972 to 1973.
Mr. Leventhal serves as Chairman of Citizens Union, an organization
which strives to reform and modernize city and state governments.
Mr. Leventhal is also a Board member of 15 other funds in the Dreyfus
Family of Funds. He is 52 years old and his address is 70 Lincoln
Center Plaza, New York, New York 10023-6583.
For so long as the Fund's plans described in the section captioned
"Distribution Plan and Shareholder Services Plan" remain in effect, the
Trustees of the Fund who are not "interested persons" of the Fund, as
defined in the Act, will be selected and nominated by the Trustees who are
not "interested persons" of the Fund.
Each Trustee, except Mr. DiMartino, was elected at a meeting of
shareholders held on August 3, 1994. There ordinarily will be no further
meetings of shareholders for the purpose of electing Trustees unless and
until such time as less than a majority of the Trustees holding office have
been elected by shareholders, at which time the Trustees then in office
will call a shareholders' meeting for the election of Trustees. Under the
Act, shareholders of record of not less than two-thirds of the outstanding
shares of the Fund may remove a Trustee through a declaration in writing or
by vote cast in person or by proxy at a meeting called for that purpose.
The Trustees are required to call a meeting of shareholders for the purpose
of voting upon the question of removal of any such Trustee when requested
in writing to do so by the shareholders of record of not less than 10% of
the Fund's outstanding shares.
The Fund typically pays its Trustees 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. The aggregate
amount of compensation paid to each Trustee by the Fund for the fiscal year
ended January 31, 1995, and by all other funds in the Dreyfus Family of
Funds for which such person is a Board member for the year ended December
31, 1994, were as follows:
<TABLE>
<CAPTION>
(5)
(3) Total
(2) Pension or (4) Compensation from
(1) Aggregate Retirement Benefits Estimated Annual Fund and Fund
Name of Board Compensation from Accrued as Part of Benefits Upon Complex Paid to
Member Fund* Fund's Expenses Retirement Board Member
<S> <C> <C> <C> <C>
Clifford L. Alexander, Jr $4,134 none none $73,210
Peggy C. Davis $4,134 none none $61,751
Joseph S. DiMartino $5,625** none none $445,000***
Ernest Kafka $4,134 none none $61,001
Saul B. Klaman $4,134 none none $61,751
Nathan Leventhal $4,134 none none $61,751
* Amount does not include reimbursed expenses for attending Board meetings, which amounted to $221 for all
Trustees as a group.
** Estimated amount for the current fiscal year ending January 31, 1996.
*** Estimated amount for the year ending December 31, 1995.
</TABLE>
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President and Chief Operating
Officer of the Distributor and an officer of other investment companies
advised or administered by the Manager. From December 1991 to July
1994, she was President and Chief Compliance Officer of Funds
Distributor, Inc., a wholly-owned subsidiary of The Boston Company, Inc.
Prior to December 1991, she served as Vice President and Controller, and
later as Senior Vice President, of The Boston Company Advisors. She is
37 years old.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President and
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From February 1992 to
July 1994, he served as Counsel for The Boston Company Advisors, Inc.
From August 1990 to February 1992, he was employed as an Associate at
Ropes & Gray, and prior to August 1990, he was employed as an Associate
at Sidley & Austin. He is 30 years old.
ERIC B. FISCHMAN, Vice President and Assistant Secretary. Associate
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From September 1992
to August 1994, he was an attorney with the Board of Governors of the
Federal Reserve System. He is 30 years old.
FREDERICK C. DEY, Vice President and Assistant Treasurer. Senior Vice
President of the Distributor and an officer of other investment
companies advised or administered by the Manager. From 1988 to August
1994, he was Manager of the High Performance Fabric Division of Springs
Industries Inc. He is 33 years old.
JOSEPH S. TOWER, III, Assistant Treasurer. Senior Vice President,
Treasurer and Chief Financial Officer of the Distributor and an officer
of other investment companies advised or administered by the Manager.
From July 1988 to August 1994, he was employed by The Boston Company,
Inc. where he held various management positions in the Corporate Finance
and Treasury areas. He is 32 years old.
JOHN J. PYBURN, Assistant Treasurer. Vice President of the Distributor and
an officer of other investment companies advised or administered by the
Manager. From 1984 to July 1994, he was Assistant Vice President in the
Mutual Fund Accounting Department of the Manager. He is 59 years old.
PAUL FURCINITO, Assistant Secretary. Assistant Vice President of the
Distributor and an officer of other investment companies advised or
administered by the Manager. From January 1992 to July 1994, he was a
Senior Legal Product Manager, and, from January 1990 to January 1992, a
mutual fund accountant, for The Boston Company Advisors, Inc. He is 28
years old.
RUTH D. LEIBERT, Assistant Secretary. Assistant Vice President of the
Distributor and an officer of other investment companies advised or
administered by the Manager. From March 1992 to July 1994, she was a
Compliance Officer for The Managers Funds, a registered investment
company. From March 1990 until September 1991, she was Development
Director of The Rockland Center for the Arts. She is 50 years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
Trustees and officers of the Fund, as a group, owned less than 1% of the
Fund's shares of beneficial interest outstanding on May 25, 1995.
As of May 25, 1995, the following persons owned 5% or more of the
outstanding shares of beneficial interest of the Fund: Class A shares:
Merrill Lynch Pierce Fenner & Smith Inc. Trade House A/C, 4800 Deer Lake
Drive E Fl 3, Jacksonville, Florida 32246-6484 - 11.4%; Class B shares:
Merrill Lynch FDS, 4800 Deer Lake Drive E, Jacksonville, Florida 32246-6484
- - 9.3%.
MANAGEMENT AGREEMENT
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the
Fund."
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") dated August 24, 1994 with the Fund, which is
subject to annual approval by (i) the Fund's Board of Trustees or (ii) vote
of a majority (as defined in the Act) of the outstanding voting securities
of the Fund, provided that in either event the continuance also is approved
by a majority of the Trustees who are not "interested persons" (as defined
in the Act) of the Fund or the Manager, by vote cast in person at a meeting
called for the purpose of voting on such approval. The Agreement was
approved by shareholders on August 3, 1994 and was last approved by the
Fund's Board of Trustees, including a majority of the Trustees who are not
"interested persons" of any party to the Agreement, at a meeting held on
July 20, 1994. The Agreement is terminable without penalty, on 60 days'
notice, by the Fund's Board of Trustees or by vote of the holders of a
majority of the Fund's shares, or, on not less than 90 days' notice, by the
Manager. The Agreement will terminate automatically in the event of its
assignment (as defined in the Act).
The following persons are officers and/or directors of the Manager:
Howard Stein, Chairman of the Board and Chief Executive Officer; W. Keith
Smith, Vice Chairman of the Board; Robert E. Riley, President, Chief
Operating Officer and a director; Lawrence S. Kash, Vice Chairman-
Distribution and a director; Philip L. Toia, Vice Chairman-Operations and
Administration; Paul H. Snyder, Vice President-Finance and Chief Financial
Officer; Daniel C. Maclean, Vice President and General Counsel; Barbara E.
Casey, Vice President-Dreyfus Retirement Services; Diane M. Coffey, Vice
President-Corporate Communications; Elie M. Genadry, Vice President-
Institutional Sales; Henry D. Gottmann, Vice President-Retail Sales and
Service; William F. Glavin, Jr., Vice President-Product Management; Andrew
S. Wasser, Vice President-Information Services; Mark N. Jacobs, Vice
President-Legal and Secretary; Jeffrey N. Nachman, Vice President-Mutual
Fund Accounting; Katherine C. Wickham, Vice President-Human Resources;
Maurice Bendrihem, Controller; Elvira Oslapas, Assistant Secretary; and
Mandell L. Berman, Frank V. Cahouet, Alvin E. Friedman, Lawrence M. Greene,
Julian M. Smerling and David B. Truman, 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 of Trustees. The Manager is responsible for investment decisions,
and provides the Fund with portfolio managers who are authorized by the
Board of Trustees to execute purchases and sales of securities. The Fund's
portfolio managers are Joseph P. Darcy, A. Paul Disdier, Karen M. Hand,
Stephen C. Kris, Richard J. Moynihan, Jill C. Shaffro, L. Lawrence
Troutman, 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
as well as for other funds advised by the Manager. All purchases and sales
are reported for the Trustees' review at the meeting subsequent to such
transactions.
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, brokerage fees and
commissions, if any, fees of Trustees who are not officers, directors,
employees or holders of 5% or more of the outstanding voting securities of
the Manager, Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of independent
pricing services, costs of maintaining the Fund's existence, costs
attributable to investor services (including, without limitation, telephone
and personnel expenses), costs of shareholders' reports and meetings, and
any extraordinary expenses. Class A, Class B and Class C shares are
subject to an annual service fee for ongoing personal services relating to
shareholder accounts and services related to the maintenance of shareholder
accounts. In addition, each of Class B and Class C shares are subject to
an annual distribution fee for distributing the relevant Class of shares
pursuant to a distribution plan adopted in accordance with Rule 12b-1 under
the Act. See "Distribution Plan and Shareholder Services Plan."
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 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 to the Fund, the Fund has
agreed to pay the Manager a monthly management fee at the annual rate of
.55 of 1% of the value of the Fund's average daily net assets. The
management fee payable for the fiscal years ended January 31, 1993, 1994
and 1995 amounted to $1,209,756, $1,365,438 and $1,264,646, respectively,
which fees were reduced by $610,731, $362,893 and $51,429, respectively,
pursuant to undertakings in effect, resulting in net fees paid to the
Manager of $599,025 in fiscal 1993, $1,002,545 in fiscal 1994 and
$1,213,217 in fiscal 1995.
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 the expense limitation of any state having jurisdiction over the
Fund, the Fund may deduct from the payment to be made to the Manager under
the Agreement, or the Manager will bear, such excess expense to the extent
required by state law. Such deduction or payment, if any, will be
estimated daily, and 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.
PURCHASE OF FUND SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund
Shares."
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement dated August 24, 1994. The Distributor also acts
as distributor for the other funds in the Premier Family of Funds, for the
funds in the Dreyfus Family of Funds and for certain other investment
companies.
Using Federal Funds. The Shareholders Services Group, Inc., the Fund's
transfer and dividend disbursing agent (the "Transfer Agent"), or the Fund
may attempt to notify the investor upon receipt of checks drawn on banks
that are not members of the Federal Reserve System as to the possible delay
in conversion into Federal Funds and may attempt to arrange for a better
means of transmitting the money. If the investor is a customer of a
securities dealer ("Selected Dealer") and his order to purchase Fund shares
is paid for other than in Federal Funds, the Selected Dealer, acting on
behalf of its customer, will complete the conversion into, or itself
advance, Federal Funds generally on the business day following receipt of
the customer's order. The order is effective only when so converted and
received by the Transfer Agent. An order for the purchase of Fund shares
placed by an investor with sufficient Federal Funds or a cash balance in
his brokerage account with a Selected Dealer will become effective on the
day that the order, including Federal Funds, is received by the Transfer
Agent.
Sales Loads--Class A. The scale of sales loads applies to purchases of
Class A shares made by any "purchaser," which term includes an individual
and/or spouse purchasing securities for his, her or their own account or
for the account of any minor children, or a trustee or other fiduciary
purchasing securities for a single trust estate or a single fiduciary
account (including a pension, profit-sharing or other employee benefit
trust created pursuant to a plan qualified under Section 401 of the
Internal Revenue Code of 1986, as amended (the "Code"), although more than
one beneficiary is involved; or a group of accounts established by or on
behalf of the employees of an employer or affiliated employers pursuant to
an employee benefit plan or other program (including accounts established
pursuant to Sections 403(b), 408(k) and 457 of the Code); or an organized
group which has been in existence for more than six months, provided that
it is not organized for the purpose of buying redeemable securities of a
registered investment company and provided that the purchases are made
through a central administration or a single dealer, or by other means
which result in economy of sales effort or expense.
Offering Prices. Based upon the Fund's net asset value at the close of
business on January 31, 1995, the maximum offering price of the Fund's
Class A and Class B shares would have been as follows. Class C shares were
not offered as of January 31, 1995.
Class A Shares:
NET ASSET VALUE per share . . . . . . . . . . . . . . . . . . . . . $ 12.24
Sales load for individual sales of shares aggregating less
than $50,000 - 4.5 percent of offering price
(approximately 4.7 percent of net asset value per share) $ .58
Offering Price to Public . . . . . . . . . . . . . . . . . . . . . .$ 12.82
Class B Shares:
NET ASSET VALUE, redemption price and offering
price to public* . . . . . . . . . . . . . . . . . . . . $ 12.25
______________________________
* Class B shares are subject to a contingent deferred sales charge on
certain redemptions, see "How to Redeem Fund Shares" in the Fund's
Prospectus.
TeleTransfer Privilege. TeleTransfer purchase orders may be made
between the hours of 8:00 a.m. and 4:00 p.m., New York time, on any
business day that the Transfer Agent and the New York Stock Exchange are
open. Such purchases will be credited to the shareholder's Fund account on
the next bank business day. To qualify to use the 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
"Redemption of Fund Shares--TeleTransfer Privilege."
Reopening an Account. An investor 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.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Distribution Plan and Shareholder Services Plan."
Class A, Class B and Class C shares are subject to a Shareholder
Services Plan and Class B and Class C shares only are subject to a
Distribution Plan.
Distribution Plan. Rule l2b-1 (the "Rule") adopted by the Securities
and Exchange Commission under the Act provides, among other things, that an
investment company may bear expenses of distributing its shares only
pursuant to a plan adopted in accordance with the Rule. The Fund's Board
of Trustees has adopted such a plan (the "Distribution Plan") with respect
to Class B and Class C shares of the Fund pursuant to which the Fund pays
the Distributor for distributing the relevant Class of shares. The Fund's
Board of Trustees believes that there is a reasonable likelihood that the
Distribution Plan will benefit the Fund and holders of the relevant Class
of shares. In some states, certain financial institutions effecting
transactions in Fund shares may be required to register as dealers pursuant
to state law.
A quarterly report of the amounts expended under the Distribution
Plan, and the purposes for which such expenditures were incurred, must be
made to the Trustees for their review. In addition, the Distribution Plan
provides that it may not be amended to increase materially the costs which
holders of the relevant Class of shares may bear for distribution pursuant
to the Distribution Plan without the approval of the holders of the
affected Class of shares and that other material amendments of the
Distribution Plan must be approved by the Board of Trustees, and by the
Trustees who are not "interested persons" (as defined in the Act) of the
Fund or the Manager and have no direct or indirect financial interest in
the operation of the Distribution Plan, by vote cast in person at a meeting
called for the purpose of considering such amendments. The Distribution
Plan is subject to annual approval by such vote of the Trustees cast in
person at a meeting called for the purpose of voting on the Distribution
Plan. The Distribution Plan was last approved by the Fund's Board of
Trustees, including a majority of the Trustees who are not "interested
persons," at a meeting held on April 12, 1995. As to the relevant Class of
shares, the Distribution Plan is terminable at any time by vote of a
majority of the Trustees who are not "interested persons" and have no
direct or indirect financial interest in the operation of the Distribution
Plan or by vote of holders of a majority of such Class of shares.
For the period from February 1, 1994 through August 23, 1994, the Fund
paid Dreyfus Service Corporation, as former distributor, $52,773 with
respect to Class B under the Distribution Plan. For the period from August
24, 1994 through January 31, 1995, the Fund paid the Distributor $42,473
with respect to Class B under the Distribution Plan. There were no
payments made under the Distribution Plan with respect to Class C during
the fiscal year ended January 31, 1995, as Class C shares had not yet been
offered.
Shareholder Services Plan. The Fund has adopted a Shareholder
Services Plan, pursuant to which the Fund pays the Distributor for the
provision of certain services to the holders of Class A, Class B and Class
C shares. Under the Shareholder Services Plan, the Distributor may make
payments to certain Selected Dealers, financial institutions and other
financial industry professionals (collectively, "Service Agents") in
respect of these services.
A quarterly report of the amounts expended under the Shareholder
Services Plan, and the purposes for which such expenditures were incurred,
must be made to the Trustees for their review. In addition, the
Shareholder Services Plan provides that it may not be amended without
approval of the Board of Trustees, and by the Trustees who are not
"interested persons" (as defined in the Act) of the Fund and who have no
direct or indirect financial interest in the operation of the Shareholder
Services Plan or in any agreements entered into in connection with the
Shareholder Services Plan, by vote cast in person at a meeting called for
the purpose of considering such amendments. The Shareholder Services Plan
is subject to annual approval by such vote cast in person at a meeting
called for the purpose of voting on the Shareholder Services Plan. The
Shareholder Services Plan was so approved on April 12, 1995. As to each
Class of shares, the Shareholder Services Plan is terminable at any time by
vote of a majority of the Trustees who are not "interested persons" and who
have no direct or indirect financial interest in the operation of the
Shareholder Services Plan or in any agreements entered into in connection
with the Shareholder Services Plan.
For the period from February 1, 1994 through August 23, 1994, the Fund
paid Dreyfus Service Corporation, as former distributor, $309,651 with
respect to Class A, and $26,386 with respect to Class B, under the
Shareholder Services Plan. For the period from August 24, 1994 through
January 31, 1995, the Fund paid the Distributor $217,565 with respect to
Class A, and $21,237 with respect to Class B, under the Shareholder
Services Plan. There were no payments made under the Shareholder Services
Plan with respect to Class C during the fiscal year ended January 31, 1995,
as Class C shares had not yet been offered.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to
Redeem Fund Shares."
Check Redemption Privilege - Class A. An investor may indicate on the
Account Application, Shareholder Services Form or by later written request
that the Fund provide Redemption Checks ("Checks") drawn on the Fund's
account. Checks will be sent only to the registered owner(s) of the
account and only to the address of record. The Account Application or
later written request 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 the investor's agent, will cause the Fund to redeem a
sufficient number of full and fractional Class A shares in the investor's
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 the
investor. Investors generally will be subject to the same rules and
regulations that apply to checking accounts, although election of this
Privilege creates only a shareholder-transfer agent relationship with the
Transfer Agent.
If the amount of the Check is greater than the value of the shares in
an investor's account, the Check will be returned marked insufficient
funds. Checks should not be used to close an account.
TeleTransfer Privilege. Investors should be aware that if they have
selected the TeleTransfer Privilege, any request for a TeleTransfer
transaction will be effected through the Automated Clearing House ("ACH")
system unless more prompt transmittal specifically is requested.
Redemption proceeds will be on deposit in the investor's account at an ACH
member bank ordinarily two business days after receipt of the redemption
request. See "Purchase of Fund Shares--TeleTransfer Privilege."
Share 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 owner 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.
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 Board of Trustees reserves the right to make payments in whole
or in part in securities or other assets in case of an emergency or any
time a cash distribution would impair the liquidity of the Fund to the
detriment of the existing shareholders. In such event, the securities
would be valued in the same manner as the Fund's portfolio is valued. If
the recipient sold such securities, brokerage charges would 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
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Shareholder
Services."
Fund Exchanges. Class A, Class B and Class C shares of the Fund may
be exchanged for shares of the respective Class of certain other funds
advised or administered by the Manager. Shares of the same Class of such
funds purchased by exchange will be purchased on the basis of relative net
asset value per share as follows:
A. Class A shares of funds purchased without a sales load may be
exchanged for Class A shares of other funds sold with a sales
load, and the applicable sales load will be deducted.
B. Class A shares of funds purchased with or without a sales load
may be exchanged without a sales load for Class A shares of other
funds sold without a sales load.
C. Class A shares of funds purchased with a sales load, Class A shares
of funds acquired by a previous exchange from Class A shares purchased
with a sales load, and additional Class A shares acquired through
reinvestment of dividends or distributions of any such funds
(collectively referred to herein as "Purchased Shares") may be
exchanged for Class A shares of other funds sold with a sales load
(referred to herein as "Offered Shares"), provided that, if the sales
load applicable to the Offered Shares exceeds the maximum sales load
that could have been imposed in connection with the Purchased Shares
(at the time the Purchased Shares were acquired), without giving
effect to any reduced loads, the difference will be deducted.
D. Class B or Class C shares of any fund may be exchanged for the same
Class of shares of other funds without a sales load. Class B or Class
C shares of any fund exchanged for the same Class of shares of another
fund will be subject to the higher applicable contingent deferred
sales charge ("CDSC") of the two exchanged funds and, for purposes of
calculating CDSC rates and conversion periods, will be deemed to have
been held since the date the Class B or Class C shares being exchanged
were initially purchased.
To accomplish an exchange under item C above, an investor's Service
Agent must notify the Transfer Agent of the investor's prior ownership of
such Class A shares and the investor's account number.
To request an exchange, the investor's Service Agent acting on the
investor's behalf 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 shareholders automatically, unless the investor
checks the applicable "NO" box on the Account Application, indicating that
the investor specifically refuses this privilege. By using the Telephone
Exchange Privilege, the investor authorizes the Transfer Agent to act on
telephonic exchange instructions from any person representing himself or
herself to be the investor or a representative of the investor's Service
Agent, 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.
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 being required for the shares of the same Class of the fund into
which the exchange is being made. For Dreyfus-sponsored Keogh Plans, IRAs
and IRAs set up under a Simplified Employee Pension Plan ("SEP-IRAs") with
only one participant, the minimum initial investment is $750. To exchange
shares held in Corporate Plans, 403(b)(7) Plans and SEP-IRAs with more than
one participant, the minimum initial investment is $100 if the plan has at
least $2,500 invested among shares of the same Class of the funds in the
Dreyfus Family of Funds. To exchange shares held in Personal Retirement
Plans, the shares exchanged must have a current value of at least $100.
Auto-Exchange Privilege. The Auto-Exchange Privilege permits an
investor to purchase, in exchange for Class A, Class B or Class C shares of
the Fund, shares of the same Class of another fund in the Premier Family of
Funds or the Dreyfus Family of Funds. This Privilege is available only for
existing accounts. Shares will be exchanged on the basis of relative net
asset value as described above under "Fund Exchanges." Enrollment in or
modification or cancellation of this Privilege is effective three business
days following notification by the investor. An investor will be notified
if his account falls below the amount designated to be exchanged under this
Privilege. In this case, an investor's 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 and 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 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 Auto-Exchange Privilege may be modified or terminated at any time upon
notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends
and distributions, the investor's shares will be reduced and eventually may
be depleted. There is a service charge of $.50 for each withdrawal check.
Automatic Withdrawal may be terminated at any time by the investor, the
Fund or the Transfer Agent. Shares for which certificates have been issued
may not be redeemed through the Automatic Withdrawal Plan. Class B or
Class C shares withdrawn pursuant to the Automatic Withdrawal Plan will be
subject to any applicable CDSC.
Dividend Sweep. Dividend Sweep allows investors to invest on the
payment date their dividends or dividends and capital gain distributions,
if any, from the Fund in shares of the same Class of another fund in the
Premier Family of Funds or the Dreyfus Family of Funds of which the
investor is a shareholder. Shares of the same Class 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 with respect to Class A shares by
a fund may be invested without imposition of a sales load in Class
A shares of other funds that are offered without a sales load.
B. Dividends and distributions paid with respect to Class A shares by
a fund which does not charge a sales load may be invested in Class
A shares of other funds sold with a sales load, and the applicable
sales load will be deducted.
C. Dividends and distributions paid with respect to Class A shares by
a fund which charges a sales load may be invested in Class A shares of
other funds sold with a sales load (referred to herein as "Offered
Shares"), provided that, if the sales load applicable to the Offered
Shares exceeds the maximum sales load charged by the fund from which
dividends or distributions are being swept, without giving effect to
any reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund with respect to Class B
or Class C shares may be invested without imposition of any applicable
CDSC in the same Class of shares of other funds and the relevant Class
of shares of such other funds will be subject on redemption to any
applicable CDSC.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Fund
Shares."
Valuation of Portfolio Securities. The Fund's investments are valued
each business day by an independent pricing service (the "Service")
approved by the Board of Trustees. When, in the judgment of the Service,
quoted bid prices for investments are readily available and are
representative of the bid side of the market, these investments are valued
at the mean between the quoted bid prices (as obtained by the Service from
dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other
investments (which constitute a majority of the portfolio securities) are
carried at fair value as determined by the Service, based on methods which
include consideration of: yields or prices of municipal bonds of
comparable quality, coupon, maturity and type; indications as to values
from dealers; and general market conditions. The Service may employ
electronic data processing techniques and/or a matrix system to determine
valuations. The Service's procedures are reviewed by the Fund's officers
under the general supervision of the Board of Trustees. Expenses and fees,
including the management fee (reduced by the expense limitation, if any)
and fees pursuant to the Shareholder Services Plan, with respect to Class
A, Class B and Class C shares, and fees pursuant to the Distribution Plan,
with respect to Class B and Class C shares only, are accrued daily and are
taken into account for the purpose of determining the net asset value of
the relevant Class of shares. Because of the difference in operating
expenses incurred by each Class, the per share net asset value of each
Class will differ.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends,
Distributions and Taxes."
Management believes that the Fund qualified as a "regulated investment
company" under the Code for the fiscal year ended January 31, 1995, and the
Fund intends to continue to so qualify so long as 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), must derive less than 30% of its
annual gross income from gain on the sale of securities held for less than
three months, and must meet certain asset diversification and other
requirements. Accordingly, the Fund may be restricted in the selling of
securities held for less than three months, and in the utilization of
certain of the investment techniques described in the Prospectus under
"Description of the Fund--Investment Techniques." The Code, however,
allows the Fund to net certain offsetting positions making it easier for
the Fund to satisfy the 30% test. The term "regulated investment company"
does not imply the supervision of management or investment practices or
policies by any government agency.
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.
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 obligations which, when
held by an individual, the interest therefrom is exempt from California
personal income tax, and if the Fund qualifies as a management company
under the California Revenue and Taxation Code, then the Fund will be
qualified to pay dividends to its shareholders that are exempt from
California personal income tax (but not from California franchise tax)
("California exempt-interest dividends"). However, the total amount of
California exempt-interest dividends paid by the Fund to a non-corporate
shareholder with respect to any taxable year cannot exceed such
shareholder's pro-rata share of interest received by the Fund during such
year that is exempt from California taxation less any expenses and
expenditures deemed to have been paid from such interest.
For shareholders subject to the California personal income tax, exempt-
interest dividends derived from California Municipal Obligations will not
be subject to the California personal income tax. Distributions from net
realized short-term capital gains to California resident shareholders will
be subject to the California personal income tax as ordinary income.
Distributions from net realized long-term capital gains may constitute
long-term capital gains for individual California resident shareholders.
Unlike under Federal tax law, the Fund's shareholders will not be subject
to California personal income tax, or receive a credit for California taxes
paid by the Fund, on undistributed capital gains. In addition, California
tax law does not consider any portion of the exempt-interest dividends paid
an item of tax preference for the purposes of computing the California
alternative minimum tax.
Any dividend or distribution paid shortly after an investor's purchase
may have the effect of reducing the net asset value of his shares below the
cost of his investment. Such a distribution would be a return on the
investment in an economic sense although taxable as stated in "Dividends,
Distributions and Taxes" in the Prospectus. In addition, the Code provides
that if a shareholder has not held his Fund shares for more than six months
(or such shorter period as the Internal Revenue Service may prescribe by
regulation) and has received an exempt-interest dividend with respect to
such shares, any loss incurred on the sale of such shares will be
disallowed to the extent of the exempt-interest dividend received.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain or loss. However, all or a portion of any gains
realized from the sale or other disposition of certain market discount
bonds will be treated as ordinary income under Section 1276 of the Code.
In addition, all or a portion of the gain realized from engaging in
"conversion transactions" may be treated as ordinary income under Section
1258 of the Code. "Conversion transactions" are defined to include certain
forward, futures, options and "straddle" transactions marketed or sold to
produce capital gains, or transactions described in Treasury regulations to
be issued in the future.
Under Section 1256 of the Code, gain or loss the Fund realizes from
certain financial futures and options transactions will be treated as 60%
long-term capital gain or loss and 40% short-term capital gain or loss.
Gain or loss will arise upon exercise or lapse of such futures and options
as well as from closing transactions. In addition, such futures and
options remaining unexercised at the end of the Fund's taxable year will be
treated as sold for their then fair market value, resulting in additional
gain or loss to the Fund characterized in the manner described above.
Offsetting positions held by the Fund involving financial futures and
options transactions may be considered, for tax purposes, to constitute
"straddles." "Straddles" are defined to include "offsetting positions" in
actively traded personal property. The tax treatment of "straddles" is
governed by Sections 1092 and 1258 of the Code, which, in certain
circumstances, overrides or modifies the provisions of Section 1256. As
such, all or a portion of any short- or long-term capital gain from certain
"straddle" and/or conversion transactions may be recharacterized to
ordinary income.
If the Fund were treated as entering into "straddles" by reason of its
engaging in certain futures or options transactions, such "straddles" would
be characterized as "mixed straddles" if the futures or options
transactions comprising a part of such "straddles" were governed by Section
1256 of the Code. The Fund may make one or more elections with respect to
"mixed straddles." Depending on which election is made, if any, the
results to the Fund may differ. If no election is made to the extent the
"straddle" rules apply to positions established by the Fund, losses
realized by the Fund will be deferred to the extent of unrealized gain in
the offsetting position. Moreover, as a result of the "straddle" and the
conversion transaction rules, short-term capital losses on "straddle"
positions may be recharacterized as long-term capital losses, and long-term
capital gains may be treated as short-term capital gains or ordinary
income.
Investment by the Fund in securities issued at a discount or providing
for deferred interest or for payment of interest in the form of additional
obligations could, under special tax rules, affect the amount, timing and
character of distributions to shareholders. For example, the Fund could
be required to take into account annually a portion of the discount (or
deemed discount) at which such securities were issued and to distribute
such portion in order to maintain its qualification as a regulated
investment company. In such case, the Fund may have to dispose of
securities which it might otherwise have continued to hold in order to
generate cash to satisfy these distribution requirements.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased from and sold to parties
acting as either principal or agent. Newly-issued securities ordinarily
are purchased directly from the issuer or from an underwriter; other
purchases and sales usually are placed with those dealers from which it
appears that the best price or execution will be obtained. Usually no
brokerage commissions, as such, are paid by the Fund for such purchases and
sales, although the price paid usually includes an undisclosed compensation
to the dealer acting as agent. The prices paid to underwriters of
newly-issued securities usually include a concession paid by the issuer to
the underwriter, and purchases of after-market securities from dealers
ordinarily are executed at a price between the bid and asked price. No
brokerage commissions have been paid by the Fund to date.
Transactions are allocated to various dealers by the Fund's portfolio
managers in their best judgment. The primary consideration is prompt and
effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected for research, statistical or
other services to enable the Manager to supplement its own research and
analysis with the views and information of other securities firms.
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.
The Fund's portfolio turnover rate for the fiscal years ended January
31, 1994 and 1995 was 26.69% and 37.39%, respectively. The Fund
anticipates that its annual portfolio turnover rate will not be a limiting
factor when the Fund deems it desirable to sell or purchase securities.
Therefore, depending upon market conditions, the Fund's annual portfolio
turnover rate may exceed 100% in particular years.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance
Information."
Class C shares had not been offered as of the date of the financials
and, therefore, no performance data is provided for Class C.
Current yield for the 30-day period ended January 31, 1995 for Class A
was 5.35% and for Class B was 5.07%. 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
(b) the maximum offering price per share in the case of Class A or the net
asset value per share in the case of Class B or Class C on the last day of
the period less any undistributed earned income per share reasonably
expected to be declared as a dividend shortly thereafter. The quotient is
then added to 1, and that sum is raised to the 6th power, after which 1 is
subtracted. The current yield is then arrived at by multiplying the result
by 2.
Based upon a combined 1995 Federal and State of California personal
income tax rate of 46.24%, the tax equivalent yield for the 30-day period
ended January 31, 1995 for Class A was 9.95% and for Class B was 9.43%.
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 noted above represents the application of the
highest Federal and State of California marginal personal income tax rates
presently in effect. For Federal personal income tax purposes, a 39.60%
rate has been used. For California personal income tax purposes, an 11.00%
tax rate has been used. The tax equivalent yield figure, however, does not
reflect the potential effect of any 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 yields. 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 average annual total return for the 1, 5 and 8.227 year periods
ended January 31, 1995 for Class A was -8.63%, 6.53% and 6.46%,
respectively. The average annual total return for the 1 and 2.047 year
periods ended January 31, 1995 for Class B was -7.46% and 3.31%,
respectively. Average annual total return is calculated by determining the
ending redeemable value of an investment purchased at net asset value
(maximum offering price in the case of Class A) per share 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. A
Class's average total return figures calculated in accordance with such
formula assume that in the case of Class A the maximum sales load had been
deducted from the hypothetical initial investment at the time of purchase
or in the case of Class B or Class C the maximum applicable CDSC has been
paid upon redemption at the end of the period.
The total return for Class A for the period November 10, 1986
(commencement of operations) to January 31, 1995 was 67.36%. Based on net
asset value per share, the total return for Class A was 75.26% for this
period. The total return for Class B for the period January 15, 1993
(commencement of initial offering of Class B shares) through January 31,
1995 was 6.89%. Without giving effect to the applicable CDSC, the total
return for Class B was 8.82% for this period. Total return is calculated
by subtracting the amount of the Fund's net asset value (maximum offering
price in the case of Class A) 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 any applicable CDSC), and dividing the result by the net asset value
(maximum offering price in the case of Class A) per share at the beginning
of the period. Total return also may be calculated based on the net asset
value per share at the beginning of the period instead of the maximum
offering price per share at the beginning of the period for Class A shares
or without giving effect to any applicable CDSC at the end of the period
for Class B or Class C shares. In such cases, the calculation would not
reflect the deduction of the sales load with respect to Class A shares or
any applicable CDSC with respect to Class B or Class C shares, which, if
reflected, would reduce the performance quoted.
From time to time, the Fund may use hypothetical tax equivalent yields
or charts in its advertising. These hypothetical yields or charts will be
used for illustrative purposes only and are not indicative of the Fund's
past or future performance.
From time to time, advertising materials for the Fund may refer to or
discuss then-current or past economic conditions, developments and/or
events, including those relating to or arising from actual or proposed tax
legislation. From time to time, advertising materials for the Fund may
also refer to statistical or other information concerning trends relating
to investment companies, as compiled by industry associations such as the
Investment Company Institute. From time to time, advertising materials for
the Fund also may refer to Morningstar ratings and related analysis
supporting such ratings.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
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. Shares
have no preemptive or subscription rights and are freely transferable.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
On August 3, 1994, the Fund's shareholders approved a proposal to
change, among other things, certain of the Fund's fundamental policies and
investment restrictions to (i) increase the amount the Fund may borrow and
(ii) increase the amount of the Fund's assets that it may pledge to secure
such borrowings and make such policy non-fundamental.
The Manager's legislative efforts led to the 1976 Congressional
Amendment to the Code permitting an incorporated mutual fund to pass
through tax exempt income to its shareholders. The Manager offered to the
public the first incorporated tax exempt fund and currently manages or
administers over $25 billion in tax exempt assets.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT,
COUNSEL AND INDEPENDENT AUDITORS
The Bank of New York, 90 Washington Street, New York, New York 10286, is
the Fund's custodian. The Shareholder Services Group, Inc., a subsidiary
of First Data Corporation, P.O. Box 9671, Providence, Rhode Island
02940-9671, is the Fund's transfer and dividend disbursing agent. Neither
The Bank of New York nor The Shareholder Services Group, Inc. has any part
in determining the investment policies of the Fund or which securities are
to be purchased or sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York
10004-2696, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the
shares of beneficial interest 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 auditors of the Fund.
APPENDIX A
RISK FACTORS - INVESTING
IN CALIFORNIA MUNICIPAL OBLIGATIONS
Certain California (the "State") constitutional amendments, legislative
measures, executive orders, civil actions and voter initiatives, as well as
the general financial condition of the State, could adversely affect the
ability of issuers of California Municipal Obligations to pay interest and
principal on such obligations. The following information constitutes only
a brief summary, does not purport to be a complete description, and is
based on information drawn from official statements relating to securities
offerings of the State of California (the "State") and various local
agencies, available as of the date of this Statement of Additional
Information. While the Fund has not independently verified such
information, it has no reason to believe that such information is not
correct in all material respects.
Recent Developments. From mid-1990 to late 1993, the State suffered a
recession with the worst economic, fiscal and budget conditions since the
1930s. Construction, manufacturing (especially aerospace), exports and
financial services, among others, were all severely affected. Job losses
were the worst of any post-war recession. Unemployment reached 10.1% in
January 1994, but fell sharply to 7.7% in October and November 1994.
According to the State's Department of Finance, recovery from the recession
in California began in 1994.
The recession seriously affected State tax revenues, which basically
mirror economic conditions. It also caused increased expenditures for
health and welfare programs. The State has also been facing a structural
imbalance in its budget with the largest programs supported by the General
Fund (K-12 schools and community colleges, health and welfare, and
corrections) growing at rates higher than the growth rates for the
principal revenue sources of the State General Fund. As a result, the
State experienced recurring budget deficits in the late 1980s and early
1990s. The State Controller reported that expenditures exceeded revenues
for four of the five fiscal years ending with 1991-92. The State had an
operating surplus of approximately $109 million in 1992-93 and $836 million
in 1993-94. However, at June 30, 1994, according to the Department of
Finance, the State's Special Fund for Economic Uncertainties ("SFEU") still
had a deficit, on a budget basis, of approximately $1.8 billion.
The accumulated budget deficits over the past several years, together
with expenditures for school funding which have not been reflected in the
budget, and reduction of available internal borrowable funds, have combined
to significantly deplete the State's cash resources to pay its ongoing
expenses. In order to meet its cash needs, the State has had to rely for
several years on a series of external borrowings, including borrowings past
the end of a fiscal year. Such borrowings are expected to continue in
future fiscal years. To meet its cash flow needs in the 1994-95 fiscal
year the State issued, in July and August 1994, $4.0 billion of revenue
anticipation warrants which mature on April 25, 1996, and $3.0 billion of
revenue anticipation notes maturing on June 28, 1995.
As a result of the deterioration in the State's budget and cash
situation, the rating agencies reduced the State's credit ratings. Between
October 1991 and July 1994 the rating on the State's general obligation
bonds was reduced by S&P from "AAA" to "A," by Moody's from "Aaa" to "A1"
and by Fitch from "AAA" to "A."
The 1994-94 Fiscal Year Budget (as updated in the January 10, 1995
Governor's Budget) is projected to have $42.4 billion of General Fund
revenues and transfers and $41.7 billion of budgeted expenditures. In
addition, the 1994-95 Budget Act anticipates deferring retirement of about
$1 billion of the accumulated budget deficit to the 1995-96 fiscal year
when it is intended to be fully retired by June 30, 1996.
The Governor's Budget for 1995-96 proposes General Fund revenues and
transfers of $42.5 billion and expenditures of $41.7 billion, which would
leave a balance of approximately $92 million in the budget reserve, the
SFEU, at June 30, 1996 after repayment of the accumulated budget deficits.
The Budget proposal is based on a number of assumptions, including receipt
of $830 million from the Federal government to offset costs of undocumented
and refugee immigrants.
On December 6, 1994, Orange County, California (the "County"), together
with its pooled investment funds (the "Funds") filed for protection under
Chapter 9 of the Federal Bankruptcy Code, after reports that the Funds had
suffered significant market losses in their investments, causing a
liquidity crisis for the Funds and the County. More than 180 other public
entities, most of which, but not all, are located in the County, were also
depositors in the Funds. As of mid-January, 1995, following a
restructuring of most of the Funds' assets to increase their liquidity and
reduce their exposure to interest rate increases, the County estimated the
Funds' loss at about $1.69 billion, or about 23% of their initial deposits
of approximately $7.5 billion. Many of the entities which deposited moneys
in the Funds, including the County, are facing cash flow difficulties
because of the bankruptcy filing and may be required to reduce programs or
capital projects. This may also effect their ability to meet their
outstanding obligations.
The State has no existing obligation with respect to any outstanding
obligations or securities of the County or any of the other participating
entities. However, in the event the County is unable to maintain county
administered State programs because of insufficient resources, it may be
necessary for the state to intervene, but the State cannot presently
predict what, if any, action may occur.
On January 17, 1994, an earthquake of the magnitude of an estimated 6.8
on the Richter Scale struck Los Angeles causing significant damage to
public and private structures and facilities. Although some individuals
and businesses suffered losses totaling in the billions of dollars, the
overall effect of the earthquake on the regional and State economy is not
expected to be serious.
State Finances. State moneys are segregated into the General Fund and
approximately 600 Special Funds. The General Fund consists of the revenues
received into the State Treasury and earnings from State investments, which
are not required by law to be credited to any other fund. The General Fund
is the principal operating fund for the majority of governmental activities
and is the depository of most major State revenue sources.
The SFEU is funded with General Fund revenues and was established to
protect the State from unforeseen reduced levels of revenues and/or
unanticipated expenditure increases. Amounts in the SFEU may be
transferred by the Controller as necessary to meet cash needs of the
General Fund. The Controller is required to return moneys so transferred
without payment of interest as soon as there are sufficient moneys in the
General Fund. For budgeting and accounting purposes, any appropriation
made from the SFEU is deemed an appropriation from the General Fund. For
year-end reporting purposes, the Controller is required to add the balance
in the SFEU to the balance in the General Fund so as to show the total
monies then available for General Fund purposes.
Inter-fund borrowing has been used for many years to meet temporary
imbalances of receipts and disbursements in the General Fund. As of June
30, 1994, the General Fund had outstanding loans in the aggregate principal
amount of $5.2 billion, which consisted of $4.0 billion of internal loans
to the General Fund from the SFEU and other Special Funds and $1.2 billion
of external loans represented by the 1994 revenue anticipation warrants.
Articles XIIIA and XIIIB to the State Constitution and Other Revenue Law
Changes. Prior to 1977, revenues of the State government experienced
significant growth primarily as a result of inflation and continuous
expansion of the tax base of the State. In 1978, State voters approved an
amendment to the State Constitution known as Proposition 13, which added
Article XIIIA to the State Constitution, reducing ad valorem local property
taxes by more than 50%. In addition, Article XIIIA provides that
additional taxes may be levied by cities, counties and special districts
only upon approval of not less than a two-thirds vote of the "qualified
electors" of such district, and requires not less than a two-thirds vote of
each of the two houses of the State Legislature to enact any changes in
State taxes for the purpose of increasing revenues, whether by increased
rate or changes in methods of computation.
Primarily as a result of the reductions in local property tax revenues
received by local governments following the passage of Proposition 13, the
Legislature undertook to provide assistance to such governments by
substantially increasing expenditures from the General Fund for that
purpose beginning in the 1978-79 fiscal year. In recent years, in addition
to such increased expenditures, the indexing of personal income tax rates
(to adjust such rates for the effects of inflation), the elimination of
certain inheritance and gift taxes and the increase of exemption levels for
certain other such taxes had a moderating impact on the growth in State
revenues. In addition, the State has increased expenditures by providing a
variety of tax credits, including renters' and senior citizens' credits and
energy credits.
The State is subject to an annual "appropriations limit" imposed by
Article XIIIB of the State Constitution adopted in 1979. Article XIIIB
prohibits the State from spending "appropriations subject to limitation" in
excess of the appropriations limit imposed. "Appropriations subject to
limitations" are authorizations to spend "proceeds of taxes," which consist
of tax revenues, and certain other funds, including proceeds from
regulatory licenses, user charges or other fees to the extent that such
proceeds exceed "the cost reasonably borne by such entity in providing the
regulation, product or service." One of the exclusions from these
limitations is "debt service" (defined as "appropriations required to pay
the cost of interest and redemption charges, including the funding of any
reserve or sinking fund required in connection therewith, on indebtedness
existing or legally authorized as of January 1, 1979 or on bonded
indebtedness thereafter approved" by the voters). In addition,
appropriations required to comply with mandates of courts or the Federal
government and, pursuant to Proposition 111 enacted in June 1990,
appropriations for qualified capital outlay projects and appropriations of
revenues derived from any increase in gasoline taxes and motor vehicle
weight fees above January 1, 1990 levels are not included as appropriations
subject to limitation. In addition, a number of recent initiatives were
structured or proposed to create new tax revenues dedicated to certain
specific uses, with such new taxes expressly exempted from the Article
XIIIB limits (e.g., increased cigarette and tobacco taxes enacted by
Proposition 99 in 1988). The appropriations limit also may be exceeded in
cases of emergency. However, unless the emergency arises from civil
disturbance or natural disaster declared by the Governor, and the
appropriations are approved by two-thirds of the Legislature, the
appropriations limit for the next three years must be reduced by the amount
of the excess.
The State's appropriations limit in each year is based on the limit for
the prior year, adjusted annually for changes in California per capita
personal income and changes in population, and adjusted, when applicable,
for any transfer of financial responsibility of providing services to or
from another unit of government. The measurement of change in population
is a blended average of statewide overall population growth, and change in
attendance at local school and community college ("K-14") districts. As
amended by Proposition 111, the appropriations limit is tested over
consecutive two-year periods. Any excess of the aggregate "proceeds of
taxes" received over such two-year periods above the combined
appropriations limits for those two years is divided equally between
transfers to K-14 districts and refunds to taxpayers.
As originally enacted in 1979, the State's appropriations limit was
based on its 1978-79 fiscal year authorizations to expend proceeds of taxes
and was adjusted annually to reflect changes in cost of living and
population (using different definitions, which were modified by Proposition
111). Commencing with the 1991-92 fiscal year, the State's appropriations
limit is adjusted annually based on the actual 1986-87 limit, and as if
Proposition 111 had been in effect. The State Legislature has enacted
legislation to implement Article XIIIB which defines certain terms used in
Article XIIIB and sets forth the methods for determining the State's
appropriations limit. Government Code Section 7912 requires an estimate of
the State's appropriations limit to be included in the Governor's Budget,
and thereafter to be subject to the budget process and established in the
Budget Act.
For the 1990-91 fiscal year, the State appropriations limit was $32.7
billion, and appropriations subject to limitation were $7.51 billion under
the limit. The limit for the 1991-92 fiscal year was $34.2 billion, and
appropriations subject to limitations were $3.8 billion under the limit.
The limit for the 1992-93 fiscal year was $35.01 billion, and the
appropriations subject to limitation were $7.53 billion under the limit.
The limit for the 1993-94 fiscal year was $36.60 billion, and the
appropriations subject to limitation were $6.55 billion under the limit.
The estimated limit for the 1994-95 fiscal year is $37.55 billion, and the
appropriations subject to limitations are estimated to be $6.05 billion
under the limit.
In November 1988, State voters approved Proposition 98, which changed
State funding of public education below the university level and the
operation of the State's appropriations limit, primarily by guaranteeing K-
14 schools a minimum share of General Fund revenues. Under Proposition 98
(as modified by Proposition 111, which was enacted in June 1990), K-14
schools are guaranteed the greater of (a) 40.3% of General Fund revenues
("Test 1"), (b) the amount appropriated to K-14 schools in the prior year,
adjusted for changes in the cost of living (measured as in Article XIIIB by
reference to California per capita personal income) and enrollment ("Test
2"), or (c) a third test, which would replace the second test in any year
when the percentage growth in per capita General Fund revenues from the
prior year plus .5% is less than the percentage growth in California per
capita personal income ("Test 3"). Under "Test 3," schools would receive
the amount appropriated in the prior year adjusted for changes in
enrollment and per capita General Fund revenues, plus an additional small
adjustment factor. If "Test 3" is used in any year, the difference between
"Test 3" and "Test 2" would become a "credit" to schools which would be the
basis of payments in future years when per capita General Fund revenue
growth exceeds per capita personal income growth.
Proposition 98 permits the Legislature by two-thirds vote of both
houses, with the Governor's concurrence, to suspend the K-14 schools'
minimum funding formula for a one-year period. In the fall of 1989, the
Legislature and the Governor utilized this provision to avoid having 40.3%
of revenues generated by a special supplemental sales tax enacted for
earthquake relief go to K-14 schools. Proposition 98 also contains
provisions transferring certain State tax revenues in excess of the Article
XIIIB limit to K-14 schools.
The 1991-92 Budget Act, applying "Test 2" of Proposition 98,
appropriated approximately $18.4 billion for K-14 schools pursuant to
Proposition 98. During the course of the fiscal year, revenues proved to
be substantially below expectations. By the time the Governor's Budget was
introduced in January 1992, it became clear that per capita growth in
General Fund revenues for 1991-92 would be far smaller than the growth in
California per capita personal income and the Governor's Budget therefore
reflected a reduction in Proposition 98 funding in 1991-92 by applying
"Test 3" rather than "Test 2."
In response to the changing revenue situation and to fully fund the
Proposition 98 guarantee in both the 1991-92 and 1992-93 fiscal years
without exceeding it, the Legislature enacted several bills as part of the
1992-93 budget package which responded to the fiscal crisis in education
funding. Fiscal year 1991-92 Proposition 98 appropriations for K-14
schools were reduced by $1.083 billion. In order to not adversely impact
cash received by school districts, however, a short-term loan was
appropriated from the non-Proposition 98 State General Fund. The
Legislature then appropriated $16.6 billion to K-14 schools for 1992-93
(the minimum guaranteed by Proposition 98), but designated $1.083 billion
of this amount to "repay" the prior year loan, thereby reducing cash
outlays in 1992-93 by that amount. In addition to reducing the 1991-92
fiscal year appropriations for K-14 schools by $1.083 billion and
converting the amount to a loan (the "inter-year adjustment"), Chapter 703,
Statutes of 1992 also made an adjustment to "Test 1," based on the
additional $1.2 billion of local property taxes that were shifted to
schools and community colleges. The "Test 1" percentage changed from 40%
to 37%. Additionally, Chapter 703 contained a provision that if an
appellate court should determine that the "Test 1" recalculation or the
inter-year adjustment is unconstitutional, unenforceable or invalid,
Proposition 98 would be suspended for the 1992-93 fiscal year, with the
result that K-14 schools would receive the amount intended by the 1992-93
Budget Act compromise.
The State Controller stated in October 1992 that, because of a drafting
error in Chapter 703, he could not implement the $1.083 billion reduction
of the 1991-92 school funding appropriation, which was part of the inter-
year adjustment. The Legislature untimely enacted corrective legislation
as part of the 1993-94 Budget package to implement the $1.083 billion
inter-year adjustment as originally intended.
In the 1992-93 Budget Act, a new loan of $732 million was made to K-12
schools in order to maintain per-average daily attendance ("ADA") funding
at the same level as 1991-92, at $4,187. An additional loan of $241
million was made to community college districts. These loans are to be
repaid from future Proposition 98 entitlements. (The teachers'
organization lawsuit discussed above also seeks to declare invalid the
provision making the $732 million a loan "repayable" from the future years'
Proposition 98 funds). Including both State and local funds, and adjusting
for the loans and repayments, on a cash basis, total Proposition 98 K-12
funding in 1992-93 increased to $21.5 billion, 2.4% more than the amount in
1992-93 ($21.0 billion).
Based on revised State tax revenues and estimated decreased reported
pupil enrollment, the 1993-94 Budget Act projected that the 1992-93
Proposition 98 Budget Act appropriations of $16.6 billion exceeded a
revised minimum guarantee by $313 million. As a result, the 1993-94 Budget
Act reverted $25 million in 1992-93 appropriations to the General Fund.
Limiting the reversion to this amount ensures that per ADA funding for
general purposes will remain at the prior year level of $4,217 per pupil.
The 1993-94 Governor's Budget subsequently proposed deficiency funding of
$121 million for school apportionments and special education, increasing
funding per pupil in 1992-93 to $4,244. The 1993-94 Budget Act also
designated $98 million in 1992-93 appropriations toward satisfying prior
years' guarantee levels, an obligation that resulted primarily from
updating State tax revenues for 1991-92, and designates $190 million as a
loan repayable from 1993-94 funding.
The 1993-94 Budget Act projected the Proposition 98 minimum funding
level at $13.5 billion based on the "Test 3" calculation where the
guarantee is determined by the change in per capita growth in General Fund
revenues, which are projected to decrease on a year-over-year basis. This
amount also takes into account increased property taxes transferred to
school districts from other local governments.
Legislation accompanying the 1993-94 Budget Act (Chapter 66/93) provided
a new loan of $609 million to K-12 schools in order to maintain per ADA
funding at $4,217 and a loan of $178 million to community colleges. These
loans have been combined with the K-14 1992-93 loans into one loan
totalling $1.760 billion. Repayment of this loan would be from future
years' Proposition 98 entitlements, and would be conditioned on maintaining
current funding levels per pupil for K-12 schools and community colleges.
Chapter 66 also adjusted the "Test 1" percentage to 35% to reflect the
property tax shift among local government agencies.
The 1994-95 Budget Act appropriated $14.4 billion of Proposition 98
funds for K14 schools based on Test 2. This exceeds the minimum
Proposition 98 guarantee by $8 million to maintain K-12 funding per pupil
at $4,217. Based upon updated State revenues, growth rates and inflation
factors, the 1994-95 Budget Act appropriated an additional $286 million
within Proposition 98 for the 1993-94 fiscal year, to reflect a need in
appropriations for school districts and county offices of education, as
well as an anticipated deficiency in special education fundings. These and
other minor appropriation adjustments increase the 1993-94 Proposition 98
guarantee to $13.8 billion, which exceeds the minimum guarantee in that
year by $272 million and provides per pupil funding of $4,225.
The 1995-96 Governor's Budget adjusts the 1993-94 minimum guarantee to
reflect changes in enrollment and inflation, and 1993-94 Proposition 98
appropriations are increased to $14.1 billion, primarily to reflect changes
in the statutory continuous appropriation for apportionments. The revised
appropriations now exceed the minimum guarantee by $32 million. This
appropriation level still provides per-pupil funding of $4,225.
The 1994-95 Proposition 98 minimum guarantee has also been adjusted for
changes in factors described above, and is now calculated to be $14.9
billion. Within the minimum guarantee, the dollars per pupil have been
maintained at the prior year's level; consequently, the 1994-95 minimum
guarantee now includes a loan repayment of $135 million, and the per-pupil
funding increases to $4,231.
The 1995-96 Governor's Budget proposes to appropriate $15.9 billion of
Proposition 98 funds to K-14 to meet the guarantee level. Included within
the guarantee is a loan repayment of $379 million for the combined
outstanding loans of $1.76 billion. Funding per pupil is estimated to
increase by $61 over 1994-95 to $4,292.
Sources of Tax Revenue. The California personal income tax, which in
1993-94 contributed about 44% of General Fund revenues, is closely modeled
after the Federal income tax law. It is imposed on net taxable income
(gross income less exclusions and deductions). The tax is progressive with
rates ranging from 1% to 11%. Personal, dependent, and other credits are
allowed against the gross tax liability. In addition, taxpayers may be
subject to an alternative minimum tax ("AMT") which is much like the
Federal AMT. This is designed to ensure that excessive use of tax
preferences does not reduce taxpayers' liabilities below some minimum
level. Legislation enacted in July 1991 added two new marginal tax rates,
at 10% and 11%, effective for tax years 1991 through 1995. After 1995, the
maximum personal income tax rate is scheduled to return to 9.3%, and the
AMT rate is scheduled to drop from 8.5% to 7%.
The personal income tax is adjusted annually by the change in the
consumer price index to prevent taxpayers from being pushed into higher tax
brackets without a real increase in income.
The sales tax is imposed upon retailers for the privilege of selling
tangible personal property in California. Most retail sales and leases are
subject to the tax. However, exemptions have been provided for certain
essentials such as food for home consumption, prescription drugs, gas,
electricity and water. Sales tax accounted for about 35% of General Fund
revenue in 1993-94. Bank and corporation tax revenues comprised about 12%
of General Fund revenue in 1993-94. In 1989, Proposition 99 added a 25
cents per pack excise tax on cigarettes, and a new equivalent excise tax on
other tobacco products. Legislation enacted in 1993 added an additional 2
cents per pack for the purpose of funding breast cancer research.
General Financial Condition of the State. In the years following
enactment of the federal Tax Reform Act of 1986, and conforming changes to
the State's tax laws, taxpayer behavior became must more difficult to
predict, and the State experienced a series of fiscal years in which
revenue came in significantly higher or lower than original estimates. The
1989-90 fiscal year ended with revenues below estimates, so that the
State's budget reserve (the Special Fund for Economic Uncertainties or
"SFEU") was fully depleted by June 30, 1990. This date essentially
coincided with the state of the current recession, and the State has
subsequently accumulated a budget deficit in the SFEU approaching 2.8
billion at its peak. The State's budget problems in recent years have also
been caused by a structural imbalance which has been identified by the
current and previous Administrations. The largest General Fund Programs --
K-14 education, health, welfare and corrections -- were increasing faster
than the revenue base, driven by the State's rapid population increases.
Starting in the 1990-91 fiscal year, each budget required multibillion
dollar actions to bring projected revenues and expenditures into balance
and to close large "budget gaps" which were identified. The Legislature
and Governor eventually agreed on significant cuts in program expenditures,
some transfers of program responsibilities and funding from the State to
local governments, revenue increases (particularly in the 1991-92 fiscal
year budget), and various one-time adjustments and accounting changes.
However, as the recession took hold and deepened after the summer of 1990,
revenues dropped sharply and expenditures for health and welfare programs
increased as job losses mounted, so that the State ended each of the 1990-
91 and 1991-92 fiscal years with an unanticipated deficit in the budget
reserve, the SFEU, as compared to projected positive balances.
As a result of the revenue shortfalls accumulating for the previous two
fiscal years, the Controller in April 1992 indicated that cash resources
(including borrowing from Special Funds) would not be sufficient to meet
all General Fund obligations due on June 30 and July 1, 1992. On June 25,
1992, the Controller issued $475 million of 1992 Revenue Anticipation
Warrants (the "1992 Warrants") in order to provide funds to cover all
necessary payments from the General Fund at the end of the 1991-92 fiscal
year and on July 1, 1992. The 1992 Warrants were paid on July 24, 1992. In
addition to the 1992 Warrants the Controller reported that as of June 30,
1992, the General Fund had borrowed $1.336 billion from the SFEU and $4.699
billion from other Special Funds, using all but about $183 million of
borrowable cash resources.
To balance the 1992-93 Governor's Budget, program reductions totalling
$4.365 billion and a revenue and transfer increase of $872 million were
proposed for the 1991-92 and 1992-93 fiscal years. Economic performance in
the State continued to be sluggish after the 1992-93 Governor's Budget was
prepared. By the time of the "May Revision", issued on May 20, 1992, the
Administration estimated that the 1992-93 Budget needed to address a gap of
about $7.9 billion, much of which was needed to repay the accumulated
budget deficits of the previous two years.
The severity of the budget actions needed led to a long delay in
adopting the budget. With the failure to enact a budget by July 1, 1992,
the State had no legal authority to pay many of its vendors until the
budget was passed. Starting on July 1, 1992, the Controller was required
to issue "registered warrants" in lieu of normal warrants backed by cash to
pay many State obligations. Available cash was used to pay
constitutionally mandated and priority obligations, such as debt service on
bonds and revenue anticipation warrants. Between July 1 and September 4,
1992, the Controller issued an aggregate of approximately $3.8 billion of
registered warrants payable from the General Fund, all of which were called
for redemption by September 4, 1992 following enactment of the 1992-93
Budget Act and issuance by the State of $3.3 billion of interim notes.
The Legislature enacted the 1992-93 Budget Bill on August 29, 1992, and
it was signed by the Governor on September 2, 1992. The 1992-93 Budget Act
provides for expenditures of $57.4 billion and consists of General Fund
expenditures of $40.8 billion and Special Fund and Bond Fund expenditures
of $16.6 billion. The Department of Finance estimates there will be a
balance in the SFEU of $28 million on June 30, 1993.
The $7.9 billion budget gap was closed primarily through cuts in the
program expenditures (principally for health and welfare programs, aid to
schools and support for higher education), together with some increases in
revenues from accelerated collections and changes in tax laws to confirm to
federal law changes, and a variety of on-time inter-fund transfers and
deferrals. The other major component of the budget compromise was a law
requiring local governments to transfer a total of $1.3 billion to K-12
school and community college districts, thereby reducing by that amount
General Fund support for those districts under Proposition 98.
In May 1993, the Department of Finance projected that the General Fund
would end the fiscal year on June 30, 1993 with an accumulated budget
deficit of about $2.8 billion, and a negative fund balance of about $2.2
billion (the difference being certain reserves for encumbrances and school
funding costs). As a result, the State issued $5 billion of revenue
anticipation notes and warrants.
The Governor's 1993-94 Budget, introduced on January 8, 1993, proposed
General Fund expenditures of $37.3 billion, with projected revenues of
$39.9 billion. It also proposed Special Fund expenditures of $12.4 billion
and Special Fund revenues of $12.1 billion. The 1993-94 fiscal year
represents the third consecutive year the Governor and the Legislature were
faced with a very difficult budget environment, requiring revenue actions
and expenditure cuts totaling billions of dollars to produce a balanced
budget. To balance the budget in the face of declining revenues, the
Governor proposed a series of revenue shifts from local government,
reliance on increased Federal aid and reductions in state spending.
The "May Revision" of the Governor's Budget, released on May 20, 1993,
indicated that the revenue projections of the January Budget Proposal were
tracking well, with the full year 1992-93 about $80 million higher than the
January projection. Personal income tax revenue was higher than projected,
sales tax was close to target, and bank and corporation taxes were lagging
behind projections. The May Revision projected the State would have an
accumulated deficit of about $2.75 billion by June 30, 1993. The Governor
proposed to eliminate this deficit over an 18-month period. He also agreed
to retain the 0.5% sales tax scheduled to expire June 30 for a six-month
period, dedicated to local public safety purposes, with a November election
to determine a permanent extension. Unlike previous years, the Governor's
Budget and May Revision did not calculate a "gap" to be closed, but rather
set forth revenue and expenditure forecasts and proposals designed to
produce a balanced budget.
The 1993-94 Budget Act was signed by the Governor on June 30, 1993,
along with implementing legislation. The Governor vetoed about $71 million
in spending. With enactment of the Budget Act, the State carried out its
regular cash flow borrowing program for the fiscal year, which included the
issuance of approximately $2 billion of revenue anticipation notes that
matured on June 28, 1994.
The 1993-94 Budget Act was predicated on General Fund revenues and
transfers estimated at $40.6 billion, about $700 million higher than the
January Governor's Budget, but still about $400 million below 1992-93 (and
the second consecutive year of actual decline). The principal reasons for
declining revenues were the continued weak economy and the expiration (or
repeal) of three fiscal steps taken in 1991 -- a half cent temporary sales
tax, a deferral of operating loss carry forwards, and repeal by initiative
of a sales tax on candy and snack foods.
The 1993-94 Budget Act also assumed Special Fund revenues of $11.9
billion, an increase of 2.9% over 1992-93.
The 1993-94 Budget Act included General Fund expenditures of $38.5
billion (a 6.3% reduction from projected 1992-93 expenditures of $41.1
billion), in order to keep a balanced budget within the available revenues.
The Budget also included Special Fund expenditures of $12.1 billion, a 4.2%
increase.
The 1993-94 Budget Act contained no General Fund tax/revenue increases
other than a two year suspension of the renters' tax credit.
Administration reports during the course of the 1993-94 fiscal year
indicated that while economic recovery appeared to have started in the
second half of the fiscal year, recessionary conditions continued longer
than had been anticipated when the 1993-94 Budget Act was adopted.
Overall, revenues for the 1993-94 fiscal year were about $800 million lower
than original projections, and expenditures were about $780 million higher,
primarily because of higher health and welfare caseloads, lower property
taxes which require greater State support for K-14 education to make up to
shortfall, and lower than anticipated Federal government payments for
immigration-related costs. The reports in May and June 1994, indicated that
revenues in the second half of the 1993-94 fiscal year have been very close
to the projections made in the Governor's Budget of January 10, 1994, which
is consistent with a slow turn around in the economy.
The Department of Finance's July 1994 Bulletin, which included final
June receipts, reported that June revenues were $114 million (2.5%) above
projection, with final end-of-year results at $377 million (about 1%) above
the May Revision projections. Part of this result was due to the end-of-
year adjustments and reconciliations. Personal income tax and sales tax
continued to track projections. The largest factor in the higher than
anticipated revenues was from bank and corporation taxes, which were $140
million (18.4%) above projection in June.
During the 1993-94 fiscal year, the State implemented the Deficit
Retirement Plan, which was part of the 1993-94 Budget Act, by issuing $1.2
billion of revenue anticipation warrants in February 1994 that matured
December 21, 1994. This borrowing reduced the cash deficit at the end of
the 1993-94 fiscal year. Nevertheless, because of the $1.5 billion
variance from the original 1993-94 Budget Act assumptions, the General Fund
ended the fiscal year at June 30, 1994 carrying forward an accumulated
deficit of approximately $1.8 billion.
Because of the revenue shortfall and the State's reduced internal
borrowable cash resources, in addition to the $1.2 billion of revenue
anticipation warrants issued as part of the Deficit Retirement Plan, the
State issued an additional $2.0 billion of revenue anticipation warrants
that matured July 26, 1994, which were needed to fund the State's
obligations and expenses through the end of the 1993-94 fiscal year.
The 1994-95 fiscal year represented the fourth consecutive year the
Governor and Legislature were faced with a very difficult budget
environment to produce a balanced budget. Many program cost and budgetary
adjustments have already been made in the last three years. The Governor's
Budget Proposal, as updated in May and June 1994, recognized that the
accumulated deficit could not be repaid in one year, and proposed a two-
year solution. The budget proposal set forth revenue and expenditure
forecasts and revenue and expenditure proposals which estimated operating
surpluses for the budget for both 1994-95 and 1995-96, and lead to the
elimination of the accumulated budget deficit, estimated at about $1.8
billion at June 30, 1994, by June 30, 1996.
The 1994-95 Budget Act, signed by the Governor on July 8, 1994,
projected revenues and transfers of $41.9 billion, $2.1 billion higher than
revenues in 1993-94. This reflected the Administration's forecast of an
improving economy. Also included in this figure was the projected receipt
of about $360 million from the Federal government to reimburse the State's
cost of incarcerating undocumented immigrants, most of which eventually was
not received.
The 1994-95 Budget Act projected Special Fund revenues of $12.1 billion,
a decrease of 2.4% from 1993-94 estimated revenues.
The 1994-95 Budget Act projected General Fund expenditures of $40.9
billion, an increase of $1.6 billion over the 1993-94 fiscal year. The
1994-95 Budget Act also projected Special Fund expenditures of $13.7
billion, a 5.4% increase over 1993-94 fiscal year estimated expenditures.
The 1994-95 Budget Act contained no tax increases. Under legislation
enacted for the 1993-94 Budget Act, the renters' tax credit was suspended
for two years (1993 and 1994). A ballot proposition to permanently restore
the renters' tax credit after this year failed at the June 1994 election.
The Legislature enacted a further one-year suspension of the renters' tax
credit, for 1995, saving about $390 million in the 1995-96 fiscal year.
The 1994-95 Budget Act assumed that the State would use a cash flow
borrowing program in 1994-95 which combines one-year notes and two-year
warrants, which have now been issued. Issuance of the warrants allows the
State to defer repayment of approximately $1.0 billion of its accumulated
budget deficit into the 1995-96 fiscal year. The Budget Adjustment Law
enacted along with the 1994-95 Budget Act is designed to ensure that the
warrants will be repaid in the 1995-96 fiscal year.
The Department of Finance Bulletin for April 1995 reported that General
Fund revenues for March 1995 were $28 million, or 1.1 percent, below
forecast, and that year-to-date General Fund revenues were $110 million, or
0.4 percent, below forecast.
Initial analysis of the Federal fiscal year 1995 budget by the
Department of finance indicates that about $98 million was appropriated for
California to offset costs of incarceration of undocumented and refugee
immigrants, less than the $356 million which was assumed in the State's
1994-95 Budget Act.
For the first time in four years, the state enters the upcoming 1995-95
fiscal year with strengthening revenues based on an improving economy. On
January 10, 1995, the Governor presented his 1995-96 Fiscal Year Budget
Proposal (the "Proposed Budget"). The Proposed Budget estimates General
Fund revenues and transfers of $42.5 billion (an increase of 0.2% over
1994-95). This nominal increase from 1994-95 fiscal year reflects the
Governor's realignment proposal and the first year of his tax cut proposal.
Without these two proposals, General Fund revenues would be projected at
approximately $43.8 billion, or an increase of 3.3% over 1994-95.
Expenditures are estimated at $41.7 billion (essentially unchanged from
1994-95). Special Fund revenues are estimated at $13.5 billion (10.7%
higher than 1994-95) and Special Fund expenditures are estimated at $13.8
billion (12.2% higher than 1994-95). The Proposed Budget projects that the
General Fund will end the fiscal year at June 30, 1996 with a budget
surplus in SFEU of about $92 million, or less than 1% of General Fund
expenditures, and will have repaid all of the accumulated budget deficits.
Recent Economic Trends. Revised employment data indicate that
California's recession ended in 1993, and following a period of stability,
a solid recovery is now underway. The State's unemployment rate fell
sharply last year, from 10.1% in January to 7.7% in October and November.
The gap between the national and California jobless rates narrowed from 3.4
percentage points at the beginning of 1994 to an average of 2 percentage
points in October and November. The number of unemployed Californians fell
by nearly 400,000 during the year, while civilian employment increased more
than 300,000.
Other indicators, including retail sales, homebuilding activity,
existing home sales and bank lending volume all confirm the State's
recovery.
Personal income was severely affected by the Northridge Earthquake,
which reduced the first quarter 1994 figure by $22 billion at an annual
rate, reflecting the uninsured damage to residences and unincorporated
businesses. As a result, personal income growth for all of 1994 was about
4.2%. However, excluding the Northridge effects, growth would have been in
excess of 5%. Personal income is expected to grow 6.6% for 1995.
APPENDIX B
Description of S&P, Moody's & 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, C
Debt rated BB, B, CCC, CC or C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and
repay principal. BB indicates the least degree of speculation and C 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 interest and repayment of principal. In the event
of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal.
CC
The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C
The rating C is typically 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.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by
the addition of a plus or minus designation to show relative standing
within the major ratings categories.
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.
SP-3
The issuers of these municipal notes exhibit speculative capacity to pay
principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than
365 days. Issues assigned an A rating 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.
A-1
This designation 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.
A-2
Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues
designated A-1.
A-3
Issues carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.
Moody's
Municipal Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment some time in
the future.
Baa
Bonds which are rated Baa are considered as medium- grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca
Bonds which are rated Ca present obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and
in categories below B. The modifier 1 indicates a ranking for the security
in the higher end of a rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates a ranking in the lower end
of a 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
differences 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 VMIG 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 VMIG 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 VMIG 1 through MIG 4 or VMIG 4. As the name implies, when Moody's
assigns a MIG or VMIG rating, all categories define an investment grade
situation.
MIG 1/VMIG 1
This designation 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/VMIG 2
This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
MIG 3/VMIG 3
This designation denotes favorable quality. All security elements are
accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access
for refinancing is likely to be less well established.
MIG 4/VMIG 4
This designation denotes adequate quality. Protection commonly regarded
as required of an investment security is present and, although not
distinctly or predominantly speculative, there is specific risk.
Commercial Paper Ratings
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.
Issuers (or related supporting institutions) rated Prime-3 (P-3) have an
acceptable capacity for repayment of short-term promissory obligations.
The effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and the requirements
for relatively high financial leverage. Adequate 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 the 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 an
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.
<TABLE>
<CAPTION>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN Premier California
Municipal Bond Fund, Class A Shares AND THE lehman brothers municipal bond
index
*Source: Lehman Brothers
Exhibit A
AVERAGE ANNUAL TOTAL RETURNS
CLASS A CLASS B
- ------------------------------------------------------------ -----------------------------------------------------------
% Return Reflecting
% Return Applicable Contingent
Reflecting % Return Deferred Sales
% Return Without Maximum Initial Assuming No Charge Upon
PERIODS ENDED 1/31/95 Sales Charge Sales Charge (4.5%) PERIODS ENDED 1/31/95 Redemption Redemption*
- -------------------- ------------ -------------- ------------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
1 Year (4.34%) (8.63%) 1 Year (4.77%) (7.46%)
5 Years 7.52 6.53 From Inception (1/15/93) 4.22 3.31
From Inception (11/10/86) 7.06 6.46
</TABLE>
Past performance is not predictive of future performance. Share price and
investment return fluctuate and share price may be more or less than original
cost upon redemption.
The above graph compares a $10,000 investment made in Class A shares of
Premier California Municipal Bond Fund on 11/10/86 (Inception Date) to a
$10,000 investment made in the Lehman Brothers Municipal Bond Index on that
date. For comparative purposes the value of the Index on 10/31/86 is used as
the beginning value on 11/10/86. All dividends and capital gain distributions
are reinvested. Performance for Class B shares will vary from the results
shown above due to the difference in charges and expenses charged to that
class.
The Fund invests primarily in California municipal securities and its
performance takes into account the maximum initial sales charge on Class A
shares and all other applicable fees and expenses. Unlike the Fund, the
Lehman Brothers Municipal Bond Index is an unmanaged total return performance
benchmark for the long-term, investment grade municipal bond market,
calculated by using municipal bonds selected to be representative of the
market. The Index does not take into account charges, fees and other expenses.
Further information relating to Fund performance, including expense
reimbursements, if applicable, is contained in the Condensed Financial
Information section of the Prospectus and elsewhere in this report.
* Maximum contingent deferred sales charge for Class B shares is 3% and is
reduced to 0% after five years.
<TABLE>
<CAPTION>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS JANUARY 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS--99.0% AMOUNT VALUE
-------------- --------------
<S> <C> <C>
CALIFORNIA--93.8%
Alameda, Special Tax (Community Facilities District Number 1) 7.75%, 9/1/2019 $ 2,000,000 $ 2,028,500
Anaheim Public Financing Authority, Tax Allocation Revenue
(Redevelopment Project Alpha) 6.31%, 12/28/2018 (Insured; MBIA)......... 4,000,000 4,003,600
Antelope Valley Hospital District, Insured COP 7.30%, 1/1/2006.............. 2,400,000 2,492,256
Bakersfield, COP (Wastewater Treatment Plant 3 Project)
8%, 1/1/2010 (Prerefunded 1/1/1998) (a)................................. 250,000 270,570
California:
6.90%, 4/1/2005......................................................... 2,000,000 2,149,480
6.125%, 10/1/2011....................................................... 2,875,000 2,864,305
California Department of Water Resources, Revenue (Central Valley Project)
6.385%, 12/1/2026 (b)................................................... 7,800,000 7,613,346
California Educational Facilities Authority, Revenue:
(Refunding - Saint Mary's College) 5%, 10/1/2012........................ 4,000,000 3,297,880
(Santa Clara University) 6.25%, 2/1/201................................. 3,500,000 3,361,855
California Health Facilities Financing Authority, Revenue:
(Eskaton Properties) 7.50%, 5/1/2020 (Insured; California Health
Facilities
Construction Insurance) (Prerefunded 5/1/2000) (a).................... 4,000,000 4,444,400
(Health Dimensions) 7%, 5/1/2020........................................ 6,000,000 5,772,780
(Kaiser Permanente) 5.60%, 5/1/2033.................................... 3,000,000 2,476,620
(Saint Francis Memorial Hospital) 5.875%, 11/1/2023..................... 4,500,000 3,842,010
California Housing Finance Agency, Home Mortgage Revenue:
Zero Coupon, 8/1/2023................................................... 6,570,000 728,810
7.50%, 8/1/2029......................................................... 1,135,000 1,167,200
8%, 8/1/2029............................................................ 525,000 552,043
7.60%, 8/1/2030......................................................... 1,605,000 1,670,869
7.70%, 8/1/2030......................................................... 1,200,000 1,253,268
California Pollution Control Financing Authority:
RRR (Waste Management, Inc.) 7.15%, 2/1/2011............................ 2,000,000 2,066,900
SWDR (North County Recycling Center)
6.75%, 7/1/2011 (LOC; Union Bank of Switzerland) (c).................. 2,500,000 2,529,275
California Public Works Board, LR:
(Department of Corrections - Madera State Prison) 6%, 6/1/2010.......... 3,000,000 2,912,010
(Department of Corrections - Susanville State Prison)
5.375%, 6/1/2018 (Insured; MBIA)...................................... 6,500,000 5,641,220
(Secretary of State) 6.75%, 12/1/2012................................... 2,375,000 2,400,175
(University of California Projects):
5.55%, 6/1/2010....................................................... 4,000,000 3,623,400
5.50%, 6/1/2019....................................................... 3,000,000 2,548,260
California Statewide Communities Development Authority, COP, Revenue,
Refunding:
(Pacific Homes) 5.90%, 4/1/2009......................................... 4,340,000 4,206,068
(Triad Healthcare) 6.25%, 8/1/2006...................................... 2,000,000 1,944,200
Central Valley Financing Authority, Cogeneration Project Revenue
(Carson Ice - General Project) 6%, 7/1/2009............................. 4,500,000 4,207,410
Compton, COP, Refunding 7.50%, 8/1/2015 (LOC; Mitsui Trust and Banking) (c). 2,000,000 2,044,740
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) JANUARY 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------- --------------
CALIFORNIA (CONTINUED)
Contra Costa County, Home Mortgage Revenue
8.25%, 6/1/2021 (Collateralized; GNMA )................................. $ 350,000 $ 429,782
Fontana Redevelopment Agency, Tax Allocation Revenue
(North Fontana Redevelopment Project) 7.25%, 9/1/2020................... 4,250,000 4,336,317
Glendora Public Finance Authority, Tax Allocation Revenue
7.625%, 9/1/2010 (Prerefunded 9/1/1999) (a)............................. 1,815,000 2,004,559
Lake Elsinore Public Financing Authority, Local Agency Revenue:
7.50%, 10/1/2010........................................................ 3,000,000 3,054,900
8%, 10/1/2020........................................................... 1,640,000 1,694,464
Los Angeles Convention and Exhibition Center Authority, COP, Revenue,
Refunding
7.375%, 8/15/2018 (Prerefunded 8/15/1999) (a)........................... 700,000 765,583
Los Angeles County Building Authority, Revenue, Refunding:
5.60%, 5/1/2008......................................................... 4,445,000 4,163,943
5.625%, 5/1/2011........................................................ 5,250,000 4,777,867
Los Angeles Department of Water and Power, Electric Plant Revenue:
4.75%, 11/15/2019....................................................... 5,000,000 3,883,250
5.30%, 2/15/2021........................................................ 2,000,000 1,685,140
5.375%, 9/1/2023........................................................ 5,000,000 4,227,900
Los Angeles Harbor Department, Revenue 7.60%, 10/1/2018..................... 750,000 839,092
Los Banos, COP 7.65%, 9/1/2019 (Prerefunded 9/1/1999) (a)................... 500,000 552,725
Mount Shasta, HR, COP (Mercy Medical Center)
7.25%, 7/1/2019 (Prerefunded 7/1/1999) (a).............................. 1,885,000 2,050,861
Mountain View Shoreline Regional Park Community 5.75%, 8/1/2018............. 4,605,000 3,853,510
Nevada County, COP (Western Nevada Co.- Solid Waste) 7.50%, 6/1/2021........ 2,200,000 2,100,384
Northern California Power Agency, Public Power Revenue:
6.30%, 7/1/2018 (b)..................................................... 6,000,000 5,948,820
(Refunding - Geothermal Project No. 3):
7%, 7/1/2007.......................................................... 1,000,000 1,023,960
5.85%, 7/1/2010....................................................... 4,000,000 3,690,400
(Refunding - Hydroelectric Project No. 1) 7.15%, 7/1/2024............... 4,445,000 4,518,476
Oakdale Public Finance Authority, Revenue (Center City Redevelopment Project)
7.90%, 7/1/2019......................................................... 1,750,000 1,807,120
Orange County, Special Tax (Community Facilities District No. 87):
7.75%, 8/15/2014........................................................ 2,375,000 2,208,750
7.80%, 8/15/2015 (Prerefunded 8/15/2000) (a)............................ 2,000,000 2,259,440
Orange Cove, Irrigation District Revenue, COP (Rehabilitation Project)
7.25%, 2/1/2012......................................................... 3,000,000 3,032,550
Richmond Joint Powers Financing Authority, Revenue 7.25%, 5/15/2013......... 1,500,000 1,536,330
Riverside County, SFMR 7.80%, 5/1/2021 (Collateralized; GNMA)............... 1,250,000 1,465,563
Roseville, Special Tax (Community Facilities District No. 1) 7.70%, 9/1/2020 2,000,000 2,028,660
Sacramento County, Special Tax (Community Facilities District No. 1):
8.20%, 12/1/2010........................................................ 2,250,000 2,386,710
8.25%, 12/1/2020........................................................ 2,000,000 2,098,160
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF INVESTMENTS (CONTINUED) JANUARY 31, 1995
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
-------------- --------------
CALIFORNIA (CONTINUED)
Sacramento Schools Insurance Authority, Revenue (Workers Compensation
Program)
5.75%, 6/1/2003......................................................... $ 3,955,000 $ 3,944,282
San Diego, IDR (San Diego Electric and Gas)
5.90%, 6/1/2018......................................................... 5,000,000 4,665,000
San Diego County Water Authority, Water Revenue, COP 5.607%, 4/23/2008...... 4,000,000 3,820,760
San Francisco City and County Public Utilities Commission, Water Revenue,
Refunding
6%, 11/1/2015........................................................... 2,000,000 1,933,060
San Jose Financing Authority, Revenue, Refunding (Convention Center Project)
6.40%, 9/1/2022......................................................... 4,000,000 3,874,040
San Marcos Public Facilities Authority, Revenue, Refunding
(Public Improvement - Civic Center) 6.15%, 8/1/2013..................... 2,320,000 2,081,782
Santa Monica, Wastewater Enterprise Revenue 4.75%, 1/1/2010 (Insured; AMBAC) 2,895,000 2,446,275
Sequoia Hospital District, Revenue, Refunding:
7.50%, 9/1/2008 (Prerefunded 9/1/1998) (a).............................. 795,000 865,890
7.60, 9/1/2014 (Prerefunded 9/1/1998) (a)............................... 750,000 819,038
Simi Valley, Single Family Residential Mortgage Revenue 7.625%, 8/1/2022 (d) 2,000,000 1,000,000
University of California, COP (UCLA Central Chiller/Cogeneration)
7%, 11/1/2018 (Prerefunded 11/1/1999) (a)............................... 3,340,000 3,615,684
Upland, HR, COP (San Antonio Community Hospital) 7.125%, 1/1/2011........... 1,000,000 1,021,860
Vista, MFHR (Vista Hacienda Project) 6.95%, 4/1/2017........................ 3,000,000 3,052,410
Waterford Public Financing Authority, Revenue 8.20%, 9/15/2020.............. 3,505,000 3,597,918
U.S. RELATED--5.2%
Puerto Rico Electric Power Authority, Power Revenue, Refunding:
7.125%, 7/1/1999........................................................ 3,500,000 3,809,050
7.125%, 7/1/2014........................................................ 2,000,000 2,072,900
Virgin Islands Territory (Hugo Insurance Claims Fund Program) 7.75%, 10/1/2006. 1,770,000 1,869,014
Virgin Islands Water and Power Authority, Electric Systems Revenue 7.40%, 7/1/2011 3,000,000 3,080,820
--------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $206,689,074)................... $206,108,449
============
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM MUNICIPAL INVESTMENTS--1.0%
California Pollution Control Financing Authority, SWDR, VRDN
<S> <C> <C>
3.30%, (cost $2,000,000) (e)............................................ $ 2,000,000 $ 2,000,000
------------
TOTAL INVESTMENTS--100.0% (cost $208,689,074)............................... $208,108,449
============
</TABLE>
<TABLE>
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
COP Certificate of Participation MFHR Multi - Family Housing Revenue
GNMA Government National Mortgage Association RRR Resources Recovery Revenue
HR Hospital Revenue SFMR Single Family Mortgage Revenue
IDR Industrial Development Revenue SWDR Solid Waste Disposal Revenue
LOC Letter of Credit VRDN Variable Rate Demand Note
LR Lease Revenue
</TABLE>
<TABLE>
<CAPTION>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (F) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
- --------- --------- -------------------- -----------------------
<S> <C> <C> <C>
AAA Aaa AAA 18.9%
AA Aa AA 18.2
A A A 36.4
BBB Baa BBB 10.7
D D D .5
F1+ & F1 MIG1,VMIG1 & P1 SP1 & A1 1.0
Not Rated (g) Not Rated (g) Not Rated (g) 14.3
-------
100.0%
======
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
Securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At January 31,
1995, these securities amounted to $13,562,166 or 6.4% of net assets.
(c) Secured by letters of credit.
(d) Non-income producing security; interest payments in default.
(e) Security payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates of an index of market interest
rates.
(f) Fitch currently provides creditworthiness information for a limited
number of investments.
(g) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Fund's Manager to be of comparable
quality to those rated securities in which the Fund may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES JANUARY 31, 1995
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $208,689,074)--see statement.................................... $208,108,449
Cash.................................................................... 238,093
Receivable for investment securities sold............................... 12,841,148
Interest receivable..................................................... 3,625,638
Receivable for shares of Beneficial Interest subscribed................. 75,515
Prepaid expenses........................................................ 10,244
--------------
224,899,087
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $ 97,428
Due to Distributor...................................................... 52,264
Payable for investment securities purchased............................. 13,496,145
Payable for shares of Beneficial Interest redeemed...................... 261,212
Accrued expenses........................................................ 72,348 13,979,397
---------- ------------
NET ASSETS ................................................................ $210,919,690
============
REPRESENTED BY:
Paid-in capital......................................................... $210,682,786
Accumulated undistributed net realized gain on investments.............. 817,529
Accumulated net unrealized (depreciation) on investments-Note 3(b)...... (580,625)
--------------
NET ASSETS at value......................................................... $210,919,690
============
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 15,678,009
============
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 1,549,730
============
NET ASSET VALUE per share:
Class A Shares
($191,939,038 / 15,678,009 shares).................................... $12.24
=======
Class B Shares
($18,980,652 / 1,549,730 shares)...................................... $12.25
=======
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS YEAR ENDED JANUARY 31, 1995
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $ 15,224,028
EXPENSES:
Management fee--Note 2(a)............................................. $ 1,264,646
Shareholder servicing costs-Note 2(c)................................. 711,937
Distribution fees (Class B Shares)-Note 2(b).......................... 95,246
Professional fees..................................................... 41,348
Prospectus and shareholders' reports.................................. 24,345
Custodian fees........................................................ 24,113
Trustees' fees and expenses-Note 2(d)................................. 20,846
Registration fees..................................................... 10,658
Miscellaneous......................................................... 30,358
-----------
2,223,497
Less-reduction in management fee due to
undertakings-Note 2(a)............................................ 51,429
--------------
TOTAL EXPENSES.................................................. 2,172,068
--------------
INVESTMENT INCOME--NET.......................................... 13,051,960
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized gain on investments--Note 3(a)............................. $ 1,747,587
Net realized gain on financial futures-Note 3(a)........................ 11,431
--------------
NET REALIZED GAIN................................................. 1,759,018
Net unrealized (depreciation) on investments............................ (27,102,766)
--------------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS............... (25,343,748)
--------------
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...................... $(12,291,788)
=============
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
PREMIER CALIFORNIA MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED JANUARY 31,
--------------------------------
1994 1995
-------------- --------------
<S> <C> <C>
OPERATIONS:
Investment income--net.................................................. $ 14,116,597 $ 13,051,960
Net realized gain on investments........................................ 1,865,591 1,759,018
Net unrealized appreciation (depreciation) on investments for the year.. 15,121,644 (27,102,766)
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS... 31,103,832 (12,291,788)
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net:
Class A shares........................................................ (13,671,122) (12,067,054)
Class B shares........................................................ (445,475) (984,906)
Net realized gain on investments:
Class A shares........................................................ (1,751,692) (1,316,480)
Class B shares........................................................ (106,093) (128,731)
-------------- --------------
TOTAL DIVIDENDS................................................... (15,974,382) (14,497,171)
-------------- --------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 26,262,438 12,980,330
Class B shares........................................................ 17,148,970 6,515,990
Dividends reinvested:
Class A shares........................................................ 7,074,547 6,079,502
Class B shares........................................................ 366,127 709,931
Cost of shares redeemed:
Class A shares........................................................ (27,275,575) (47,805,009)
Class B shares........................................................ (1,244,937) (3,113,197)
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS................................ 22,331,570 (24,632,453)
-------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... 37,461,020 (51,421,412)
NET ASSETS:
Beginning of year....................................................... 224,880,082 262,341,102
-------------- --------------
End of year............................................................. $262,341,102 $210,919,690
============== =============
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------------------------------------------------------------------
CLASS A CLASS B
-------------------------------- --------------------------------
YEAR ENDED JANUARY 31, YEAR ENDED JANUARY 31,
-------------------------------- --------------------------------
1994 1995 1994 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................ 1,965,588 1,040,833 1,279,001 506,103
Shares issued for dividends reinvested. 526,710 489,182 27,085 57,245
Shares redeemed........................ (2,036,874) (3,847,929) (92,319) (252,804)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING............. 455,424 (2,317,914) 1,213,767 310,544
=============== ============ ============= =============
</TABLE>
See notes to financial statements.
PREMIER CALIFORNIA MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
Reference is made to page 4 of the Fund's Prospectus dated June 1, 1995.
PREMIER CALIFORNIA MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940 ("Act")
as a diversified, open-end management investment company. Dreyfus Service
Corporation, until August 24, 1994, acted as the distributor of the Fund's
shares. Dreyfus Service Corporation is a wholly-owned subsidiary of The
Dreyfus Corporation ("Manager"). Effective August 24, 1994, the Manager
became a direct subsidiary of Mellon Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the
"Distributor") was engaged as the Fund's distributor. The Distributor,
located at One Exchange Place, Boston, Massachusetts 02109, is a wholly-owned
subsidiary of Institutional Administration Services, Inc., a provider of
mutual fund administration services, the parent company of which is Boston
Institutional Group, Inc.
The Fund offers both Class A and Class B shares. Class A shares are
subject to a sales charge imposed at the time of purchase and Class B shares
are subject to a contingent deferred sales charge imposed at the time of
redemption on redemptions made within five years of purchase. Other
differences between the two Classes include the services offered to and the
expenses borne by each Class and certain voting rights.
(A) PORTFOLIO VALUATION: The Fund's investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Trustees. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
The Fund follows an investment policy of investing primarily in municipal
obligations of one state. Economic changes affecting the state and certain of
its public bodies and municipalities may affect the ability of issuers within
the state to pay interest on, or repay principal of, municipal obligations
held by the Fund.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to
comply with
PREMIER CALIFORNIA MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
the distribution requirements of the Internal Revenue Code. To the extent
that net realized capital gain can be offset by capital loss carryovers, if
any, it is the policy of the Fund not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
NOTE 2--MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .55 of 1% of the average
daily value of the Fund's net assets and is payable monthly. The Agreement
provides for an expense reimbursement from the Manager should the Fund's
aggregate expenses, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Fund for any full fiscal year. The most stringent state
expense limitation applicable to the Fund presently requires reimbursement of
expenses in any full fiscal year that such expenses (exclusive of
distribution expenses and certain expenses as described above) exceed 2 1/2%
of the first $30 million, 2% of the next $70 million and
1 1/2% of the excess over $100 million of the average value of the Fund's net
assets in accordance with California "blue sky" regulations. However, the
Manager had undertaken from February 1, 1994 through July 7, 1994, to reduce
the management fee paid by the Fund to the extent that the Fund's aggregate
expenses (excluding certain expenses as described above) exceeded specified
annual percentages of the Fund's average daily net assets. The reduction in
management fee, pursuant to the undertaking, amounted to $51,429 for the
year ended January 31, 1995.
Dreyfus Service Corporation retained $17,596 during the year ended
January 31, 1995 from commissions earned on sales of the Fund's Class A
shares.
Prior to August 24, 1994, Dreyfus Service Corporation retained $33,555
during the year ended January 31, 1995 from contingent deferred sales charges
imposed upon redemptions of the Fund's Class B shares.
(B) On August 3, 1994, the Fund's shareholders approved a revised
Distribution Plan with respect to Class B shares only (the "Class B
Distribution Plan") pursuant to Rule 12b-1 under the Act. Pursuant to the
Class B Distribution Plan, effective August 24, 1994, the Fund pays the
Distributor for distributing the Fund's Class B shares at an annual rate of
.50 of 1% of the value of the average daily net assets of Class B shares.
Prior to August 24, 1994, the Distribution Plan ("prior Class B
Distribution Plan") provided that the Fund pay Dreyfus Service Corporation at
an annual rate of .50 of 1% of the value of the Fund's Class B shares average
daily net assets, for costs and expenses in connection with advertising,
marketing and distributing the Fund's Class B shares. Dreyfus Service
Corporation made payments to one or more Service Agents based on the value of
the Fund's Class B shares owned by clients of the Service Agent.
During the year ended January 31, 1995, $42,473 was charged to the Fund
pursuant to the Class B Distribution Plan and $52,773 was charged to the Fund
pursuant to the prior Class B Distribution Plan.
(C) Under the Shareholder Services Plan, the Fund pays the Distributor,
at an annual rate of .25 of 1 % of the value of the average daily net assets
of Class A and Class B shares for servicing shareholder
PREMIER CALIFORNIA MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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. The Distributor may make payments to
Service Agents in respect of these services. The Distributor determines the
amounts to be paid to Service Agents. From February 1, 1994 through August
23, 1994, $309,651 and $26,386 were charged to Class A and Class B shares,
respectively, by Dreyfus Service Corporation. From August 24, 1994 through
January 31, 1995, $217,565 and $21,237 were charged to Class A and B shares,
respectively, by the Distributor pursuant to the Shareholder Services Plan.
(D) Prior to August 24, 1994, certain officers and trustees of the Fund
were "affiliated persons," as defined in the Act, of the Manager and/or
Dreyfus Service Corporation. Each trustee who is not an "affiliated person"
receives an annual fee of $2,500 and an attendance fee of $500 per meeting.
Prior to April 20, 1994 the annual fee was $400 and the attendance fee
was $250 per meeting.
NOTE 3--SECURITIES TRANSACTIONS:
(A) The aggregate amount of purchases and sales of investment securities
amounted to $171,195,785 and $197,790,045, respectively, for the year ended
January 31, 1995, and consisted entirely of long-term and short-term municipal
investments. The Fund is engaged in trading financial future contracts. The
Fund is exposed to market risk as a result of changes in the value of underlying
financial instruments. Investments in financial futures require the Fund to
"mark to market" on a daily basis, which reflects the change in the market
value of the contract at the close of each day's trading. Accordingly,
variation margin payments are made or received to reflect daily unrealized
gains or losses. When the contracts are closed, the Fund recognizes a
realized gain or loss. These investments require initial margin deposits
which consist of cash or cash equivalents, up to approximately 10% of the
contract amount. The amount of these deposits is determined by the exchange
or Board of Trade on which the contract is traded and is subject to change
At January 31, 1995, there were no financial futures contracts outstanding.
(B) At January 31, 1995 accumulated net unrealized depreciation on
investments was $580,625, consisting of $4,975,986 gross unrealized
appreciation and $5,556,611 gross unrealized depreciation.
At January 31, 1995 the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
PREMIER CALIFORNIA MUNICIPAL BOND FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
PREMIER CALIFORNIA MUNICIPAL BOND FUND
We have audited the accompanying statement of assets and liabilities of
Premier California Municipal Bond Fund, including the statement of
investments, as of January 31, 1995, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of
the two years in the period then ended, and financial highlights for each of
the years indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of January 31, 1995 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Premier California Municipal Bond Fund, at January 31, 1995, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated years, in conformity with generally
accepted accounting principles.
(Ernst & Young LLP Signature)
New York, New York
March 7, 1995
PREMIER CALIFORNIA MUNICIPAL BOND FUND
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits - List
(a) Financial Statements:
Included in Part A of the Registration Statement:
Condensed Financial Information -- Class A - For the
period from November 10, 1986 (commencement of
operations) to January 31, 1987 and for each of the
eight years ended January 31, 1995.
Class B - For the period from January 15, 1993
(commencement of initial offering) to January 31, 1993
and for each of the two years ended January 31, 1995.
Included in Part B of the Registration Statement:
Statement of Investments -- January 31, 1995.
Statement of Assets and Liabilities --January 31, 1995.
Statement of Operations -- year ended January 31, 1995.
Statement of Changes in Net Assets -- for the years
ended January 31, 1994 and 1995.
Notes to Financial Statements.
Report of Ernst & Young LLP, Independent Auditors,
dated March 7, 1995.
All Schedule Nos. I through VII and other financial statement information,
for which provision is made in the applicable accounting regulations of the
Securities and Exchange Commission, are either omitted because they are not
required under the related instructions, they are inapplicable, or the
required information is presented in the financial statements or notes
which are included in Part B of the Registration Statement.
Item 24. Financial Statements and Exhibits - List (continued)
(b) Exhibits:
(1) Registrant's Amended and Restated Agreement and Declaration of
Trust are incorporated by Reference to Exhibit (1) of Post
Effective Amendment No. 15 to the Registration Statement on Form
N-1A, filed on March 30, 1995.
(2) Registrant's By-Laws are incorporated by reference to Exhibit (2)
of Post-Effective Amendment No. 14 to the Registration Statement
on Form N-1A, filed on May 19, 1994.
(5) Management Agreement is incorporated by Reference to Exhibit (5)
of Post-Effective Amendment No. 15 to the Registration Statement
on Form N-1A, filed on March 30, 1995.
(6)(a) Distribution Agreement is incorporated by Reference to Exhibit
(6)(a) of Post-Effective Amendment No. 15 to the Registration
Statement on Form N-1A, filed on March 30, 1995.
(6)(b) Forms of Service Agreements are incorporated by Reference to
Exhibit (6)(b) of Post-Effective amendment No. 15 to the
Registration Statement on Form N-1A, filed on March 30, 1995.
(6)(c) Forms of Distribution Plan Agreements are incorporated by
Reference to Exhibit (6)(b) of Post-Effective amendment No. 15 to
the Registration Statement on Form N-1A, filed on March 30, 1995.
(8)(a)
(8)(a) Registrant's Custody Agreement is incorporated by reference to
Exhibit (8)(a) of Post-Effective Amendment No. 5 to the
Registration Statement on Form N-1A, filed on May 30, 1990.
(8)(b) Registrant's Sub-Custodial Agreements are incorporated by
reference to Exhibit (8)(b) of Post-Effective Amendment No. 14 to
the Registration Statement on Form N-1A, filed on May 19, 1994.
(9) Shareholder Services Plan.
(10) Opinion and consent of Registrant's counsel are incorporated by
Reference to Exhibit (10) of Post-Effective Amendment No. 15 to
the Registration Statement on Form N-1A, filed on March 30, 1995.
(11) Consent of Independent Auditors.
(15) Distribution Plan.
Item 24. Financial Statements and Exhibits - List (continued)
(16) Schedules of Computation of Performance Data are incorporated by
reference to Exhibit (16) of Post-Effective Amendment No. 14 to
the Registration Statement on Form N-1A, filed on May 19, 1994.
(18) Registrant's Rule 18f-3 Plan.
Other Exhibits:
(a) Powers-of-Attorney of Registrant's Trustees and officers
are incorporated by Reference to Other Exhibit (a) of
Post-Effective Amendment No. 15 to the Registration
Statement on Form N-1A, filed on March 30, 1995.
(b) The Certificate of Assistant Secretary is incorporated by
Reference to Other Exhibit (b) of Post-Effective Amendment
No. 15 to the Registration Statement on Form N-1A, filed
on March 30, 1995.
Item 25. Persons Controlled by or under Common Control with Registrant
Not Applicable
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Title of Class Holders as of May 25, 1995
Beneficial Interest
(par value $.001)
Class A 3,773
Class B 589
Item 27. Indemnification
The Statement as to the general effect of any contract,
arrangements or statute under which a trustee, officer,
underwriter or affiliated person of the Registrant is indemnified
is incorporated by reference to Item 27 of Part C of
Pre-Effective Amendment No. 1 to the Registration Statement on
Form N-1A, filed on September 10, 1986.
Reference is also made to the Distribution Agreement attached as
Exhibit (6)(a) of Post-Effective Amendment No. 15 to the
Registration Statement on Form N-1A, filed on March 30, 1995.
Item 28. Business and Other Connections of Investment Adviser
Investment Adviser - The Dreyfus Corporation
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 several investment companies. Dreyfus Service
Corporation, a wholly-owned subsidiary of Dreyfus, serves
primarily as the registered broker-dealer of shares of investment
companies sponsored by Dreyfus and of other investment companies
for which Dreyfus acts as sub-investment adviser and/or
administrator. Dreyfus Management, Inc., another wholly-owned
subsidiary, provides investment management services to various
pension plans, institutions and individuals.
Item 28. Business and Other Connections of Investment Adviser (continued)
________ ________________________________________________________________
Officers and Directors of Investment Adviser
____________________________________________
Name and Position
with Dreyfus Other Businesses
_________________ ________________
MANDELL L. BERMAN Real estate consultant and private investor
Director 29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034;
Past Chairman of the Board of Trustees of
Skillman Foundation.
Member of The Board of Vintners Intl.
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
ALVIN E. FRIEDMAN Senior Adviser to Dillon, Read & Co. Inc.
Director 535 Madison Avenue
New York, New York 10022;
Director and member of the Executive
Committee of Avnet, Inc.**
LAWRENCE M. GREENE Director:
Director Dreyfus America Fund
JULIAN M. SMERLING None
Director
DAVID B. TRUMAN Educational consultant;
Director Past President of the Russell Sage Foundation
230 Park Avenue
New York, New York 10017;
Past President of Mount Holyoke College
South Hadley, Massachusetts 01075;
DAVID B. TRUMAN Former Director:
(cont'd) Student Loan Marketing Association
1055 Thomas Jefferson Street, N.W.
Washington, D.C. 20006;
Former Trustee:
College Retirement Equities Fund
730 Third Avenue
New York, New York 10017
HOWARD STEIN Chairman of the Board:
Chairman of the Board and Dreyfus Acquisition Corporation*;
Chief Executive Officer The Dreyfus Consumer Credit Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Service Corporation*;
Chairman of the Board and Chief Executive
Officer:
Major Trading Corporation*;
Director:
Avnet, Inc.**;
Dreyfus America Fund++++;
The Dreyfus Fund International
Limited+++++;
World Balanced Fund+++;
Dreyfus Partnership Management,
Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Organization, Inc.*;
Seven Six Seven Agency, Inc.*;
Trustee:
Corporate Property Investors
New York, New York;
W. KEITH SMITH Chairman and Chief Executive Officer:
Vice Chairman of the Board The Boston Company
One Boston Place
Boston, Massachusetts 02108
Vice Chairman of the Board:
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
ROBERT E. RILEY Director:
President, Chief Dreyfus Service Corporation
Operating Officer,
and a Director
LAWRENCE S. KASH Chairman, President and Chief
Vice Chairman-Distribution Executive Officer:
and a Director The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
Executive Vice President and Director:
Dreyfus Service Organization, Inc.*;
Director:
The Dreyfus Consumer Credit Corporation*;
The Dreyfus Trust Company++'
Dreyfus Service Corporation*;
President:
The Boston Company
One Boston Place
Boston, Massachusetts 02108;
Laurel Capital Advisors
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Boston Group Holdings, Inc.
Executive Vice President
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Boston Safe Deposit & Trust
One Boston Place
Boston, Massachusetts 02108
PHILIP L. TOIA Chairman of the Board and Trust Investment
Vice Chairman-Operations Officer:
and Administration The Dreyfus Trust Company+++;
Chairman of the Board and Chief Executive
Officer:
Major Trading Corporation*;
Director:
The Dreyfus Security Savings Bank F.S.B.+;
Dreyfus Service Corporation*;
Seven Six Seven Agency, Inc.*;
President and Director:
Dreyfus Acquisition Corporation*;
The Dreyfus Consumer Credit Corporation*;
Dreyfus-Lincoln, Inc.*;
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Partnership Management, Inc.+;
Dreyfus Service Organization*;
The Truepenny Corporation*;
Formerly, Senior Vice President:
The Chase Manhattan Bank, N.A. and
The Chase Manhattan Capital Markets
Corporation
One Chase Manhattan Plaza
New York, New York 10081
PAUL H. SNYDER Director:
Vice President-Finance Pennsylvania Economy League
and Chief Financial Philadelphia, Pennsylvania;
Officer Children's Crisis Treatment Center
Philadelphia, Pennsylvania;
Dreyfus Service Corporation*
Director and Vice President:
Financial Executives Institute,
Philadelphia Chapter
Philadelphia, Pennsylvania
BARBARA E. CASEY President:
Vice President- Dreyfus Retirement Services Division;
Dreyfus Retirement Executive Vice President:
Services Boston Safe Deposit & Trust Co.
One Boston Place
Boston, Massachusetts 02108;
DIANE M. COFFEY None
Vice President-
Corporate Communications
ELIE M. GENADRY President:
Vice President- Institutional Services Division of Dreyfus
Institutional Sales Service Corporation*;
Broker-Dealer Division of Dreyfus Service
Corporation*;
Group Retirement Plans Division of Dreyfus
Service Corporation;
Executive Vice President:
Dreyfus Service Corporation*;
Dreyfus Service Organization, Inc.*;
Vice President:
The Dreyfus Trust Company++;
HENRY D. GOTTMANN Executive Vice President:
Vice President-Retail Dreyfus Service Corporation*;
Sales and Service Vice President:
Dreyfus Precious Metals*;
DANIEL C. MACLEAN Director, Vice President and Secretary:
Vice President and General Dreyfus Precious Metals, Inc.*;
Counsel Director and Vice President:
The Dreyfus Consumer Credit Corporation*;
Director and Secretary:
Dreyfus Partnership Management, Inc.*;
Major Trading Corporation*;
The Truepenny Corporation+;
Director:
The Dreyfus Trust Company++;
Secretary:
Seven Six Seven Agency, Inc.*;
JEFFREY N. NACHMAN None
Vice President-Mutual Fund
Accounting
WILLIAM F. GLAVIN, JR. Senior Vice President:
Vice President-Product The Boston Company Advisors, Inc.
Management 53 State Street
Exchange Place
Boston, Massachusetts 02109
KATHERINE C. WICKHAM Formerly, Assistant Commissioner:
Vice President- Department of Parks and Recreation of the
Human Resources City of New York
830 Fifth Avenue
New York, New York 10022
MARK N. JACOBS Vice President, Secretary and Director:
Vice President-Fund Lion Management, Inc.*;
Legal and Compliance, Secretary:
and Secretary The Dreyfus Consumer Credit Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.*;
Major Trading Corporation*;
The Truepenny Corporation*
ANDREW S. WASSER Vice President:
Vice President-Information Mellon Bank Corporation
Services One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
MAURICE BENDRIHEM Treasurer:
Controller Dreyfus Partnership Management, Inc.*;
Dreyfus Service Organization, Inc.*;
Seven Six Seven Agency, Inc.*;
The Truepenny Corporation*;
Controller:
Dreyfus Acquisition Corporation*;
The Dreyfus Trust Company++;
The Dreyfus Consumer Credit Corporation*;
Assistant Treasurer:
Dreyfus Precious Metals*
Formerly, Vice President-Financial Planning,
Administration and Tax:
Showtime/The Movie Channel, Inc.
1633 Broadway
New York, New York 10019
______________________________________
* The address of the business so indicated is 200 Park Avenue, New
York, New York 10166.
** The address of the business so indicated is 80 Cutter Mill Road,
Great Neck, New York 11021.
*** The address of the business so indicated is 45 Broadway, New York,
New York 10006.
**** The address of the business so indicated is Five Triad Center, Salt
Lake City, Utah 84180.
+ The address of the business so indicated is Atrium Building, 80 Route
4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
+++ The address of the business so indicated is One Rockefeller Plaza,
New York, New York 10020.
++++ The address of the business so indicated is 2 Boulevard Royal,
Luxembourg.
+++++ The address of the business so indicated is Nassau, Bahama Islands.
Item 29. Principal Underwriters
________ ______________________
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or
exclusive distributor:
1) Comstock Partners Strategy Fund, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC Money Market Fund, Inc.
7) Dreyfus BASIC Municipal Fund, Inc.
8) Dreyfus BASIC U.S. Government Money Market Fund
9) Dreyfus California Intermediate Municipal Bond Fund
10) Dreyfus California Tax Exempt Bond Fund, Inc.
11) Dreyfus California Tax Exempt Money Market Fund
12) Dreyfus Capital Value Fund, Inc.
13) Dreyfus Cash Management
14) Dreyfus Cash Management Plus, Inc.
15) Dreyfus Connecticut Intermediate Municipal Bond Fund
16) Dreyfus Connecticut Municipal Money Market Fund, Inc.
17) The Dreyfus Convertible Securities Fund, Inc.
18) Dreyfus Edison Electric Index Fund, Inc.
19) Dreyfus Florida Intermediate Municipal Bond Fund
20) Dreyfus Florida Municipal Money Market Fund
21) Dreyfus Focus Funds, Inc.
22) The Dreyfus Fund Incorporated
23) Dreyfus Global Bond Fund, Inc.
24) Dreyfus Global Growth, L.P. (A Strategic Fund)
25) Dreyfus Global Investing, Inc.
26) Dreyfus GNMA Fund, Inc.
27) Dreyfus Government Cash Management
28) Dreyfus Growth and Income Fund, Inc.
29) Dreyfus Growth Opportunity Fund, Inc.
30) Dreyfus Institutional Money Market Fund
31) Dreyfus Institutional Short Term Treasury Fund
32) Dreyfus Insured Municipal Bond Fund, Inc.
33) Dreyfus Intermediate Municipal Bond Fund, Inc.
34) Dreyfus International Equity Fund, Inc.
35) Dreyfus Investors GNMA Fund
36) The Dreyfus/Laurel Funds, Inc.
37) The Dreyfus/Laurel Funds Trust
38) The Dreyfus/Laurel Tax-Free Municipal Funds
39) The Dreyfus/Laurel Investment Series
40) The Dreyfus Leverage Fund, Inc.
41) Dreyfus Life and Annuity Index Fund, Inc.
42) Dreyfus Liquid Assets, Inc.
43) Dreyfus Massachusetts Intermediate Municipal Bond Fund
44) Dreyfus Massachusetts Municipal Money Market Fund
45) Dreyfus Massachusetts Tax Exempt Bond Fund
46) Dreyfus Michigan Municipal Money Market Fund, Inc.
47) Dreyfus Money Market Instruments, Inc.
48) Dreyfus Municipal Bond Fund, Inc.
49) Dreyfus Municipal Cash Management Plus
50) Dreyfus Municipal Money Market Fund, Inc.
51) Dreyfus New Jersey Intermediate Municipal Bond Fund
52) Dreyfus New Jersey Municipal Bond Fund, Inc.
53) Dreyfus New Jersey Municipal Money Market Fund, Inc.
54) Dreyfus New Leaders Fund, Inc.
55) Dreyfus New York Insured Tax Exempt Bond Fund
56) Dreyfus New York Municipal Cash Management
57) Dreyfus New York Tax Exempt Bond Fund, Inc.
58) Dreyfus New York Tax Exempt Intermediate Bond Fund
59) Dreyfus New York Tax Exempt Money Market Fund
60) Dreyfus Ohio Municipal Money Market Fund, Inc.
61) Dreyfus 100% U.S. Treasury Intermediate Term Fund
62) Dreyfus 100% U.S. Treasury Long Term Fund
63) Dreyfus 100% U.S. Treasury Money Market Fund
64) Dreyfus 100% U.S. Treasury Short Term Fund
65) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
66) Dreyfus Pennsylvania Municipal Money Market Fund
67) Dreyfus Short-Intermediate Government Fund
68) Dreyfus Short-Intermediate Municipal Bond Fund
69) Dreyfus Short-Term Income Fund, Inc.
70) The Dreyfus Socially Responsible Growth Fund, Inc.
71) Dreyfus Strategic Growth, L.P.
72) Dreyfus Strategic Income
73) Dreyfus Strategic Investing
74) Dreyfus Tax Exempt Cash Management
75) Dreyfus Treasury Cash Management
76) Dreyfus Treasury Prime Cash Management
77) Dreyfus Variable Investment Fund
78) Dreyfus-Wilshire Target Funds, Inc.
79) Dreyfus Worldwide Dollar Money Market Fund, Inc.
80) General California Municipal Bond Fund, Inc.
81) General California Municipal Money Market Fund
82) General Government Securities Money Market Fund, Inc.
83) General Money Market Fund, Inc.
84) General Municipal Bond Fund, Inc.
85) General Municipal Money Market Fund, Inc.
86) General New York Municipal Bond Fund, Inc.
87) General New York Municipal Money Market Fund
88) Pacifica Funds Trust -
Pacific American Money Market Portfolio
Pacific American U.S. Treasury Portfolio
89) Peoples Index Fund, Inc.
90) Peoples S&P MidCap Index Fund, Inc.
91) Premier Insured Municipal Bond Fund
92) Premier California Municipal Bond Fund
93) Premier GNMA Fund
94) Premier Growth Fund, Inc.
95) Premier Municipal Bond Fund
96) Premier New York Municipal Bond Fund
97) Premier State Municipal Bond Fund
(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
__________________ ___________________________ _____________
Marie E. Connolly+ Director, President, Chief President and
Operating Officer and Compliance Treasurer
Officer
Joseph F. Tower, III+ Senior Vice President, Treasurer Assistant
and Chief Financial Officer Treasurer
John E. Pelletier+ Senior Vice President, General Vice President
Counsel, Secretary and Clerk and Secretary
Frederick C. Dey++ Senior Vice President Vice President
and Assistant
Treasurer
Eric B. Fischman++ Vice President and Associate Vice President
General Counsel and Assistant
Secretary
Lynn H. Johnson+ Vice President None
Ruth D. Leibert++ Assistant Vice President Assistant
Secretary
Paul D. Furcinito++ Assistant Vice President Assistant
Secretary
Paul Prescott+ Assistant Vice President None
Leslie M. Gaynor+ Assistant Treasurer None
Mary Nelson+ Assistant Treasurer None
John J. Pyburn++ Assistant Treasurer Assistant
Treasurer
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
________________________________
+ Principal business address is One Exchange Place, Boston, Massachusetts
02109.
++ Principal business address is 200 Park Avenue, New York, New York 10166.
Item 30. Location of Accounts and Records
________________________________
1. The Shareholder Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. The Bank of New York
90 Washington Street
New York, New York 10286
3. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 31. Management Services
_______ ___________________
Not Applicable
Item 32. Undertakings
________ ____________
(1) To call a meeting of shareholders for the purpose of voting upon
the question of removal of a trustee or trustees when requested
in writing to do so by the holders of at least 10% of the
Registrant's outstanding shares of beneficial interest and in
connection with such meeting to comply with the provisions of
Section 16(c) of the Investment Company Act of 1940 relating to
shareholder communications.
(2) To furnish each person to whom a prospectus is delivered with a
copy of the Fund's latest Annual Report to Shareholders, upon
request and without charge.
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 requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 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 1st day of June, 1995.
PREMIER CALIFORNIA MUNICIPAL BOND FUND
BY: /s/Marie E. Connolly*
_______________________
MARIE E. CONNOLLY, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Signatures Title Date
___________________________ ______________________________ ___________
/s/Marie E. Connolly * President (Principal Executive 06/01/95
______________________________ Officer, and Principal Financial
Marie E. Connolly and Accounting Officer)
/s/Clifford L. Alexander, Jr.* Trustee 06/01/95
______________________________
Clifford L. Alexander, Jr.
/s/Peggy C. Davis * Trustee 06/01/95
______________________________
Peggy C. Davis
/s/Joseph S. DiMartino * Trustee 06/01/95
______________________________
Joseph S. DiMartino
/s/Ernest Kafka * Trustee 06/01/95
______________________________
Ernest Kafka
/s/Saul B. Klaman * Trustee 06/01/95
______________________________
Saul B. Klaman
/s/Nathan Leventhal * Trustee 06/01/95
______________________________
Nathan Leventhal
*BY: __________________________
Eric B. Fischman,
Attorney-in-Fact
INDEX OF EXHIBITS
ITEM PAGE
(9) Shareholder Services Plan
(11) Consent of Independent Auditors
(15) Distribution Plan
(18) Rule 18f-3 Plan
PREMIER CALIFORNIA MUNICIPAL BOND FUND
SHAREHOLDER SERVICES PLAN
Introduction: It has been proposed that the above-
captioned investment company (the "Fund") adopt a Shareholder
Services Plan under which the Fund would pay the Fund's
distributor (the "Distributor") for providing services to (a)
shareholders of each series of the Fund or class of Fund shares
set forth on Exhibit A hereto, as such Exhibit may be revised
from time to time, or (b) if no series or classes are set forth
on such Exhibit, shareholders of the Fund. The Distributor would
be permitted to pay certain financial institutions, securities
dealers and other industry professionals (collectively, "Service
Agents") in respect of these services. The Plan is not to be
adopted pursuant to Rule 12b-1 under the Investment Company Act
of 1940, as amended (the "Act"), and the fee under the Plan is
intended to be a "service fee" as defined in Article III, Section
26, of the NASD Rules of Fair Practice.
The Fund's Board, in considering whether the Fund
should implement a written plan, has requested and evaluated such
information as it deemed necessary to an informed determination
as to whether a written plan should be implemented and has
considered such pertinent factors as it deemed necessary to form
the basis for a decision to use Fund assets for such purposes.
In voting to approve the implementation of such a plan,
the Board has concluded, in the exercise of its reasonable
business judgment and in light of applicable fiduciary duties,
that there is a reasonable likelihood that the plan set forth
below will benefit the Fund and its shareholders.
The Plan: The material aspects of this Plan are as
follows:
1. The Fund shall pay to the Distributor a fee at the
annual rate set forth on Exhibit A in respect of the provision of
personal services to shareholders and/or the maintenance of
shareholder accounts. The Distributor shall determine the
amounts to be paid to Service Agents and the basis on which such
payments will be made. Payments to a Service Agent are subject
to compliance by the Service Agent with the terms of any related
Plan agreement between the Service Agent and the Distributor.
2. For the purpose of determining the fees payable
under this Plan, the value of the net assets of the Fund or the
net assets attributable to each series or class of Fund shares
identified on Exhibit A, as applicable, shall be computed in the
manner specified in the Fund's charter documents for the
computation of net asset value.
3. The Board shall be provided, at least quarterly,
with a written report of all amounts expended pursuant to this
Plan. The report shall state the purpose for which the amounts
were expended.
4. This Plan will become effective immediately upon
approval by a majority of the Board members, including a majority
of the Board members who are not "interested persons" (as defined
in the Act) of the Fund and have no direct or indirect financial
interest in the operation of this Plan or in any agreements
entered into in connection with this Plan, pursuant to a vote
cast in person at a meeting called for the purpose of voting on
the approval of this Plan.
5. This Plan shall continue for a period of one year
from its effective date, unless earlier terminated in accordance
with its terms, and thereafter shall continue automatically for
successive annual periods, provided such continuance is approved
at least annually in the manner provided in paragraph 4 hereof.
6. This Plan may be amended at any time by the Board,
provided that any material amendments of the terms of this Plan
shall become effective only upon approval as provided in
paragraph 4 hereof.
7. This Plan is terminable without penalty at any
time by vote of a majority of the Board members who are not
"interested persons" (as defined in the Act) of the Fund and have
no direct or indirect financial interest in the operation of this
Plan or in any agreements entered into in connection with this
Plan.
8. The obligations hereunder and under any related
Plan agreement shall only be binding upon the assets and property
of the Fund or the affected series or class, as the case may be,
and shall not be binding upon any Board member, officer or
shareholder of the Fund individually.
Dated: January 15, 1993
As Revised: April 12, 1995
EXHIBIT A
Fee as a percentage of
Name of Class average daily net assets
Class A .25
Class B .25
Class C .25
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed
Financial Information" and "Custodian, Transfer and Dividend Disbursing
Agent, Counsel and Independent Auditors" and to the use of our report
dated March 7, 1995, in this Registration Statement (Form N-1A 33-7498)
of Premier California Municipal Bond Fund.
ERNST & YOUNG LLP
New York, New York
May 30, 1995
PREMIER CALIFORNIA MUNICIPAL BOND FUND
DISTRIBUTION PLAN
Introduction: It has been proposed that the above-
captioned investment company (the "Fund") adopt a Distribution
Plan (the "Plan") in accordance with Rule 12b-1, promulgated
under the Investment Company Act of 1940, as amended (the
"Act"). The Plan would pertain to each class set forth on
Exhibit A hereto, as such Exhibit may be revised from time to
time (each, a "Class"). Under the Plan, the Fund would pay the
Fund's distributor (the "Distributor") for distributing shares
of each Class. If this proposal is to be implemented, the Act
and said Rule 12b-1 require that a written plan describing all
material aspects of the proposed financing be adopted by the
Fund.
The Fund's Board, in considering whether the Fund
should implement a written plan, has requested and evaluated
such information as it deemed necessary to an informed
determination as to whether a written plan should be implemented
and has considered such pertinent factors as it deemed necessary
to form the basis for a decision to use assets attributable to
each Class for such purposes.
In voting to approve the implementation of such a plan,
the Board members have concluded, in the exercise of their
reasonable business judgment and in light of their respective
fiduciary duties, that there is a reasonable likelihood that the
plan set forth below will benefit the Fund and shareholders of
each Class.
The Plan: The material aspects of this Plan are as
follows:
1. The Fund shall pay to the Distributor for
distribution a fee in respect of each Class at the annual rate
set forth on Exhibit A.
2. For the purposes of determining the fees payable
under this Plan, the value of the Fund's net assets attributable
to each Class shall be computed in the manner specified in the
Fund's charter documents as then in effect for the computation
of the value of the Fund's net assets attributable to such
Class.
3. The Fund's Board shall be provided, at least
quarterly, with a written report of all amounts expended
pursuant to this Plan. The report shall state the purpose for
which the amounts were expended.
4. As to each Class, this Plan will become effective
upon approval by (a) holders of a majority of the outstanding
shares of such Class, and (b) a majority of the Board members,
including a majority of the Board members who are not
"interested persons" (as defined in the Act) of the Fund and
have no direct or indirect financial interest in the operation
of this Plan or in any agreements entered into in connection
with this Plan, pursuant to a vote cast in person at a meeting
called for the purpose of voting on the approval of this Plan.
5. This Plan shall continue for a period of one year
from its effective date, unless earlier terminated in accordance
with its terms, and thereafter shall continue automatically for
successive annual periods, provided such continuance is approved
at least annually in the manner provided in paragraph 4(b)
hereof.
6. As to each Class, this Plan may be amended at any
time by the Fund's Board, provided that (a) any amendment to
increase materially the costs which such Class may bear pursuant
to this Plan shall be effective only upon approval by a vote of
the holders of a majority of the outstanding shares of such
Class, and (b) any material amendments of the terms of this Plan
shall become effective only upon approval as provided in
paragraph 4(b) hereof.
7. As to each Class, this Plan is terminable without
penalty at any time by (a) vote of a majority of the Board
members who are not "interested persons" (as defined in the Act)
of the Fund and have no direct or indirect financial interest in
the operation of this Plan or in any agreements entered into in
connection with this Plan, or (b) vote of the holders of a
majority of the outstanding shares of such Class.
8. The obligations hereunder and under any related
Plan agreement shall only be binding upon the assets and
property of the Fund and shall not be binding upon any Board
member, officer or shareholder of the Fund individually.
Dated: May 26, 1994
Revised: April 12, 1995
EXHIBIT A
Fee as a Percentage of
Name of Class Average Daily Net Assets
Class B .50 of 1%
Class C .75 of 1%
THE DREYFUS FAMILY OF FUNDS
(Premier Family of Fixed-Income Funds)
Rule 18f-3 Plan
Rule 18f-3 under the Investment Company Act of 1940,
as amended (the "1940 Act"), requires that the Board of an
investment company desiring to offer multiple classes pursuant
to said Rule adopt a plan setting forth the separate arrangement
and expense allocation of each class, and any related conversion
features or exchange privileges.
The Board, including a majority of the non-interested
Board members, of each of the investment companies, or series
thereof, listed on Schedule A attached hereto (each, a "Fund")
which desires to offer multiple classes has determined that the
following plan is in the best interests of each class
individually and the Fund as a whole:
1. Class Designation: Fund shares shall be divided
into Class A, Class B and Class C.
2. Differences in Services: The services offered to
shareholders of each Class shall be substantially the same,
except that Right of Accumulation, Letter of Intent,
Reinvestment Privilege and Checkwriting services shall be
available only to holders of Class A shares.
3. Differences in Distribution Arrangements: Class
A shares shall be offered with a front-end sales charge, as such
term is defined in Article III, Section 26(b), of the Rules of
Fair Practice of the National Association of Securities Dealers,
Inc., and a deferred sales charge (a "CDSC"), as such term is
defined in said Section 26(b), may be assessed on certain
redemptions of Class A shares purchased without an initial sales
charge as part of an investment of $1 million or more. The
amount of the sales charge and the amount of and provisions
relating to the CDSC pertaining to the Class A shares are set
forth on Schedule B hereto.
Class B shares shall not be subject to a front-end
sales charge, but shall be subject to a CDSC and shall be
charged an annual distribution fee under a Distribution Plan
adopted pursuant to Rule 12b-1 under the 1940 Act. The amount
of and provisions relating to the CDSC, and the amount of the
fees under the Distribution Plan pertaining to the Class B
shares, are set forth on Schedule C hereto.
Class C shares shall not be subject to a front-end
sales charge, but shall be subject to a CDSC and shall be
charged an annual distribution fee under a Distribution Plan
adopted pursuant to Rule 12b-1 under the 1940 Act. The amount
of and provisions relating to the CDSC, and the amount of the
fees under the Distribution Plan pertaining to the Class C
shares, are set forth on Schedule D hereto.
Each Class of shares shall be subject to an annual
service fee at the rate of .25% of the value of the average
daily net assets of such Class pursuant to a Shareholder
Services Plan.
4. Expense Allocation. The following expenses
shall be allocated, to the extent practicable, on a Class-by-
Class basis: (a) fees under the Distribution Plan and
Shareholder Services Plan; (b) printing and postage expenses
related to preparing and distributing materials, such as
shareholder reports, prospectuses and proxies, to current
shareholders of a specific Class; (c) Securities and Exchange
Commission and Blue Sky registration fees incurred by a specific
Class; (d) the expense of administrative personnel and services
as required to support the shareholders of a specific Class; (e)
litigation or other legal expenses relating solely to a specific
Class; (f) transfer agent fees identified by the Fund's transfer
agent as being attributable to a specific Class; and (g) Board
members' fees incurred as a result of issues relating to a
specific Class.
5. Conversion Features. Class B shares shall
automatically convert to Class A shares after a specified period
of time after the date of purchase, based on the relative net
asset value of each such Class without the imposition of any
sales charge, fee or other charge, as set forth on Schedule E
hereto. No other Class shall be subject to any automatic
conversion feature.
6. Exchange Privileges. Shares of a Class shall be
exchangeable only for (a) shares of the same Class of other
investment companies managed or administered by The Dreyfus
Corporation and (b) shares of certain other investment companies
specified from time to time.
Dated: April 12, 1995
SCHEDULE A
Premier California Municipal Bond Fund
Premier GNMA Fund
Premier Insured Municipal Bond Fund
Premier Municipal Bond Fund
Premier New York Municipal Bond Fund
Premier State Municipal Bond Fund
SCHEDULE B
Front-End Sales Charge--Class A Shares--The public offering
price for Class A shares shall be the net asset value per share
of that Class plus a sales load as shown below:
Total Sales Load
______________________
As a % of As a % of
offering net asset
price per value per
Amount of Transaction share share
__________ __________
Less than $50,000. . . . . . . . . . 4.50 4.70
$50,000 to less than $100,000 . . . .4.00 4.20
$100,000 to less than $250,000 . . . 3.00 3.10
$250,000 to less than $500,000 . . . 2.50 2.60
$500,000 to less than $1,000,000 . . 2.00 2.00
$1,000,000 or more -0- -0-
Contingent Deferred Sales Charge--Class A Shares--A CDSC of 1%
shall be assessed at the time of redemption of Class A shares
purchased without an initial sales charge as part of an
investment of at least $1,000,000 and redeemed within two years
after purchase. The terms contained in Schedule C pertaining to
the CDSC assessed on redemptions of Class B shares (other than
the amount of the CDSC and its time periods), including the
provisions for waiving the CDSC, shall be applicable to the
Class A shares subject to a CDSC. Letter of Intent and Right of
Accumulation shall apply to such purchases of Class A shares.
SCHEDULE C
Contingent Deferred Sales Charge--Class B Shares--A CDSC payable
to the Fund's Distributor shall be imposed on any redemption of
Class B shares which reduces the current net asset value of such
Class B shares to an amount which is lower than the dollar
amount of all payments by the redeeming shareholder for the
purchase of Class B shares of the Fund held by such shareholder
at the time of redemption. No CDSC shall be imposed to the
extent that the net asset value of the Class B shares redeemed
does not exceed (i) the current net asset value of Class B
shares acquired through reinvestment of dividends or capital
gain distributions, plus (ii) increases in the net asset value
of the shareholder's Class B shares above the dollar amount of
all payments for the purchase of Class B shares of the Fund held
by such shareholder at the time of redemption.
If the aggregate value of the Class B shares redeemed
has declined below their original cost as a result of the Fund's
performance, a CDSC may be applied to the then-current net asset
value rather than the purchase price.
In circumstances where the CDSC is imposed, the amount
of the charge shall depend on the number of years from the time
the shareholder purchased the Class B shares until the time of
redemption of such shares. Solely for purposes of determining
the number of years from the time of any payment for the
purchase of Class B shares, all payments during a month shall be
aggregated and deemed to have been made on the first day of the
month. The following table sets forth the rates of the CDSC:
CDSC as a % of
Year Since Amount Invested
Purchase Payment or Redemption
Was Made Proceeds
________________ _________________
First. . . . . . . . . . . . . . 3.00
Second . . . . . . . . . . . . . 3.00
Third . . . . . . . . . . . . . 2.00
Fourth . . . . . . . . . . . . . 2.00
Fifth . . . . . . . . . . . . . 1.00
Sixth . . . . . . . . . . . . . 0.00
In determining whether a CDSC is applicable to a
redemption, the calculation shall be made in a manner that
results in the lowest possible rate. Therefore, it shall be
assumed that the redemption is made first of amounts
representing shares acquired pursuant to the reinvestment of
dividends and distributions; then of amounts representing the
increase in net asset value of Class B shares above the total
amount of payments for the purchase of Class B shares made
during the preceding five years; then of amounts representing
the cost of shares purchased five years prior to the redemption;
and finally, of amounts representing the cost of shares held for
the longest period of time within the applicable five-year
period.
Waiver of CDSC--The CDSC shall be waived in connection with (a)
redemptions made within one year after the death or disability,
as defined in Section 72(m)(7) of the Internal Revenue Code of
1986, as amended (the "Code"), of the shareholder,
(b) redemptions by employees participating in qualified or non-
qualified employee benefit plans or other programs where (i) the
employers or affiliated employers maintaining such plans or
programs have a minimum of 250 employees eligible for
participation in such plans or programs, or (ii) such plan's or
program's aggregate investment in the Dreyfus Family of Funds or
certain other products made available by the Fund's Distributor
exceeds one million dollars, (c) redemptions as a result of a
combination of any investment company with the Fund by merger,
acquisition of assets or otherwise, and (d) a distribution
following retirement under a tax-deferred retirement plan or
upon attaining age 70-1/2 in the case of an IRA or Keogh plan or
custodial account pursuant to Section 403(b) of the Code. Any
Fund shares subject to a CDSC which were purchased prior to the
termination of such waiver shall have the CDSC waived as
provided in the Fund's prospectus at the time of the purchase of
such shares.
Amount of Distribution Plan Fees--Class B Shares--.50 of 1% of
the value of the average daily net assets of Class B.
SCHEDULE D
Contingent Deferred Sales Charge--Class C Shares--A CDSC of
1.00% payable to the Fund's Distributor shall be imposed on any
redemption of Class C shares within one year of the date of
purchase. The basis for calculating the payment of any such
CDSC shall be the method used in calculating the CDSC for Class
B shares. In addition, the provisions for waiving the CDSC
shall be those set forth for Class B shares.
Amount of Distribution Plan Fees--Class C Shares--.75 of 1% of
the value of the average daily net assets of Class C.
SCHEDULE E
Conversion of Class B Shares--Approximately six years after the
date of purchase, Class B shares automatically shall convert to
Class A shares, based on the relative net asset values for
shares of each such Class, and shall no longer be subject to the
distribution fee. At that time, Class B shares that have been
acquired through the reinvestment of dividends and distributions
("Dividend Shares") shall be converted in the proportion that a
shareholder's Class B shares (other than Dividend Shares)
converting to Class A shares bears to the total Class B shares
then held by the shareholder which were not acquired through the
reinvestment of dividends and distributions.
